Dogcatcher Diligence Finds Bargains In Fortune Investor Guide 2019

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Includes: AMTD, ATVI, BURL, CODYY, ESSYY, FB, GOOGL, HD, ITUB, MKTX, MLCO, MRK, STZ, TIF, TSC, TSM, TTWO, TXN, USB
by: Fredrik Arnold
Summary

The December 2018 issue of Fortune featured companies to "ride out the storm" in 2019. Thirty operate in six Fortune "sectors"; 21 pay dividends.

Ten analyst target augured top net gain Fortune Investor Guide 2019 top stocks were GOOGL, BURL, AMTD, FB, TTWO, TIF, MLCO, ATVI, and TSM, averaging 39.4% net. Two losers emerged.

The guide's 10 analyst target augured top price upside stocks were GOOGL, AMTD, STZ, AMZN, FB, TTWO, TIF, MLCO, ATVI, and TSM, averaging a 38.82% projected price gain.

By yield, the following made the Fortune Guide top 10: HD, AMTD, TIF, ESSYY, MRK, USB, TXN, MLCO, CODYY, and TSM. These averaged 3.22% yields.

$5k invested in the lowest-priced five top yield 2019 Fortune Investor Guide picks showed 8.8% more net gains than from the same investment in all top 10.

Fortune Investor Guide 2019 Selections

At year end, Fortune features a list of 30 companies to "ride out the storm" in 2019. The 2019 Guide caught my dogcatcher eye because so many were dividend payers. Yet Fortune editors failed to include dividends as significant data in that article.

Lately readers and other contributors have questioned the intent, purpose, validity, and usefulness of my various stock lists. Here's a case where a grevious omission in a current business publication can be noted and called out in this plucky and audacious on-line format. Note how well the dividend dogs hold up against the unfettered no-yielders.

Best, however are my articles such as this that are able to note significant dividend investment opportunities ignored by the mainstream media. Fortune cites only one foreign exchange ticker in their article, all other tickers are compatible with those available from Seeking Alpha.

Below are the top ten best gainers now revealed among 30 "companies strong enough to control their own destiny" found in the Fortune December 2018, "Investors Guide 2019."

Source: YCharts

Actionable Conclusions (1-10): Analysts Predicted 26.36% To 67.85% Net Gains For 10 Fortune Investor Guide 2019 Stocks

Four of 10 top dividend-yielding Fortune Investor Guide stocks were verified as being among the top 10 gainers for the coming year based on analyst one-year targets. (They are tinted gray in the chart above). Thus, the yield-based forecast for the investor guide stocks, as graded by Wall St. wizards, was 40% accurate.

The following probable profit-generating trades were identified by projections based on estimated dividend returns from $1k invested in each of the 30 stocks. That dividend and their aggregate one-year analyst median target prices, as reported by YCharts, created the 2018-19 data points.

Note: one-year target prices by a lone analyst were not applied. Ten probable profit-generating trades projected to December 10, 2019 were:

Taiwan Semiconductor (TSM) netted $678.54 based on dividends plus a median target price estimate from six analysts less broker fees. The Beta number showed this estimate subject to volatility 17% more than the market as a whole.

Activision Blizzard (ATVI) was projected to net $521.50, based on a median of target estimates from twenty-nine analysts, plus annual dividend, less broker fees. The Beta number showed this estimate subject to volatility 5% more than the market as a whole.

Melco Resorts and Entertainment (MLCO) was projected to net $470.31, based on dividends plus the median target price estimate from seventeen analysts, less broker fees. The Beta number showed this estimate subject to volatility 64% above the market as a whole.

Tiffany & Co (TIF) was projected to net $398.60, based on target price estimates from twenty-nine analysts, plus annual dividends, less broker fees. The Beta number showed this estimate subject to volatility 73% more than the market as a whole.

Take-Two Interactive Software (TTWO) was projected to net $355.10, based on no dividends, just the median of target price estimates from twenty analysts, less broker fees. The Beta number showed this estimate subject to volatility 11% over the market as a whole.

