Using closing prices for ten Financials stocks as of April 26, 2013, this report is based on analyst 1 yr target prices from stocks selected by yield from the following list of thirty:
The plan 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 financials stocks boasted price upsides exceeding 5% per analysts: Capstead Mortgage Corp. (NYSE:CMO) at 5.25% showed the lowest upside of those seven. Anworth Mortgage Asset Co. (NYSE:ANH) at 5.63% placed sixth. Hatteras Financial Corp. (NYSE:HTS) posted 5.75% for the fifth best price upside projection. Invesco Mortgage Capital, Inc. (NYSE:IVR) took the middle point of the seven at 6.83%. Triangle Capital Corporation (NYSE:TCAP) at 7.77% showed the third best upside. CYS Investments, Inc. (NYSE:CYS) with 8.89% upside placed second. Finally, TICC Capital Corp. (NASDAQ:TICC) exhibited a 12.40% analyst 1 yr, target price upside to lead the April financial sector dogs. Three other firms back in the pack showed 4.15% to 4.88% analyst estimated upsides.
Wall Street Meets Main Street Financials
The contrast between April 26 closing prices compared to November 26 closing prices were reported and charted below.
The November price comparison showed three stocks with healthy upsides, five in very negative territory, one slightly negative, and one near zero on the positive side. The best price upside was 7.77% posted by Triangle Capital Corporation. The worst performers were American Capital Agency (NASDAQ:AGNC) at minus 39.77%, and CYS Investments, Inc. exhibiting a 38.11% drop.
The Road Between Wall Street & Main St. Financial Reality
Two charts and graph sets below document monthly price changes compared to analyst straight line incremental 1 yr target price projections for the ten financial stocks from April to November.
The price decline of CYS Investments, Inc. was most dramatically illustrated above as its actual monthly price journey graphed in aqua color fell markedly from the yellow analyst linear price projection at the top of the graph. In contrast, remarkably similar price performances were shown by TICC Capital Corp. and BlackRock Kelso Capital Co. (NASDAQ:BKCC) as their prices dropped away and then rejoined their analyst vectors as graphed in the middle of the chart above (in magenta and blue for TICC, and aqua and yellow colors for BKCC).
Opposite trajectories of price performance were demonstrated above. American Capital Agency (represented in magenta) showed a monthly price line dropping deep toward the bottom compared to its blue optimistic analyst target projection. In contrast, Triangle Capital Corporation (represented in aqua) showed a price path rising above, dropping below, then rising again to remain above ad parallel to the yellow upslope of its analyst target price projection.
The Road Ahead: Can Analyst Forecasts Be Recovered?
As of November 26, ten financials stocks contrasted to their analyst annual net gain projections as follows:
TICC Capital Corp. netted $127.90 in dividends and price less broker fees as of November. It was on track and needed just $93.03 to meet the April goal of netting $220.93, based on dividends plus mean target price estimate from five analysts less $20 in broker fees;
American Capital Agency netted a loss of $315.52 in dividends and price less broker fees as of November. It desperately needed nearly $500 more to meet the April goal of netting $177.36, based on dividend plus mean target price estimates from seventeen analysts less broker fees;
CYS Investments, Inc. netted a loss of $330.49 in dividends and price less broker fees as of November. It desperately needed nearly $500 more to meet the April goal of netting $174.24, based on dividend plus mean target price estimates from thirteen analysts less broker fees;
Invesco Mortgage Capital Inc. netted a loss of $238.04 in dividends and price less broker fees as of November. It needed just over $410 more to meet the April goal of netting $172.36, based on dividend plus mean target price estimates from eight analysts less broker fees;
Prospect Capital Corporation (NASDAQ:PSEC) netted $113.12 in dividends and price less broker fees as of November. It was ahead of pace and needed just $37.39 to meet the April goal of netting $150.51, based on dividends plus mean target price estimate from five analysts less $20 in broker fees;
Hatteras Financial Corp. netted a loss of $360.40 in dividends and price less broker fees as of November. It needed $503 more to meet the April goal of netting $142.60, based on dividend plus mean target price estimates from eleven analysts less broker fees;
Triangle Capital Corporation was ahead of pace as it netted $110.97 in dividends and price less broker fees as of November. It needed just $30.30 to meet the April goal of netting $141.27 based on dividends plus the mean of annual price estimates from eight analysts less broker fees;
Anworth Mortgage Asset Co. netted a loss of $274.97 in dividends and price less broker fees as of November. It needed $202.45 more to meet the April goal of netting $165.44 based on dividends plus mean target price estimate from seven analysts less broker fees;
BlackRock Kelso Capital Co. netted $56.83 in dividends and price less broker fees as of November. It was slightly behind the analyst trendline and had to make up $72.35 to meet the April goal of netting $129.18 based on estimates from six analysts plus dividends less $20 in broker fees;
Capstead Mortgage Corp. netted a loss of $21.48 in dividends and price along with $20 in broker fees as of November. It needed about $150 more to meet the April goal of netting $128.26 based on dividends plus mean target price estimate from four analysts less broker fees.
As of November 2014, the average net was a loss of 11.3% on $10k invested as $1k in each of these ten equities. This contrasts to an average net gain in dividend and price projected by analysts by April of nearly 15.7%.
The ability of Analyst 1 yr mean target price projections to forecast performance is still in doubt. As of November, the April forecasts in the financials sector were about (generously) 35% accurate. The final examination for this issue will be taken in April 2014. Stay tuned.
The Road Ahead: What do Analyst 1 yr. Mean Targets Foretell For Holding These To November 2014?
For the analytically curious, the chart and graph below answer the above question.
The five stocks in positive territory November 2013 were projected by analysts to be more positive by November 2014 mostly due to dividends paid to the stockholder.
The five stocks in negative territory November 2013 were projected by analysts to remain so by November 2014. However, the paper loss dropped to less than $25 for both Invesco Mortgage Capital Inc. and Anworth Mortgage Asset Co. As noted above, the ability of Analyst 1 yr mean target price projections to forecast performance is still in doubt. As of November 2014, the analyst upsides could put the average net for these ten stocks in positive territory at 5.5% The final examination for this issue will be taken in November 2014. Stay tuned.
The stocks listed above were suggested only as decent starting points for a sector dog dividend stock purchase research process in April 2013. 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 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.