(Editors' Note: This article covers a micro-cap stock. Please be aware of the risks associated with these stocks.)
- Analyst 1 year mean target price calculations for eight indices from January 2013 to 2014 averaged 61.25% accuracy.
- Analysts did poorest projecting prices for the S&P 500 and Russell indices with 30% accuracy.
- Analysts below average price prediction performance was exhibited on the NYSE International 100 and Top Sector Indices at 50%.
- Above average price prediction accuracy was turned in by analysts for the S&P Aristocrats at 70%; JPMorgan New Sovereigns at 80%; Dow Industrials at 80%; NASDAQ 100 at 100%.
- Mean target price projections for 33 analyst selected top dogs were 58% accurate; those for 41 analyst unrated dogs were 61% accurate.
For the past year I've been using analyst one year mean target price projections as a measure of market sentiment for stocks that were top ranked by yield. Last January I published the following eight lists touting one year mean target prices [MTP] set by brokerage analysts multiplied by the number of shares in a $1k investment to compare 10 stocks in each index showing the highest upside net gain potential into 2014. Here we are in 2014 and now it's time to tally up the box score to learn how analyst projections compared to real market results for all 8 indices.
Accuracy rankings were based on 2014 market prices meeting or exceeding analyst mean target projections made in January 2013. Here is the box score for eight indices:
- S&P 500 index: 30%
- Russell 1000 index: 30%
- NYSE International 100 index: 50%
- 9+1 Top Sector Index: 50%
- S&P 500 Aristocrats: 70%
- JPMorgan New Sovereigns: 80%
- Dow Jones Industrial Index: 80%
- NASDAQ 100 Index: 100%
Average score for eight indices: 61.25%
Detailed summaries for each index follow:
Analysts Forecast Dogs in 8 Indices Reckoned 7.5% to 25% Annual Net Gains by January 2014
Charts below for each index showed comparative net gains from $1k invested in each stock based on analyst mean target prices to January, 2014.
Five dogs from each index (marked *) showed the highest net gain. The hypothetical sale of those stocks (including a -$20 broker fee) added to the projected dividends revealed the total net for each stock. Since $1k is the initial investment, the percentage net gain was easy to calculate for each stock.
The number of analysts contributing to the mean target price estimate was noted in the last column on the charts. Three to nine analysts was considered optimal for a higher probability projection estimate.
Analyst 1yr MTP Showed 19% Av. Net Gains for Top 10 S&P 500 Stocks come 2014
McGraw Hill, publisher of the S&P 500 Index states "Standard & Poor's strives to provide investors who want to make better informed investment decisions with market intelligence in the form of credit ratings, indices, investment research and risk evaluations and solutions." The company states that the "index includes 500 leading companies in leading industries of the U.S. economy, capturing 75% coverage of U.S. equities".
Five of nine Yahoo sectors placed top dogs in this index by yield in January 2013. One services firm was listed, Donnelley, R.R. & Sons (RRD) posted a top $444.14 net gain in price and dividends per the mean of estimates from 4 analysts including a $20 broker fee. Top dog by yield, Pitney Bowes Inc (PBI) showed a $404.90 net gain per 3 analysts. It was one of two consumer goods firms. The other consumer goods dog, Reynolds American Inc. (RAI) was estimated to produce s $105.41 net gain by 9 analysts. Three technology firms made the top ten: Frontier Communications (FTR) showed a possible $185.24 net gain based on mean target pricing from 11 analysts; CenturyLink Inc. (CTL) showed a $148.15 possible net gain from 15 analysts; Windstream Corp (WIN), showed $125.19 net from 14 analysts. Three utilities made the list: Exelon Corp. (EXC), showed $145.19 net gain based on mean target pricing from 17 analysts; First Energy (FE) flashed a $135,39 net gain estimate based on mean target pricing form 15 analysts; Pepco Holdings Inc. (POM) revealed a $69.78 net gain based on estimates from 9 analysts. One basic materials firm, Cliffs Natural Resources (CLF) with an estimated $141.94 net gain from sixteen analysts completed the S&P 500 top dogs.
S&P 500 Analyst Estimates Were 30% Accurate.
