Barron's 2019 Roundtable Picks 48 Scrappy Dog Stocks

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Includes: ABBV, CFG, CHL, DWDP, ENR, GILD, HTGC, LMT, MGDDY, MTN, OEC, PKG, RF, RHHBY, TAK, TPR
by: Fredrik Arnold
Summary

Barron's January 21 issue presented 48 investment selections chosen by staff and 10 elite Wall Street panelists. Of 48 suggestions, 11 were consumer cyclicals.

The top net-gain ten from staff and street-elite were LMT, CFG, HTGC, ENR, MTN, GILD, DWDP, OEC, TAK, and TPR: three ConCy; two Health; two BasMats; two Financials; one Industrial.

48 top-yield Barron's picks showed estimated broker ratings ranging from 2.7 to 1.0 on the traditional (5) sell to (1) buy scale.

48 yields from Barron's picks for 2019 ranged 0-9.79% as of YCharts and Yahoo Finance 1/24/19 numbers. The top ten yielders were: RHHBY, PKG, RF, CFG, TPR, MGDDY, TAK, CHL, ABBV, HTGC.

$5k invested in the lowest-priced five of Barron's 10 roundtable picks showed 0.81% more net gain than from $5k invested in all ten.

Actionable Conclusions (1-10): Analysts Project 20.28% To 44.04% Net Gains For Top Ten Barron's 2019 Picks

Four top yielders of ten top Barron's 2019 picks (tinted gray in the chart above) were among the top ten gainers for the coming year based on 1-year target estimates. So, the dog strategy for Barron's 2019 picks graded out with 40% accuracy.

The following probable profit-generating trades were based on estimated dividend returns from $1,000 invested in each of the highest yielding stocks. Those dividends and their aggregate one-year estimated median target prices created the 2019-2020 data points.

Note: the target price for one fund was estimated to fall at the same rate as last year by the author. Target prices for stocks were based on the median of broker target estimates reported by YCharts. Ten probable profit-generating trades projected to January 24, 2020, were:

Tapestry Inc. (TPR) was projected to net $440.41 on a $1K investment based on the median target price estimates from nineteen analysts combined with projected annual dividend less broker fees. The Beta number showed this estimate subject to volatility 58% less than the market as a whole.

Takeda Pharmaceutical Co. (TAK) was projected to net $400.82 based on dividends plus the median target price estimates from fourteen analysts less broker fees. The Beta number showed this estimate subject to volatility 83% less than the market as a whole.

Orion Engineered Carbons (OEC) was projected to net $386.01 based on dividends plus the median target price estimates from twenty-nine analysts plus dividend less broker fees. The Beta number showed this estimate subject to volatility 15% more than the market as a whole.

DowDuPont Inc. (DWDP) was projected to net $299.43 based on dividends plus the median target price estimates from nineteen analysts less broker fees. The Beta number showed this estimate subject to volatility 28% less than the market as a whole.

Gilead Sciences Inc. (GILD) was projected to net $271.74 based on dividends plus the mean target price estimates from twenty-four analysts less broker fees. The Beta number showed this estimate subject to volatility 32% less than the market as a whole.

Vail Resorts Inc. (MTN) was projected to net $244.27 based on dividends plus the mean target price estimates from twenty-four analysts less broker fees. The Beta number showed this estimate subject to volatility 56% more than the market as a whole.

Energizer Holdings Inc. (ENR) was projected to net $234.96 based on the median target price estimates from thirteen analysts combined with projected annual dividend less broker fees. The Beta number showed this estimate subject to volatility 20% less than the market as a whole.

Hercules Capital Inc. (HTGC) was projected to net $217.76 based on dividends plus the median target price estimates from sixteen analysts less broker fees. The Beta number showed this estimate subject to volatility 7% more than the market as a whole.

Citizens Financial Group (CFG) was projected to net $210.94 based on dividends plus the median target price estimates from twenty-nine analysts less broker fees. The Beta number showed this estimate subject to volatility 23% more than the market as a whole.

Lockheed Martin Corp. (LMT) was projected to net $202.84 based on dividends plus the median target price estimates from twenty-four analysts less broker fees. The Beta number showed this estimate subject to volatility 56% over the market as a whole.

Average net gain in dividend and price was estimated at 29.09% on $10k invested as $1k in each of these ten stocks. This gain estimate was subject to average volatility 7% less than the market as a whole.

