This new end of month report tallied results from here as verified using Yahoo Finance data for basic materials sector stocks as of market closing prices November 1 compared with analyst mean target price results one year hence. Four stocks boasted 18.05% to 52.17% price upsides. Southern Copper (NYSE:SCCO) a Phoenix, AZ headquartered copper firm at 18.05% showed the lowest upside of those four. Enduro Royalty Trust (NYSE:NDRO) an Austin, TX based independent oil and gas firm at 37.38% showed the third best upside. Alon USA Partners LP (NYSE:ALDW) the Dallas oil and gas refining & marketing firm with 44.44% showed the nearly best upside. Finally, Rentech Nitrogen Partners LP (NYSE:RNF) a Los Angeles based nitrogen fertilizer agricultural chemicals firm exhibited a 52.17% price upside to lead the November 1 basic materials dogs. Five other firms back in the pack showed 7.56% to 11.98% upsides.
Since the fall of 2011 this report series applied dog dividend methodology to uncover possible buy opportunities in each of eight major market sectors listed by Yahoo Finance: basic materials (BasMats), consumer goods (ConGo), financials (Fins), healthcare (Heal), industrial goods (IndiGo), services (Svcs), technology (Tec), and utilities (Utes).
Below, the Arnold Basic Materials Sector top dog selections for October were reported .
Dog Metrics Sorted Basic Materials Sector Stocks by Yield
Seven of the top ten basic materials stocks showing the biggest dividend yields per the Yahoo screen as of November 1 represented oil and/or gas (o&g) industries. These included the top dog, Alon USA Partners LP the marketer, and two independent o&g firms slotted two and three: SandRidge Mississippian Trust II (NYSE:SDR); Whiting USA Trust II (NYSE:WHZ).
So, merely three of the top ten basic materials firms by yield did not mention oil or gas in their industry description. The highest of these placed fourth, Great Northern Iron Ore Properties (NYSE:GNI), a steel and iron concern whose lease also expires in 2015. An agricultural chemicals firm, Rentech Nitrogen Partners LP was sixth by yield, and PetroLogistics LP, a major chemicals firm placed seventh.
The balance of the ten top dogs by yield were all o&g firms: Sandridge Permian Trust (NYSE:PER) an independent, in fifth; VOC Energy Trust, another independent o&g firm was eighth; Hugoton Royalty Trust (NYSE:HGT), classified as a driller in this sector was ninth; Northern Tier Energy LP (NYSE:NTI), listed as a refiner and marketer by Yahoo, was tenth.
Dividend vs. Price Results Compared to Dow Dogs
The graph below of the relative strengths of the top ten basic materials dogs by yield was plotted as of market close 11/1/2013 compared to those of the Dow of 10/17. Historic projected annual dividend history from $1000 invested in each of the ten highest yielding stocks and the total single share prices of those ten stocks created the data points shown in green for price and blue for dividends.
Actionable Conclusion (1): Basic Materials Top Ten Dogs Got Mauled; Dow Got Muddled
Dividend from $10k invested as $1k in each basic material top ten dog rocketed higher while the aggregate single share price of those ten dropped since September. Dividend flew up at a rate of 41.5% while total single share price dropped 42% in that period. The market signal was fully bearish primarily caused by the author's migration this month to a more inclusive basic materials stock screen for price and dividend data.
For the Dow dogs, meanwhile, projected annual dividend from $10k invested as $1K in each of the top ten Dow dogs dropped just 0.6% since September, while aggregate single share price swooned 11%, ending a brief bullish track. The Dow dogs overbought condition in which aggregate single share price of the ten exceeded projected annual dividend from $1k invested in each of the ten shrank. The overhang was $198 or 53% in June, then shrunk to $153 or 41% in July, compressed to $125 or 33% in August then expanded to $161 or 43% for September, then shrank down to $111 or 30% for October.
To quantify the top dog rankings, analyst mean price target estimates provided a "market sentiment" gauge of upside potential and so were added to the simple high yield "dog" metric used to dig out bargains.
