Hyper activity in markets creates opportunities for the rational investor, as the selloff of unpopular stocks continues. Hunting among the out of favour stocks is a popular hunting ground for many successful investors, and below we will look at two high earnings yielding stocks and determine if the price decline is justified?
The two high yielding stocks are GameStop Corp. (NYSE:GME), which is yielding 16%, and Natural Health Trends Corp. (NASDAQ:NHTC)) is yielding a massive 24.5%. TIP: If you hold a stock with an earning yield of 25%, you can expect to double your money every 2.88 years, according to the rule of 72.
GameStop
The near 15% decline in Gamestop’s share price over the last 6 months have push its earnings yield over a mouth-watering 16% and also pushing up its dividend yield to a juicy 7%. GameStop has been unfairly sold off, due a misunderstanding of the company. Many Wall Street analysts wrongly think that GameStop is the Blockbuster of the gaming industry, lucky for us, it provides us with an opportunity to potentially profit from their folly.
GameStop is a global retailer of multichannel video games, pop culture collectibles and consumer electronics and wireless services operating across the globe. It is no longer a specialty retailer of physical video game products, it is diversifying the product range sold.
GameStop produces healthy consist free cash flow.
GameStop producing a high average return of 15% on equity.
Natural Health Trends Corp. (Off the Chart!)
I saved the best for last. Natural Health Trends Corp. (NHT) is an international direct-selling and e-commerce company headquartered in Rolling Hills Estates, California. China is NHT’s primary market, delivering 80%+ in revenues. As you can see from the graphs below NHT is an aggressive growing cash cow!
NHT has earning yields exceeding 24%!
While 90% of its revenues are earned from Chinese consumers, but there is one thing every analyst seems to misunderstand about the company and it is stated plainly in its latest annual report.
‘We distribute our products internationally primarily through a network marketing system, which is a form of person-to-person direct selling’.
Herbal Life, Amway and Avon are three of the largest multi-level marketing companies worldwide. While they seem like operating Ponzi schemes, they certainly have very powerful persuasion models working in their favour. When I first heard of Amway I thought it was a Ponzi scheme, so I become a member to investigate. I can tell you that if you have read books by either Dr. Robert Cialdini or by Anthony Pratkanis on the topics of human psychology (persuasion in particular) you will know the forces in effect.
I believe that NHT is recreating those same persuasion techniques in a similar business model in the Chinese market. Judging from the below two graphs it seems to be paying off.
The cause of the dip in 2016 is due to Accrued commissions paid out. Which will be an added cost in the continuing future, but not something to be too concerned about but just beware of it.
Return on equity averaging 135% over 5 years. Quite Impressive!
If you had the foresight to invest in July 2013 at a dollar per share, and sold at its peak of $49 per share in Oct 2015, you would have earned 48X your money!
Keep these two stocks on your watch list, they are sure not to disappoint.
Yours in Investing, Adam C. Parris