From Canadian Business Online,

By Norm Rothery

For most of us, picking stocks is as tricky as ordering a seven-course dinner at a swanky new restaurant. Lots of items on the menu sound appetizing, but that’s where our knowledge ends.

Rather than simply point and hope, smart diners look for an expert opinion on the restaurant’s offerings. To provide smart investors with a similar scouting report, we’re pleased to present you with our candid take on all of Canada’s largest stocks.

We’ve worked hard to produce a rating system that’s easy to use, logical, and appealing to all types of investors. We think the Top 200 provides you with a more objective look at large Canadian stocks than you’re likely to find from any other single source. If you’re looking for a sensible take on any large Canadian stock, you’ll find the Top 200 to be an invaluable way to generate promising investment ideas.

To arrive at the Top 200, we begin by identifying by revenue the largest 200 companies in Canada. Using data supplied from Bloomberg, we evaluate each stock, first for its attractiveness as a value investment, then on its appeal as a growth investment. (Value investors like stocks that trade at low multiples of book value and pay juicy dividends. Growth investors like companies that are rapidly expanding their revenues and earnings.) Our value and growth screens employ sophisticated measures of financial merit, but in the end we reduce everything about a stock to two grades — one for value appeal, one for growth potential.

The grades work just like they did back when you were in school. Top-of-the-class stocks earn an A. Solid but uninspired students get by with a B or a C grade. Disappointments get sent home with a D or even an F. 

Only a select group of stock — those that manage to achieve at least one A and one B on both the value and the growth tests — make our all-stars. Only nine stocks made the grade this summer.

Before we talk about those all-stars, here’s the low-down, by growth and value, on how we rate all our 200 stocks.

NORM ROTHERY, PhD, CFA, is the Chief Investment Strategist at Dan Hallett and Associates Inc. and the founder of the StingyInvestor.com. They may hold securities mentioned in this story.