Can These Five Screen Stars Can Light Up Your Portfolio
AnnaLisa is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Screeners are so much fun...more fun than Angry Birds and more profitable. Using the Motley Fool screener (found under the CAPS community tab at www.fool.com) I noodled around for stocks with 2% plus yield, at least 1% insider ownership, P/Es between 5 and 15, and revenue growth of at least 20% for the last three years.
In the mid-cap and big cap stocks only 3 names each popped up but for small caps there were 10! The majority of these were financials of one sort or another with Sturm, Ruger & Company (NYSE: RGR) and Future Fuel Company as the only names from other sectors. The name that really popped was New York Mortgage Trust (NASDAQ: NYMT) with a 14.70% yield.
In the mid cap category two of three names were financials led by Fifth Street Finance Corporation (NASDAQ: FSC) with a really stunning yield of 10.4%, then Main Street Capital Corporation, and oilfield services and equipment supplier RPC. All of these had five star CAPS ratings as well.
Small and speculative
With such a huge yield New York Mortgage Trust had to be investigated. That 14.7% yield was raised by 8% earlier this year. Its P/E at 6.8 looked good. New York Mortgage Trust has a three year revenue growth rate of 52.66 and three Wall Street Outperforms.
New York Mortgage is a hybrid mortgage REIT with a portfolio of agency residential and commerical mortgage backed securities (RMBS) and (CMBS) with 40% taken up by ARM loans held in securitization trusts and other commercial real estate debt investments.
The company has come back from a loss in 2011 to a profit by opportunistic price dislocations. Risks (beside its loss the year before last) are: its operating cash flow is down to $29.9 million, it had four secondary offerings last year, and finally it is more leveraged than its peers. Consider this as a speculative name, especially with a 41% short interest.
Sturm, Ruger is worth mentioning as it had rocketed higher over the last two years but pulled back almost 20% since the tragic Newtown shootings. This firearms manufacturer has no debt, a 3.30% yield, and a 13.37 P/E. This would be a practically perfect stock if it weren't so volatile; you can't screen for headline risk. The return on equity is 60.78% and the operating margin is 22.45%.
It has a big short interest at 29% but that is decreasing. Competitor Smith & Wesson has a lower P/E of 8.88 but no yield. Smith & Wesson has a PEG of only .24 signifying it's undervalued. With background checks for gun permits hitting 2.1 million in March, threats of regulation aren't hampering demand. At this point Ruger looks unfairly oversold with its 22.65% revenue growth over the last three years.
Middle market mid-cap
Fifth Street Finance was the star of the mid-cap screen with a 10.4% yield, 9 Wall Street Outperforms, a P/E of 10.8, and a 3 year revenue growth rate of 57.49%. It has more than $1.5 billion in assets prompting JPMorgan to rate it Overweight due to increasing competitive advantages.
However, the day before the Morgan upgrade Wells Fargo downgraded the entire sector to Market Weight on fears of "elevated risks to credit markets."
Fifth Street is a middle market lender in the business development company sector with opportunities for growth in areas that traditional banks have left due to regulatory burdens. Risks are interest rate stagnation and cuts to the dividend as well as the company risking more lending to less creditworthy businesses to generate income. That said, it is risking less than peers Pennant Park Investment and Prospect Capital.
Time for the big boys
Energy Transfer Partners, a master limited partnership and natural gas midstream pipeline company has a 7.40% yield and an 11.1 P/E. The revenue growth over the last three years has been 39.72%.
In October the company bought Sunoco for $5.3 billion giving it an interest in Sunoco Logistics Partners for exposure to crude oil and new projects in the Permian Basin.
The company just announced a secondary offering at $48.05 to be completed by the end of April. Proceeds are earmarked to pay off debt. The stock still traded higher, closing at $49.20 on April 9. It has almost round tripped its way back to the $51.00 high of last May 1.
Despite having a lower P/E than peers Kinder Morgan and Enbridge its growth profile is a negative 14.38% EPS growth rate expected over the next five years compared to analysts' expectation for the industry at 14.34% and a negative PEG of -1.77. However, net income increased from $206 million to $307 million year over year for almost a 50% improvement.
If you're not sold on energy right now or master limited partnerships you might consider stalwart Stanley, Black & Decker. As Home Depot has had one of the more remarkable runs this last year Stanley, Black & Decker could be a derivative play on the housing market.
It offers a 2.50% yield at a 14.7 P/E. Stanley, Black & Decker is more than just a consumer tool company with two other divisions: Security and Industrial. The Security division offers security solutions for residential and commercial use and Industrial offer tools and services for use in the automotive, natural gas pipeline, manufacturing, and aerospace industries.
There is talk of a deal with Tyco International to gain access to its security business and favored overseas tax treatment. So far, it's just talk but that could be a catalyst going forward. There is certainly precedent as Stanley Black & Decker has been a serial deal maker acquiring 25 companies, including Black & Decker, since 2002.
It should also be noted that CEO John Lundgren sold $12 million worth of shares in March at $80.00. The stock closed on Apr. 9 at $77.80 and has underperformed the S&P 500, only up 4.05% over the last year. Nonetheless, analysts see an 11.05% five year EPS growth rate with a median price target of $85.00.
Screening is a great way to get stock ideas and whether these fit your portfolio's profile or not, they have potential for a starring role. Among these I like the pure equities of Sturm, Ruger and Stanley, Black & Decker the most. But if you're looking for big yields there are two financials and an oil pipeline MLP to consider. (Caveat: consult your tax advisor with questions on the tax implications of an MLP.) Now, it's time for me to tackle the winter Angry Birds game and you to look at the pretty chart.
AnnaLisa Kraft has no position in any stocks mentioned. The Motley Fool owns shares of Sturm, Ruger & Company. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!