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|
|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|
- Three Stocks the Market May Be Overlooking -- Total of $10K invested equally in each stock
- Retirement Income ETFs Tactical Asset Allocation Moderate -- Above funds using TAA (40% fixed income, 30% for each of the top two asset classes)
- Retirement Income ETFs Strategic Asset Allocation Moderate -- Above funds using SAA (40% fixed income, 12% for each of the five asset classes -- funds selected based on price momentum)
Portfolio Performance Comparison
|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%|
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%|
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.