Accuracy rankings were based on 2014 market prices meeting or exceeding analyst mean target projections made in January 2013. As you can see in the graph and chart below only three or the ten S&P500 stocks met or exceeded analyst net gain estimates: Donnelley (R.R.) & Sons; Pitney Bowes; Reynolds American, Inc.. Those three were joined by Frontier Communications, and Pepco Holdings, Inc. to create the five stocks of the top ten S&P500 that did not lose money for their annual January stock traders.
Analyst Estimates Averaged 17.8% Net Gains for Top 10 Russell 1000 Index Stocks for 2014
Russell Investments stated that the Russell 1000 Index offered investors "access to the extensive large-cap segment of the U.S. equity universe, representing approximately 90% of the U.S. market."
Six of the top ten stocks in this index paying the big dividends in January 2013 were financial sector firms: American Capital Agency (AGNC) led these but only placed third in the net gain rankings from analyst mean target pricing plus dividends minus $20 in broker fees with $208.18 based on estimates from 20 analysts. One services firm, Donnelley R R & Sons Co. was tops with $444.24 in gains based on mean target prices from 4 analysts. One consumer goods firm, Pitney Bowes Inc., was next with $404.90 in gains per 3 analysts. A technology firm, Windstream Corp with an estimated $131.08 per 12 analysts was surrounded by five Financials: Hatteras Financial Corp (HTS) showing $131.59 in gains per 4 analysts; Annaly Capital Management Inc (NLY) displaying $129.29 gains per 4 analysts; Chimera Investment Corp. (CIM) with $102.45 gain per 16 analysts; Ares Capital Corp (ARCC) posted $98.30 per 14 analysts; MFA Financial Inc, (MFA) had $68.70 gain per 12 analysts. One basic materials firm, Southern Copper Corp, (SCCO) with $63.93 gains per 15 analysts completed the top ten.
Russell 1000 Analyst Estimates Were 30% Accurate.
Accuracy percentage was determined by 2014 market prices meeting or exceeding analyst mean target projections made January 2013. The graph and chart below showed only three or the ten Russell 1000 stocks meeting or exceeding analyst net gain estimates: Donnelley (R.R.) & Sons; Pitney Bowes; Chimera Investment. Ares Capital Corporation joined those three and made four stocks of the top ten Russell 1000 that did not lose money for January stock traders.
Analyst 1yr MTP Showed 25% Av. Net Gains for Top 10 Sector Dogs come 2014
January 2013 results for selected top yielding dogs from each of nine business sectors along with the best yielding runner-up from any sector as the tenth perfectly diversified a top ten sector index portfolio, named 1x9+1 Sectors Index.
Nine top dogs and top runner-up made the 1x9+1 list: TAL Education Group in Services showed a $686.71 net gain per 8 analysts; Pitney Bowes the consumer goods representative showed $443,77 net gains per three analysts; Diana Containerships, the services runner-up showed $352.67 net gains estimated by 7 analysts; Whiting USA Trust I in basic materials showed $326.08 net gain per 1 analyst; Portugal Telecom, technology showed $207.72 net gain per 1 analyst; Two Harbors Investment in financial posted #167.71 net gain from dividends only requiring 0 analysts; Just Energy (JE), for utilities put up a$113,89 net gain from dividends only requiring no analysts; United Technologies Corporation (UTX), from conglomerates flashed a $83.91 net gain per 18 analysts; PDL BioPharma (PDLI) for healthcare showed a $61.19 net gain per 4 analysts; Highway Holdings (HIHO), represented industrial goods with $43.49 net gain from dividends only requiring no analysts.
Top 10 Sector Dogs Analyst Estimates Were 50% Accurate.
Accuracy percentage determined by 2014 market prices meeting or exceeding analyst January 2013 mean target projections showed five of the ten 1x9+1 index stocks meeting or exceeding analyst net gain estimates: TAL Education Group; Pitney Bowes; Highway Holdings; United Technologies; PDL BioPharma. Two more sector stocks, Whiting USA Trust I, and Portugal Telecom SGPS joined those five and made seven stocks of the top ten 1x9+1 index that did not lose money for January stock traders.
