On Friday, March 6, 2015, it was announced that Apple Inc. (NASDAQ:AAPL) will be replacing AT&T (NYSE:T) in the Dow Jones Industrial Average, which will take place on March 18. This announcement serves as confirmation of what I wrote about recently, that AAPL had become essentially the market in whole.
AAPL makes up a sizeable portion of the S&P 500, may one day be added to the DOW, and is a top holding by many of the Mutual Funds where most Americans park their employer sponsored savings plans; AAPL is possibly the most important component of the market, and is close to being the de facto market. I have no idea how long this trend will continue, nor how messy the divergence may become months or years from now to end it, but this is the case as I see it today.
While the first part has only become increasingly true, it is the last half of the statement that will cause lost sleep more and more as time goes by. As AAPL goes so will go the market.
Overall the market has been choppy, with the net result thus far this year an almost sideways market with the S&P 500 up 0.60% and the DJIA up 0.19%, rolling over after reaching record highs at the turn of the month. For those who saw a sideways market for 2015, the first two months have been confirmation. Earnings season had some notable surprises but has been generally positive and external concerns - Greece, Ukraine, Middle East Turmoil - have not had too much overhang on sentiment. Increasingly the US Market is leading the world market, however, if our markets slide into the negative it could be bad news elsewhere. Those who try and parse the Fed tea leaves are fixated on the level of "patience" and when the inevitable rate increase will come. Quantitative easing elsewhere is creating some interesting carry trades, and even Berkshire Hathaway (NYSE:BRK.B) is getting into the Euro Bond spirit.
Today, I am going to highlight the stocks in my coverage universe that have beaten the market so far in 2015 - with the top 10 getting detailed attention and then lesser attention to the rest - it is interesting to me to see the overlap and divergence since my 2014 year-end review. There are some unexpected surprises. All percentages and calculations based on end-of-day March 6 numbers.
The Top 10 - Double Digit Winners
I may not have been surprised if AAPL had been number one so far this year, such is the amount of focus it gets from me and everyone else, but I was more surprised that it was not in the top-5. Unfortunately for me, all of the biggest winners so far this year were those in the smaller side of my allocation map, either caused by previous loses or the positions being outstripped by contemporaries in the time I have held them. Oddly, AAPL is the only one of the Top 10 which was also in the Top 30 for 2014, and a follow-up to this article will be a look at the struggles some of these have had.
Ebix Inc. +48.15% YTD
Div Yield: 1.32%
Analyst Score: 2
DCF: 46.12 (103%)/46.35 (104%)
IVC: 27.43 (21%)
I have had a weird relationship with Ebix Inc. (NASDAQ:EBIX) - having first taken a liking to it during an early phase prior to having fully evolved my picking strategy. EBIX has been one of the classic "pretty girl" stocks, swinging wildly in the last five years with the January explosion in price the mirror image of the Mid-2013 collapse. I have ignored EBIX to such a degree that I was pleasantly surprised today when I did the metric screen and saw EBIX that had universally positive numbers. Suddenly EBIX was on my map again! Too late for the rally year-to-date, but long-term EBIX has re-won my interest after so long in the doghouse of indifference. Maybe I could have been forgiven based on the fact that the last time I checked EBIX had been a percentage gain/loss loser the last time I checked, but it is now a +11.42% total return winner since my initial purchase in March, 2012. Ironically, this seems to be a contrarian pick that my IVC calculation would have predicted had I run that check on EBIX prior to today (or the turn of 2015). In any case, as will be the same with many of today's Top 13, the matter is not what has been but what is likely to come.
Of worry, in no uncertain terms, is the Short Interest in EBIX - currently sitting at 36.72% of the float, an astronomical number that means there is a huge amount of negative expectation overhanging on EBIX. I tend to be at heart a partially contrarian investor, often loving that which is unloved, but as I am coming up on making my biggest allocations of the year I am not yet ready to make EBIX one of my big IRA buys. EBIX has a high BETA (1.75) which is much higher, given past fluctuations in stock price, than I would be comfortable with allocating a sizeable chunk of my IRA to. James Brumley thinks that the planets may have finally aligned for EBIX, recently stating,
The market may still be underestimating the organization's potential while simultaneously undervaluing the stock.
