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Two Stocks for Capital Gains Hunters

Selling at a little over 8 times forward (one-year) earnings, PSEC had stellar results in the quarter ending Sept. 30. Revenue growth (year-over-year) was an amazing 123%, and the quarterly earnings growth increased by 18.4%. The following five-year chart gives a colorful look at price history and revenue results. PSEC Chart PSEC data by YCharts

When you look at the trailing-12-months revenue-per-share trajectory you'd have a better feel for why CEO John Barry owns close to 2.7 million shares and why Vanguard Group owns 4.2% of the outstanding shares of PSEC (as of Sept. 29). I'd like to buy shares on a pullback to $10.16 or lower.

The second total-return, capital-gains generator I'm interested in buying is Armour Residential REIT (ARR - Get Report), which invests in hybrid adjustable rate, adjustable rate and fixed rate residential mortgage-backed securities issued by or guaranteed by U.S. government agencies or U.S. government-sponsored entities.

These included MBS owned by Fannie Mae (Federal National Mortgage Association), Freddie Mac (Federal Home Loan Mortgage Corporation) and the Ginnie Mae (Government National Mortgage Administration). Thus it's really a mortgage real estate investment trust with a $2.1 billion market cap and a dividend yield of more than 14% per year.

On Nov. 1 the firm reported third-quarter earnings results that included a 17.9% annualized ROE from taxable REIT income, according to the company.

The one-year chart below speaks volume about why I want to own shares of ARR at $6.50 a share or lower. ARR Chart ARR data by YCharts

With its greatly improved operating earnings yield, it's no wonder shares of ARR leaped almost 23% from its Nov. 15 intraday low of $5.70 to the recent price of $7.00 a share.

Buy these kinds of companies during a stock market correction and you may harvest total annual returns of 20% or more.

At the time of publication the author had no position in any of the stocks mentioned.

This article was written by an independent contributor, separate from TheStreet's regular news coverage.

Make smarter trading decisions and provide investment ideas that could help make you richer. Bryan Ashenberg does the dirty work so you don't have to!

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PSEC $8.41 0.00%
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