In yesterday's column I introduced the concept of "Goga stocks" in honor of Goga Bitadze, the Georgian prospect who was overshadowed by Duke's Zion Williamson at NBA Draft media day.
Well, Goga was selected 18th in last night's draft by the Indiana Pacers, and he is about to become a very wealthy 19 year old. So, there is a place for under-followed names in any industry. As for finding Goga stocks -- high-yielding names that will act as ballast for the shorts in my new entity, Excelsior Capital Partners -- perhaps the young man's story is insightful in more than one way. I was able to watch Zion in person at Cameron Indoor Stadium last season, but even without that access you would have had to have been living under a rock to not have seen at least one of his hyper-athletic highlights. In contrast, Goga's team, Buducnost VOLI, based in Podgorica, Montenegro, did not seem to feature very often on ESPN's highlight reels. That has nothing to do with the quality of basketball and everything to do with location.
I mentioned PetroChina (PTR) in my Real Money column yesterday, and there is a universe of high-yielding names outside the U.S. with which you are probably not familiar. I use Dividend.com to run my screens, but there are many screening services through which to find high-yielding stocks. As someone who has been investing for income for nearly 18 years, I want to add some advice: Do not just screen for highest yields and then buy the names with that form the top of the list. That is exceedingly stupid.
Instead, do your homework and make sure the yields are safe and also reflective of regular, periodic dividend payments not special payouts, which sometimes confuse the screening programs. So here are two attractive non-U.S. names:
First, BT Group (BT) . In British fashion, BT pays dividends twice a year, with a smaller interim dividend paid in December and a larger, "final" one paid in August. So, this is the time to buy BT's American depository receipt to get one's hands on that final payout, which has been proposed as about 68 cents per American depository receipt share (using today's exchange rate of 1.266 and the American depository receipt ratio of 5:1.) That's a 5.28% yield on today's BT American depository receipt share price of $12.92. I am not overly enamored of BT's business model, but that's the situation with most high-yielding names. BT's full fiscal 2019 payout is unchanged from 2018's level and the biggest risk here is probably currency. With all signs pointing to a Boris Johnson takeover at 10 Downing St., however, I believe the British people will finally be delivered the Brexit for which they voted, and the pound will stabilize.
The next is Westpac (WBK) . Like BT, Westpac pays dividends twice a year, although the payments are usually in equal installments. Those payments have been steady in the 65 cent range, with the most recent dividend declared in May and payable in early July. On that basis, Westpac's indicated annual yield is 10.3%. It's a bank, for goodness' sake! Context is important: The first word in Westpac's interim-results presentation was "disappointing." The Aussie economy has slowed to near-recession levels in recent quarters, and I have heard some wild stories about the overvaluation of the Sydney property market. But with fiscal conservative Prime Minister Scott Morrison's surprise re-election, I believe that the economy is bottoming and that the Aussie "peso" will find a bottom here. Westpac's Common Equity Tier 1 ratio was 10.6% at the end of March and its stressed exposures (an Aussie euphemism for impaired loans) stood at a minuscule 1.1% of its total loan book at Mach 31. Jamie Dimon -- JPMorgan Chase's chief executive -- would be envious of that balance sheet. If the markets hate Aussie stocks enough (and a 10.3% yield is extraordinary for a bank) to sell down Westpac shares to ridiculously cheap levels, then Excelsior will happily take the other side of that trade.
So, there are two names -- along with PetroChina from yesterday -- that I have never mentioned in the 300 or so columns I have written for Real Money in the past six years. The lesson: The net must be cast wide in order to maximize returns.
Through Excelsior Capital I will be shorting the names "everybody owns" -- Facebook (FB) , Beyond Meat (BYND) , Tesla (TSL) -- but to produce alpha, I will have to balance those positions with long positions in names that seemingly "nobody owns." It's a huge challenge, and I cannot wait to begin.
Facebook is holding in Jim Cramer's Action Alerts PLUS member club.