So while some, including myself, would feel wary of EBIX based on the short interest there are some that see what could be a monster of a short squeeze in the making.
World Wrestling Entertainment Inc. +39.14%
Div Yield: 2.80%
Analyst Score: 2.4
DCF: -7.23 (-142%) / -4.82 (-128%)
IVC: 4.11 (-76%)
America Sports Entertainment loves an underdog, this is without doubt - what was in doubt for some time was whether World Wrestling Entertainment Inc. (NYSE:WWE) could turn around its sloggy prospects and actually look like a good stock. Has that time finally arrived? Has the boat left the pier? I cannot say that I am sold either way on this one, and my metrics don't scream hidden gem either. When the only good metric is analyst score my skepticism is normally enhanced, and such is the case now. WWE has certainly posted good year-to-date numbers on the back of much better than expected user growth in the WWE Network. Historically we are entering the part of the calendar where WWE has its strongest results with Wrestlemania. As former Champion Diamond Dallas Page said in May 2014,
They're gonna bounce back stronger than ever. There's always a drop after Wrestlemania. Buy in November - by April it'll be through the roof.
Jake Huneycutt said recently,
If the stock falls below $8, it would be much more interesting.
I would have to concur with this. WWE is not a very good prospect right now by my criteria, and the valuation numbers are in no way helpful. Steven Borovay sees WWE and the WWE Network evolving in time and "eventually the network is transformational and becomes a cash cow that keeps on giving."
Xinyuan Real Estate Co. Ltd +31.78%
Div Yield: 6.11%
Analyst Score: na
DCF: 9.88 (218%) / 22.79 (633%)
I do not have a personal rule in avoiding Chinese stocks (many do), but I enter the prospect with a level of wariness worthy of the task. I could exchange the word "Chinese" in that statement with "Real Estate" and it would mean exactly the same thing. Maybe the devil's cocktail is combining the two. In the time I have held Xinyuan Real Estate Co. Ltd (NYSE:XIN), it has variously shot into the top 5 of my holdings based on amazing run-ups in share value, and it has disappeared completely off of my top-holdings screen due to sharp value declines. XIN is largely a holdover in my portfolio from my earliest days spent almost blindly chasing dividend yield, and at this one thing it still delivers. If I was a short-term swing trader, I would love to play the massive swings on XIN as these could have been quite profitable in the last few years. The opacity of the situation does not make it one which would be a good long-term investment and despite the recent appreciation I am not changing my view on this. Elliott R. Morss, on the other hand, likes XIN going forward,
Putting everything together, the next two years should be very good for XIN. If and when XIN cuts its dividend, its price will fall. That would be a great time to buy more!
One question Mr. Morss asked, where are the eight outside China projects XIN is working on, I can answer a portion of that: Williamsburg, Brooklyn New York. As for the rest I have no idea.
Prothena Corporation PLC +25.82%
Div Yield: na
Analyst Score: 1.7
DCF: -1.77 (-107%) / 8.82 (-66%)
Prothena Corporation (NASDAQ:PRTA) is a legacy holding related to my original holding in Elan Corporation plc, which spun off in December 2012. I have not tracked or followed this holding much in the interim largely because I am not very knowledgeable about the intricacies of pharmaceuticals. I wish I was, and plan to work on it going forward. Going by my normal metric screen I would have to throw out the PEG as essentially silly but the analyst score is promising. It does not surprise me that the DCF calculation is very bearish as this is something I have seen repeatedly with pharma stocks - which have an essentially different business model than most of the types of industries I regularly follow - which should not be construed to be an indictment but rather an acceptance of ignorance on my part. I will be digging into PRTA further in the near term to determine if I should increase my exposure here and will no doubt write about anything I find worth reporting. Bret Jensen previously saw good things in PRTA.
