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Summary

  • Citi may have the best upside surprise of this bunch to claim a playoff spot.
  • Rowan Companies is another company which can make a big surprise towards the end of the season to claim a spot in the playoffs.
  • Of these bottom ten teams, there are a couple that might not see the regular season once August rolls around for my quarterly portfolio change out.

It's that time of year again…The summer solstice has passed, some schools are about to begin their fall semester, and most importantly, football season is upon us! A lot has happened in 2014; we saw an emerging market crisis in January which saw the S&P 500 (NYSEARCA:SPY) drop by about 6% only to rally into March for a 1% gain on the year. Then all of a sudden the market was hit with a growth stock ailment which caused the S&P 500 to drop 2% for the year, then rallying again to go up about 6.45% for 2014. To make things interesting, I'm going to use this time to throw out my Dividend Portfolio Pre-Season Power Rankings and see if people feel the same way I do about some of these stocks. I've divided the power rankings into three parts and this is the last chapter. If you would like a refresher of spots 1-10 or would like to catch spots 1-10 for the first time, the first article is located here. If you'd like to catch up on spots 11-20 or read about them for the first time, the article is located here.

21

American Realty Capital Properties, Inc. (NASDAQ:ARCP)

ARCP is a real estate investment trust, owning and acquiring single-tenant, freestanding commercial real estate primarily subject to medium-term net leases with credit quality tenants.

Fundamentals

Price

TTM P/E

Fwd P/E

PEG

P/FCF

EPS Next Yr

EPS Next 5 Yr

13.03

-

-

-

-

10.8%

10.2%

Financials

Dividend

ROA

ROE

ROI

Debt/Eq

Gross Margin

Oper Margin

Profit Margin

7.67%

-7%

-17.5%

-4.2%

1.13

89.9%

9.2%

-

Performance

1 Yr

YTD

My Return

My Weighting

-6.06%

6.54%

2.63%

3.41%

My Take

I got into this stock just one day before the announcement that they decided they weren't going to spin off a portion of the company, then a couple days later there was an equity offering. It's safe to say that I was provided a one, two punch combination that took me a couple weeks to recover from. I was initially in the stock for the spinoff, but it wasn't the only reason why I wanted the stock. A REIT company doesn't follow normal fundamental metrics based off earnings like other companies, because it has to dole out 90% of its earnings to shareholders through dividends. So when speaking about a REIT, you have to evaluate it from a Funds From Operations perspective and that ratio for ARCP is an inexpensive 12.04. Within the realm of REIT stocks, this is a value play. The financial metrics aren't anything great because of the fact that it is a REIT. The debt to equity ratio is pretty high because the company is levered a bit much in order to do its wheeling and dealing for better properties. Gross margins are a bright spot on the financial side of things, showing that revenues far exceed cost of goods. This company has to move up nine spots in order to make a playoff spot and I believe it is going to be tough, but if they do, I have no doubt they are going to lose in the first round.

22

JPMorgan Chase & Co. (NYSE:JPM)

JPMorgan is a financial holding company and is engaged in investment banking, financial services for consumers and small business, commercial banking, financial transaction processing, asset management and private equity.

Fundamentals

Price

TTM P/E

Fwd P/E

PEG

P/FCF

EPS Next Yr

EPS Next 5 Yr

58.23

14.34

9.88

2.87

2.29

11.27%

5%

Financials

Dividend

ROA

ROE

ROI

Debt/Eq

Gross Margin

Oper Margin

Profit Margin

2.75%

0.9%

10.8%

7.5%

1.34

-

61.2%

41%

Performance

1 Yr

YTD

My Return

My Weighting

6.14%

1.55%

2.25%

3.33%

My Take

The company reported earnings during this past week and Wall Street applauded the results by increasing the stock price 3.52% the day of reporting. I on the other wasn't too enthused by the results as revenue and earnings dropped, but the tangible book value increased. On a fundamental basis the stock is trading around fair value on trailing earnings but is trading very well under 2015 earnings estimates. The company's long term growth prospects are pretty low, thus making it pretty expensive based on growth metrics. On a free cash flow basis though, the company is inexpensive which can mean higher dividend growth next year. From a financial perspective the company shows that it is operated very well by showing a 61.2% operating margin which leads to total profit margins of 41%. After losing to KLA-Tencor (NASDAQ:KLAC) in the first ever Dividend Portfolio Super Bowl back in January, this stock has just plummeted; all while KLAC has sky-rocketed. JPMorgan is going to have to catch up in a big way if it looks to go back to the big game, but I don't believe it is going to happen.

