Stocks moved very little last week until Thursday, which saw a significant sell off. Then, Friday saw a decline reminiscent of the exciting days of 2008, as the Dow Industrials declined over 300 points, and all the other major averages declined similarly. The end result was that the week ended up being a down week, with pundits speculating that the long-awaited correction might be at hand. Maybe, if it continues, but not yet, as the averages are still only down 2 per cent or so from recent highs. A slowdown in China and lackluster earnings thus far have been named as a couple of possible catalysts. It was not the economic readings from last week, which indicated steady progress. The march of economic releases continues this week, with no major surprises expected. The focus will be on earnings, as we move into the thick of earnings season, and the Fed meeting, which will be occurring Tuesday and Wednesday.

A number of my stocks experienced upgrades / downgrades last week:

Main Street Capital (MAIN) was initiated as a Buy at MLV & Co.

Prospect Capital (PSEC) was also initiated as a Buy at MLV & Co.

Linn Energy LP (LINE) was upgraded from OutPerform to a Focus Stock at Howard Weil.

Unilever (UN, UL) was upgraded from UnderPerform to Sector Perform at RBC Capital.

Verizon (VZ) was downgraded from OutPerform to Sector Perform at Pacific Crest.

GlaxoSmithKline (GSK) was downgraded from OutPerform to Market Perform at Cowan.

Walgreen (WAG) was upgraded from Cautious to Neutral at ISI Group.

Norfolk Southern (NSC) was upgraded from Neutral to OverWeight at JP Morgan.

General Dynamics (GD) was upgraded from Perform to OutPerform at Oppenheimer.

Gladstone Investments (GAIN) was upgraded from Neutral to Buy at Ladenburg.

Breitburn LP (BBEP) was resumed at OutPerform at Imperial Capital.

Several of my stocks reported last week:

Johnson & Johnson (JNJ) reported Q4 EPS of $1.24, beating by four cents. Revenue of $18.4B, up 4.8% Y/Y, beat by $450M. The stock dropped on Tuesday after the report, and continued down the rest of the week, dropping almost five dollars.  

Verizon Communications (VZ) reported Q4 EPS of $0.66, beating by four cents. Revenue of $31.1B, up 3.5% Y/Y, beat by $80M. The stock dropped after reporting Tuesday, but actually gained on Friday, at least initially, during the big sell off.

Freeport-McMoRan Copper & Gold Inc. (FCX) reported Q4 EPS of $0.68, missing by twelve cents. Revenue of $5.88B, up 30.4% Y/Y, missed by $510M. FCX declined every day last week.

Norfolk Southern Corporation (NSC) reported Q4 EPS of $1.64, beating by thirteen cents. Revenue of $2.9B, up 8.2% Y/Y, beat by $50M. NSC gained after the release, but then declined with the market sell off.

McDonald's Corporation (MCD) reported Q4 EPS of $1.40, beating by a penny. Revenue of $7.09B, up 2.0% Y/Y, missed by $20M. MCD declined modestly on the week.

Microsoft Corporation (MSFT) reported Q2 EPS of $0.78, beating by ten cents. Revenue of $24.52B, up 14.3% Y/Y, beat by $850M. MSFT has been strong in recent weeks, and actually gained on Friday, even as the rest of the market sold off.

Kimberly-Clark Corporation (KMB) reported Q4 EPS of $1.44, beating by five cents. Revenue of $5.3B, flat Y/Y, beat by $20M. KMB soared after the release, but did decline modestly along with the market on Friday.

The Procter & Gamble Company (PG) reported FQ2 EPS of $1.21, beating by a penny. Revenue of $22.28B, up 0.4% Y/Y, missed by $100M. PG performed similarly to KMB, as the company continues to make progress on it’s turnaround plan.

General Dynamics Corporation (GD) reported Q4 EPS of $1.76, beating by a penny. Revenue of $8.08B, down 0.4% Y/Y, beat by $70M.

One of my stocks went ex-dividend last week that I overlooked. Kayne Anderson (KED) went ex-dividend 1/23/2014. KED yields 7.28%, and is effectively a BDC investing in MLPs, and thus is an alternative for investors desiring MLP exposure without the tax complications.