Facebook (FB) was projected to net $324.98, based on the median of target price estimates from forty-eight analysts, no dividends, less broker fees. The Beta number showed this estimate subject to volatility 44% under the market as a whole.

Constellation Brands Inc (STZ) was projected to net $313.79, based on a median of target price estimates from twenty-four analysts, plus the projected annual dividend, less broker fees. The Beta number showed this estimate subject to volatility 95% less than the market as a whole.

TD Ameritrade (AMTD) netted $308.03 based on the median of target price estimates from twenty analysts, plus dividends, less broker fees. The Beta number showed this estimate subject to volatility 22% over the market as a whole.

Burlington Stores Inc (BURL) was projected to net $305.25, based on the median of target prices from twenty-two analysts plus next year's dividends, less broker fees. The Beta number showed this estimate subject to volatility 70% over the market as a whole.

Alphabet Inc (GOOGL) was projected to net $263.61, based on the median of target prices from forty-five analysts, no dividends, less broker fees. The Beta number showed this estimate subject to volatility 6% more than the market as a whole.

Average net gain in dividend and price was estimated at 39.4% on $10k invested as $1k in each of these ten stocks. This gain estimate was subject to average volatility 13% over the market as a whole.

Source: YCharts

Actionable Conclusions (11-12): (Bear Alerts) Analysts Anticipated Two 2019 Investors Guide Dogs To Lose 6.1% & 12.7% By December, 2019

The two probable losing trades revealed by YCharts were:

Itau Unibanco Holding SA (ITUB) projected a loss of $61.16 based on dividends and a projected target price based on estimates from 10 analysts, including $10 of broker fees. The Beta number showed this estimate subject to volatility 21% more than the market as a whole.

MarketAxess (MKTX) cast a loss of $127.08 based on dividends and a median of target price estimates from eight analysts, including $10 of broker fees. The Beta number showed this estimate subject to volatility 91% less than the market as a whole.

Average net loss in dividend and price was estimated at 9.4% on $2k invested as $1k in each of these two stocks. This loss estimate was subject to average volatility 87% under the market as a whole.

Source: flickr.com

The Dividend Dogs Rule

The "dog" moniker was earned by stocks exhibiting three traits: (1) paying reliable, repeating dividends, (2) their prices fell to where (3) yield (dividend/price) grew higher than their peers. So, the highest yielding stocks in any collection have become affectionately known as "dogs." More precisely, these are, in fact, best called, "underdogs."

30 For the Money

Yield (dividend/price) results from YCharts.com verified by Yahoo Finance for 30 Fortune Investor Guide 2019 stocks as of market closing prices 12/10/18 revealed the actionable conclusions discussed below.

See any Dow 30 article for an explanation of the term "dogs" for stocks reported based on Michael B. O'Higgins book "Beating The Dow" (HarperCollins, 1991), now named Dogs of the Dow. O'Higgins' system works to find bargains in any collection of dividend paying stocks. Utilizing analysts' price upside estimates expanded the stock universe to include popular growth equities, as desired.

Actionable Conclusions (13-22): Fortune Investor's Guide 2019 Top Equity, By Yield, Taiwan Semiconductor (TSM), Led 30

Source: YCharts

The 30 Fortune Investor Guide 2019 stocks sorted by yield calculated as of market close 12/10/18 included 6 of 11 Morningstar sectors.

Of the leading ten by yield, the top one was Asian Technology firm, Taiwan Semiconductor Manufacturing Co Ltd (TSM) [1], followed by a US-Proof Basic Materials firm, Compagnie de Saint-Gobain SA (OTCPK:CODYY) [2]. An Asian Consumer Cyclical firm placed third by yield, Melco Resorts and Entertainment Ltd (MLCO) [3]. Another Technology firm placed fourth, Texas Instruments (TXN) [4].

Financial services placed fifth and ninth, U.S. Bancorp (USB) [5], and TD Ameritrade (AMTD) [9]. The top yielding Healthcare stock placed sixth, Merck & Co Inc. (MRK) [6], then lone US-Proof Consumer Defensive representative placed seventh, Essity AB (OTCPK:ESSYY) [8].

