JT’s DAILY (WEEKLY as of 12/9/2013) BLOG for Month Of December 2017

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 12/11/2017

Posted Sunday 12/10/2017 10:00 AM

Last week was not a week where stocks gained every day, as they pulled back a bit mid-week, but by the end of the week, all the major averages except the NASDAQ ended the week higher than they began it. As for the NASDAQ, it ended the week basically flat, just ever so slightly below the close from the prior Friday. A positive monthly Jobs report for November from the government resulted in a positive day Friday, ensuring a weekly gain for the blue chips, as exemplified by gains for the Dow Industrials and S & P 500 indexes.

My dividend payers just keep on paying, thank goodness. Stocks on my lists going ex-dividend in the week upcoming are listed as follows:

SCANA (SCG), 12/11/2017, yield 5.52%.

Dr Pepper Snapple (DPS), 12/13/2017, yield 2.47%.

Ares Capital (RCC), 12/14/2017, yield 9.34%.

TICC Capital (TICC), 12/14/2017, yield 12.86%.

Frontier Communications (FTR), 12/14/2017, yield 26.23%. Yes, that yield is over 26%. Certainly, FTR holders deserve something after a 15:1 reverse split effectively destroyed their investment. It seems the end-game is approaching for the high-yielding rural telecoms. Windstream (WIN) has eliminated its dividend, and Consolidated Communications (CNSL), while holding steady on the dividend, has shed 50% of its value over the past 12 months.

Monroe Capital (MRCC), 12/14/2017, yield 9.76%.

Iron Mountain (IRM), 12/14/2017, yield 5.88%.

Digital Realty (DLR), 12/14/2017, yield 3.26%.

Total S A (TOT), 12/15/2017, yield 4.88%. Note that the yield is before 30% foreign tax withholding by that bastion of capitalism, France.

Greif (GEF), 12/15/2017, yield 4.88%.

Main Street Capital (MAIN), 12/18/2017, yield 5.67%. MAIN pays monthly.

Gladstone Investment (GAIN), 12/18/2017, yield 7.08%. GAIN also pays monthly.

Blackrock Capital Investment (BKCC), 12/18/2017, yield 11.03%.

Only one of my stocks reported earnings last week, Greif (GEF) on 12/6/2017. While the report was positive, success seems to be fully priced in, as shares hit a 52 week high following the report. The same sad story (for a value investor) is told for GEF as for so many other quality stocks, buying in at today’s prices almost guarantees losses unless perfection continues unabated for many years to come.

None of my stocks are scheduled to report this week.

As we move deeper into the holiday season, the upgrade / downgrade activity volume has trailed off somewhat. What came out that I managed to locate is presented as follows:

United Parcel Service (UPS) was upgraded from Hold to Buy at Deutsche Bank.

Ventas (VTR) was downgraded from Market Perform to UnderPerform at Raymond James.

Crestwood Energy Partners L P (CEQP) was upgraded from Neutral to Buy at UBS.

Wal-Mart Stores (WMT) was initiated at Neutral at MufettNathanson.

HCP Inc (HCP) was upgraded from Hold to Buy at Stifel.

NuStar Energy L P (NS) was upgraded from Neutral to Buy at Citigroup.

McDonalds (MCD) was upgraded from Hold to Buy at Jeffries.

Novartis (NVS) was downgraded from Neutral to UnderPerform at BofA/Merrill.

Sanofi (SNY) was downgraded from Buy to Neutral at BofA/Merrill.

Ares Capital (ARCC) was initiated at Buy at Compass Point.

NextEra Energy (NEE) was initiated at OutPerform at Credit Suisse.

Total S A (TOT) was downgraded from Neutral to UnderWeight at JP Morgan.

MicroSoft (MSFT) was reiterated at OutPerform at Evercore ISI.  

Emerson Electric (EMR) was initiated at Neutral at Goldman.

As the political drama continues on unabated, the major issue for investors is the fate of the proposed tax plan. Numerous pundits have attributed the recent rally to an expectation that lower tax rates for corporations and pass-through entities (partnerships and S-corporations) will lead to an improved economy and more GDP growth than has been seen for many years. Of course, the flip side is that if the plan is derailed, which is very possible, the disappointment could lead to a major selloff. With the bull market extended well beyond the usual “shelf life” already, and considering the contentious political environment and the nervous international situation, I recommend maintaining a higher than usual cash position, and exercising extreme caution when contemplating entering any new positions.