Stocks on my lists going ex-dividend this week, by date, are:

1/29/2014

Alliant Energy (LNT), yield 4.02%.

ConAgra Foods (CAG), yield 3.05%.

Kinder Morgan Inc. (KMI), yield 4.62%.

Kinder Morgan Energy Partners LP (KMP), yield 6.60%.

Plains All American Pipeline (PAA), yield 4.76%.

Prospect Capital (PSEC), yield 11.83%. PSEC pays monthly.

1/30/2014

Paychex (PAYX), yield 3.33%.

Southern Company (SO), yield 4.92%.

Realty Income (O), yield 5.53%. O pays monthly.

As earnings season moves into high gear, a number of my stocks are scheduled to report this week, as shown below, by date:

1/27/2014

American Electric Power (AEP), before market hours, and Royal Dutch Shell (RDS.B), no time specified.

1/28/2014

NextEra Energy (NEE), Nucor (NUE), Pfizer (PFE), and Potlatch (PCH), all before market hours, and AT&T (T), after the close.

1/29/2014

The Southern Company (SO) and Novartis (NVS), both before market hours.

1/30/2014

Altria (MO), Colgate Palmolive (CL), ConocoPhillips (COP), Enterprise Products Partners LP (EPD), Exxon Mobil (XOM), Northrop Grumman (NOC), Raytheon (RTN), United Parcel Service (UPS), and Xcel Energy (XEL), all before market hours. Also on this date, Gladstone Investments (GAIN), no time supplied.

1/31/2014

Chevron (CVX), before market hours.

It will be interesting to see if the sell off continues this week, or if it was just a two-day aberration. It will have to continue for awhile to get some of the more stellar names down from the stratosphere to buyable territory. Examples are Johnson & Johnson (JNJ), Procter & Gamble (PG), 3M Co (MMM), Colgate Palmolive (CL), General Mills (GIS), to name a few. One name that isn’t too far up there is ConocoPhillips (COP), which has declined from recent highs, and now yields over 4%. I started a position week before last at barely $68, and added to it last week under $67. COP reports this week on the 30^th, and the next ex-dividend date will be coming up soon, in early February. What’s not to like -  stellar blue chip, down a little in price, will pay out soon. If earnings are good, it may go right back up in price, and the opportunity would have been missed if I had not acted. If the stock declines further, I have plenty of room to add more before I will hit my maximum on shares allowed for any one position. That’s how I will play it, have a game plan for either scenario, up or down.

JT    

Stocks went down hard on Monday, rebounded all of the way back on Tuesday, then edged down modestly from that point, ending the week about where they were at the end of the prior week. None of the economic reports from last week rattled the market, as all were more or less in line with expectations. Inflation, at least per the official figures, is benign, housing seems to be slowing a little, and the rest of the economic data shows progress, but at an agonizingly slow pace. Data releases scheduled for the coming week are sparse, with only a couple of housing-related items and the weekly numbers on unemployment claims and oil/natural gas inventories.   

Upgrades/ downgrades from last week that came out after my Monday posting were as follows:

Intel (INTC) was upgraded from Neutral to OverWeight at JP Morgan.

Breitburn Energy Partners LP (BBEP) was initiated at OverWeight by JP Morgan. BBEP has shifted from a quarterly dividend to a monthly dividend.

Memorial Production Partners LP (MEMP) was initiated at OverWeight by JP Morgan

Xcel Energy (XEL) was upgraded from Neutral to Buy at ISI Group.

Westar Energy (WR) was downgraded from Buy to Neutral at ISI Group.

Nucor (NUE) was downgraded from OutPerform to Market Perform at BMO Capital.

Freeport-McMoran (FCX) was downgraded from OutPerform to Market Perform at FBR Capital.

MicroSoft (MSFT) was downgraded from Buy to Neutral at Citigroup.

Pan American Silver (PAAS) was upgraded from Hold to Buy at Deutsche Bank.

Hercules Technology Growth Capital (HTGC) was upgraded from Hold to Buy at Wunderlich.

United Parcel (UPS) was initiated at Neutral at Susquehanna.

