AKR Capital Research was founded over 6 years ago on a mandate to help retail and institutional investors identify the true and best stewards of scarce capital in Canada using basic fundamental capitalistic principles. We began this task really for our own personal resource in targeting and identifying companies for investment, because frankly we believe our institutional brethren has failed miserably in providing the investor with any thoughtful insight. What began as merely a hobby has now evolved into something of extreme value given the accounting malaise that has finally been exposed in the last several years. This malaise has fostered the creation of mediocre, irrelevant investment research.

We are pleased to present our fifth annual ranking of the top wealth creating companies in Canada for fiscal 2005. Non-financial and non-income trust companies that trade on the TSX Composite index were analyzed and ranked by Economic Profit (EP) for fiscal 2005.

EP (or Economic Value Added as some people refer to it), measures the residual wealth created by a company when its capital costs are deducted from its core operating profits (See Wealth Primer). EP has gained a lot of prominence in other countries for its ability to filter out accounting items, which can distort Net Income. This ability has come into more prominent focus as a result of high-profile accounting irregularities at Enron, WorldCom, and more recently at Nortel Networks.

AKR Capital Research uses EP as the foundation of their analysis of Canadian companies. EP yields a more accurate insight into the quality of a firm's earnings by examining the foundation of business success; specifically, the ability to generate returns on its invested capital resources that are in excess of its associated capital costs. The limitation of EP analysis is that it is extremely time consuming. Significant time is invested in pouring over financial statements to extract the relevant drivers that formulate Economic Profit. The results of these surveys are a culmination of the past years research in Canadian Economic Profit performance.

For our 2006 edition, we have added an additional list, the AKR Value Ranking, which ranks the best wealth creating Canadian firms that are selling for the cheapest price. After trying to identify which firms are truly creating tangible wealth for their shareholders, the next hardest task for investors is to determine if the stock is selling at reasonable price to offer growth opportunities. The Ranking, which is based on the infamous Magic Formula ranking which was developed by Joel Greenblatt attempts to answer this question.

Overview of Economic Profit

Canadian Economy in 2005: The World Takes Notice

Rankings Discussion: Energy Firms Continue To Dominate

The Wealth Creators: Quality Rather Than Quantity in 2005

Movers and Shakers

Pensions: Prognosis Negative

Capital Analysis: Strong Economy and Loonie Drive Investment ... And Expectations

Stock Performance of EP Generating Companies

AKR Value Ranking

Sub-Index Analysis

Final Thoughts

Complete Rankings and Sub-Sector Rankings

AKR Value Rankings

Download 2006 Report