23

Polaris Industries, Inc. (NYSE:PII)

Polaris designs, engineers and manufactures off-road vehicles including all-terrain vehicles and side-by-side vehicles for recreational and utility use, snowmobiles, and on-road vehicles including motorcycles and small electric vehicles.

Fundamentals

Price

TTM P/E

Fwd P/E

PEG

P/FCF

EPS Next Yr

EPS Next 5 Yr

132.80

24.01

17.10

1.37

72.02

19.68%

17.5%

Financials

Dividend

ROA

ROE

ROI

Debt/Eq

Gross Margin

Oper Margin

Profit Margin

1.45%

21.9%

53%

46.7%

0.54

29.7%

14.2%

9.8%

Performance

1 Yr

YTD

My Return

My Weighting

30.57%

-8.15%

1.53%

1.82%

My Take

I brought this stock over into my dividend portfolio after it won the Growth Portfolio Super Bowl in January, but the results haven't just translated into this league. Growth stocks have had a rough year in 2014 and this is one of those stocks. Fundamentally it is trading at an extremely high free cash flow ratio, but on a financial efficiency perspective this company is top of the class. Management definitely knows how to manage the company's assets, their shareholders' equity, and investments by boasting excellent financial efficiency metrics. Because this is a capital intense environment that the company operates in, the debt ratio is a bit high. Because this stock trades on earnings growth, it is going to have to boost earnings forecasts quite just to think about a playoff spot.

24

Consolidated Edison Inc. (NYSE:ED)

ConEd is a holding company that owns Consolidated Edison Company of New York and Orange & Rockland Utilities.

Fundamentals

Price

TTM P/E

Fwd P/E

PEG

P/FCF

EPS Next Yr

EPS Next 5 Yr

56.92

13.58

14.71

5.39

-

2.98%

2.52%

Financials

Dividend

ROA

ROE

ROI

Debt/Eq

Gross Margin

Oper Margin

Profit Margin

4.43%

3%

10.1%

7.2%

1

68.1%

18.5%

9.5%

Performance

1 Yr

YTD

My Return

My Weighting

-2.2%

4.17%

0.67%

5.14%

My Take

This company has literally done nothing for me, and it is one of my largest positions. There is still the unknown about the explosion in March hanging over the company like an ominous cloud. This team is definitely a candidate for change-out in August when the time comes. The stock is inexpensive based on trailing earnings and forward earnings, but I don't like that I would be paying more for next year's earnings than I have been for the past year. There is no growth for the company and that's why it sports a high valuation based on growth. Again, this is one of those capital intense industries and that's why it sports a high debt to equity ratio. There is absolutely no way this company survives my quarterly change-out which will happen in August.

25

Citigroup, Inc. (NYSE:C)

Citi is a global diversified financial services holding company, whose businesses provide consumers, corporations, governments and institutions with a broad range of financial products and services, which include consumer banking and credit, corporate and investment banking, securities brokerage and wealth management.

Fundamentals

Price

TTM P/E

Fwd P/E

PEG

P/FCF

EPS Next Yr

EPS Next 5 Yr

49.56

11.69

9.26

1.03

3.94

17.58%

11.34%

Financials

Dividend

ROA

ROE

ROI

Debt/Eq

Gross Margin

Oper Margin

Profit Margin

0.08%

0.9%

8.5%

8.2%

1.11

-

43.8%

26.8%

Performance

1 Yr

YTD

My Return

My Weighting

-5.87%

-4.86%

0.59%

5.78%

My Take

Again, this is one of my largest positions and it has done absolutely nothing for me. The company reported earnings earlier this week and The Street seemed to like it as the price of the stock was bid up 3.02%. To me it was one step forward and two steps back as the company earned less revenue and earnings per share dropped, but on the bright side, tangible book value increased. Leon Cooperman however did tout the company during the Delivering Alpha conference this week. Fundamentally, it is really inexpensive based on trailing earnings, future earnings estimates, and free cash flow. The company is however highly levered from a financial perspective with all the debt on its balance sheet. Management however does show that it knows how to run the company by showing a 43.8% operating margin which leads to a high 26.8% net margin. Interest rates are going to need to sky-rocket for this company to begin to make any real money, but that is not going to happen till early in 2015 possibly. This is definitely a rebuilding team which won't make the playoffs this year, but quite possibly next year.