Top 30 Barron's 2019 Roundtable Picks Represented 7 Of 11 Sectors and One ETF

The list from Barron's published as of 1/21/19 sorted by yield (dividend/price) calculated from here 1/24/19 for forty-eight stocks contributed to the various actionable conclusions discussed in this article.

The Barron's Roundtable Picks for 2019 were selected by "10 of Wall Street's smartest investors... offer[ing] up 48 specific ways to prosper in a changing and tumultuous world."

From aerospace companies to gold miners, these were mostly Barron's panelists' best investment bets for 2019. The list as of 1/21/19 entire issue provided the subjects for this article. Numeric calculations for the list were made as of 1/24/19 from YCharts and Yahoo Finance data.

Source: huffingtonpost.ca

The Dividend Dogs Rule

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

48 Barron's Roundtable Picks

The Barron's Roundtable Picks for 2019 were selected by "10 of Wall Street's smartest investors... offer[ing] up 48 specific ways to prosper. Their ranking by yield is shown below.

Source: YCharts

Actionable Conclusion (11-20): Dividend Yield Metrics Selected 10 Top Barron's 2019 Roundtable Picks

Top ten Barron's Roundtable Picks by yield for 2019, represented three financial services, three healthcare equities, one communications services stock, and three consumer cyclical firms.

Tops and leader of the three financial services were Hercules Capital Inc. [1] followed in seventh and eight places by Citizens Financial Group [7] and Regions Financial (RF) [8].

The best of the three healthcare pack placed second, AbbVie Inc. (ABBV) [2], trailed in fourth and tenth places by Takeda Pharmaceutical Co. Ltd. ADR [4] and Roche Holding AG ADR (OTCQX:RHHBY) [10].

The lone communication services representative placed third, China Mobile Ltd. ADR (NYSE:CHL) [3].

Completing the top ten Barron's Roundtable list by yield were the three consumer cyclical representatives, placing fifth, sixth, and ninth, Michelin ADR (OTCPK:MGDDY) [5], Tapestry [6], and Packaging Corp. of America (PKG) [9].

Actionable Conclusions: (21-30): Ten Barron's Roundtable Plays Showed 19.17% To 42.3% Estimated Upsides, While (31) One ETF Showed A Downside To January 2020

Source: YCharts

Actionable Conclusions (31-49): Barron's Roundtable Broker Buys Led by Takeda Pharma ADR

Source: YCharts

The 48 Barron's stocks sorted by broker ratings calculated as of market close 1/25/19 included 7 of 11 Morningstar sectors. Top was the healthcare sector member, Takeda Pharmaceutical Co. Ltd. ADR, whose single analyst called it a buy.

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

A 0.81% Advantage Was Estimated For Five Highest Yield, Lowest Priced Of the Ten Barron's Roundtable Picks For 2019

Top ten Barron's Roundtable picks were culled by yield for their monthly update from here. Yield (dividend/price) results verified by Yahoo Finance did the ranking.

Source: YCharts

As noted above, top ten Barron's best yield plays for 2019 represented seven closed-end investment companies, two ETFs and one communications services stock.

Actionable Conclusions: Analysts Estimated 5 Lowest-Priced Of The Top Ten Highest-Yield Barron's Best (32) Delivering 15.26% Vs. (33) 17.74% Net Gains by All Ten by January 2020

Source: YCharts

$5,000 invested as $1k in each of the five lowest-priced stocks in the top ten Barron's Roundtable picks for 2019 by yield were predicted by analyst 1-year targets to deliver 0.81% more net gain than $5,000 invested as $.5k in each of all ten. The seventh lowest priced Barron's Roundtable stock, Tapestry Inc. showed the best broker-augered net gain of 44.04%.

Source: YCharts

The five lowest-priced Barron's best yield plays for 2019 were: Hercules Capital Inc., Regions Financial, Takeda Pharmaceutical Co. Ltd. ADR, Michelin ADR, and Roche Holding AG ADR, with prices ranging from $12.66 to 32.07.

Five higher-priced Barron's best yield plays for 2019 were: Citizens Financial Group, Tapestry Inc., China Mobile Ltd. ADR, AbbVie Inc., and Packaging Corp. of America, whose prices ranged from $35.16 to $92.31.

That distinction between the five low-priced dividend dogs and the general field of ten reflected Michael B. O'Higgins' "basic method" for beating the Dow. The scale of projected gains based on analyst 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 Champion Dividend 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 www.indexarb.com; YCharts.com; finance.yahoo.com; analyst median target prices by YCharts. Dog photo: huffingtonpost.ca

Disclosure: I am/we are long CSCO. 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.