activist investor stocks 2019

3 Dividend Stocks the Experts are Buying Now

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Buy these dividend stocks before activist investors

Buying a position in a stock before institutional and activist investors can be one of the best investments you make. These big money buyers can send shares soaring and preview an acquisition.

I’ve found three high yielding dividend stocks with huge buying by institutional and activist investors. In fact, one stock saw over $2 billion in buying over the last quarter.

In this video, I'll show you how to find stocks with institutional interest and reveal three dividend stocks that could be about to pop.

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Why Every Investor Should Follow Activist Investors

One of the best ways to pick stocks for your portfolio is by following the big hedge funds, institutional buyers and activist investors like Carl Icahn. These multi-billion dollar funds have to disclose their stocks every quarter so it’s a great look into what investments they like and trends in the stock market.

This is important for a couple of reasons. First is just the sheer dollar-volume investment from these funds can drive a stock higher. We’re talking hundreds of millions of dollars here so it can really drive momentum in a stock. In fact, a friend of mine from my analyst days, his whole job is setting up computer programs that track these big inflows into a stock to make money off that momentum.

More importantly though is most of these funds invest on a fundamental basis, looking deeply at a company’s financials and competitive advantage. The portfolio managers at these funds have teams of analysts working sixty and eighty hours a week pouring over cash flow models. That’s what I did, creating those models and finding the undervalued stocks. So while I still say you need to do some of your own research to make sure a stock is right for your portfolio, if an institutional investor is building a position then it’s probably for a very good reason.

A Warning about Hot Stocks

I’ve been so busy tracking our 2019 dividend stocks portfolio, up over 20% so far this year, that I haven’t looked at what the funds are buying lately. I looked to my old sources and found three solid dividend stocks that are getting some big money interest and that could be great additions to your portfolio.

I’m first going to show you how to find these stocks with big money buying and then reveal those three dividend investments to watch.

One warning though while you’re using this strategy. That form that the hedge funds and big money players are required to submit, it’s called the 13F for institutional investors and the 13D which is filed by activist investors and anyone with more than 5% of a company’s shares. The warning here is that these are always filed for investments in the previous quarter or at least with a ten-day lag for the 13D, so they are a little dated. Usually though, what we see is an institutional buyer will build their position over at least a few quarters so it’s not like they’re trading in and out of these stocks.

Looking for crash-proof dividend stocks? Watch this video for three stock picks to grow your portfolio even if the market tumbles.

How to Find Institutional Buying in Stocks

Let’s look at where you can find these big money players and find stocks that could be getting that big money boost. A good place to start is on the Nasdaq site and you can enter a company name or ticker here in the search box to go to its profile page. Now there’s a lot of good info available but if you scroll down and click on institutional holdings, this will show you all the funds and big institutional investors with a position.

First you’ll see the percentage of shares outstanding that are held by these big money players so we see here that funds and institutions own about 58% of all stock available for The Gap. That’s pretty typical for these large, established companies. You usually see anywhere from 50% to even 90% held by funds because these stocks are in all kinds of index funds like the S&P and dividend funds.

Scroll down a little further and you’ll see changes in holdings and what I like to look at is this new positions vs sold positions. This gives you a good idea of the net interest in a stock over the last quarter. So we see that there was huge new buying in The Gap, almost triple the buying in the shares versus selling.

You can also scroll down further and see which funds hold the most shares and which added or sold the most in the last quarter. Most of the biggest institutional investors are going to be the fund managers, so the people that put together the ETFs and mutual funds that hold these stocks. That’s why you see Vanguard and Blackrock almost always at the top. When you’re looking here, you want to look for the hedge funds, so the non-ETF institutional investors and the activist investors. They’re the ones that are really moving a stock through buying and selling.

Understand that these institutional investors and activists aren’t infallible. Even Warren Buffett has taken a hit on investments like IBM and has even called his holding company Berkshire Hathaway, the dumbest stock he ever bought.

The point is that you have to do your own research as well when you find these stocks with big institutional investors buying.

