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Billionaire Jim Simons Bets On 3 High Yield Dividend Stocks
A rising tide lifts all ships, as President John Kennedy said, and we are seeing it now on Wall Street as both the S&P 500 and the NASDAQ are near record highs. The gains are real and broad-based, reflecting growing optimism now that the elections are behind us and a COVID-19 vaccine is in sight. So let’s look back to 1973, when the economist Burton Malkiel told us that “a blindfolded monkey throwing darts at the financial pages of a newspaper could select a portfolio that would perform as well as one carefully selected by the experts.” I was pointing out the effect of random forces on a large enough sample, and the stock market, with more than 7,000 publicly traded stocks and even more thousands of active traders working daily, is definitely a large enough sample. But that was Before mathematicians and code breaker Jim Simons taught us all how to do calculations. Simons recognized that people are not monkeys and therefore have access to information that transcends random effects. He invented quantitative trading and changed the investment landscape forever. And in the present, Simons revealed in his most recent 13F filings three new stock positions that are analyzed more closely. These are buy-rated stocks that boast at least a 5% dividend yield and increase from there. We used the TipRanks database to find out what else makes these selections so attractive. Plains GP Holdings (PAGP) First comes Plains GP, an oil and gas midstream portfolio company. Plains controls assets in the oil and gas transportation sector, where it moves hydrocarbons from wellhead production sites to refineries, storage tank farms and transportation facilities. The company’s assets include nearly 19,000 miles of pipelines, 8,000 crude oil tankers, nearly 2,500 trucks and tractors, and, on the rivers, 20 transport tugs and 50 barges. These assets move oil and gas in and out of 148 million barrels of storage capacity. PAGP was hit hard earlier this year by falls in the price of oil and gas, and by declining demand during pandemic-inspired economic shutdowns. For the second quarter, revenue was cut by more than half, to $ 3.23 billion. The top line for the third quarter shows the beginning of a recovery, with revenue of $ 5.83 billion. Third-quarter EPS was flat sequentially at 9 cents. The company’s share price, as might be expected from financial performance, hasn’t gained much traction since falling last winter at the start of the crown crisis. PAGP shares are down 52% so far this year. However, the low price of the shares presents an opportunity for investors. Clearly, Jim Simons would agree. His fund wagered a position in PAGP by purchasing 1,045,521 shares. The stake is worth $ 8.44 million at the current share price. Plains GP has maintained its commitment to the dividend. The company cut the payout from 36 cents a share to 18 cents for the April payout, but has held it at that level ever since. The cut prevented yield from spiking as the share price fell and kept the pay affordable at current income levels. The current payment is annualized at 72 cents per common share and yields 8.3%. Raymond James analyst Justin Jenkins likes Plains for its ability to generate cash. He writes: “PAGP’s cash flow profile has improved this year. While 2021 will see more headwinds for EBITDA than 2020, lower capital investments and cost-cutting measures implemented since the pandemic are still driving a FCF inflection. Now we model Plains generating a total surplus of FCF […] We continue to believe the association’s outlook is much better than recent equity investor sentiment. “Based on these comments, Jenkins rates PAGP as Buy. Its $ 9 price target suggests it has room to grow ~ 10 % from current levels. (To view Jenkins’s history, click here) Overall, there are three recent PAGP reviews on record, and all are buys, making the analyst consensus here a unanimous strong Buy. share is selling for $ 8.17, and its average price target of $ 10 implies a year up 22%. (See PAGP’s stock analysis on TipRanks) Granite Point Mortgage Trust (GPMT) Next, Granite Point Mortgage Trust, is a home loan company that serves a US customer base qualifying commercial mortgages, as well as originating and managing such loans. The company’s portfolio is valued at more than $ 1.8 billion . GPMT is showing some strong messages on recent financial performance. The company beat earnings estimates, reporting 27 cents a share against an estimate of 20 cents, for a 35% rate. Revenue increased year-over-year and the company ended the quarter with more than $ 353 million in cash and cash equivalents, allowing GPMT to maintain its dividend, although the company adjusted the payment to 20 cents per common share. At that rate, it annualizes at 80 cents and yields a hefty 8.3%. This compares favorably with its peers in the financial sector, and is more than 4 times higher than the average dividend found among companies listed on the S&P. Granite Point is another of Jim Simons’ new positions. The quantum billionaire bought 155,800 shares of this real estate investment trust (REIT), for a stake that is now worth $ 1.48 million. Stephen Laws, who covers these Raymond James shares, sees GPMT as a potential winner for dividend investors. He writes, “We expect net interest income to continue to benefit from LIBOR loans on flats, and we are increasing our basic earnings estimates to reflect this. While GPMT reinstated the quarterly dividend of $ 0.20 per share, the company still has approximately $ 29 million of undistributed taxable income as of September 30. Given this, we anticipate a special dividend of $ 0.40 per share that will be declared before the end of the year ”. The star analyst rates the stock outperforming (ie buy) and his $ 11 price target implies 16% growth over the next several months. (To view Laws history, click here) This is another stock with a unanimous analyst rating, although the two recent purchases make the consensus opinion a moderate buy. The average target price matches that of Laws, at $ 11, and indicates a 16% increase from the current trading price of $ 9.60. (Check out GPMT’s share analysis on TipRanks) Phillips 66 (PSX) Last on our list of new purchases from Simons is Phillips 66, the oil and gas giant. With more than $ 107 billion in annual revenue and more than $ 58 billion in total assets, Phillips 66 is deeply involved in the production, refining and marketing of oil. The company also has a large presence in the petrochemical industry. Low prices, economic closures and unpredictable demand have put pressure on PSX’s share price this year, and the shares have only partially recovered from last winter’s fading. PSX is down 40% so far this year, but is up 54% from its low at the end of March. In the third quarter, Phillips 66 posted an EPS loss of 1 cent, but that was much better than the 80 cent loss that had been forecast. Revenues for the quarter reached $ 15.93 billion, 45% more than in the previous quarter. The company pays 90 cents per common share and has an 8-year track record of maintaining reliable payment with occasional increases. The annualized payment of $ 3.60 gives a return of 5.4%, well above the average utility sector return of 3.3%. Simons, for his part, was impressed enough by this action to buy 120,800 shares. That’s a stake that is now worth $ 7.47 million. In his note on PSX, Scotiabank’s Paul Cheng makes several key points, including some that may seem contradictory. “Overcoming Election Day can trigger new group purchases even with a Biden victory. Contrary to widespread belief, the sector has historically outperformed the general market in the first year of a new Democratic administration … Cyclical sectors could return to demand as investors refocus their attention from elections to availability of vaccines, “said Cheng. The analyst added, “… compared to other refineries, PSX should benefit more from an environment of rising oil prices given its large chemical and NGL operations.” To this end, Cheng rates PSX as Superior (i.e. Buy). Set a price target of $ 79, indicating a potential upside of 25% for the next 12 months. (To see Cheng’s track record, click here) All in all, Phillips 66 got a thumbs up from Wall Street, as evidenced by the stock’s 11 Buy ratings, giving it a Strong Buy analyst consensus. . (See PSX Stock Analysis on TipRanks) To find good ideas for trading dividend stocks with attractive valuations, visit TipRanks Best Stocks to Buy, a recently launched tool that brings together all of TipRanks’ stock knowledge. only those of leading analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
