It’s easy to get vertigo, when markets get yanked around in several directions at once. The crazy currents we’ve seen in recent weeks have been a recipe for confusion – a bear turned into a bullish rally, inflation hit a 40+ year peak and then pulled back, the Federal Reserve made some of the most aggressive rate hikes in its history before sounding a dovish note.
For the average investor, charting a course through these waters is a daunting task. It is in time like this that some expert advice might provide a clearer picture. Hardly any on the Street come more highly regarded than billionaire Steve Cohen.
The legendary stock picker has built Point72 into a giant of the hedge fund industry, with over $26 billion in total assets under management. Using what’s known as a multi-strategy approach which involves stock market investments as well as global investments in several asset classes all at once based on macroeconomic trends, Cohen is considered one of the best in the business.
With this in mind, we’ve opened up the TipRanks database to get the scoop on two of Cohen’s recent new positions. These are Buy-rated stocks – and perhaps more interestingly, both are strong dividend payers, with annual yields exceeding 5%. We can turn to the Wall Street analysts to find out what else might have brought these stocks to Cohen’s attention.
Highwoods Properties (HIW)
We’ll start with an unsurprising member of the ‘high-yield dividend club,’ Highwoods Properties. This company is a real estate investment trust (REIT), based in Raleigh, North Carolina, holds a portfolio of properties in the best business districts (BBDs) of rising urban areas across the sunbelt: Atlanta, Charlotte, Nashville, Orlando, Raleigh, Richmond, and Tampa. In addition, Highwoods also has properties in Pittsburgh, Pennsylvania. The company owns, develops, leases, and manages its properties, and boasts more than 27.4 million square feet of usable space with a 91.1% occupancy.
These properties have generated consistently sound revenues for Highwoods. The company reported $203.8 million at the top line in 2Q22, the most recent reported, for a gain of 9.8% year-over-year. That revenue line supported a net earning of $50.5 million, or 48 cents per diluted share. Highwood held net real estate assets worth $4.9 billion at the end of the quarter, along with cash and liquid assets of $25 million.
Earnings and assets together held up the company’s dividend. Highwood declared, at the end of July, a common stock dividend of 50 cents per share, for payment on September 13. This marks the fifth quarter in a row with the dividend at this level, which annualizes to $2 even and gives an above-average yield of 5.6%. That yield is almost triple the average found among S&P-listed companies, and is high enough to provide some protection from inflation.
All of this makes for an interesting stock, at a time when defensive plays are gaining ground, and it’s clear that Cohen would agree. His firm opened its position in HIW by purchasing 103,061 share. This stake is now worth $3.56 million.
What this all comes down to is summed up by Baird analyst Dave Rodgers, who writes: “We expect HIW shares to deliver outperformance against an Underweight Office group given the company’s more limited exposure to tech-oriented expansion tenants, solid visibility toward re-tenanting needs and a healthy balance sheet. Leasing for 3Q22 is progressing well for the company, and its development pipeline has limited risk or, at the very least, bridges the delivery gap past our view of recession timing. Portfolio upgrades and strategic transactions should limit better FFO growth, but HIW should provide solid relative near-term risk-adjusted returns.”
Rodgers goes on to give HIW an Outperform (i.e. Buy) rating, along with a $43 price target that implies ~25% one-year upside potential. (To watch Rodgers’ track record, click here)
While Rodgers is openly bullish, the Street generally takes a mixed – though somewhat positive – view of this stock. The 10 recent analyst reviews split down the middle, with 5 Buys and 5 Holds for a Moderate Buy consensus rating. The shares are trading for $34.53 and their $38.78 average price target suggests about 10% upside the coming year. (See HIW stock forecast on TipRanks)
For the second Cohen pick, we’ll turn to the Chinese digital market. A famously complex language, and an authoritarian government, have combined to keep China’s digital world isolated from the West – but the country has an urban population of 800 million, a total population of 1.4 billion, and a ‘digital’ population of connected internet users of more than 1 billion. By scale along, the Chinese internet scene is worth a second look from investors.
Within that internet scene, JOYY is a major social media company, operating multiple brands that act to connect users through video formats. The company’s brands include the live-streaming Bigo Live, the short-form video provider Likee, and the multiplayer social game networking platform Hago.
JOYY will report its 2Q22 numbers at the end of this month, but we can get an idea of the company’s trends by looking at the 1Q22 numbers. At the top line, JOYY brought in $623.8 million, down 3% year-over-year. However, net income, on a non-GAAP basis, came to $20.9 million, a massive turnaround from the $24.1 million net loss reported in the prior year’s Q1. This turnaround was attributed to improvements in gross margin, more disciplined marketing efforts, and an overall improvement in operating efficiency.
Along with improved operating efficiencies, JOYY has accumulated a cash ‘war chest’ totaling more than $4.47 billion. The company is also cash-positive in operations, generating $592 million in cash from ops during Q1.
Having turned profitable and accumulated plenty of cash, JOYY now has a solid base for its dividend payment. The company pays out 51 cents per common share, with last payment sent out on July 6. The annualized payment of $2.04 gives a strong yield of 7.25%, which is well over 3x the average dividend yield.
Steve Cohen has showed that he’s impressed by the attributes of JOYY, and he’s done so with a large buy. His firm picked up 198,000 shares of YY, setting up an initial position that’s now worth $5.3 million.
5-star analyst Fawne Jiang, of Benchmark, also counts herself as a fan. Jiang sees a company with a clear attraction for value investors. The analyst says that YY is a ‘strong cash play,’ and writes, “YY currently has a cash balance of $43 per share and could boost its cash balance to ~$70 cash per share upon the completion of the YY Live sale (pending on regulatory approval). The company has issued aggregate share repurchase plans of $1.2B in 2021 (with $316M repurchase executed in 1Q22). YY pays quarterly dividends with an annual dividend yield of 5%. The group has turned profitable in FY21, which effectively reduced concerns on potential cash burn.”
That’s a bullish posture, and Jiang’s rating on the stock is a Buy. Jiang backs that with a $62 price target indicating confidence in a robust one-year upside of 131%. (To watch Jiang’s track record, click here)
Overall, JOYY has 4 recent analyst reviews, including 3 Buys and 1 Hold, making its analyst consensus view a Strong Buy. The $57.67 average price target suggests the stock has ~115% upside potential from its share price of $26.81. (See JOYY stock forecast on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured 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.