My Favorite Dividend Stocks with Activist Interest

So I looked into the biggest institutional buying for stocks to buy. You know I’m all about dividend stocks this year so I put the strategy to the test, digging into my old sources, and found three good dividend investments that are getting lots of big money interest.

The Gap, ticker gps, of course is the $10 billion retailer that owns Old Navy, Banana Republic and it’s flagship brand. The company sells online and through about 3,200 stores internationally though 80% of sales comes from the U.S.

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The stock pays a solid 3.8% dividend yield but apparel retailers have been struggling for more than a year now. The company has been shedding underperforming stores and cutting costs but just hasn’t been able to get a break against higher costs and weak demand.

The stock jumped 16% early March when the company announced that it would be spinning off the Old Navy brand. Investors will get shares in both companies, Old Navy and then the new company holding Gap, Athleta and Banana Republic. The idea is that separately the companies can focus better on getting out the right fashions at the right time and managing costs.

The shares have come back down on fears about how they’ll pull it off but there’s been some real institutional investor buying here and I think some solid value. Unigestion Holdings is a $23 billion hedge fund manager out of Geneva with two-thirds of its clients from either pension or insurance investors so an eye towards safety. It added $49 million to its position in the company last quarter. Kempner Capital is a $31 billion independent advisor with a deep-value approach and a 3-5 year holding period and added $27 million to its position in the Gap.

Analysts expect earnings to fall by almost 5% to $2.47 per share over the next year but the company has a great track record of beating estimates. Even on the lower earnings, the shares still trade for just 10-times earnings. My sum-of-parts valuation puts the shares around $30 each or higher and I think the individual shares of the new companies could go higher on investor sentiment even before the spinoff happens.

Like I said, retail apparel has been hit hard over the last couple of years and I’d like to go into the factors and maybe some turning points you can look for. If you’d like to see a video about investing in different sectors or industries of the economy and the factors driving stocks, let me know in the comments below the video.

Next, Huntington Bancshares (HBAN)is a regional bank with 945 branches across eight states in the upper Midwest from Illinois across to Pennsylvania. The shares pay a great 4% dividend yield and the bank has really advanced its move into online service which is helping to boost profitability.

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Boston Partners added over $211 million to its position in Huntington last quarter and nearly 80% of the shares are owned by big money players. Boston is an $81 billion value and long/short manager and won the 2018 Lipper Fund award for its long/short equity fund.

Banking has struggled over the last year on lower long-term interest rates as those short-term rates they pay out on deposits increases on Fed rate hikes. That means lower profitability but they could see some relief through the rest of the year. Analysts see earnings jumping 12% to $1.37 per share over the next year which means the bank is trading on that 10-times price to earnings multiple I like to find.

We’ve got one more dividend stock and this one has gotten more big money interest than the other two combined. If you like the video so far though, please tap the thumbs up button below so I know to make more of these stock pick videos.

W.P. Carey (WPC) is $17 billion real estate investment trust paying a 5.4% dividend yield. The REIT is one of the few with geographic diversification, about a third of properties are in Europe and is fairly well diversified across property types with office space, retail and self-storage offsetting the 43% holdings in industrial and warehouse.

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The company collects over $1.1 billion in annualized base rent and books 98% occupancy over 131 million square feet across more than 1,100 properties.

Of the three dividend stocks, this is the one that’s seen the biggest institutional investor buying with over $2 billion added last quarter. Geode Capital Management is $388 billion multi-strategy asset manager founded in 2001. Centersquare is a $9 billion real estate asset manager in listed shares, private equity and infrastructure. The fund has almost 30 years investing and managing real estate assets so it’s a big vote of confidence that it put on this new position in WP Carey.

WP Carey has topped expectations for funds from operations over the last four quarters, reporting an FFO of $6.37 last year. Remember as we talked about in our REITs and MLPs video, you can’t use regular earnings or price-to-earnings for these stocks because of that huge depreciation charge they book. So that $6.37 in funds from operations gives is a 12-times price to FFO multiple which is just under the REIT industry average around 14-times.

Don’t forget to check out that 5 investing strategies video. These are some great investing strategies to combine with following institutional investors and activist investors so check that out.

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