JT

1st Posting for Week Beginning Monday 12/04/2017

Posted Sunday 12/03/2017 10:00 AM

Stocks exploded to the upside last week, with the venerable Dow Industrials index experiencing three triple-digit up days. The progress on the tax bill in the Republican Congress has been given the credit for the upswing by most pundits. It remains to be seen whether a final product will make it to the President’s desk by year-end, but for now, at least, the market has decided to “let the good times roll”.

Firms I track going ex-dividend in the upcoming week are as follows:

Gladstone Investment (GAIN), 12/4/2017, yield 7.19%. This is a special one-time dividend, which GAIN is passing out in addition to the usual monthly dividend.

Triangle Capital (TCAP), 12/5/2017, yield 12.23%.

Medical Properties Trust (MPW), 12/6/2017, yield 7.01%.

Newmont Mining (NEM), 12/7/2017, yield 0.68%.

Potlatch (PCH), 12/7/2017, yield 3.10%.

Public Service Enterprise Group (PEG), 12/7/2017, yield 3.24%.

Wal-Mart Stores (WMT), 12/7/2017, yield 2.10%.

Kimberly Clark (KMB), 12/7/2017, yield 3.24%.

SCANA (SCG), 12/11/2017, yield 5.68%.

Only one of my stocks reported last week, PennantPark Investment (PNNT), on 11/29/2017.

Again this week, only one of my stocks is scheduled to report, Greif (GEF), on 12/6/2017.

While my prediction for a quiet week as far as the market’s gyrations was incorrect, not so with my expectation for a slow week for upgrades / downgrades on stocks I track. Those that came out are listed following. As always, note that I list these as being of interest, not as actionable advice.

Kimco Realty (KIM) was downgraded from OutPerform to Neutral at Robert W. Baird.

Mid America Apartment Communities (MAA) was downgraded to Market Perform at BMO Capital.

Norfolk Southern (NSC) was downgraded from Hold to Sell at Loop Capital.

Sanofi (SNY) was downgraded to UnderWeight at Morgan Stanley.

Kimco Realty (KIM) was resumed at Hold at Stifel.

AGNC Investment (AGNC) was resumed at Market Perform at Wells Fargo.

Barrick Gold (ABX) was downgraded from Buy to Sell at Citigroup.

Merck (MRK) was resumed at Buy at BofA/Merrill.

Emerson Electric (EMR) was reiterated at OutPerform at Cowen & Co.

Mid America Apartment Communities (MAA) was downgraded from OutPerform to Market Perform at Raymond James.BMO Capital.

Wal-Mart Stores (WMT) was upgraded to Sector Perform at RBC Capital.

Colgate Palmolive (CL) was downgraded from Hold to Sell at Societe Generale.

To repeat myself from last week, the holiday season is (usually) a slow time for the markets. Not much is likely to happen until after year-end, barring some type of monumental geopolitical event (or as we saw last week, a major change in the income tax rules affecting business corporations). A couple of additional “boiling pots” that could boil over at any time are the North Korea situation and the Mueller investigation. Plus, there is always the potential for some cataclysmic event occurring that no one sees coming, such as the 9/11 terror attacks. All things considered, I remain convinced that now is a time to be cautious and hold a higher than usual cash position, as there are many possibilities for a market-unsettling exogenous event. 

JT

1st Posting for Week Beginning Monday 11/27/2017

Posted Sunday 11/26/2017 10:00 AM

As expected, stocks did very little during the holiday week, but what movement occurred was to the upside, as all the major averages posted modest gains. With earnings season now in the rear-view mirror, the focus will likely shift to Washington (which it actually never shifted away from) and the prospects for tax changes.

We also have a larger-than-usual number of firms going ex-dividend this week, as many firms announce payouts when reporting earnings, or shortly thereafter. Firms I track going ex-dividend in the upcoming week are as follows:

Johnson & Johnson (JNJ), 11/27/2017, yield 2.45%.

