In the Zero Interest Rate Policy world, many investors have struggled to find reasonable yields. You either have to increase your maturities on your bonds and buy them further out or you have to make concessions on the credit quality. Either way you are essentially increasing your risk in order to increase your income. While that may be perfectly acceptable for some, it’s not acceptable for seniors who are looking for income to fund their retirement lifestyle.
The options have become increasingly limited. Investment grade corporate bonds have yields near twenty year lows right now and sovereign debt is paying virtually nothing. As a result, people have looked in other areas or alternative investments in order to find yield.
One company has entered this space and helped baby boomers find income from real estate investment trusts that hold some of the highest quality real estate money can buy. RCS Capital (RCAP) is a wholesale broker-dealer and an industry leading multi-product distributor of sector-specific direct investment programs. The distributed investment programs are designed to provide “Durable Income” and capital preservation.
Basically this company wants you to diversify your current investment portfolio into one of their REITs or other alternative investments. Right now only about 3% of the $7.5 trillion of investable assets the Mass Affluent of America have is invested in alternative and direct investments. RCS sees this as a huge opportunity for them to grab market share.
RCS Capital plays an essential role in the architecture, distribution and value monetization of yield-focused direct investment programs. RCS, as the wholesale broker-dealer, distributes REIT, BDC, and other direct investment programs, as well as liquid funds, through independent broker-dealers. Through 2013 RCS had 16 total direct investment programs for a total value of $21.4 billion raised.
Here at Zacks we like it because it’s a Zacks Rank #1 (Strong Buy) for good reason. In the last month, two analysts have raised their earnings estimates for the next year. This helped pushed consensus up from $1.95 to $2.26. Analysts are equally as bullish on this year as well. Current year consensus has jumped from $1.47 to $2.15.
The stock has seen its share of volatility this year so far. In January RCAP was trading down near $17 per share. From there, in a matter of only three months the stock more than doubled, rocketing up to a high of $39.98. After failing to vault $40 the stock came down to test the $30 handle. For a few months there was quite a bit of back and forth until a precipitous drop in late May.
Since then the stock has been bouncing along the bottom near $20. In the last few weeks RCAP has popped above its 25 day moving average shifted by 5 days and is beginning to show some signs of momentum. Currently, stochastics are neutral coming off a buy signal in early August. With relatively light volume as of late, the stock could catch fire if institutions start paying attention again.