JT’s DAILY (WEEKLY as of 12/9/2013) BLOG for Month Of December 2018
Note: All previous month's posts are available in the archives, as noted above.
All postings for the month are available here, sorted in descending order - i.e. most recent at the top.
1st Posting for Week Beginning Monday 12/10/2018
Posted Sunday 12/09/2018 08:00 AM
After a brief rally on Monday, stocks posted big declines the rest of the week, interrupted only by the Wednesday pause to honor former President Bush. From the high reached intraday on 10/03/2018, the Dow Industrials Index has declined over 2500 points, as of Friday’s close. The other general stock averages I track have all declined by similar percentages. The closely watched monthly Jobs report issued Friday, while still showing a remarkable 3.7% unemployment rate, failed to generate any relief, as some of the data in the report and in other economic releases suggests the economy is slowing. Of course, the continuing rancor in Washington adds to the general sense of unease.
In times like this, steady dividend payers in the portfolio are greatly appreciated. Stocks on my lists going ex-dividend in the week ahead are as follows:
Medical Properties Trust (MPW), ex-dividend date 12/12/2018, yield 5.72%.
Ares Capital (ARCC), ex-dividend date 12/13/2018, yield 9.34%.
Monroe Capital (MRCC), ex-dividend date 12/13/2018, yield 12.42%.
Oaktree Specialty Lending (OCSL), ex-dividend date 12/13/2018, yield 8.17%.
Crown Castle International (CCI), ex-dividend date 12/13/2018, yield 3.83%.
Williams Companies (WMB), ex-dividend date 12/13/2018, yield 5.54%.
Digital Realty Trust (DLR), ex-dividend date 12/13/2018, yield 3.46%.
Oxford Square Capital (OXSQ), ex-dividend date 12/14/2018, yield 12.33%.
Iron Mountain (IRM), ex-dividend date 12/14/2018, yield 7.11%.
Merck (MRK), ex-dividend date 12/14/2018, yield 2.81%.
Total S A (TOT), ex-dividend date 12/14/2018, yield 5.43%. The yield is BEFORE 30% or so withholding by France. Based on the news, it looks like they need the money.
Main Street Capital (MAIN), ex-dividend date 12/17/2018, yield 6.18%. MAIN pays monthly.
Greif (GEF), ex-dividend date 12/17/2018, yield 3.91%.
BlackRock Capital Investment (BKCC), ex-dividend date 12/17/2018, yield 12.46%.
Horizon Technology Finance (HRZN), ex-dividend date 12/17/2018, yield 10.46%. HRZN is a monthly payer.
None of my stocks will be reporting earnings in the upcoming week.
Upgrades / downgrades on my stocks from last week were as follows:
Senior Housing Properties Trust (SNH) was upgraded from UnderPerform to OutPerform at Wells Fargo.
AT&T (T) was upgraded to OutPerform at Cowens & Co, and from Neutral to OverWeight at JP Morgan.
Verizon (VZ) was downgraded from OverWeight to Neutral at JP Morgan.
Crown Castle International (CCI) was downgraded from Buy to Neutral at MoffettNathanson.
NGL Energy Partners LP (NGL) was initiated at Buy at Guggenheim.
Waste Management (WM) was upgraded from Sell to Buy at Goldman.
United Parcel Service (UPS) was reiterated at UnderWeight at Morgan Stanley.
Intel (INTC) was downgraded from Market Perform to UnderPerform at Northland Capital.
Apollo Investment (AINV) was reiterated at Equal Weight at Barclays, and at OutPerform at Raymond James. AINV had a 1:3 reverse split effective 12/03/2018, resulting in a new stock price of $15.05, as of Friday’s close. It appears that the dividend amount tripled as well, to $0.45, maintaining the yield at 11.96%. Usually reverse splits are bad news, but in this case it seems benign, and the outlook for the BDC remains positive.
Spirit Capital (SRC) was downgraded from Market Perform to UnderPerform at Raymond James.
Darden Restaurants (DRI) was reiterated at Market Perform at Wells Fargo.
Southern Co (SO) was reiterated at UnderPerform at Credit Suisse.
Greif (GEF) was reiterated at OutPerform at Wells Fargo.
Altria (MO) was reiterated at OverWeight at Barclays.
General Mills (GIS) was reiterated at Neutral at Bank of America.
Taking advantage of the market decline last week, I started new positions in Blackstone Group LP (BX) and Amerigas Partners LP (APU). As per my strategy, I start cautiously, only buying a portion of the shares I would consider a full position, leaving room to add more at a lower cost basis if the market decline continues. Illustrating my acquisition strategy further, I added to existing positions in Kraft Heinz (KHC) and Buckeye Partners LP (BPL), at a lower cost per share than my initial purchases of these holdings. If the New Year plays out as many are predicting, with major turbulence ahead, I will be continuing to gradually acquire stock at reduced prices. That’s how a value investor is supposed to react to market declines. I can’t say I like it when it happens, but I accept it as necessary at times, and look to take advantage of it when it occurs.
1st Posting for Week Beginning Monday 12/03/2018
Posted Sunday 12/02/2018 10:00 AM
Stocks ended up about where they started the month after the dust settled for November, but not without some drama, as evidenced by the Dow Industrials posting triple-digit moves up or down on 18 out of 21 trading days in the month. Included were 2 days up over 500 Dow points, and also 2 days down over 500 points. Talk about a yo-yo market! The latest on what is probably the number one investor concern, the trade friction with China, Trump and Chinese President Xi announced after their closely-watched meeting at the G-20 Summit that effectively there will be a truce, with negotiations to continue. My expectation is that there will not be a blow-out rally on this news, but that there will not be a big drop, either, as there would have been of there was no positive news.
The first week of December is a bit light on dividend announcements, as far as the stocks I track are concerned, but there are a few to report, as follows:
Gladstone Investment (GAIN), ex-dividend date 12/05/2018, yield 9.05%. Note that this dividend of 6 cents is a special dividend, in addition to the regular monthly dividend of 7 cents, which has an ex-dividend date of 12/19/2018. The annualized yield is thus calculated considering twelve 7 cent payments and one 6 cent payment, and Friday’s closing price of $9.04 for GAIN.
Newmont Mining (NEM), ex-dividend date 12/05/2018, yield 1.73%. NEM is a speculation on gold and silver prices, and is not recommended as an income stock, but it is nice to get something while waiting for a rebound in precious metals.
Public Service Enterprise Group (PEG), ex-dividend date 12/06/2018, yield 3.30%. While the yield is slightly less than I expect from a utility, holders of PEG have been somewhat insulated from the recent market turmoil, proving once again that utility stocks are less volatile than most in an agitated market.
Kimberly Clark (KMB), ex-dividend date 12/06/2018, yield 3.48%. Consumer staples are another good place to be when the market goes crazy, as KMB has demonstrated in the month just ended.
Pepsico (PEP), ex-dividend date 12/06/2018, yield 3.14%. Another good hiding place, no one has lost money yet when betting on Americans making poor diet choices. This soda and snack food giant proved that once again in November.
Pitney Bowes (PBI), a high-risk, high-yield firm that I have on my Tier3 list, was missed a couple of weeks ago. PBI went ex-dividend 11/19/2018, and currently yields 8.99%. PBI is trying to branch out from being just a mail products firm, to stop the slide towards oblivion, as “snail-mail” usage continues to decline.
Only one firm I follow will be reporting earnings next week, Greif (GEF), on 12/05/2018. GEF is an international packaging products and services firm, with operations in over 45 countries. With solid financials and a dividend yield of 3.52% currently, GEF is a solid Tier1 stock in my universe.
Upgrades / downgrades on my stocks from last week were as follows:
Novartis (NVS) was upgraded to OutPerform at Cowen & Co..
AT&T (T) was upgraded from Sell to Neutral at Moffett Nathanson. T is heavily indebted, and there is a concern that the dividend may not be sustainable over the long term. The concurrent decline in the share price since 2016 from the low-40s to the low-30s reflects that concern, but it hasn’t happened yet, as evidenced by the current 6.54% yield.
Pattern Energy Group (PEGI) was downgraded from Buy to Hold at Desjardins Group. PEGI is a “yield-co”, which is a company that is formed to own operating assets that produce a predictable cash flow, primarily through long term contracts. PEGI currently yields over 8%.
Buckeye Partners LP (BPL) was reiterated at Neutral at Citigroup. Like most MLPs, BPL is down somewhat from highs reached in 2015, and currently yields almost 10%.
