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The companies highlighted below reported earnings last week (03/04 - 03/08). All companies reported positive EPS Q/Q and have a positive Profit Margin.

Company

Ticker

Sales Q/Q

EPS Q/Q

Apollo Residential Mortgage

AMTG

338.50%

778.20%

Bitauto Holdings Ltd

BITA

56.41%

44.54%

Energy Partners Ltd.

EPL

34.38%

438.39%

Homeowners Choice, Inc.

HCI

39.68%

91.94%

Main Street Capital

MAIN

34.34%

62.65%

AG Mortgage Investment Trust

MITT

261.31%

7.37%

Nationstar Mortgage Holdings Inc.

NSM

180.55%

233.44%

New York Mortgage Trust Inc.

NYMT

642.19%

220.37%

Qihoo 360 Technology Co. Ltd

QIHU

76.95%

17.30%

Resource Capital Corp.

RSO

33.05%

2523.03%

Santarus, Inc.

SNTS

65.01%

149.04%

Sapiens International Corp.

SPNS

66.55%

68.84%

Smith & Wesson Holding Corp.

SWHC

47.95%

1574.38%

Syntroleum Corp.

SYNM

269.22%

78.88%

Triangle Capital Corporation

TCAP

36.40%

4.76%

THL Credit, Inc.

TCRD

37.98%

7.55%

Data retrieved from Finviz.com

9 out of 16 of the companies are either in the Financial Services industry or Real Estate Industry. Does this suggest that the Bull Run in these sectors is far from over? I do believe so.

1 Year Return vs. S&P 500

(click to enlarge)

1 Year Return of Financial Services companies vs. XLF

(click to enlarge)

Valuation

Company

Ticker

P/E

Forward P/E

Industry P/E

Sector P/E

Sector

Apollo Residential

AMTG

3.31

7.28

22.60

37.23

Financial

Bitauto

BITA

20.14

9.17

22.38

24.33

Technology

Energy Partners

EPL

18.82

5.67

12.28

12.54

Basic Materials

Homeowners Choice

HCI

8.07

8.25

15.14

37.23

Financial

Main Street Capital

MAIN

9.34

15.25

131.83

37.23

Financial

AG Mortgage

MITT

3.53

7.72

22.60

37.23

Financial

Nationstar Mortgage

NSM

16.52

6.76

15.89

37.23

Financial

New York Mortgage

NYMT

5.71

6.64

22.60

37.23

Financial

Qihoo 360

QIHU

81.75

19.43

22.38

24.33

Technology

Resource Capital

RSO

9.27

8.84

85.08

37.23

Financial

Santarus

SNTS

58.46

13.21

27.49

27.21

Healthcare

Sapiens International

SPNS

22.57

-

25.67

24.33

Technology

Smith & Wesson

SWHC

11.06

8.96

18.27

14.13

Industrial Goods

Syntroleum

SYNM

39.79

1.91

13.18

12.54

Basic Materials

Triangle Capital

TCAP

13.37

12.18

22.60

37.23

Financial

THL Credit

TCRD

12.42

10.12

131.83

37.23

Financial

It appears that equities within the financial industry are the only stocks that have a forward P/E greater than the trailing P/E.

Possible reasons behind the higher forward P/E for stocks in the financial sector include:

  1. Financial stocks are overpriced in the long-term
  2. The EPS expectations and growth are lower than what is appropriate, as they have a very large sales growth Q/Q.
  3. All equities within the financial sector that appear to have a rising future P/E also pay dividends and should be added back to arrive at a better calculation.

Notable ETFs with holdings

ETF

# Stocks

% of ETF

PZI

09/16

2.33%

EWRS

13/16

0.44%

BIZD

03/16

11.54%

Results from ETFChannel.com

The Zacks Micro Cap ETF has the highest combination of holdings of the mentioned 13 stocks (09/13) and % allocation (2.33%). The only ETF that holds all 13 securities is Guggenheim Russell 2000 Equal Weight ETF, but the total is only 0.44%. BDC Income ETF holds a surprising 11.54% and contains 3/13 of the above mention securities (MAIN, TCAP, and TCRD).

If investing based on an ETF instead of purchasing individual stocks, I would purchase BIZD based upon the findings above. The XLF ETF did not even generate a notable percentage of the holdings detailed above.

I love the idea of being able to trade and invest in ETFs, but leaving my investing decisions in a sector or industry to someone else makes me uneasy. Are the remaining 88.46% of BDC Income ETF companies that I would actually like to invest in? Probably not, but I would enjoy kicking the tires on BDC and seeing how far it can really travel.

Weighting within BIZD out of 25 holdings

Main Street Capital

4.66%

4th highest holding

Triangle Capital

4.76%

5th highest holding

THL Credit

2.09%

16th highest holding

Results from ETFChannel.com

An alternative to purchasing a pre-allocated ETF with 0% control over holdings would be to invest with equal weight. I believe equal weighting, not weighting by market capitalization, is the best strategy.

(click to enlarge)

Comments are welcome and appreciated.

Source: Companies That Reported 30% Sales Growth Last Week