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Billionaire Jim Simons bets on 3 stocks with high yield dividends
A rising tide lifts all boats, as President John Kennedy said, and now we see it on Wall Street, as both the S&P 500 and NASDAQ are close to record highs. The gains are large and real and reflect 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 economist Burton Malkiel told us that “a blindfolded monkey throwing darts at the financial pages of a newspaper could select a portfolio that would do as well as one carefully selected by experts.” He was pointing out the effect of random forces on a fairly large sample – and the stock market, with over 7,000 publicly traded shares and even more thousands of active traders working every day, is certainly a large enough sample, but that was before. mathematician and decipherer Jim Simons taught us all how to work out numbers. Simons recognized that people are not apes and therefore have access to information that transcends random effects. He invented quantitative trading and it changed the investing landscape forever and in the present, Simons revealed in his latest 13F papers three new positions in stocks that take a closer look. These are buy-rated stocks that boast at least a 5% dividend yield and rise from there. We used the TipRanks database to find out what else makes these choices so compelling. Plains GP Holdings (PAGP) The first is Plains GP, a midstream oil and gas holding company. Plains controls operations 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 operations include nearly 19,000 miles of pipelines, 8,000 rail tankers for crude oil, nearly 2,500 truck and tractor trailers, and, on rivers, 20 tugboats and 50 barges. These businesses move oil and gas in and out of 148 million barrels of storage capacity. PAGP took a hit earlier this year from falling oil and gas prices and lower demand during inspired economic closures. from the pandemic. In the second quarter, revenues fell more than half to $ 3.23 billion. The top row for the third quarter shows the beginning of a recovery, with revenues coming in at $ 5.83 billion. EPS for the third quarter was stable sequentially, at 9 cents. The company’s share price, as might be expected from financial performance, has failed to gain much traction since it fell last winter at the start of the crown crisis. Shares of PAGP have so far fallen 52% this year, but the low share price offers investors an opportunity. Clearly, Jim Simons would agree. His fund staked a position in PAGP by purchasing 1,045,521 shares of the stock. The holding is valued at $ 8.44 million at the current share price and Pllains GP has kept its dividend commitment. The company cut the payment from 36 cents per share to 18 cents for the April payment, but has kept it at that level ever since. The cut prevented the yield from exploding as the share price fell and kept the payment affordable at current income levels. The current annualized payment is 72 cents per common share and gives a yield of 8.3%. Raymond James analyst Justin Jenkins loves the plains for his ability to generate cash. He writes: “PAGP’s cash flow profile has actually improved this year. While 2021 will see more headwinds to EBITDA than 2020, lower investment and cost-cutting measures implemented after the pandemic still drive an FCF inflection. We now model Plains by generating an all-in FCF surplus […] We continue to believe the partnership outlook is much better than the recent investor sentiment in the stock. “In line with these comments, Jenkins values PAGP at Buy. His price target of $ 9 suggests he has room to grow ~ 10% from current levels. See Jenkins track record, click here) Overall, there are three recent PAGP reviews on record, and all are Buys – making analyst consensus here a unanimous Strong Buy. The stock sells for $ 8.17, and its $ 10 average price target implies a one-year upside. (See PAGP Stock Analysis on TipRanks) Granite Point Mortgage Trust (GPMT) The next step, Granite Point Mortgage Trust, is a mortgage company serving a US client base. The company invests in senior floating – commercial mortgage rate, as well as the origin and management of such loans. The company’s portfolio is worth over $ 1.8 billion. GPMT is showing some concrete messages in recent financial performance. The company has outperformed its forecast useful, rip yielding 27 cents per share against an estimate of 20 cents, for a beat of 35%. Revenues increased year on year and the company ended the quarter with more than $ 353 million in cash and cash equivalents, which allowed GPMT to maintain its dividend, although the company has adjusted the payment at 20 cents per ordinary share. At that rate, it annualizes at 80 cents and produces a substantial 8.3%. This compares favorably with peers in the financial sector and is more than 4 times higher than the average dividend found among S&P listed companies. Granite Point is another of Jim Simons’ new positions. The quantum billionaire bought 155,800 shares of this real estate investment fund (REIT), for a stake that is now worth $ 1.48 million. Stephen Laws, who covers this stock for Raymond James, sees GPMT as a potential winner for dividend investors. He writes: “We expect net interest income to continue to benefit from LIBOR floor loans and are increasing our key earnings estimates to reflect this. Although GPMT has restored the quarterly dividend of $ 0.20 per share, the company still has approximately $ 29 million of undistributed taxable income as of September 30. That said, we expect a special dividend of $ 0.40 per share to be declared before the end of the year. ” The -star analyst views the stock as outperforming (aka buying) and its $ 11 price target implies 16% growth over the next few months. (To see Laws’ track record, click here) This is another stock with a unanimous analyst rating, although the two recent purchases make the consensus view a moderate buy. The average price target matches Laws’ target of $ 11, indicating a 16% upside from the current trading price of $ 9.60. (See GPMT stock analysis on TipRanks) Phillips 66 (PSX) Last on our list of Simons’ new purchases is Phillips 66, the oil and gas giant. With over $ 107 billion in annual revenues and over $ 58 billion in total assets, Phillips 66 is deeply involved in petroleum production, refining and marketing. The company also has a large presence in the petrochemical industry – low prices, economic closures and unpredictable demand have put PSX’s share price under pressure this year, and the stock has only partially rebounded from last winter’s swoon. PSX is down 40% year to date, but is up 54% from its late March low. In the third quarter, Phillips 66 posted an EPS loss of 1 cent, but this was far better than the Lost 80 cent that was expected. Revenue for the quarter was $ 15.93 billion, up 45% from the prior quarter. The company pays 90 cents per joint share and has an 8-year history of maintaining a reliable payment with occasional raises. The annualized payment of $ 3.60 gives a return of 5.4%, well above the utility sector average return of 3.3%. Simons, for his part, was impressed enough with this stock to buy 120,800 shares. This is a stake that is now worth $ 7.47 million. In his PSX note, Scotiabank’s Paul Cheng notes several key points, including some that might seem counterintuitive. “Exceeding election day could actually trigger new signings in the group even with a Biden win. Contrary to widespread belief, the sector has historically outperformed the general market in the first year of a new democratic administration … Cyclical sectors may be in demand again as investors refocus their attention from the elections to the availability of vaccines, “said Cheng The analyst added, “… compared to other refineries, PSX should benefit more from a rising oil price environment given its large chemical and NGL operations.” To this end, Cheng views PSX to outperform ( i.e. Buy). Sets 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 gets a large thumbs up up from Wall Street, as evidenced by the 11 Buy ratings on the stock, which give it a consensus from Strong Buy analysts. (See PSX share analysis on TipRanks). For good ideas for trading dividend stocks at attractive valuations, visit TipRanks ‘Best Stocks to Buys, a newly launched tool that combines all of TipRanks’ equity insights. Disclaimer: The views expressed in this article are only those of the analysts present. The content is to be used for informational purposes only. It is very important to do your own analysis before making any investments.