Darden Restaurants (DRI) was reiterated at OverWeight at Barclays. DRI has defied gravity for such a long time in the hyper-competitive restaurant chain sector, it seems Barclays believes it will continue for a while yet, and indeed they may be right.
Intel (INTC) was downgraded to Hold at DZ Bank.
NuStar (NS) was reiterated at Neutral at Citigroup. I wrote a Seeking Alpha article about NS a few years ago, and NS did recover from an earlier decline, as I had expected. After rebounding and earning its distribution for a few quarters, the MLP, along with its peers, dropped substantially starting in 2015, and cut the dividend by nearly 40%. Even so, NS still yields almost 10%, and I have no plans to sell anytime soon.
Plains All American Pipeline LP (PAA) was reiterated at Buy at Citigroup. PAA has fared about the same as the rest of the MLP sector in recent years, and also had to reduce the distribution. If I owned it I would hold on, but I don’t, and the current 5% yield is not enough to entice me to buy it at this point.
Cisco Systems (CSCO) was resumed at OutPerform at Baird. CSCO is a solid performer, but the price has gone up almost exponentially since I wrote an article for Seeking Alpha wherein I described CSCO as a value stock. That was then, not now.
Enterprise Products Partners LP (EPD) was reiterated at Buy at Citigroup. If not the safest, strongest MLP available, EPD has to be in the top two or three. If a risk-averse investor wants to take the plunge and buy an MLP right now, EPD, yielding 6.58%, would be an excellent choice.
McDonalds (MCD) was upgraded from Equal Weight to OverWeight at Morgan Stanley. I’ll say this, MCD would be my choice for my portfolio before it would be my choice for lunch.
ONEOK (OKE) was upgraded from Neutral to Buy at Citigroup. OKE absorbed its related MLP OKS some time ago, and without the tax complications of an MLP, it yields over 5%, and continues to prosper.
Total S A (TOT) was upgraded from UnderWeight to Neutral at JP Morgan. TOT is based in France, and the 5.35% yield advertised is BEFORE foreign tax withholding of 30% or so. While TOT is a solid firm, I would go with Chevron (CVX), Royal Dutch Shell (RDS.B), or ExxonMobil (XOM) instead of TOT if I wanted to add shares of an integrated oil major to my portfolio.
Amerigas Partners LP (APU) was upgraded from Hold to Buy at Jeffries. APU is on my short list of stocks to buy before the next ex-dividend date, probably in January 2019.
General Electric (GE) was reiterated at Hold at Deutsche Bank. The hits just keep on coming for GE. At one time my largest holding, I sold nearly half when it got above $30 at the end of 2016, which was a chance to exit at break-even. At the time, I really believed it would continue to go up, but I felt that I should take the opportunity to take some money off the table. Unfortunately, I held the rest into the current slide. In November I sold half of what I still owned at $9 and change, to get a tax loss useable when I file taxes next year. At the time, I really did not think it would go down much further, but guess what – WRONG AGAIN! GE is a poster child for what can happen to a great company when a series of bad decisions are made by management, and poor practices and complexity mask the reality of what is happening until it really falls apart. No greater case for diversity in portfolio holdings can be made than the example of GE.
The outlook for December is mixed, but there is at least a chance we could have at least a mild Santa Claus rally. If so, it just means minimal buy opportunities will come along, so I don’t expect I’ll be doing much. As for next year, there are definitely some storm clouds on the horizon. My approach is to use the lull, if there is one, to get ready for a challenging 2019. I suggest others do the same.
1st Posting for Week Beginning Monday 11/26/2018
Posted Sunday 11/25/2018 07:00 AM
Stocks continued their descent during the holiday-shortened week just ended, led by the so-called “FANG” technology stocks, complemented by a collapse in oil prices resulting in the energy sector also taking it on the chin. The contrast between the frantic “Black Friday” shopping frenzy and the “we’re all gonna die” climate change report released, strangely enough, on that same date, gives one an eerie feeling that we may be at the precipice of an economic cliff that most (excepting stock investors) are failing to recognize.
For the time being, at least, my dividend payers are continuing to spit out the expected payments, providing some consolation for securities holders experiencing price declines. Stocks on my lists going ex-dividend the final week of November are as follows, with ex-dividend date and annualized yield as of Friday’s close shown. Assume payouts are quarterly unless otherwise noted.
