This progress report started April 26, 2013 using closing prices for ten basic materials stocks selected by price upside from the following list of thirty:
The intent in April was to use analyst estimates as a "market sentiment" gauge of upside potential. Dow dividend dog theory picks from Yahoo sectors were supplemented with one year mean target price estimates reported by yahoo from broker analysts. Eight months of reality have now passed to provide a mid-term grade for the analyst April upside calls.
Wizards of Wall Street Weighed In
One year mean target price set by analysts multiplied by the number of shares in a $1k investment were used to compare ten stocks. The number of analysts providing price estimates was noted after the name for each stock. Three to nine analysts was considered optimal for a valid mean target price estimate.
Seven April basic materials stocks boasted double digit percentage price upsides per analysts: Vanguard Natural Resources (NYSE:VNR) at 10.57% showed the lowest upside of those seven. Legacy Reserves LP (NASDAQ:LGCY) at 11.19% placed sixth. Linn Energy LLC (LINE) posted 14.14% for the fifth best price upside projection. Seadrill Limited (NYSE:SDRL) took the middle point of the seven at 14.67%. Enerplus Corporation (NYSE:ERF) at 25.18% showed the third best upside. Pengrowth Energy (NYSE:PGH) with 29.98% upside placed second. Finally, Penn West Corporation (NYSE:PWE) exhibited a 53.94% price upside to lead the April basic materials dogs. Three other firms back in the pack showed 4.78% to 9.42% analyst estimated upsides.
Wall Street Meets Main Street
April 1 closing prices compared to December 1 closing prices were reported and charted below.
The December price comparison showed four stocks with healthy upsides, four in negative territory, and two near zero. The best price upside was 78.34% posted by Pioneer Southwest Energy (PSE). The worst performer was Linn Energy at minus 20.64%.
The Road Between Wall Street & Main
Two charts and graphs below document monthly price changes compared to analyst straight line incremental 1 yr target price projections.
Price progress of Pioneer Southwest was most dramatically illustrated above as its actual monthly price journey graphed in aqua color took off markedly from the yellow analyst linear price projection. In contrast, remarkably steady performance by Pengrowth Energy prices nearly exactly followed the analyst vector as it was graphed at the base of the chart above in the same aqua and yellow colors.
Opposite trajectories of price performance were demonstrated above. Linn Energy (represented in aqua) showed a monthly price line dropping of the chart at the bottom compared to its analyst yellow optimistic analyst target projection. In contrast, Seadrill Limited (represented in magenta) showed a price path shooting off the top of the chart before settling back to near the dark blue upslope of its analyst target price projection.
The Road Ahead: Can Analysts Forecasts Be Recovered?
As of December 1, ten basic materials stocks contrasted to their analyst annual net gain projections as follows:
Penn West Corporation netted just $3.33 in dividends and price less broker fees as of December. It must make up $633.72 to meet the April goal of netting $637.05, based on dividends plus mean target price estimate from six analysts less broker fees;
Pengrowth Energy Corporation netted $336.24 in dividends and price less broker fees as of December. It only needs $40.06 more to meet the April goal of netting $376.30, based on dividends plus a mean target price estimate by six analysts less broker fees;
Enerplus Corporation netted $402.70 in dividends and price less broker fees as of December. It is $92.80 beyond the April goal of netting $309.90 based on dividends plus mean target price estimate from seven analysts less broker fees;
Seadrill Limited netted $144.45 in dividends and price less broker fees as of December. It needs $71.19 more to meet the April goal of netting $215.64 based on a mean target price estimate from thirteen analysts combined with projected annual dividend less broker fees;
Linn Energy, LLC netted a loss of $169.93 in dividends and price less broker fees as of December. It desperately needs $367 more to meet the April goal of netting $197.06, based on dividend plus mean target price estimates from fourteen analysts less broker fees;
Legacy Reserves LP netted $22.27 in dividends and price less broker fees as of December. It must make up $152.68 to meet the April goal of netting $174.96 based on estimates from ten analysts plus dividends less broker fees;
Vanguard Natural Resources netted just $9.65 in dividends and price less broker fees as of December. It must make up $160.05 to meet the April goal of netting $169.70 based on dividends plus the mean of annual price estimates from ten analysts less broker fees;
BreitBurn Energy Partners LP (BBEP) netted a loss of $37.01 in dividends and price less broker fees as of December. It desperately needs $202.45 more to meet the April goal of netting $165.44 based on dividends plus mean target price estimate from thirteen analysts less broker fees;
Enbridge Energy Partners LP (NYSE:EEP) netted $22.14 in dividends and price less broker fees as of December. It must make up $100.81 to meet the April goal of netting $122.95 based on estimates from fifteen analysts plus dividends less broker fees;
Pioneer Southwest Energy netted $684.30 in dividends and price less $20 in broker fees as of December. It is $576.41 beyond the April goal of netting $107.89 based on a mean target price estimate from five analysts combined with projected annual dividend less broker fees.
As of December the average net gain was 14.18% on $10k invested as $1k in each of these ten equities. On a steady pace, these ten equities would show 16.5% average net gain in December based on an average net gain in dividend and price projected by analysts by April of over 24.7%.
The ability of analyst 1 yr. mean target price projections to forecast performance is still in doubt. As of December the April forecasts in the basic materials sector were about (generously) 40% accurate. The final examination of this issue will be taken in April. Stay tuned.
The stocks listed above were suggested only as decent starting points for your sector dog dividend stock purchase research process in April. These were not recommendations.
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 ERF, PGH. 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.