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 | 338.50% | 778.20% | |
Bitauto Holdings Ltd | 56.41% | 44.54% | |
Energy Partners Ltd. | 34.38% | 438.39% | |
Homeowners Choice, Inc. | 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. | 180.55% | 233.44% | |
New York Mortgage Trust Inc. | 642.19% | 220.37% | |
Qihoo 360 Technology Co. Ltd | 76.95% | 17.30% | |
Resource Capital Corp. | RSO | 33.05% | 2523.03% |
Santarus, Inc. | 65.01% | 149.04% | |
Sapiens International Corp. | 66.55% | 68.84% | |
Smith & Wesson Holding Corp. | 47.95% | 1574.38% | |
Syntroleum Corp. | 269.22% | 78.88% | |
Triangle Capital Corporation | 36.40% | 4.76% | |
THL Credit, Inc. | 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
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1 Year Return of Financial Services companies vs. XLF
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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:
- Financial stocks are overpriced in the long-term
- The EPS expectations and growth are lower than what is appropriate, as they have a very large sales growth Q/Q.
- 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.
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Comments are welcome and appreciated.
