Short-Term Technical View Of Quantitative Dividend Stock Filter: One Standout Stock

by: Richard Shaw

In our prior article, we presented the criteria for the Quantitative List of dividend stocks from our Rational Risk Equity Income Investor letter, along with the performance history of the list in the aggregate, and the identity of the constituents of the Quantitative List for each of the past 6 months.

In this article, we take a look at the short-term technical ratings for the 45 stocks that made the cut into our Quantitative List in the October issue that covered September.

Figure 1:

This is a table of technical indicators from based on 20-day, 50-day and 100-day technical indicators.

Only 17 of the 45 stocks that made it to our Quantitative List are attractive on a short-term technical basis according to BarChart's "Today's Opinion", and only 23 on a "Trend Spotter" basis.

Figure 2:

This table shows the technical rating ("SCTR") for our Quantitative List, along with a binary (Yes/No) assessment of three questions:

  1. Is the price above the 200-day moving average?

  2. Did the stock outperform SPY over 1 year?

  3. Did the stock outperform DVY over 1 year?

Because StockCharts did not provide a rating for 13 foreign and MLP securities, only 32 have technical ratings from StockCharts.

Only 16 had ratings greater than 50 on their 100 point scale, and only six had ratings of 75 or more.

Of the 16 with a rating above 50, there are 10 where the price is above the 200-day moving average, and where the 1-year performance was greater than both that of SPY and DVY.

Symbol SCTR > 200-d SMA 1-Yr TR > SPY 1-Yr TR > DVY
LLY 98.0 Yes Yes Yes
NNN 89.6 Yes Yes Yes
ORI 89.4 Yes No No
OHI 83.6 Yes Yes Yes
PPL 78.6 Yes No No
VZ 76.2 Yes Yes Yes
HNZ 74.5 Yes No No
RYN 74.1 Yes Yes Yes
WDR 72.1 Yes Yes Yes
WR 69.9 Yes No No
SYY 63.1 Yes Yes Yes
BLK 60.1 Yes Yes Yes
BMS 59.9 Yes No No
LMT 57.4 Yes Yes Yes
DRI 54.2 Yes Yes Yes
GIS 54.1 Yes No No
BMY 48.4 Yes No No
SON 47.4 Yes No No
PEP 43.4 Yes No No
GD 37.6 Yes No No
ADI 35.4 Yes No No
RSG 34.4 Yes No No
GPC 33.4 No No No
CTL 32.9 Yes No No
FLO 18.6 No No No
MCD 18.0 No No No
SEE 17.9 No No No
CA 14.3 No No No
MSFT 12.0 No No No
GNTX 9.4 No No No
QSII 3.0 No No No
INTC 2.4 No No No
BBL --- Yes No No
BBY --- No No No
BPL --- No No No
BWP --- Yes No No
DLR --- No No No
EPD --- Yes No No
EVEP --- Yes No No
MMP --- Yes Yes Yes
MWE --- Yes Yes Yes
NVS --- Yes No No
RCI --- Yes Yes Yes
TRI --- Yes No No
WPZ --- No No No

BarChart / StockCharts Ratings Convergence:

Only four of our Quantitative List stocks are rated favorably for short-term technicals by both BarChart and StockCharts. That meaning a BarChart "Trend Spotter" rating of Buy and a "Today's Opinion" of 50% Buy or better, as well as a StockCharts "SCTR" rating of 50 or better and a "Yes" to each of the three questions above.

Those four stocks are Eli Lilly, National Retail Properties, Waddell & Reed and BlackRock .

Figure 3: LLY, NNN, WDR, BLK vs SPY and DVY -- 1 Year

Figure 4: LLY, NNN, WDR, BLK vs SPY and DVY -- 3 Years

Figure 5: LLY, NNN, WDR, BLK vs SPY and DVY -- 7 Years

Rational Risk Subjective List Convergence

We mentioned in our prior article, that after we generate our Quantitative List of dividend stocks, we generate a subset of that list consisting of those stocks with favorable 1-year forward looking ratings from independent analysts. We call that the Subjective List. Those ratings are based on whatever tools and methods each independent may use. Some may be more technically oriented and some others more fundamentally oriented, so there is a mixture of approaches.

In our October issue of Rational Risk Equity Income Investor, 13 of the 45 companies in the Quantitative List made it to the Subjective List. Of those 13, only one overlaps the converged lists of technical ratings from BarChart and StockCharts. That stock is Eli Lilly.

This article is principally about comparing what a quantitative filter suggests, versus what a short-term technical filter suggests. If you can put the two together for entry points and for decisions about substitutions, you may be able to enhance performance while maintaining a given level of dividend stock exposure in a portfolio.

However, since we have taken the reduction to the fine point of a single stock, let's wrap up with a review of how that looks versus it industry peers.

Here are three charts of LLY versus the five largest market-cap other pharma stocks in the Dow Jones Pharma index. Those five are Pfizer (NYSE:PFE), Johnson & Johnson (NYSE:JNJ), Merck (NYSE:MRK), Abbott Labs (NYSE:ABT) and Bristol Myers.

ABT has been a member of our Quantitative List many times. It is splitting itself, and it may take a few months for the data to be sorted out sufficiently to know whether its parts make it back to the list.

Figure 5: LLY versus the Pharma Industry - 1 Year

Figure 6: LLY versus the Pharma Industry - 3 Years

Figure 7 LLY versus the Pharma Industry - 7 Years

Due Diligence Doesn't Stop Here

As with any security identified by filtering and chart review, there is still a need for thematic and other qualitative reviews of the business, financial statements and notes, its products, markets, competition, management and so on. Don't jump into any of the stocks discussed here without doing that, and make sure that it works for your particular needs.

Disclosure: QVM has positions in a variety of stocks identified here as of the creation date of this article (October 21, 2012). We certify that except as cited herein, this is our work product. We received no compensation or other inducement from any party to produce this article, but are compensated retroactively by Seeking Alpha based on readership of this specific article.

General Disclaimer: This article provides opinions and information, but does not contain recommendations or personal investment advice to any specific person for any particular purpose. Do your own research or obtain suitable personal advice. You are responsible for your own investment decisions. This article is presented subject to our full disclaimer found on the QVM site available here.