HOW IT WORKS
To be rated, a stock must: have two years of price history; be a common share, income trust, ETF or ADR; and have a Company Snapshot.
On a daily basis, we calculate each stock's price performance, and then subtract the rate of return on a risk-free asset, specifically 90-day Canadian T-bills. Positive returns add to a stock's return score and negative returns to a stock's regret score. We sum up five years of these monthly returns and regrets, with more weighting placed on recent months.
All Canadian and U.S.-listed stocks are then grouped together into industries. Each stock's regret score is adjusted to penalize those that performed poorly, when their industry group had a high expected return. The final score for each stock is computed as its return score minus its regret score.
Stocks scoring in the top 10 per cent receive five stars, the next 22.5 per cent four stars, the middle 35 per cent three stars, the next 22.5 per cent two stars and the bottom 10 per cent one star.