Analyst Estimates Averaged 11% Net Gains for NYSE International 100 Stocks for 2014
The NYSE stated, "The NYSE International100 Index tracks the largest 100 non-U.S. common stocks listed on the New York Stock Exchange. As of year-end 2011, the companies represented represent over one-quarter of the total market capitalization of all common stocks listed on the NYSE."
As of January 22, 2013 the stock that projected the biggest net gains for this index was a technology firm, France Telecom (FTE) with $323.54 net gain per one analyst. One of four basic materials firms in this Global Index, BP PLC displayed a $204.74 net gain per 8 analysts. The lone utility, National Grid PLC (NGG) showed $144,93 net gain per 2 analysts. One healthcare firm in the top ten, GlaxoSmithKline PLC (GSK) posted a net gain of $111.17 per 3 analysts. Another basic materials firm, Total S.A. (TOT) showed $109.19 net gains per 6 analysts. Two financial companies placed at the top of the lower five, Westpac Banking Corp. (WBK) showed $71.50 net gain per 1 analyst, and BCE Inc. (BCE), projected a $50,40 net gain per 7 analysts. VimpelCom Ltd. (VIP), the second technology firm on the list showed $46.17 net gain per 18 analysts. The last two basic materials firms, Ecopetrol S.A. (EC) projected $27.74 net gains per eleven analysts; Royal Dutch Shell PLC B (RDS.B) showing $27.53 net gain from dividends only requiring 0 analysts. In all six of nine sectors were represented in the NYSE International top ten.
Top 10 NYSE International 100 Index Analyst Estimates Were 50% Accurate.
Accuracy as determined by 2014 market prices meeting or exceeding analyst January 2013 mean target projections showed five of the ten NYSE International 100 index stocks doing so: GlaxoSmithKline PLC; National Grid PLC; Total SA; Royal Dutch Shell PLC; VimpelCom Ltd. Three more NYSE International 100 stocks, France Telecom/Orange, BP PLC, and Westpac Banking Corp joined those five and made eight stocks of the top ten NYSE International 100 index that did not lose money for January stock traders.
Analyst 1yr MTP Showed 7.5% Av. Net Gains for Top 10 Aristocrats Dogs come 2014
McGraw Hill, publisher if this index, stated, "The S&P 500® Dividend Aristocrats index measures the performance of large cap, blue chip companies within the S&P 500 that have followed a policy of increasing dividends every year for at least 25 consecutive years."
January 2013 Aristocrats featured six of nine business sectors in the top ten by yield. One of four consumer goods firms led the pack. Pitney Bowes Inc. projected $412.03 net gain per 3 analysts; one technology firm, AT&T (T) projected $112.62 net gain per mean target price determined by 28 analysts. Johnson & Johnson (JNJ) the lone health care company posted a $80,21 net gain per 17 analysts. One utility, Consolidated Edison (ED) charted $$46,76 in net gain per 12 analysts. One of two financials, HCP, Inc. (HCP) showed a $23,05 net gain per 10 analysts. Leggett & Platt (LEG) was the best of three for the consumer goods contingent with $19.67 net gain per 12 analysts. The other financial firm, Cincinnati Financial (CINF), posted an $18.48 net gain per 7 analysts. One service firm, Sysco Corporation (SYY) posted a $15.31 net gain per nine analysts. Kimberly-Clark (KMB) with $1402 net gain by 15 analysts, and Clorox Co with $13.20 net gain per 13 analysts rounded out the top ten Aristocrats.
Top 10 S&P500 Aristocrats Index Analyst Estimates Were 70% Accurate.
2014 market prices meeting or exceeding analyst January 2013 mean target projections showed seven of the ten Aristocrats index stocks doing so: Pitney Bowes; Johnson & Johnson; Kimberly-Clark; Cincinnati Financial; Clorox Co; Sysco Corp; Leggett & Platt. One more Aristocrat, AT&T Inc. joined those seven and made eight stocks of the top ten S&P500 Aristocrats index that did not lose money for January stock traders.
