A few industries in this extended bull market show healthy projected upside prices to tempt investment. This article reported results calculated as of August 12, 2013 projecting gains one year hence for Specialty Finance Industry stocks. Arlington Asset Investment Corp. (NYSE:AI), the Arlington, VA headquartered mortgage backed-investment firm formerly known as Friedman, Billings, Ramsay Group, showed a 19.95% price upside to lead the top five finishers in that industry.
In case you want a piece of the specialty finance industry market action, the chart above used the one year mean target price set by brokerage analysts matched against August 12 closing price to compare 5 specialty finance industry stocks showing the highest upside price potential into 2014. These were: Arlington Asset Investment Corp. (as noted above) with a 19.95%% price gain; Ellington Financial LLC (NYSE:EFC) projected a17.59% upside; KKR Financial Holdings (KFN) had a 12.69% price upside; MCAN Mortgage (OTC:MAMTF) showed a 11.03% price upside; TCP Capital Corp (NASDAQ:TCPC) charted a 9.88% upside.
The number of analysts providing price estimates was noted after the name for each stock. Three to nine analysts were considered optimal for a valid mean target price estimate.
Wall Street Wizards Wrest A 22.8% Average Net Gain from 5 Specialty Finance Industry Stocks By 2014
Five YCharts picks were graphed below to show relative strengths by dividend and price as of August 12, 2013 and those projected by Yahoo Finance analyst mean 1 year target estimates to the same date in 2014.
A hypothetical $1000 investment in each stock was divided by the current share price to find the number of shares purchased. The shares number was then multiplied by projected annual per share dividend amounts to find the dividend return. Thereafter the analyst mean target price was used to gauge the stock price upsides and net gains including any dividends less broker fees as of 2014.
Historic prices and actual dividends paid from $1000 invested in the five stocks and the aggregate single share prices of those stocks created data points for 2013. Projections based on estimated dividend amounts from $1000 invested in each of the five highest yielding stocks and aggregate one year analyst target share prices from Yahoo Finance created the 2014 data points. The green line showed price and blue showed dividend.
Yahoo Finance projected a 12.6% lower dividend from $10K invested in this group while aggregate single share price was projected to increase almost 14.6% in the coming year. The number of analysts contributing to the mean target price estimate for each stock was noted in the next to the last column on the chart. Three to nine analysts was considered best for a valid projection estimate.
A beta (risk) ranking for each analyst rated stock was provided in the far right column on the chart above. A beta of 1 meant the stock's price would move with the market. Less than 1 showed less than market movement. Higher than 1 showed greater than market movement. Negative numbers show movement the opposite of market direction.
Five Specialty Finance Industry Stocks Net 17% to 32% by August 2014
Five possible profit generating stock trades from $1k invested in each revealed by YCharts and Yahoo Finance for 2014 were:
- Arlington Asset Investment Corp. netted $320.02, based on a mean target price estimate by six analysts plus dividends less $20 in broker fees. The Beta number showed this estimate subject to volatility 33% less than the market as a whole.
- Ellington Financial netted $242.07 based on a mean target price estimate from six analysts combined with projected annual dividend less $20 in estimated broker fees. The Beta number showed this estimate subject to volatility 38% less than the market as a whole.
- KKR Financial Holdings netted $234.94 based on a mean target price estimate from three analysts combined with projected annual dividend less $20 in estimated broker fees. The Beta number showed this estimate subject to volatility 8% more than the market as a whole.
- TCP Capital Corp netted $172.94, based on mean target price estimates from three analysts plus dividends less the usual broker fee. A Beta number was not available from Yahoo.
- MCAN Mortgage Corp. netted $170.54 based on a mean target price estimate from three analysts combined with projected annual dividend less the broker fees. A Beta number was not available from Yahoo.
The average net gain in dividend and price was 22.8% on $5k invested ($1k each) in these five stocks. This net gain estimate was subject to average volatility 21% less than the market as a whole.
The gains noted above did not factor-in any tax problems resulting from distributions. Consult your tax advisor regarding the source of "dividends" from any investment.
The stocks listed above were suggested only as decent starting points for your specialty finance industry stock purchase research process. These were not recommendations.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
Disclaimer: This article is for informational and educational purposes only and should not be construed to constitute investment advice. Nothing contained herein shall constitute a solicitation, recommendation or endorsement to buy or sell any security. Prices and returns on equities in this article except as noted are listed without consideration of fees, commissions, taxes, penalties, or interest payable due to purchasing, holding, or selling same.