If there’s one thing for sure, it’s that markets are unpredictable – and that unpredictability is growing. Last week saw the highest daily volatility on Wall Street since 2020. In a further complication, the reasons are multiplying: high inflation rising, wages not keeping up, Russia’s invasion of Ukraine sparked Europe’s greatest war. since 1945, and energy and food commodities – key ingredients of inflation – are sure to rise in price as a result of these fights.
All of this is enough to make investors’ heads spin. And certainly investors are looking for a clear signal about stock picks. One source for such signals: legendary market investors. Billionaire hedge managers have amassed enormous funds and also made personal fortunes – and the average retail investor can take a page or two from these books.
Few names are as attached to such long-term success as Izzy Englander. The founder of the Millennium fund – which he started with $35 million in 1989, now manages over $196 billion and has a reputation for high profits. Even in the “corona year” of 2020, Englander’s fund recorded returns for investors of $10.2 billion. Englander himself has amassed a personal fortune of over $10 billion.
Regular filings with the SEC show the actions taken by Englander, through the Millennium Fund. Interestingly, he leans heavily towards dividend stocks, the traditional defensive game of the stock market, and one that will naturally increase returns for investors.
We used the TipRanks platform to extract details of two of the recent purchases, positions he saw fit to increase wide margins and offer dividend yields of up to 8%. Let’s take a closer look.
Arbor Real Estate Trust (ABR)
We’ll start with Arbor Realty Trust, a mortgage lender operating in the multi-family residential and commercial property market. Arbor works with Fannie Mae and Freddie Mac, providing direct financing for their loans, as well as financing developers for multi-family residences.
Arbor is focused on large-scale loan securitization. In February, the company closed two such deals, the first for $2.05 billion and the second for $489 million. Securitizations provide funding for multi-family real estate mortgage loans.
Also in February, Arbor released its 4Q21 financial results, with good news for dividend investors. The company’s net income was $126 million, compared with $112 million in the year-ago quarter. Distributable earnings were quoted at 57 cents and provided full coverage of the common stock dividend, which was declared at 37 cents per share. At this rate, the dividend cancels out at $1.48 per common share and gives a yield of 8.19%. Importantly for investors, the dividend declaration marked the seventh consecutive quarterly increase.
For a hedge manager looking to secure returns, this type of performance will certainly attract attention. And Englander’s fund bought 1,108,129 shares of ABR, according to the latest regulatory filing. These shares increased an existing stake by 750% and are currently worth more than $19.5 million.
Englander is not the only one to be optimistic about this title. Raymond James 5-star analyst Stephen Laws describes ABR’s fourth quarter results as exceptionally strong and goes on to write, “Distributable EPS easily exceeded our estimate and adjusted book value increased 6% in Sequential…We expect new origination activity for the balance sheet portfolio to remain strong, and we continue to expect this portfolio to fuel agency business as loans mature.”
“We are reiterating our outperformance rating to reflect strong financial results, our expectations for continued portfolio growth, recent dividend increases and a strong dividend coverage ratio,” the analyst added.
Laws’ outperform (i.e. buy) rating comes with a price target of $24, implying a 36% year-over-year upside for the stock. Based on the current dividend yield and expected price appreciation, the stock has a potential total return profile of approximately 44%. (To see Laws’ background, Click here)
While bullish, Laws’ view is not an outlier – Arbor has a unanimous Strong Buy consensus rating based on 3 positive reviews. The shares are priced at $17.63 and their average target of $21 suggests an upside of around 19% year over year. (See ABR stock analysis on TipRanks)
Physicians Real Estate Trust (DOC)
Next up is Physicians Realty Trust, a real estate investment trust (REIT) with a real estate portfolio comprised of health-related holdings. DOC buys, manages, and leases these properties, and the tenants are primarily hospitals, medical clinics, and medical practices. These properties, located on the American continent, have an overall occupancy rate of 95%. Of the total number of properties, 246 are medical office buildings (MOBs), which hold 84% of the company’s total leasable area.
Physicians Realty made a major acquisition last December, when it added 14 MOBs from the “historical portfolio” to its own. These buildings, like DOC’s pre-acquisition holdings, are 95% leased; three-quarters of leases are granted to “investment grade” tenants. The company paid a total sale price of $750 million to complete the acquisition and expects a 4.9% cash yield for the first year of the Landmark purchase.
Shortly after the Landmark acquisition, DOC declared its fourth quarter dividend for 2021. At 23 cents per common share, the payout marks the thirty-fourth consecutive quarterly dividend. It annualizes at 92 cents per share, giving a return of 5.4%. Dividend investors should note that the DOC, in its Q421 report, reported total funds from operations (FFO, a key metric that supports the dividend) of 26 cents per share, making the current dividend rate sustainable. for the company.
Clearly, Englander saw something appealing here; he increased his existing stake in Physicians Realty by 6,198%, buying 1,972,817 shares. At current rates, these shares are valued at $33 million.
In his coverage of DOC, Berenberg analyst Connor Siversky agrees that DOC is a buy proposition. He writes, “DOC closed 2021 strong, collecting nearly all of its contract rent while posting reasonable same-store NOI growth of 2.5% year-on-year. It should be noted that the acquisition of the $750 million Landmark portfolio by DOC in December resulted in a total investment volume of approximately $1 billion for the year. Based on our estimates, we expect the portfolio transaction to add nearly $37 million in annualized NOI… DOC is currently trading at a 15.0% discount on P/2022E AFFO compared to its dedicated peers MOB.”
To that end, Siversky rates DOC as a buy, while setting a price target of $19 which suggests upside potential of around 13% over the next 12 months. (To see Siversky’s track record, Click here)
Overall, the analyst consensus here is a moderate buy, based on 8 reviews which include 3 buys and 5 takes. The $19.63 average share price target implies a 17% upside over the coming year from the current price of $16.76. (See DOC’s stock analysis)
Warning: The views expressed in this article are solely those of the analysts featured. The Content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.