Analyst Estimates Averaged 9.3% Net Gains for JPMorgan New Sovereigns Stocks for 2014
Thomas Lee, an equity strategist with J.P. Morgan, July 22, 2011, published a note titled "Corporates are the New Sovereigns: 22 stocks to own around sovereign default." The Barron's article covering Lee's announcement defined a Sovereign as an entity which can print money or tax at will. Lee's report listed 22 corporate stocks that show less risk of default than the sovereign U.S. government, based on five-year credit spreads, free cash flow yields exceeding bond yields, ratings of overweight by J.P. Morgan, and showing upside to their target prices at that time.
The biggest estimated gainers for ten January 2013 Sovereigns included firms from just four of nine business sectors. A basic materials firm was tops. Freeport-McMoRan (FCX) projected $159.54 net gain per 14 analysts. One of two consumer goods firms, Coca Cola Co. (KO) posted $142.67 net gain per 13 analysts. The lone healthcare firm, Merck (MRK) showed $132.27 in net gain according to 17 analysts. Three services firms placed in the top ten: CSX Corporation (CSX) with $130.37 net gain by 23 analysts; United Parcel Service (UPS) showed $95.26 net gain per 19 analysts; Norfolk Southern Corp. (NSC) posted $78.38 net gain according to 22 analysts. A second basic materials concern, Conoco Phillips (COP) projected $81.70 net gain by 17 analysts. The other consumer goods firm, PepsiCo Inc. showed $73,58 net gain per 13 analysts. Finally, two industrial goods firms, Lockheed Martin Corp. (LMT), with $27.88 net gain per 13 analysts, and Raytheon Inc.(RTN) with $14,97 net gain estimated by sixteen analysts rounded out the top ten January new sovereign dogs.
Top 10 JPMorgan New Sovereigns Index Analyst Estimates Were 80% Accurate.
2014 market prices meeting or exceeding analyst January 2013 mean target projections showed eight of the ten New Sovereigns index stocks succeeding: Raytheon Co.; Lockheed Martin Corp; Norfolk Southern Corp.; CSX Corp.; United Parcel Service; Merck & Co.; ConocoPhillips; PepsiCo Inc.. One more New Sovereign, Coca Cola Co. joined those eight and made nine stocks of the top ten JPMorgan New Sovereigns index that did not lose money for January stock traders.
Analyst 1yr MTP Showed 12% Av. Net Gains for Top 10 Dow Dogs come 2014
McGraw Hill Financial, publisher of this index, states: "The Dow®, is a price-weighted measure of 30 U.S. blue-chip companies. The Dow® covers all industries with the exception of transportation and utilities, which are covered by the Dow Jones Transportation Average™ and Dow Jones Utility Average™.
While stock selection is not governed by quantitative rules, a stock typically is added to The Dow® only if the company has an excellent reputation, demonstrates sustained growth and is of interest to a large number of investors. Maintaining adequate sector representation within the indices is also a consideration in the selection process."
The January 2013 Dow dogs included five of nine business sectors in the top ten by yield. When it came to net gains, one of five technology firms led the pack. Microsoft Corp. (MSFT) posted a $278.80 net gain estimated by 31 analysts. The lone industrial goods firm, General Electric (GE) showed $186.19 net gain per 14 analysts. Two healthcare firms made the list: Merck with $158.46 net gain per 17 analysts, and Pfizer (PFE) with $104.42 net gain by 16 analysts. One basic materials firm, DuPont (DD) was sandwiched by the health dogs and posted a $124.98 net gain as estimated by 14 analysts. The lone services firm, McDonald's (MCD) posted a $98.20 net gain per 23 analysts. Four technology firms: $103,82 net gain per 37 analysts; Verizon (VZ) posting a $75.03 gain per 29 analysts; AT&T with $66.01 gain per 28 analysts; Hewlett-Packard (HPQ) showing $15.01 net gain from 22 analysts rounded out the top ten Dow list.
Top 10 Dow Industrials Index Analyst Estimates Were 80% Accurate.
Market prices in 2014 meeting or exceeding analyst January 2013 mean target projections showed eight of the ten Dow Industrial index stocks: Hewlett-Packard; DuPont (E.I.); Microsoft Corp.; General Electric; Intel Corp.; Merck & Co.; Pfizer Inc.; Verizon Communications. Two more Dow Industrials, McDonald's Corp. and AT&T Inc. joined those eight and made ten stocks of the top ten Dow index that did not lose money for January stock traders.
