NEW YORK ( TheStreet) -- I'm not just referring to gold or silver mining companies when I say I'm "prospecting" for overlooked gems in today's stock markets.All that glitters isn't gold, and here are a couple of companies with the prospect for exceptional total returns. On a recent fishing expedition through the oceans of investment opportunities I came across two companies I'd forgotten. One of them I'd owned in the past. Because I waited until the price of the stock came down to my buy-limit price, I experienced an excellent total return outcome. For those who don't know what a "total return outcome" is, allow me to explain. If I can find a publicly traded company that is profitable and gushes geysers of cash profits, I begin there. If that company also happens to pay a generous dividend to shareholders I get even more interested. If I purchase the shares at a reasonable price and I'm able to hold the stock for 12 months or longer, I'm going to anticipate that when I sell that stock for a capital gain I will also have collected most of the annual dividends. The amount of those dividends plus the amount of the capital gains are my "total return outcome." One way I accomplish this is by utilizing two important disciplines: position sizing and a carefully chosen trailing stop alert system that lets me know (via an email or text message alert) when the stock I own has moved a given percentage below or above the price for which I purchased it. It's called a "trailing stop" because it follows the movement of the stock price and alerts me when that price has moved a predetermined percentage below my entry price or the highest price that the stock has climbed since buying it. For more details on trailing stop alerts click here. Let me introduce you to one of the examples of a stock that a total return investment prospector like me would be attracted to.
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), 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 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!