Finally, two consumer cycical sector representatives placed eighth, and tenth: Tiffany & Co (TIF) [8] , and The Home Depot Inc (HD) 10], to complete the top 10.

Actionable Conclusions: (23-32) Top 10 Fortune Investor's Guide 2019 Stocks By Price Upsides Showed 27.36% To 63.77% Gains To December 2019; (33) Two Downsiders Dropped -5.81% & -12.45%.

Source: YCharts

To quantify top dog rankings, analysts' mean price target estimates provided a "market sentiment" gauge of upside potential. Added to the simple high-yield metrics, analysts' median price target estimates became another tool to dig out bargains.

Analyst Targets Predicted A 8.8% Advantage For 5 Highest Yield, Lowest Priced 2019 Fortune Guide Stocks To December 2019

10 top Fortune Investor's Guide 2019 stocks were culled by yield. Dividend/price results verified by YCharts did the ranking.

Source: YCharts

As noted above, top 10 Fortune Investor's Guide 2019 stocks selected 12/10/18 showing the highest dividend yields represented six sectors: technology (1); basic materials (2); consumer cyclical (3); financial services (4); healthcare (5); consumer defensive (6).

Actionable Conclusions: Analysts Expected 5 Lowest-Priced of the Top 10 Highest-Yield 2019 Fortune Investor's Guide 2019 Dogs To (34) Deliver 28.11% Vs. (35) 25.84% Net Gains by All 10 To December 2019

Source: YCharts

$5k invested as $1k in each of the five lowest-priced stocks in the top 10 Fortune Investor's Guide 2019 kennel by yield were predicted by analyst one-year targets to deliver 8.80% more net gain than $5k invested in all 10. The very lowest priced Investor's Guide 2019 top yield stock, Compagnie de Saint-Gobain SA (OTCPK:CODYY), was projected to deliver the best net gain of 67.85%.

Source: YCharts

The five lowest-priced Fortune Investor's Guide 2019 top yield dogs for December 10 were: Compagnie de Saint-Gobain SA (OTCPK:CODYY); Melco Resorts and Entertainment Ltd (MLCO), Essity AB (OTCPK:ESSYY), Taiwan Semiconductor Manufacturing Co Ltd (TSC); TD Ameritrade (AMTD), with prices ranging from $6.78 to $49.24 per share.

Five higher-priced Fortune Investor's Guide 2019 for December 10 were: U.S. Bancorp (USB), Merck & Co Inc (MRK), Tiffany & Co (TIF), Texas Instruments (TXN), and The Home Depot Inc (HD), whose prices ranged from $50.70 to $171.96.

The distinction between five low-priced dividend dogs and the general field of 10 reflected Michael B. O'Higgins' "basic method" for beating the Dow. The scale of projected gains based on analysts' targets added a unique element of "market sentiment" gauging upside potential.

It provided a here-and-now equivalent of waiting a year to find out what might happen in the market. Caution is advised, since analysts are historically only 20% to 80% accurate on the direction of change and just 0% to 20% accurate on the degree of change.

The net gain/loss estimates above did not factor in any foreign or domestic tax problems resulting from distributions. Consult your tax advisor regarding the source and consequences of "dividends" from any investment.

Stocks listed above were suggested only as possible reference points for your FoFave dog stock purchase or sale research process. These were not recommendations.

Disclaimer: This article is for informational and educational purposes only and should not be construed to constitute investment advice. Nothing contained herein shall constitute a solicitation, recommendation or endorsement to buy or sell any security. Prices and returns on equities in this article except as noted are listed without consideration of fees, commissions, taxes, penalties, or interest payable due to purchasing, holding, or selling same.

Graphs and charts were compiled by Rydlun & Co., LLC from data derived from Indexarb, YCharts, Yahoo Finance; analyst mean target price by Thomson/First Call from Yahoo Finance. Dog photo taken from flickr.com.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Editor's Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks.