High Income Securities Fund (NYSE:PCF) vs. Compass Diversified (NYSE:CODI) Critical Survey

Compass Diversified (NYSE:CODI) and High Income Securities Fund (NYSE:PCF) are both small-cap finance companies, but which is the superior investment? We will contrast the two businesses based on the strength of their institutional ownership, risk, dividends, analyst recommendations, profitability, earnings and valuation.

Earnings and Valuation

This table compares Compass Diversified and High Income Securities Fund”s top-line revenue, earnings per share and valuation.

	Gross Revenue	Price/Sales Ratio	Net Income	Earnings Per Share	Price/Earnings Ratio
Compass Diversified	$2.29 billion	0.16	-$208.86 million	($1.45)	-3.31
High Income Securities Fund	N/A	N/A	N/A	N/A	N/A

High Income Securities Fund has lower revenue, but higher earnings than Compass Diversified.

Profitability

This table compares Compass Diversified and High Income Securities Fund’s net margins, return on equity and return on assets.

	Net Margins	Return on Equity	Return on Assets
Compass Diversified	-0.71%	19.03%	3.25%
High Income Securities Fund	N/A	N/A	N/A

Analyst Recommendations

This is a summary of recent ratings and recommmendations for Compass Diversified and High Income Securities Fund, as reported by MarketBeat.

	Sell Ratings	Hold Ratings	Buy Ratings	Strong Buy Ratings	Rating Score
Compass Diversified	1	3	1	0	2.00
High Income Securities Fund	0	0	0	0	0.00

Compass Diversified currently has a consensus target price of $18.00, suggesting a potential upside of 275.00%. Given Compass Diversified’s stronger consensus rating and higher possible upside, analysts plainly believe Compass Diversified is more favorable than High Income Securities Fund.

Insider and Institutional Ownership

72.7% of Compass Diversified shares are held by institutional investors. Comparatively, 16.6% of High Income Securities Fund shares are held by institutional investors. 1.8% of Compass Diversified shares are held by company insiders. Comparatively, 1.6% of High Income Securities Fund shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a company will outperform the market over the long term.

Dividends

Compass Diversified pays an annual dividend of $1.00 per share and has a dividend yield of 20.8%. High Income Securities Fund pays an annual dividend of $0.71 per share and has a dividend yield of 11.6%. Compass Diversified pays out -69.0% of its earnings in the form of a dividend.

Risk and Volatility

Compass Diversified has a beta of 1.02, meaning that its share price is 2% more volatile than the S&P 500. Comparatively, High Income Securities Fund has a beta of 0.69, meaning that its share price is 31% less volatile than the S&P 500.

Summary

Compass Diversified beats High Income Securities Fund on 11 of the 12 factors compared between the two stocks.

About Compass Diversified

Compass Diversified is a private equity firm specializing in add on acquisitions, buyouts, industry consolidation, recapitalization, late stage and middle market investments. It seeks to invest in niche industrial or branded consumer companies, manufacturing, distribution, consumer products, business services sector, healthcare, safety & security, electronic components, food and foodservice. The firm prefers to invest in companies based in North America. It seeks to invest between $100 million and $800 million in companies with an EBITDA between $15 million to $80 million. It seeks to acquire controlling ownership interests in its portfolio companies and can make additional platform acquisitions. The firm prefer to have majority stake in companies. The firm invests through its balance sheet and typically holds investments between five to seven years. Compass Diversified was founded in 2006 and is based in Westport, Connecticut with an additional office in Costa Mesa, California.

About High Income Securities Fund

High Income Securities Fund is a closed-ended balanced income mutual fund launched and managed by Putnam Investment Management, LLC. The fund is co-managed by Putnam Investments Limited. It invests in the fixed income markets of the United States. The fund seeks to invest in stocks of companies operating across diversified sectors. It invests in both convertible bonds and convertible preferred stocks. The fund benchmarks the performance of its portfolio against a composite index comprising of 50% JPMorgan Developed High Yield Index and 50% BofA Merrill Lynch AllConvertibles Speculative Quality Index. The fund was formerly known as Putnam High Income Securities Fund High Income Securities Fund was formed on July 9, 1987 and is domiciled in the United States.