26

Rowan Companies Inc. (NYSE:RDC)

Rowan is a provider of international and domestic offshore contract drilling services.

Fundamentals

Price

TTM P/E

Fwd P/E

PEG

P/FCF

EPS Next Yr

EPS Next 5 Yr

31.01

16.07

7.36

0.45

-

86.66%

35.9%

Financials

Dividend

ROA

ROE

ROI

Debt/Eq

Gross Margin

Oper Margin

Profit Margin

1.29%

3%

5.1%

4.7%

0.57

44.2%

17.7%

15.6%

Performance

1 Yr

YTD

My Return

My Weighting

-12.13%

-12.03%

0.19%

4.96%

My Take

Rowan is another one of my big positions which has done nothing for me of late. I initially put the stock into my portfolio back in May because I felt that it was severely undervalued. Indeed from a trailing earnings and future earnings perspective the stock is undervalued. Then when you look at the long-term growth rate, the stock is also extremely undervalued from that perspective. Earnings per share are expected to grow almost 87% in 2015, and almost 36% for the next five years, that is freaking great. Financially however, this is in a capital intense industry and that's why it has a high debt to equity ratio. Barclays recently upgraded the sector saying it was severely undervalued and I really believe that if this stock is going to realize the earnings growth potential that it will come at the back half of the year and this team may be able to claim a playoff spot.

27

Transocean Ltd. (NYSE:RIG)

Transocean is an international provider of offshore contract drilling services for oil and gas wells by operating in the contract drilling service and drilling management services business segments.

Fundamentals

Price

TTM P/E

Fwd P/E

PEG

P/FCF

EPS Next Yr

EPS Next 5 Yr

42.82

10.03

12.13

1

-

-17.89%

10%

Financials

Dividend

ROA

ROE

ROI

Debt/Eq

Gross Margin

Oper Margin

Profit Margin

7.01%

4.7%

9.3%

7.2%

0.61

40.9%

26.6%

15.9%

Performance

1 Yr

YTD

My Return

My Weighting

-8.45%

-10.66%

-0.91%

5.81%

My Take

Just like Rowan, this stock is in the same industry and occupies a big part of my portfolio which has done me nothing. This stock is a prime candidate for my quarterly change out in August and might not see the light of day for the new season. The stock is extremely undervalued on trailing earnings and on future earnings estimates, but I absolutely despise paying more for next year's earnings estimates than what I have been for proven earnings in the past twelve months. The main issue is that earnings estimates for next year are expected to contract by a large amount and that's why I'm skeptical about the fortunes of this team. Again, this is another stock which operates in a capital intense environment and that's why it has a high debt to equity ratio. However, the company shows us that it knows how to manage its operations pretty well by giving us a 26.6% operating margin. If this team wants to live to see the playoffs it is definitely going to have to raise forecasts on earnings and I just don't see that happening anytime soon.

28

Dunkin' Brands Group Inc. (NASDAQ:DNKN)

Dunkin' is a franchiser of quick service restaurants serving hot and cold coffee and baked goods, as well as hard serve ice cream in the form of Dunkin' Donuts and Baskin-Robbins, respectively.

Fundamentals

Price

TTM P/E

Fwd P/E

PEG

P/FCF

EPS Next Yr

EPS Next 5 Yr

44.14

32.7

21.03

2.1

81.77

16.35%

15.58%

Financials

Dividend

ROA

ROE

ROI

Debt/Eq

Gross Margin

Oper Margin

Profit Margin

2.08%

4.6%

38%

10.2%

4.63

81.3%

40.4%

20.2%

Performance

1 Yr

YTD

My Return

My Weighting

3.88%

-7.54%

-1.99%

1.07%

My Take

My 'how the mighty have fallen'. In last year's playoffs Dunkin' had the number eight playoff spot but lost to JPMorgan in the opening round, and now they are in the 28th spot. The company has dropped quite a bit because it is spending like mad for its westward expansion. Even though the stock has dropped by so much during the past six months, it is still expensively valued based on the earnings growth expectations, and on the free cash flow. Financially, management knows how to handle the shareholders' equity but the debt to equity ratio is pretty high due to the expansion process. Management needs some praise again because gross, operating, and net profit margins are all extremely high. I believe the stock has dropped like a rock to the bottom of the rankings and may not be able to dream about the playoffs for another couple of years.