AGNC Investments (AGNC), 11/29/2017, yield 10.58%. AGNC pays monthly.

STAG Industrial (STAG), 11/29/2017, yield 4.98%. STAG also pays monthly.

Enerplus (ERF), 11/29/2017, yield 1.04%. ERF is another monthly payer. Of course, with this yield, who cares?

Barrick Gold (ABX), 11/29/2017, yield 0.85%. ABX’s yield isn’t much either, but ABX was recommended as a gold speculation, not an income stock.

Prospect Capital (PSEC), 11/29/2017, yield 10.51%. PSEC pays monthly. The expectation of most analysts is that a dividend cut by PSEC is imminent.

Waste Management (WM), 11/30/2017, yield 2.12%. Like many upper tier firms, WM had a decent yield at one time, but an extended valuation has resulted in a subpar yield, barely 2% in this case.

Kellogg (K), 11/30/2017, yield 3.34%.

Coca Cola (KO), 11/30/2017, yield 3.23%.

McDonalds (MCD), 11/30/2017, yield 2.39%.

Realty Income (O), 11/30/2017, yield 4.52%. O is a monthly payer.

Safety Insurance Group (SAFT), 11/30/2017, yield 3.89%.

Pepsico (PEO), 11/30/2017, yield 2.80%.

Ensco (ESV), 12/01/2017, yield 0.71%. ESV is a about the only offshore driller still paying a dividend, but it is such a paltry amount, one has to wonder, why bother? I suppose just to keep all the machinery operating in the unlikely event the sector recovers and payouts become respectable again.

Gladstone Investment (GAIN), 12/04/2017, yield 7.16%. GAIN pays monthly. GAIN was on my short buy list several months ago, but it never dropped down to my desired price. Unknown then, but based on where it is now, the price I disdained was actually a bargain. Such is the life of a value investor.

None of my stocks reported last week. Only one is scheduled to report this week, PennantPark Investment (PNNT), on 11/29/2017.

As you would expect for a holiday week, it was a slow week for upgrades / downgrades on stocks I track. Some that came out are listed following. As always, note that I list these as being of interest, not as actionable advice.

Gladstone Investment (GAIN) was downgraded from OutPerform to Neutral at Wedbush, probably because of valuation.

Hercules Capital (HTGC) was initiated at Buy at Ladenburg Thalmann.

Verizon (VZ) was upgraded from Market Perform to OutPerform at Wells Fargo.

Wal-Mart Stores (WMT) was downgraded to Neutral at Goldman.

Frontier Communications (FTR) was reiterated at Sector Perform at RBC Capital Markets. Since the sector (rural telecoms) is performing miserably, the rating is not much of a vote of confidence. Considering FTR holders were treated to a 15:1 reverse split not long ago, I doubt if any FTR holders retain much confidence in their investment anyway.

Pan American Silver (PAAS) was upgraded from Market Perform to OutPerform at Raymond James.

Royal Dutch Shell (RDS.A, RDS.B) was downgraded from Buy to Hold at HSBC Securities.

General Electric (GE) was reiterated at Sell at Deutsche Bank.

Pan American Silver (PAAS) was upgraded from Neutral to OutPerform at Credit Suisse.

Kellogg (K) was upgraded from Hold to Buy at Argus.

Merck (MRK) was reiterated at Hold at Deutsche Bank.

This is a slow time for the markets. Not much is likely to happen until after year-end, barring some type of monumental geopolitical event. It is a good time to review one’s holdings and strategy, face up to mistakes made, and determine how to avoid them in the future. In my case, the number one fault I have is reluctance to fold and exit a position when the trend is obviously down. My built-in rules for position size and sector concentration have allowed me to avoid serious damage, but performance would certainly have been better if I had exited my speculations in Oil and Gas Production MLPs (LINE, BBEP, LGCY, MEMP) and OffShore Drillers (RIG, SDRL, NE, ESV) sooner. The oil price collapse went down much further and lasted much longer than I imagined, and still has only recovered marginally. It may well be that fossil fuels are in permanent decline, underscoring that “this time it WAS different”, unlike numerous oil busts of the past, which were predictably followed by oil booms.  

JT