Billionaire Jim Simons is betting on 3 high yield dividend stocks
A rising tide lifts all boats, as President John Kennedy said, and we see it now on Wall Street as both the S&P 500 and NASDAQ hit near record highs. The gains are broad and real, 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 economist Burton Malkiel told us, a blindfolded monkey throwing arrows at the financial pages of a newspaper could pick a portfolio that worked just as well as one carefully selected by the experts. “He pointed out the effect of random forces on a sufficiently large sample – and the stock market, with over 7,000 publicly traded stocks and even more thousands of active traders working daily, is definitely a sufficiently large sample. But that was before mathematician and code breaker Jim Simons taught us all how to crunch the numbers. Simons realized that humans are not apes – and therefore have access to information that goes beyond random effects. He invented quantitative trading and forever changed the investment landscape. And in the present, Simons revealed three new equity positions in his most recent 13F filing that should be considered. These are stocks with a buy rating that have a dividend yield of at least 5% and rise from there. We used the TipRanks database to find out what else makes these choices so compelling. First up is Plains GP Holdings (PAGP) Plains GP, a midstream oil and gas holding company. Plains controls assets in the oil and gas transportation sector, where the hydrocarbons are transported from the wellhead manufacturing facilities to the refineries, storage tank farms and transportation facilities. The company's assets include almost 30,000 km of pipelines, 8,000 crude oil tankers, almost 2,500 trucks and tractor units, as well as 20 transport tugs and 50 barges on the rivers. These assets move oil and gas into and out of storage capacities valued at 148 million barrels. PAGP was hit hard earlier this year by declines in oil and gas prices and lower demand during the economic stalemate triggered by the pandemic. By the second quarter, sales had more than halved to $ 3.23 billion. The top line of the third quarter shows the beginning of a recovery with sales of $ 5.83 billion. The EPS of the third quarter remained unchanged sequentially at 9 cents. The company's share price, as expected from financial performance, has not gained much traction since falling last winter at the start of the corona crisis. PAGP's shares are down 52% so far this year. However, the low share price offers investors an opportunity. Jim Simons would clearly agree. His fund got involved in PAGP by buying 1,045,521 shares. The investment is valued at USD 8.44 million at the current share price. Plains GP has kept its commitment to dividends. The company cut the payment for the April payment from 36 cents per share to 18 cents, but has kept it at that level since then. The cut prevented returns from exploding as the stock price fell and kept the payment affordable at current income levels. The current payment is 72 cents per common share for a yield of 8.3%. Justin Jenkins, an analyst at Raymond James, likes Plains for its cash-generating ability. He writes: “PAGP's cash flow profile has actually improved this year. While EBITDA will face more headwinds in 2021 than in 2020, lower investment and cost-cutting measures implemented since the pandemic are still leading to an FCF inflection. We are now modeling plains that generate an all-in FCF excess (…). We continue to believe the partnership's outlook is much better than recent investor sentiment for the stock. "Consistent with these comments, Jenkins is pricing PAGP at a purchase price of $ 9, the target suggests there is room for ~ 10% growth from current levels. (To see Jenkins' track record, click here.) There are a total of three recent PAGP valuations on record, and all of them are buys – which makes the consensus of analysts unanimously strong Buy. The stock is selling for $ 8.17, and its average price target of $ 10 implies a year-long upside of 22%. (See PAGP stock analysis on TipRanks.) Granite Point Mortgage Trust (GPMT) Next, Granite Point Mortgage Trust is a mortgage lending company serving a U.S. customer base. The company invests in senior adjustable rate commercial mortgages as well as in taking out and Managing such loans. The company's portfolio is valued at more than $ 1.8 billion. GPMT is showing some solid messages in recent years Best Financial Achievement Being the Company The earnings forecast stated 27 cents per share versus an estimate of 20 cents, an increase of 35%. Revenue increased year over year, and the company ended the quarter with more than $ 353 million in cash. That foundation allowed GPMT to hold on to its dividend, even though the company had adjusted the payment to 20 cents per common share. At this rate, it annualizes to 80 cents and gives a whopping 8.3%. This compares favorably with comparable companies in the financial sector – and is more than four times higher than the average dividend among companies listed on the S&P exchange. Granite Point is another new position from Jim Simons. The quant billionaire bought 155,800 shares of this real estate investment trust (REIT) for what is now $ 1.48 million. Stephen Laws, who covers that stock for Raymond James, sees GPMT as a potential winner for dividend investors. He writes, “We expect net interest income will continue to benefit from tiered LIBOR loans and are increasing our core earnings estimates to reflect this. While GPMT reintroduced the quarterly dividend of $ 0.20 per share, the company still has undistributed taxable income of approximately $ 29 million as of September 30. With this in mind, we expect a special dividend of $ 0.40 per share to be declared before year end. “The 5 The Star analyst rates the stock as outperforming (ie buying) and its price target of $ 11 implies growth of 16% over the next few months. (To see Laws' track record, click here.) This is another stock with an unanimous analyst rating – although the two most recent buys make the consensus view a modest buy. The average target price corresponds to that of Laws at USD 11 and shows an upward movement of 16% compared to the current trading price of USD 9.60. (See GPMT stock analysis on TipRanks) Phillips 66 (PSX) Last on our list of Simons' new acquisitions is Phillips 66, the oil and gas giant. With annual sales of over $ 107 billion and total assets of more than $ 58 billion, Phillips 66 is heavily involved in oil exploration, refining and commercialization. The company is also well represented in the petrochemical industry. Low prices, economic stagnation, and unpredictable demand have put pressure on PSX's share price this year, and the stock has only partially recovered from last winter's swoon. PSX is down 40% since the start of the year but is up 54% since the end of March. In the third quarter, Phillips 66 posted a 1 cent EPS loss – but that was far better than the 80 cents loss had been predicted. Revenue for the quarter was $ 15.93 billion, up 45% from the previous quarter. The company pays 90 cents per common share and has an 8 year history of making reliable payment with occasional increases. The annualized payment of $ 3.60 gives a return of 5.4%, which is well above the average return for the utility sector of 3.3%. For his part, Simons was impressed enough with the stock to buy 120,800 shares. That's a $ 7.47 million stake. In his PSX note, Scotiabank's Paul Cheng makes a few key points, including some that may seem counterintuitive. “Passing Election Day can lead to new acquisitions in the group even if Biden wins. Contrary to popular belief, the sector historically outperformed the general market in the first year of a new democratic government … cyclical sectors may be in demand again as investors focus their attention on vaccine availability from choice, ”said Cheng. The analyst added, "… Compared to other refineries, PSX should benefit more from a rising oil price environment because of its large chemical and NGL activities." To this end, Cheng rates PSX as outperforming (i.e. buying). He sets a price target of $ 79, which indicates upside potential of 25% over the next 12 months. (To see Cheng & # 39; s track record, click here.) Overall, Phillips 66 gets a broad thumbs-up from Wall Street – as indicated by the stock's 11 buy ratings, suggesting a strong consensus among buy analysts. (See PSX stock analysis on TipRanks.) To find great ideas for trading dividend stocks at attractive valuations, visit TipRanks 'Best Stocks to Buy, a newly launched tool that brings together all of TipRanks' stock insights. Disclaimer: The opinions expressed in this article are solely those of the presented analysts. The content is intended to be used for informational purposes only. It is very important that you do your own analysis before making any investment.