Cross Timbers Royalty Trust +25%
Div Yield: 8.41%
Analyst Score: na
DCF: 40.57% (87%) / 42.43 (96%)
IVC: 28.56 (32%)
One must be willing to sell and move on when the dividends are below 8%. If the price of the issue rises to the point where the dividend is less than 8%, the risk inherent in this issue does not warrant holding the stock any longer.
Obviously, if the share price was to reach the IVC target the dividend yield would sink well below the 8% waterline. In the meantime, this might be an interesting contrarian income pick.
Genesee & Wyoming Inc. +16.66%
Div Yield: na
Analyst Score: 1.8
DCF: 65.68 (-37%) / 86.85 (-17%)
IVC: 99.24 (-5%)
Genesee & Wyoming Inc. (NYSE:GWR) is a part of my Railroad Sector spread holding and has outpaced its sector peers thus far in 2015. The metrics above show a mixed bag, with the PEG and Analyst Score bullish and the valuation metrics simultaneously bearish. What sets GWR apart from the other rail plays I follow is an international expansion bend, and unlike the more followed larger cap railroads GWR does not sport a dividend or robust stock buyback. As Michael Boyd said,
Management is committed to using their strong free cash flow generation to acquire and grow the company.
One knock on GWR is that its Operation Ratio (the most followed metric in the rail space) considerably trails its larger Class I peers. Improvement of this over time with the consolidation of the Freightliner operations presents a possible catalyst long term.
Apple Inc. +14.69%
Div Yield: 1.48%
Analyst Score: 1.9
DCF: 211.23 (67%) / 230.72 (82%)
IVC: 272.48 (115%)
Now we reach the first of my Top 30 from 2014 to be among the top winners thus far in 2015 - Apple Inc., a stock that should be no stranger to anyone. What is remarkable about the continued upside resilience of AAPL is that each tick upward represents a record breaking market cap, an increasing percentage of the S&P 500 and soon a major component of the DJIA. Many are saying that the addition to the Dow is quite late, and precariously, should AAPL itself run out of steam, detrimental to the overall market. Far fewer funds benchmark to the DJIA and the addition itself should not result in a tremendous catalyst in itself, the DJIA still possesses a great deal of psychological sway over market participants but the inversely tricky thing now is that anyone attempting to beat the market will almost certainly be exposed, to one degree or another, to AAPL. One could be forgiven for concerning themselves, even if privately or only at that time at the edge of sleep, that the bubble everyone is looking for could be this right here. If the AAPL bubble was to burst, how big would the shock wave be? It gets bigger by the day. On my own part, I am planning on allocating a significant portion of my IRA buy into AAPL and for better or worse I will be on this roller coaster. As it stands now I do not have many other stocks in my coverage universe that match up with AAPL in multiple of my 7 metrics (much less all 7 simultaneously), and if the upcoming AAPL event is successful and the iWatch truly is revolutionary, then what might look like ridiculously high DCF and IVC's now could very well be attained, even within my original time frame.
Div Yield: 1.95%
Analyst Score: 2.4
DCF: 39.68 (-43%) / 36.64 (-47%)
IVC: 65.66 (-6%)
Media Property Conglomerate IAC/InterActiveCorp (IACI), which also takes the cake as the most redundantly named company in my coverage universe, makes the leaders list after what was certainly a disappointing 2014, owing largely to the Aereo court challenge coming up short, however, the future looks much brighter with the monetization of dating site Tinder possibly a sign of the way of the future. Ignoring the valuation metrics and focusing only on what I call the "upper" metrics (since I always arrange them in this order) gives intriguing prospects here, especially if the current momentum continues. The PEG would have normally turned me off, however, the modified-PEG, which accounts for dividend yield, more than halves what would have been a disqualifier. The dividend yield is a bit light for most dividend reinvestment investors but this probably would not turn me off at this time, because I am more underweight on IACI than I would like to be going forward.