Unilever (UL, UN) was downgraded from Neutral to UnderWeight at JP Morgan.

ENI S P A (E) was downgraded from Neutral to Reduce at Nomura.

Statoil (STO) was upgraded from Reduce to Neutral at Nomura.

Norfolk Southern (NSC) was downgraded from Buy to Hold at Stifel.

QR Energy LP (QRE) was downgraded from Buy to Hold at MLV & Co.

Magellan Midstream Partners (MMP) was initiated at Buy at Wunderlich.

Main Street Capital (MAIN) was downgraded from OutPerform to MarketPerform at Raymond James.

Total S A (TOT) was upgraded from Neutral to Buy at Citigroup.

Statoil (STO) was upgraded from Hold to Buy at Deutsche Bank.

Only a couple of my stocks will be going ex-dividend this week:

Colgate Palmolive (CL), 1/22/2014, yield 2.10%.

Procter & Gamble (PG), 1/22/2014, yield 3.01%.

Moving on to earnings, a few of my stocks reported last week:

Kinder Morgan Inc. (KMI) reported Wednesday that Q4 EPS was $0.33, missing by two cents. Revenue of $3.87B, up 25.6% Y/Y, beat by $60M.

Kinder Morgan Energy Partners LP (KMP) reported that Q4 EPS was $0.83, beating by four cents. Revenue of $3.47B, up 38.2% Y/Y, beat by $130M.

Intel (INTC) reported Thursday that Q4 EPS was $0.51, missing by a penny. Revenue of $13.83B beat by $.11B.

General Electric Company (GE) reported Friday that Q4 EPS was $0.53, in-line. Revenue of $40.38B, up 3.1% Y/Y, beat by $160M.

Earnings season continues this week, still in low gear, but accelerating. Stocks on my lists scheduled to report, by date, are:

1/21/2014

Verizon (VZ) and Johnson & Johnson (JNJ), both before the open.

1/22/2014 

Freeport-McMoran (FCX), Norfolk Southern (NSC), and General Dynamics (GD), all before the open.

1/23/2014

McDonalds (MCD), Raytheon (RTN), and MicroSoft (MSFT). MSFT will be after the close. 

1/24/2014

Kimberly Clark (KMB), Procter & Gamble (PG).

To repeat myself from last week, the market situation is the same as it has been in recent months, as far as investing new money is concerned. You can buy solid blue chips at astronomical prices with a sub-3% yield or worse, and likely experience sub-par returns, or you can selectively buy into depressed sectors, with higher risk, but potentially higher rewards. These would be REITs, Utilities, Preferreds trading less than par, and Business Development Companies (BDCs). Even further out on the risk spectrum, several Mortgage REITs are trading substantially under book value, and yielding double digits, at least at the moment. Just be aware that book value can adjust downward, depending upon conditions, so while it is a floor on value, the floor can move. And finally, even further out on the risk spectrum, you can pick up shares of precious metals mining firms at prices not seen since the financial crisis. If gold and / or silver should suddenly come back to life, these firms would deliver capital gains quickly. Just be aware that the conventional wisdom is that gold and silver will decline further in 2014. Further, if it gets bad enough, the miners will certainly reduce or eliminate dividends, and in some cases, could even go out of business.

While not a screaming bargain, I initiated a position in ConocoPhillips (COP) last week at $68.25, after having sold above $73 a month or two ago. A dividend announcement should be forthcoming any day now. COP currently yields a respectable 4.09%. COP will be reporting on 1/30/2014.

I also added to my position in Unilever (UL) last week. UL should be announcing a dividend soon as well. UL currently yields 3.50%, not world-beating, but pretty good for a huge, stable, international food company. Many of the top blue chips are barely yielding above 2% at today’s inflated prices. These were two that I could buy without giving in too much on my buy rules.

JT

Stocks were up and down last week, with the end result being that the major averages ended Friday a little higher than where they started on Monday. The December Payrolls report was somewhat disappointing, with the number of newly employed coming in at 74K, less than half of the consensus expectation. While the Unemployment Rate showed a decline to 6.7%, it was down for the wrong reason – because of a drop in labor force participation. Asian and European markets had mixed results over the time period, some up and some down, with no clear consensus. The usual calendar of economic reports will be presented next week, with the CPI, due out Thursday, likely being the most significant.

Upgrades/ downgrades from last week that came out after my Monday posting were as follows:

Alliant Energy (LNT) was downgraded from OverWeight to Equal Weight at Barclays.

Phillip Morris (PM) was initiated at Sell by Standpoint Research.

Johnson & Johnson (JNJ) was upgraded from Sector Perform to OutPerform at RBC Capital Markets.

Exxon Mobil (XOM) was upgraded from Sector Perform to Sector OutPerform at Howard Weil.

Chevron (CVX) was downgraded from Sector OutPerform to Sector Perform at Howard Weil.

Total S A (TOT) was downgraded from Sector OutPerform to Sector Perform at Howard Weil.

McDonalds (MCD) was initiated at Buy at UBS.

Paychex (PAYX) was downgraded from Sector Perform to UnderPerform at RBC Capital.

Novartis (NVS) was initiated at Buy at UBS.

Sanofi (SNY) was initiated at Neutral at UBS.

McDonalds (MCD) was upgraded from Equal Weight to OverWeight at Morgan Stanley.

Exxon Mobil (XOM) was downgraded from Buy to Neutral at Citigroup.

Exterran Partners LP (EXLP) was upgraded from UnderPerform to Neutral at Credit Suisse.

Novartis (NVS) was downgraded from Buy to Hold at Jeffries.

Johnson & Johnson (JNJ) was upgraded from Hold to Buy at Jeffries.

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

Medical Properties Trust (MPW) was upgraded from Hold to Buy at Jeffries.

MicroSoft (MSFT) was upgraded from Equal Weight to OverWeight at Barclays.

Johnson & Johnson (JNJ) was downgraded from OverWeight to Equal Weight at Barclays.

Just this morning, Ventas (VTR) was upgraded from OutPerform to Top Pick at RBC Capital.

Only a few of my stocks will be going ex-dividend this week:

Consolidated Communications (CNSL), 1/13/2014, yield 7.60%.

Freeport-McMoran (FCX), 1/13/2014, yield 3.46%.

Fifth Street Finance (FSC), 1/13/2014, yield 10.57%. FSC pays monthly.

General Dynamics (GD), 1/15/2014, yield 2.36%.

Main Street Capital (MAIN), 1/16/2014, yield 5.83%. MAIN pays monthly.

Moving on to earnings, I missed that one of my stocks reported last week. RPM Inc (RPM) reported FQ2 EPS of $0.48, beating by three cents. Revenue of $1.07B, up 5.3% Y/Y, missed by $0.01B. While a good company, RPM only yields 2.23% at the current market price.

Some notable names on my lists will be reporting this week, as earnings season starts to get cranked up:

Kinder Morgan Inc (KMI) will report after the market closes on 1/15/2014.

Kinder Morgan L P (KMP) will also report after the market on 1/15/2004.

Intel (INTC) will report after the market closes on 1/16/2014.

General Electric (GE) will report before the open on 1/17/2014.

The market situation is the same as it has been in recent months, as far as investing new money is concerned. You can buy solid blue chips at astronomical prices with a sub-3% yield or worse, and likely experience sub-par returns, or you can selectively buy into depressed sectors, with higher risk, but potentially higher rewards. These would be REITs, Utilities, Preferreds trading less than par, and Business Development Companies (BDCs). Even further out on the risk spectrum, several Mortgage REITs are trading substantially under book value, and yielding double digits, at least at the moment. Just be aware that book value can adjust downward, depending upon conditions, so while it is a floor on value, the floor can move. And finally, even further out on the risk spectrum, you can pick up shares of precious metals mining firms at prices not seen since the financial crisis. If gold and / or silver should suddenly come back to life, these firms would deliver capital gains quickly. Just be aware that the conventional wisdom is that gold and silver will decline further in 2014. Further, if it gets bad enough, the miners will certainly reduce or eliminate dividends, and in some cases, could even go out of business.

JT

The stock rally continued on through the end of the year, then started the New Year with a thud, as all of the major averages dropped substantially on the first trading day of the New Year, which was Thursday January 2. Finally, the week ended flat on Friday, with minimal change. Asian markets mostly performed likewise, with Japan being an exception, gaining each day of the New Year. European markets were mixed, with Germany, France, and Spain dropping the latter half of the week, similar to the US action, while Spain gained, and Britain ended the week about where it started. The Payrolls and Unemployment report for December, due out Friday, is the most significant economic release on the schedule. 

It was a very slow week once again for upgrades / downgrades on my stocks, but there were a few:

Health care REIT (HCN) was downgraded from Market Perform to UnderPerform at BMO Capital.

Ventas (VTR) was also downgraded from Market Perform to UnderPerform at BMO Capital.

American Electric Power (AEP) was upgraded from Market Perform to OutPerform at BMO Capital.

General Electric (GE) was downgraded from OutPerform to Perform at Oppenheimer.

Exelon (EXC) was downgraded from Neutral to Sell at Citigroup.

Entergy (ETR) was downgraded from Neutral to Sell at Citigroup.

Public Service Enterprise Group (PEG) was upgraded from Neutral to Buy at Citigroup.

Westar Energy (WR) was upgraded from Neutral to Buy at Citigroup.

Several of my stocks will be going ex-dividend this week:

General Mills (GIS), 1/8/2014, yield 3.09%.

AT&T (T), 1/8/2014, yield 5.29%.

Verizon (VZ), 1/8/2014, yield 4.38%.

Darden Restaurants (DRI), 1/8/2014, yield 4.15%.

RPM International (RPM), 1/9/2014, yield 2.31%.

Universal (UVV), 1/9/2014, yield 3.84%.

Linn Energy LLC (LINE), 1/9/2014, yield 9.34%.

This morning, 1/6/2014, a few more upgrades / downgrades have come out on my stocks:

Ventas (VTR) was upgraded from OutPerform to Top Pick at RBC Capital Markets.

Linn Energy LLC (LINE) was upgraded from Neutral to OverWeight at JP Morgan.

Medtronic (MDT) was upgraded from Neutral to OverWeight at JP Morgan.

Conoco (COP) was upgraded from UnderPerform to Market Perform at Raymond James.

Entergy (ETR) was downgraded from OutPerform to Market Perform at Wells Fargo.

Sanofi (SNY) was doengraded from OverWeight to Neutral at JP Morgan.

Now that the holidays are behind us, it is time to return to “normalcy”, and see where the market wants to go. At this point I don’t see much to get excited about. Most quality names are bid up to the moon, and of the bargains available, namely REITs, Utilities, and Gold and Silver Miners, I’ve picked up all I can handle from these categories. Now is a good time to sit tight and await further developments before making a move, it seems to me.

JT

The stock rally continued last week, with all of the major averages registering gains every day until Friday, which ended flat, on very low volume. Asian and European markets mostly performed likewise, with the exceptions of Hong Kong and Shanghai, which were a little more erratic. With the New Year holiday coming at mid-week, activity will likely be subdued this coming week as well. The ISM reading for December, due out Thursday, is the most significant economic release on the schedule. The December Jobs report will not be coming out until the following week, on January 10^th.

It was a very slow week for upgrades / downgrades on my stocks, with only one to report; Plains All American Pipeline (PAA) was initiated at Buy at Wunderlich. 

Then, early Monday morning, Entergy (ETR) was resumed into coverage by Goldman with a Neutral rating.

Several of my stocks will be going ex-dividend this week:

Realty Income (O), 12/30/2013, yield 5.77%. O pays monthly.

Raytheon (RTN), 12/30/2013, yield 2.42%.

Kimco Realty (KIM), 12/30/2013, yield 4.47%.

Sysco (SYY), 12/31/2013, yield 3.15%.

Medtronic (MDT), 12/31/2013, yield 1.95%.

Cisco Systems (CSCO), 1/2/2014, yield 3.09%.