Johnson & Johnson (JNJ), 11/26/2018, 2.54%.
Enerplus (ERF), 11/28/2018, 0.93%. ERF pays monthly.
AGNC Investment (AGNC), 11/29/2018, 12.34%. AGNC also pays monthly.
Wheaton Precious Metals (WPM), 11/29/2018, 2.21%.
Coca Cola (KO), 11/29/2018, 3.20%.
Waste Management (WM), 11/29/2018, 2.04%.
STAG Industrial (STAG), 11/29/2018, 5.30%. This REIT pays monthly.
NextEra Energy (NEE), 11/29/2018, 2.52%.
Prospect Capital (PSEC), 11/29/2018, 10.56%. This BDC pays monthly.
Realty Income (O), 11/30/2018, 4.16%. The “monthly dividend company” pays, you guessed it, monthly.
Safety Insurance Group (SAFT), 11/30/2018, 3.69%.
Ensco (ESV), 11/30/2018, 0.61%.
Kellogg (K), 11/30/2018, 3.62%. I was seriously considering starting a new position in K, but a somewhat convincing recent Seeking Alpha article warning that K was down for good reason(s) has given me pause. It’s no secret that the cereal business is hyper-competitive, with a number of trends working against the main players in the sector. The firm that invented corn flakes and the entire concept of ready-to-eat packaged cereals is not immune to these negative trends.
McDonalds (MCD), 11/30/2018, 2.54%. MCD continues to prosper, against all odds.
Washington Prime Group (WPG), 11/30/2018, 15.77%. This REIT is either a terrific buy or doomed, depending on what happens – a yield of 15% is not sustainable. Either the stock price will recover, along with the company, or the dividend, and perhaps the company, will disappear. All I can say to investors thinking of buying WPG at these levels is the famous quote from a Clint Eastwood film, “do you feel lucky, punk?”
Two firms on my lists will be reporting earnings next week. Smucker JM (SJM) on 11/28/2018, and Hoegh LNG Partners LP (HMLP) on 11/29/2018.
There were minimal new stock ratings issued last week, reflecting the holiday slowdown. Those I noticed regarding the stocks I follow are listed following:
American Electric Power (AEP) was reiterated at OverWeight at Barclays.
Duke Energy (DUK), Exelon (EXC), NextEra Energy (NEE), and Southern Company (SO) were all reiterated at Equal Weight at Barclays, which apparently just completed a review of several major utilities.
Frontier Communications (FTR) was reiterated at Equal Weight at Morgan Stanley.
3M Co (MMM) was reiterated at UnderWeight at Barclays.
Novartis (NVS) was upgraded to Conviction Buy at Goldman.
Windstream Holdings (WIN) was reiterated at Equal Weight at Morgan Stanley. Hard to see any reason for holding either FTR or WIN, with no dividend and dismal prospects, but apparently an analyst at Morgan Stanley is not as pessimistic on these telecoms as I am.
CenturyLink (CTL) was reiterated at Sell at MoffettNathanson. CTL is certainly not without a lot of risk, but with a heady dividend yielding 12% currently, it surely deserves a higher rating than FTR and WIN, in my opinion.
Emerson Electric (EMR) and Eaton (ETN) were both initiated at OverWeight at Stephens & Co.
ExxonMobil (XOM) was downgraded from Market Perform to UnderPerform at Raymond James.
Iron Mountain (IRM) was initiated at Neutral at Bank of America.
Frontier Communications (FTR) was reiterated at Sell at Citigroup.
Alliant Energy (LNT) was downgraded from Neutral to UnderPerform at Bank of America.
The market has declined steadily since the election, possibly because of the better than (initially at least) expected performance of the Democrats and the minimal prospects for economic progress and maximum prospects for political rancor that is now in the offing for the next two years, if not longer. The latest missive from John Mauldin reiterating our cumulative debt problems and the likelihood of another debt crisis or two, with eventually a “great reset” being required, makes for sobering reading indeed. Add to that the latest report on climate change that was issued Friday, and there certainly is plenty to worry about. Investors globally are aware of these concerns, and are preparing for tough times to come. I’m doing the same, and that is my recommendation for my readers, if there are any.