3 Stocks The Market May Be Overlooking

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 |  Includes: EBF, NCT, RRMS
by: MyPlanIQ

As we continue to look at a variety of stocks -- some for long term safety and income -- others for potential growth, we pick up on three stocks highlighted by Scott Rubin. His filter was simple:

  • P/E below 15
  • PEG ratio below 1
  • Dividend yield above 3%
  • An analyst recommendation of "Strong Buy."

The three stocks this turned up was:

  • Ennis, Inc. (EBF) has two different businesses, prints and apparel. A strange mix of business forms and a line of activewear, including t-shirts, fleece goods, and other apparel.
  • Newcastle Investment Corp. (NCT) actively manages a portfolio of real estate securities, loans and other real estate related assets. Newcastle was hit hard during the financial crisis and the stock is inherently risky
  • Rose Rock Midstream LP (RRMS) owns, operates, develops and acquires a diversified portfolio of midstream energy assets

These are three different businesses and we will look at them individually and together to see if there is any hedging. Also, as Scott noted that Newcastle was hit hard in the crisis, we will be able to isolate its impact on the other two and perhaps consider the other two.We will compare this selection with our dividend bearing ETF portfolio.

Asset Fund in this portfolio
REAL ESTATE (ICF) iShares Cohen & Steers Realty Majors
CASH CASH
FIXED INCOME (TIP) iShares Barclays TIPS Bond
Emerging Market (VWO) Vanguard Emerging Markets Stock ETF
US EQUITY (DVY) iShares Dow Jones Select Dividend Index
US EQUITY (VIG) Vanguard Dividend Appreciation ETF
INTERNATIONAL EQUITY (IDV) iShares Dow Jones Intl Select Div Idx
High Yield Bond (HYG) iShares iBoxx $ High Yield Corporate Bd
INTERNATIONAL BONDS (EMB) iShares JPMorgan USD Emerg Markets Bond
Click to enlarge


Portfolio Performance Comparison

Portfolio/Fund Name YTD
Return
1Yr AR 1Yr Sharpe 3Yr AR 3Yr Sharpe 5Yr AR 5Yr Sharpe
Retirement Income ETFs Tactical Asset Allocation Moderate 0% -1% -9% 9% 72% 8% 58%
Retirement Income ETFs Strategic Asset Allocation Moderate 5% 1% 6% 18% 125% 2% 10%
Three Stocks the Market May Be Overlooking 27%
Click to enlarge

Rose Rock Midstream and the newcomers and this limits the table to under a year's data. They have shown strong returns for the short time we can track the selection. This is, of course, a concern and we will drop down to the graphs to see what they indicate.

Three Month Chart One Year Chart Three Year Chart Five Year Chart

When I looked at the performance of each of the stocks by how big a piece of the portfolio they represent:

Fund in this portfolio Percentage
EBF (Ennis, Inc.) 30.58%
NCT (Newcastle Investment Corp.) 37.75%
RRMS (Rose Rock Midstream LP) 31.67%
Click to enlarge

I note that Newcastle is ahead but the other two are doing reasonably well.

I am going to pass on this selection for now. It may be worth tracking it and come back after another year. I don't know enough about each of the companies to decide whether I want to invest and I have a list of other companies (MAKO and Westpoint) that are new but, for me, have better growth potential if I am going to accept more risk in my portfolio.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Additional disclosure: MyPlanIQ does not have any business relationship with the company or companies mentioned in this article. It does not set up their retirement plans. The performance data of portfolios mentioned above are obtained through historical simulation and are hypothetical.