29

Agilent Technologies Inc. (A)

Agilent is a measurement company providing bio-analytical and electronic measurement solutions to the communications, electronics, life sciences and chemical analysis industries.

Fundamentals

Price

TTM P/E

Fwd P/E

PEG

P/FCF

EPS Next Yr

EPS Next 5 Yr

56.15

26.61

16.49

2.85

24.62

10.95%

9.33%

Financials

Dividend

ROA

ROE

ROI

Debt/Eq

Gross Margin

Oper Margin

Profit Margin

0.94%

6.7%

13.5%

10.2%

0.48

52.3%

16.2%

10.5%

Performance

1 Yr

YTD

My Return

My Weighting

23.49%

-1.35%

-4.11%

2.91%

My Take

I broke the rules to put this stock in my portfolio. I don't even change out a holding until my quarterly change out period, but I had to make a special case for Agilent. I used to hold Covidien (NYSE:COV) in this portfolio, but during mid-quarter, Medtronic (NYSE:MDT) made a buyout offer to Covidien and from there I felt the upside to Covidien itself was capped. Hence, the change out to Agilent during the mid-quarter period. I like Agilent in my portfolio because it gives me that spinoff opportunity I'm always looking for. Fundamentally though it has a high valuation based on earnings growth expectations. Financially, gross margins are pretty high. I should know this because they are basically the only game in town sometimes when it comes to equipment in the biotech industry. I have to fight tooth and nail with my sales rep just to get a loyal customer discount. I expect this team to remain at the bottom of the rankings for the entire season.

30

Rayonier Inc. (NYSE:RYN)

Rayonier is compared to real estate investment trusts and is an international forest products company primarily engaged in activities associated with timberland management, the sale and entitlement of real estate, and the production and sale of specialty cellulose fibers and fluff pulp.

Fundamentals

Price

TTM P/E

Fwd P/E

PEG

P/FCF

EPS Next Yr

EPS Next 5 Yr

35.1

16.87

38.36

-

275.72

-14.73%

-4.5%

Financials

Dividend

ROA

ROE

ROI

Debt/Eq

Gross Margin

Oper Margin

Profit Margin

5.58%

7.1%

16.5%

11.5%

0.91

24.6%

21.5%

15.7%

Performance

1 Yr

YTD

My Return

My Weighting

-15.83%

14%

-18.18%

2.93%

My Take

This is another one of those spinoff stocks I like to own. I got my shares of Rayonier Advanced Materials (NYSE:RYAM) and will continue to hold this team in the portfolio as well. My return calculation may look a bit bad, but that is not inclusive of the RYAM spinoff. Rayonier is expensive on a free cash flow metric and earnings are expected to contract by a lot in the near term and long term. The company operates in a capital intense environment and that's why it has a high debt to equity ratio. This team is the poster child of the rebuilding process and will remain at the last spot for the entire season probably, or it's going to jockey for the position with Agilent during the fourth quarter.

It's going to take a lot from any one of these stocks from 21 through 30 to claim a playoff spot. If anyone can do it though, I believe it is either going to be Citi, JPMorgan, or Rowan. I'm trying to keep my homework on the stocks I own entertaining for myself, and I hope I've made it a bit entertaining for you. Sometimes it just gets boring reading the same mundane stuff over and over again. As always, happy investing, and may you profit much!

Disclaimer: This article is meant to serve as a journal for myself as to the rationale of why I bought/sold this stock when I look back on it in the future. These are only my personal opinions and you should do your own homework. Only you are responsible for what you trade and happy investing!

Disclosure: The author is long A, DNKN, RYAM, ARCP, ED, PII, RYN, C, JPM, RDC, SPY, KLAC, RIG. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.

Source: Dividend Portfolio Pre-Season Power Rankings: 21-30