Bring on the quants! Macquarie analysts Javed Jussa, Yin Luo and Rochester Cahan used quant factors to rank mining stocks based on a combination of their ability to perform well in a rebounding market, but still hold up if the market deteriorates again.
They studied all the Canadian metals and mining stocks over the past three weeks (when they had a major upswing) and over the past three years (when the market went from bull to bear). They figured out which quant factors had the most predictive power for the miners during both periods, and screened all the companies against the combined list.
The most important factors turned out to be upward analyst revisions, strong five-year earnings growth, improved liquidity, positive earnings surprises, and high return on assets.
The rankings turned up plenty of surprises, to say the least. The analysts found that the company most likely to perform well in a rebounding market, and still hold up if the market deteriorates, is Silvercorp Metals Inc., a silver miner working in China. Debt-laden giant Teck Cominco Ltd. also cracked the top three following its big rebound in March. Here is the entire top 10:
1. Silvercorp
2. Inmet Mining Corp.
3. Teck
4. Quadra Mining Ltd.
5. Corriente Resources Inc.
6. First Uranium Corp.
7. Taseko Mines Ltd.
8. First Quantum Minerals Ltd.
9. HudBay Minerals Inc.
10. Thompson Creek Metals Company Inc.