Actionable Conclusion (2): Wall Street Wizard Wisdom Weighed Over 22% Net Gain from Top 20 Basic Materials Dogs In 2014
Top twenty dogs for the basic materials sector were graphed below to show relative strengths by dividend and price as of November 1, 2013 and those projected by analyst mean price target estimates to the same date in 2014.
A hypothetical $1000 investment in each equity 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 upsides to 2014.
Historic prices and actual dividends paid from $1000 invested in the ten highest yielding stocks and the aggregate single share prices of those twenty stocks divided by 2 created the data points for 2013. Projections based on estimated increases in dividend amounts from $1000 invested in the twenty highest yielding stocks and aggregate one year analyst target share prices from Yahoo Finance divided by 2 created the 2014 data points green for price and blue for dividends.
Yahoo projected an 8% lower dividend from $10K invested in this group while aggregate single share price was projected to increase by 7.7% 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 charts. Three to nine analysts was considered optimal for a valid projection estimate. Estimates provided by one analyst were not applied.
A beta (risk) ranking for each analyst rated stock was provided in the far right column on the above chart. A beta of 1 meant the stock's price would move with the market. Less than 1 showed lower than market movement. Higher than 1 showed greater than market movement. A negative beta number indicated the degree of a stocks movement opposite of market direction.
Actionable Conclusion (3): Analysts Forecast 9 Basic Materials Sector Dogs to Net 14.1% to 64.85% By October 2014
Just four of the nine top dividend yielding basic materials dogs were verified as being among the ten gainers for the coming year based on analyst 1 year target prices. So this month the dog strategy for basic materials as graded by Wall St. wizards was 44% accurate.
Nine probable profit generating trades revealed by Yahoo Finance for 2014 were:
Rentech Nitrogen Partners LP netted $648.49, based on dividend plus mean target price estimates from seven analysts less broker fees. The Beta number showed this estimate subject to volatility 256% more than the market as a whole.
Alon USA Partners LP (ALDW) netted $613.57 based on estimates from three analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility 59% less than the market as a whole.
Enduro Royalty Trust netted $467.62, based on dividends plus mean target price estimate from four analysts less broker fees. The Beta number showed this estimate subject to volatility 8% less than the market as a whole.
Southern Copper netted $277.25 based on dividends plus mean target price estimate from nineteen analysts less broker fees. The Beta number showed this estimate subject to volatility 42% more than the market as a whole.
PetroLogistics LP (NYSE:PDH) netted $232.94 based on a mean target price estimate from five analysts combined with projected annual dividend less broker fees. The Beta number showed this estimate subject to volatility 69% less than the market as a whole.
Northern Tier Energy LP netted $191.75, based on dividends plus a mean target price estimate by ten analysts less broker fees. The Beta number showed this estimate subject to volatility 7% less than the market as a whole.
Memorial Prod'n Partners LP (NASDAQ:MEMP) netted $194.36 based on dividends plus the mean of annual price estimates from eight analysts less broker fees. The Beta number showed this estimate subject to volatility 57% less than the market as a whole.
CVR Energy, Inc. (NYSE:CVI) netted $167.26 based on a mean target price estimate from three analysts combined with projected annual dividend less broker fees. The Beta number showed this estimate subject to volatility 84% greater than the market as a whole.
LinnCo LLC (NASDAQ:LNCO) netted $141.10 based on estimates from eight analysts plus dividends less broker fees. The Beta number showed this estimate subject to volatility .002% opposite the market as a whole.
The average net gain in dividend and price was over 32.8% on $9k invested as $1k in each of these nine dogs. This gain estimate was subject to average volatility 9% greater than the market as a whole.
The stocks listed above were suggested only as decent starting points for your sector dog dividend stock purchase research process. These were not recommendations.
These gains as reported do not factor-in any tax problems resulting from distributions. Consult your tax advisor regarding the source of "dividends" from any investment.
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.
Disclosure: I am long GE, INTC, MCD, MSFT, PFE, T, VZ. 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.