Nordic American Tankers Ltd. +13.36%
Div Yield: 8.71%
Analyst Score: 2.2
Nordic American Tankers (NYSE:NAT) has shown recently some price resilience, more so than following my original call on them back in April 2014. After such a long time operating out of debt financing (but maintaining the dividend) the PEG, DCF and IVC are all not available (or negative), however, the mPEG and yield are still compelling and the analyst score suggests other analysts have seen improving prospects of late. If the dividend remains NAT could be a big turn around name in 2015, but will still need a significant period of time to improve the underlying finances to account for the previous debt financing.
BlackRock Kelso Capital (NASDAQ:BKCC) +12.68%
Div Yield: 9.09%
Analyst Score: 2.7
|11-62 (Bold-Italics indicate a Top 30 holding in 2014)|
|Solar Capital Ltd.||(NASDAQ:SLRC)||12.10%|
|Lululemon Athletica Inc.||(NASDAQ:LULU)||11.67%|
|KCAP Financial Inc.||(NASDAQ:KCAP)||11.58%|
|AllianceBernstein Holding LP||(NYSE:AB)||9.68%|
|Reynolds American Inc.||(NYSE:RAI)||9.58%|
|United Microelectronics Corp.||(NYSE:UMC)||8.81%|
|Ulta Salon, Cosmetics & Fragrance, Inc.||(NASDAQ:ULTA)||8.41%|
|Altria Group Inc.||(NYSE:MO)||8.32%|
|Walgreens Boots Alliance Inc.||(NASDAQ:WBA)||8.07%|
|Cooper Tire & Rubber Co.||(NYSE:CTB)||6.93%|
|Priceline Group Inc.||(NASDAQ:PCLN)||6.65%|
|Och-Ziff Capital Management Group LLC||(NYSE:OZM)||6.42%|
|Westinghouse Air Brake Technologies Corp.||(WAB)||6.38%|
|Eaton Vance Tax-Advantaged Bond&Options Strategies Fund||(NYSE:EXD)||6.07%|
|Prospect Capital Corp.||(NASDAQ:PSEC)||5.69%|
|E I du Pont de Nemours and Co.||(DD)||5.68%|
|Foot Locker Inc.||(NYSE:FL)||5.68%|
|Voya Prime Rate Trust||(NYSE:PPR)||4.71%|
|Waste Management Inc.||(NYSE:WM)||4.54%|
|SK Telecom Co. Ltd.||(NYSE:SKM)||3.70%|
|Lithia Motors, Inc.||(NYSE:LAD)||3.33%|
|Verizon Communications Inc.||(NYSE:VZ)||3.23%|
|Eaton Vance Tax-Managed Global Diversified Equity Income Fund||(NYSE:EXG)||3.06%|
|Randgold Resources Ltd.||(NASDAQ:GOLD)||2.73%|
|Lockheed Martin Corp.||(NYSE:LMT)||2.64%|
|Thermo Fisher Scientific Inc.||(NYSE:TMO)||2.57%|
|Two Harbors Investment Corp.||(NYSE:TWO)||2.50%|
|Providence and Worcester Railroad Company||(NASDAQ:PWX)||2.27%|
|Southern Copper Corp.||(NYSE:SCCO)||2.27%|
|Alaska Communications Systems Group Inc.||(NASDAQ:ALSK)||2.23%|
|Sunoco Logistics Partners LP||(NYSE:SXL)||2.15%|
|KKR & Co. LP||(NYSE:KKR)||2.15%|
|CYS Investments Inc.||(NYSE:CYS)||1.15%|
|Dreyfus High Yield Strategies Fund||(NYSE:DHF)||1.39%|
|Honeywell International Inc.||(NYSE:HON)||1.95%|
|New York Mortgage Trust Inc.||(NASDAQ:NYMT)||1.17%|
|Invesco Mortgage Capital Inc.||(NYSE:IVR)||0.71%|
|Horizon Technology Finance||(NASDAQ:HRZN)||0.64%|
Disclosure: The author is long EBIX,WWE,XIN,PRTA,CRT,GWR,AAPL,IACI,NAT, BKCC.
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.