iQ Canada Cyclical Super Sector Model
INVESTMENT OBJECTIVE
The iQ Canada Cyclical Super Sector Model seeks to generate long-term returns in excess of the total return of the S&P / TSX Index with less down-market risk by selecting stocks of companies from sectors whose betas are consistently above 1.
CYCLICAL SUPER SECTOR - DEFINED
The Cyclical Super Sector is comprised of industries significantly impacted by economic shifts. When the economy is prosperous these industries tend to expand, and when the economy is in a downturn these industries tend to shrink. In general, the stocks in these industries have betas of greater than 1.
Cyclical Super Sector includes the following Sectors:
Basic Materials
Consumer Cyclical
Financial Services
Real Estate
PROCESS
The iQ Canada Cyclical Super Sector Model represents an equal-weighted portfolio of ten Canadian stocks. The stocks are selected by applying two proprietary investment strategies to a database of all Canadian-traded common stocks from the Materials, Consumer Services, Financial Services and Real Estate Investment Trust sectors.
The Model takes the two lists selected by each strategy and assigns each security a score based on its position in the list. The Model then selects the top ten stocks based on their highest overall score, favoring those that were chosen by both of the following strategies:
First Strategy
We begin with all common stocks of Materials, Consumer Services, Financial Services and Real Estate Investment Trust sectors listed on a Canadian securities exchange as identified by Standard & Poors.
We rank these securities by market capitalization and keep the top forty.
Of the forty remaining securities, we rank by return on invested capital and select the top twenty.
Of the twenty remaining securities, we sort by 6 month change in 18 month CAPM Alpha and select the top ten.
Second Strategy
We begin with all common stocks of Materials, Consumer Services, Financial Services and Real Estate Investment Trust sectors listed on a Canadian securities exchange as identified by Standard & Poors.
We rank these securities by market capitalization and keep the top forty.
Of the remaining forty securities, we rank by 60-month beta and select the top twenty.
Of the twenty remaining securities, we rank by the stability of return on assets and select the top ten.
This model reconstitutes every February, May, August and November