Analyst Estimates Averaged 10.5% Net Gains for Top 10 NASDAQ 100 Stocks for 2014
NASDAQ states, "The NASDAQ-100 Index includes 100 of the largest domestic and international non-financial securities listed on The Nasdaq Stock Market based on market capitalization. The Index reflects companies across major industry groups including computer hardware and software, telecommunications, retail/wholesale trade and biotechnology. It does not contain securities of financial companies including investment companies."
Three sectors were represented in the top ten NASDAQ dogs into January per IndexARB.com data. Technology had seven firms in the top ten showing high forward looking yields in this index. Microsoft from this sector with $239.33 claimed the top spot by net gain projections from 31 analysts. The other six technology firms in declining order were: Garmin (GRMN) showing $218.38 net gains from 8 analysts; Vodafone (VOD) posting $188.81 net gains per 4 analysts; Intel (INTC) showing $107.90 by 37 analysts; CA Technologies (CA) $84.91 net gains per 10 analysts; Microchip Technology (MCHP) $84.37 net from 15 analysts; Seagate Technology (SEA) with $20.96 per 16 analysts. The lone consumer goods representative, Mattel (MAT) with $89.53 net gain per 11 analysts was surrounded by tech. A remaining NASDAQ high yield sector for January sported two service firms, Paychex (PAYX) at $46.20 net gain per 17 analysts, and Staples (SPLS) which projected $19.29 net gain per 16 analysts, which filled out the NASDAQ top ten.
Top 10 NASDAQ 100 Analyst Estimates Were 100% Accurate.
Market prices in 2014 meeting or exceeding analyst January 2013 mean target projections included all ten NASDAQ index stocks. Not one January stock traders lost money on these ten NASDAQ stocks bought January 2013 and sold January 2014. Average return on $10k invested as $1k in each NASDAQ dog.
Background and Conclusion
The net gain charts above used one year mean target price set by brokerage analysts multiplied by the number of shares in a $1k investment to compare ten stocks in each of eight indices. Stocks thus showed their upside price potential into 2014 out 10 selected by yield in 2013. 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 price upsides and net gains including dividends less broker fees as of 2014.
Charts compared actual to projected gains by adding the difference between actual net gains in 2014 minus projected net gains from 2013 to the 2013 net gain amount to produce a total gain for each equity. In several instances negative numbers resulted.
This article was written to reveal how bargain stocks bought and held for the past year fared. It is a quarterly follow-up summary for an ongoing series that has reported (1) dividend yield; (2) price upside; (3) net gain results based on analyst 1 yr target projections in eight indices.
Stocks reported were termed dogs because they were all selected based on Michael B. O'Higgins book "Beating The Dow" (HarperCollins, 1991), which revealed how high yielding stocks whose prices increased (and whose dividend yields therefore decreased) could be sold off once a year to sweep gains and reinvest the seed money into higher yielding stocks in the same index, named Dogs of the Dow. O'Higgins system works to find bargains in any collection of dividend paying stocks. Utilizing analyst price upside estimates expanded the stock universe to include popular growth equities, if desired.
Wall St. Wizard Winners: 33 Analyst Picks Compared Top to Bottom
Five dogs from seven indices and four from one index (marked * above) were selected by analysts as most likely to show the highest net gains. The hypothetical sale of those stocks (including a -$20 broker fee) added to the projected dividends revealed the total net for each stock. Below is a ranking of the net gains for stocks from each index (33 total) as flagged by analysts.
Nineteen of the thirty-three analyst-selected top dogs met or exceeded analyst January 2013 mean target price projections. Thus the analyst top selections were 58% accurate.
Wall St. Wizard Leftovers: 41 Analyst Rejects Compared Top to Bottom
Forty-one stocks not selected as top dogs by analysts (five from seven indices plus six from one index) were ranked by net gains below.
Twenty five of the forty-one analyst-rejected dogs met or exceeded January 2013 mean target price projections. Thus the analyst rejects were 61% accurate.
These indices and their component stocks have ongoing stories to tell. Their graphs, charts, and lists of companies will be updated for publication periodically. Stay tuned. In April another annual updated analyst scorecard will feature more stocks in more indices.
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.