PowerShares QQQ Trust, Series 1 (NASDAQ: QQQ) and Saratoga Investment Corp (NYSE:SAR) are both finance companies, but which is the superior investment? We will contrast the two businesses based on the strength of their analyst recommendations, valuation, profitability, dividends, institutional ownership, risk and earnings.

Volatility & Risk

PowerShares QQQ Trust, Series 1 has a beta of 1.13, suggesting that its share price is 13% more volatile than the S&P 500. Comparatively, Saratoga Investment Corp has a beta of 0.5, suggesting that its share price is 50% less volatile than the S&P 500.

Profitability

This table compares PowerShares QQQ Trust, Series 1 and Saratoga Investment Corp’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
PowerShares QQQ Trust, Series 1 N/A N/A N/A
Saratoga Investment Corp 26.84% 8.03% 3.19%

Institutional and Insider Ownership

38.4% of PowerShares QQQ Trust, Series 1 shares are held by institutional investors. Comparatively, 16.2% of Saratoga Investment Corp shares are held by institutional investors. 32.0% of Saratoga Investment Corp shares are held by company insiders. Strong institutional ownership is an indication that large money managers, hedge funds and endowments believe a stock is poised for long-term growth.

Valuation & Earnings

This table compares PowerShares QQQ Trust, Series 1 and Saratoga Investment Corp’s top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
PowerShares QQQ Trust, Series 1 N/A N/A N/A N/A N/A
Saratoga Investment Corp $33.96 million 3.60 $9.43 million $1.58 12.97

Saratoga Investment Corp has higher revenue and earnings than PowerShares QQQ Trust, Series 1.

Dividends

PowerShares QQQ Trust, Series 1 pays an annual dividend of $1.30 per share and has a dividend yield of 0.9%. Saratoga Investment Corp pays an annual dividend of $1.88 per share and has a dividend yield of 9.2%. Saratoga Investment Corp pays out 119.0% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future.

Analyst Ratings

This is a summary of current recommendations and price targets for PowerShares QQQ Trust, Series 1 and Saratoga Investment Corp, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
PowerShares QQQ Trust, Series 1 0 0 0 0 N/A
Saratoga Investment Corp 0 0 0 0 N/A

Summary

Saratoga Investment Corp beats PowerShares QQQ Trust, Series 1 on 6 of the 9 factors compared between the two stocks.

PowerShares QQQ Trust, Series 1 Company Profile

PowerShares QQQ Trust, Series 1 is a unit investment trust that issues securities called Nasdaq-100 Index Tracking Stock. The Trust’s investment objective is to provide investment results that generally correspond to the price and yield performance of the Nasdaq-100 Index. The Trust provides investors with the opportunity to purchase units of beneficial interest in the Trust representing proportionate undivided interests in the portfolio of securities held by the Trust, which consists of substantially all of the securities, in substantially the same weighting, as the component securities of the Nasdaq-100 Index. Invesco PowerShares Capital Management, LLC is the Sponsor of the Trust and The Bank of New York Mellon is the Trustee.

Saratoga Investment Corp Company Profile

Saratoga Investment Corp. is a specialty finance company. The Company is an externally managed, closed-end, non-diversified management investment company. The Company invests primarily in leveraged loans and mezzanine debt issued by private middle-market companies in the United States. Its investment objective is to generate current income and, to a lesser extent, capital appreciation from its investments. It purchases mezzanine debt and makes equity investments in middle market companies. It may invest in other investments, such as investments in distressed debt, including securities of companies in bankruptcy, foreign debt, private equity, securities of public companies that are not thinly traded and structured finance vehicles, such as collateralized loan obligation funds. Its leveraged loan portfolio consists primarily of first lien and second lien term loans. The Company’s investment activities are externally managed and advised by Saratoga Investment Advisors, LLC.

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