Good IPO Charts, Sans Hype

 | May 18, 2012 | 2:55 PM EDT  | Comments
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mtge

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stag

Now that it appears most investors are not going all in on Facebook (FB), it's a good time to visit some other fairly new companies with charts indicating good setups. Recent IPOs are frequently among the market's best performers and tend to populate my scans of stocks outperforming the market during the downturn.

In my latest scan of recent IPO leaders with good price and fundamental metrics, a number of REITs popped up. REITs are not necessarily associated with growth portfolios, but when they are showing good technical performance -- aside from hefty dividend yields -- they are worth a look.

American Capital Mortgage (MTGE) went public at $19.15 in August, 2011, particularly bad timing in terms of the general market, which was tanking at the time. The security made a small rally attempt in its early days of trading, but overwhelming market weakness was just too much, and American Capital Mortgage fell along with the downdraft. It bottomed in early October, as did the major indices.

As of Friday, the REIT was working on its sixth month in a row of gains, although it suffered a reversal in March and finished near the bottom of its monthly range.

Early in Friday's session, it was perched between its 10-day and 20-day moving averages, and was possibly forming a bullish handle formation to a consolidation that began in March. At this juncture, a buy point could occur above $23.95, but there are a couple caveats.

First, as long as the major indices remain in a downtrend, new buys could be risky. Even if the benchmark index bounces off support at the 1,300 level that could be short lived, and further news from Europe could always be a sobering slap in the face to traders next week.

Second, depending on how the stock continues to consolidate, a buy point may present itself before the stock rallies all the way back to that $23.95 prior high.

The Maryland-based REIT invests in agency (such as Ginnie Mae) and non-agency residential mortgage-backed securities. Its current dividend yield is 15.4%, another factor likely to attract some investors.

The company is expected to report earnings of $3.76 per share in 2012, up more than 200% over 2011. 

From the commercial mortgage area, Stag Industrial (STAG) is getting solid support at its 50-day moving average. It reported its first quarter on May 7. On May 15, Stag said it would boost its second-quarter dividend to $1.08 per share, from $1.04 per share.

The Boston-based REIT owns and manages industrial properties throughout the U.S. It went public in April, 2011 at $13, fell to a low of $9.55 on Aug. 9. On Friday, it was trading at around $13.81, just above its 50-day line.

Its previous high was $14.75, reached on May 10. Like most equities, Stag got swept along with the market downdraft. But the 50-day support is a good indication that institutional investors continue to have confidence in the company, and are tending to hold shares, rather than bail out.

As with American Capital, it's a bit premature to peg an exact buy point on Stag. The market weakness has a lot to do with that, and it's also too soon to say how the stock's consolidation will continue to play out. If the market goes back into rally mode before Stag crosses back above its 10-day moving average, that move could offer an entry point.

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