It’s easy to feel giddy when markets move in multiple 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 high and then retraced, the Federal Reserve made some of the price hikes most aggressive rates in its history before sounding a moderate note.
For the average investor, charting a course through these waters is a daunting task. It is at a time like this that some expert advice can provide a clearer picture. Hardly anyone on the street is more respected than billionaire Steve Cohen.
The legendary stock picker has built Point72 into a giant in the hedge fund industry, with more than $26 billion in total assets under management. Using what is known as a multi-strategy approach that involves stock market investments as well as global investments in multiple asset classes at once based on macroeconomic trends, Cohen is considered one of the best in the business.
With this in mind, we’ve opened the TipRanks database for information on two of Cohen’s recent new jobs. These are buy-rated stocks and, perhaps most interestingly, both pay strong dividends, with annual returns of over 5%. We can turn to Wall Street analysts to find out what else might have drawn Cohen’s attention to these actions.
Properties of Highwoods (HOLA)
We’ll start with an unsurprising member of the ‘high yield dividend club’, Highwoods Properties. This company is a real estate investment trust (REIT), headquartered in Raleigh, North Carolina, owns a portfolio of properties in the best business districts (BBD) of growing urban areas throughout the sun belt: Atlanta, Charlotte , Nashville, Orlando, Raleigh, Richmond and Tampa. Additionally, Highwoods also has properties in Pittsburgh, Pennsylvania. The company owns, develops, leases and manages its properties and has more than 27.4 million square feet of usable space at 91.1% occupancy.
These properties have generated consistently strong revenue for Highwoods. The company reported $203.8 million on the top line in 2Q22, the most recent report, for a 9.8% year-over-year gain. That revenue line supported a net profit of $50.5 million, or 48 cents per diluted share. Highwood had net real estate assets of $4.9 billion at the end of the quarter, along with cash and liquid assets of $25 million.
Earnings and assets together sustained the company’s dividend. Highwood declared, at the end of July, a common stock dividend of 50 cents per share, with payment on September 13. This marks the fifth consecutive quarter with the dividend at this level, which is annualized to $2 even and outperforms the 5.6% median yield. That return is nearly triple the average found among S&P-listed companies, and is high enough to provide some protection against inflation.
All of this makes for interesting action at a time when defensive plays are gaining ground, and it’s clear Cohen would agree. His signing opened his position in HIW by purchasing 103,061 shares. This stake is now worth $3.56 million.
What this all boils down to is summed up by Baird analyst Dave Rodgers, who writes: “We expect HIW shares to outperform an Office Underweight group given the company’s more limited exposure to expansion tenants. technology-oriented, strong visibility into re-leasing needs and a healthy balance sheet. Leasing for 3Q22 is progressing well for the company and its development pipeline is at limited risk or at least closes the delivery gap beyond our recession-time view. Portfolio upgrades and strategic transactions should cap further FFO growth, but HIW should provide strong short-term relative risk-adjusted returns.”
Rodgers continues to give HIW an outperformance rating (ie buy), along with a $43 price target implying ~25% one-year upside potential.
While Rodgers is openly optimistic, Street generally takes a mixed, if somewhat positive, view of this stock. The 10 recent analyst reviews are split down the middle, with 5 buys and 5 holds for a moderate buy consensus rating. The stock is trading at $34.53 and its average price target of $38.78 suggests a rise of around 10% next year. (See HIW stock forecast on TipRanks)
happiness (AA)
For Cohen’s second pick, we will focus on the Chinese digital market. A famously complex language and authoritarian rule 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 Internet users. connected. of more than 1 billion. By scale, China’s Internet scene deserves 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 live streaming Bigo Live, short-form video provider Likee, and multiplayer gaming social media 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. On the top line, JOYY generated $623.8 million, down 3% year over year. However, net income, on a non-GAAP basis, came in at $20.9 million, a massive turnaround from the $24.1 million net loss reported in the prior year first quarter. This change was attributed to improvements in gross margin, more disciplined marketing efforts, and an overall improvement in operating efficiency.
Coupled with improved operating efficiencies, JOYY has amassed a cash ‘war chest’ totaling more than $4.47 billion. The company is also cash positive from operations, generating $592 million in cash from operations during the first quarter.
Having become profitable and accumulated a lot of cash, JOYY now has a solid foundation for its dividend payout. The company pays 51 cents per common share, with the last payment sent on July 6. The $2.04 annualized payout provides a solid 7.25% yield, which is well over three times the average dividend yield.
Steve Cohen has shown that he is impressed by the attributes of JOYY, and he has done so with a great purchase. His company bought 198,000 shares of YY, establishing an initial position now worth $5.3 million.
5-star analyst Fawne Jiang of Benchmark also considers herself a fan. Jiang sees a company with a clear attraction to value investors. Analyst says YY is a ‘solid cash game,’ writing: “YY currently has a cash balance of $43 per share and could increase its cash balance to ~$70 cash per share upon completion of the YY sale.” Live (pending regulatory approval). The company has issued aggregate share repurchase plans of $1.2 billion in 2021 (with a $316 million repurchase executed in 1Q22). YY pays quarterly dividends with an annual dividend yield of 5%. The group became profitable in FY21, effectively reducing concerns about potential cash burn.”
That’s a bullish stance, and Jiang’s rating on the stock is Buy. Jiang backs that up with a $62 price target indicating confidence in a solid one-year rise of 131%.
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Disclaimer: The opinions expressed in this article are solely those of the 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.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.