As usual at this time of year, there are numerous articles prognosticating about the coming year, and what may be in store for investors in stocks. The conventional wisdom seems to be that 2014 will not see the markets advance like they did in 2013, but that a collapse is not likely. A vocal minority, however, makes the point that current conditions are reminiscent of a market top, and caution is warranted. My view remains that a diversified dividend portfolio is the way to go, with some cash held in reserve, and that new positions or add-ons must represent value, with a margin of safety, to be attractive. Thus, terrific companies, such as Johnson & Johnson (JNJ), Procter & Gamble (PG), or Colgate Palmolive (CL), which today command terrific prices, are sadly, off the radar. REITs are buyable, with the caveat that they should not make up more than around 15% of the portfolio. A couple of gold and silver miners are worthy of speculation, maybe up to 2% of a portfolio, as long as you are prepared to wait it out a couple of years. Also, some select MLP’s, such as Kinder Morgan (KMP), represent decent value in this over-valued market. Until we have that long-predicted, never materializing 10% to 15% stock market correction, there is very little to buy just now.

Time to publish and get ready for the New Year.

JT

Stocks last week rallied on Monday, then traded flat up until the Fed announcement came out Wednesday afternoon. The news that the Fed would trim asset purchases by 10% triggered a huge rally, and the momentum carried through to the end of the week. The implication was that the Fed believed the economy was recovering enough to allow them to take such a step, or at least that was how it was interpreted. The gains for the week outpaced the prior week’s declines, such that the major averages ended the week at new all-time highs. European markets mostly mirrored the U.S. action, while Asian markets were more varied. Japan, India, and Singapore roughly followed the U.S. script, but Shanghai and Hong Kong registered declines, which accelerated towards the end of the week.

Looking forward to the week ahead, it’s Christmas – time to get serious about my Christmas shopping! But aside from that, there will be a few economic releases of note: Personal Income and Spending for November on Monday, Durable Orders for November and a couple of housing-related reads on Tuesday, the usual Weekly Claims for Unemployment on Thursday, and delayed weekly readings on petroleum and natural gas supplies on Friday.

Upgrades / downgrades on my stocks that came out last week after my Monday posting were:

 Tuesday, 12/17/2013

Medtronic (MDT) was upgraded from Neutral to Buy at Goldman.

Magellan Midstream Partners LP (MMP) was upgraded from Hold to Buy at Deutsche Bank.

Plains All American Pipeline LP (PAA) was downgraded from Buy to Hold at Deutsche Bank.

GlaxoSmithKline (GSK) was downgraded from Buy to Hold at Deutsche Bank.

Wednesday, 12/18/2013

Pan American Silver (PAAS) was upgraded from UnderWeight to Neutral at JP Morgan.

Plains All American Pipeline LP (PAA) was resumed at Buy at Citigroup.

Thursday, 12/19/2013

Buckeye Partners LP (BPL) was initiated at Sector Perform at RBC Capital.

Windstream (WIN) was initiated at UnderPerform at Jeffries.

CenturyLink (CTL) was initiated at UnderPerform at Jeffries.

Consolidated Communications (CNSL) was initiated at Buy at Jeffries.

Frontier Communications (FTR) was initiated at UnderPerform at Jeffries.

AT&T (T) was initiated at Buy at Jeffries.

Verizon (VZ) was initiated at Buy at Jeffries.

Calumet Specialty Products Partners LP (CLMT) was initiated at Neutral at Goldman.

Friday, 12/20/2013

3M Company (MMM) was upgraded from UnderWeight to Neutral at JP Morgan.

Prospect Capital (PSEC) was initiated at Buy at Deutsche Bank.

Then this morning, Plains All American Pipeline LP (PAA) was initiated at Buy at Wunderlich.

Two of my stocks reported earnings last week, both on Wednesday:

General Mills (GIS) reported FQ2 EPS of $0.83, missing by five cents. Revenue was $4.88B, missing by $0.07B. The stock declined on the news, but with the big rally that came afterwards, it had recovered most of the lost ground by the end of the week.

Paychex (PAYX) reported FQ2 EPS of $0.43, beating by a penny. Revenue was $610.5M, up 7% Y/Y, beating by $11.61M. PAYX is now seriously over-valued, in my opinion. I thought it was over-valued at $40, and sold. This sleepy payroll processor has been discovered, apparently, spoiling the party for long-time holders like me, selling above value, then unable to get back in at anything close to a reasonable price.

Stocks on my lists going ex-dividend during Christmas week are as follows:

Monday, 12/23/2013    

Altria (MO), yield 4.98%.

Philip Morris (PM), yield 4.40%.

Thursday, 12/26/2013

Main Street Capital (MAIN), yield 6.05%. MAIN pays monthly.

Friday, 12/27/2013   

Prospect Capital (PSEC), yield 11.70%. PSEC also pays monthly.

Windstream (WIN), yield 12.14%.

National Health Investors (NHI), yield 5.16%.

Nucor (NUE), yield 2.85%.

Annaly Capital Management (NLY), yield 11.88%. The five cent cut was perhaps less than had been priced in. I added to my position last week, just above $10.

American Capital Agency (AGNC), yield 13.09%. I bought back in around $22, a bit too soon, obviously, but I’m seriously considering adding to my small position this week, if I can get more shares around $19.50 or so.

MFA Financial (MFA), yield 10.96%.

All three mortgage REITs (NLY, MFA, AGNC) are selling below book value while sporting double-digit yields, both conditions reflecting the severe market price declines in these names over the past several months. With the Fed committed to holding interest rates down for a long time to come, they may be priced for a poorer environment than will reasonably be experienced any time soon. I own all three, and I consider them to be a reasonable speculation for a small share of my total portfolio. Just be aware, you are not investing in Chevron (CVX), Johnson & Johnson (JNJ), or Procter & Gamble (PG) here. You are reaching for double-digit yields, rather than the sub-3% yields offered by safe blue chips, and are definitely further out on the risk spectrum with these names. Mortgage REITs have more in common with hedge funds than they do with property REITs, their (very) distant cousins. The skills and experience (maybe also luck) of their management teams are key to their success. That is true to some extent for all companies, but is more so for mortgage REITs than most other firms.

None of my stocks will be reporting earnings this week. It should be a quiet week in the markets, with Christmas day coming right in the middle of the week. Asian markets have begun the week with gains overnight, European markets are likewise mostly in the green at this hour (7:45 AM 12/23/2013), and U.S. futures are positive, so it appears the “Santa Claus Rally” will continue on, for now at least. 

JT

Stocks began to decline on Monday, and the slide accelerated on through the week until Friday, when a feeble rally attempt ended in a draw, with minimal movement from the Thursday closing levels. Both Asian and European markets mirrored the U.S. on the week, declining in similar fashion. The economic releases during the week presented no big surprises, although an up tick in the weekly Claims for Unemployment, to 368K, was a bit of a disappointment.

Looking towards the week ahead, Asian markets overnight resumed the slide, led by China and Japan, both down over 1.5%. European stocks, in contrast, are all trading with substantial gains at this hour. The week ahead will see a lot of economic releases. Some of the major ones which might affect stocks are: Monday, Unit Labor Costs and Productivity, Q3, Revised, plus November Industrial Production and Capacity Utilization; Tuesday, November CPI; Wednesday, November Housing Starts and Building Permits, plus the Fed Meeting concludes; Thursday, the weekly Claims for Unemployment, November Existing Home Sales and Leading Indicators; and finally, on Friday, the Third Estimate of Q3 GDP and the GDP Deflator, the latter being a measure of inflation pressure. U.S. futures are positive, with an hour and a half to go to the open.   

There were a few upgrades / downgrades on my stocks last week after Monday, as follows:

Tuesday, 12/10/2013

Spectra Energy (SE) was initiated at Sector Perform at CIBC.

Royal Dutch Shell (RDS.B) was upgraded from UnderWeight to Neutral at JP Morgan.

Cisco Systems (CSCO) was initiated at Sell at Citigroup.

Wednesday, 12/11/2013

Cisco (CSCO) was resumed at Neutral at Mizuho.

3M (MMM) was upgraded from Neutral to Buy at Nomura.

General Dynamics (GD) was upgraded from Sell to Fair Value at CRT Capital.

ENI S P A (E) was downgraded from Buy to Hold at Deutsche Bank.

Entergy (ETR) was downgraded from Buy to Hold at Deutsche Bank.

Friday, 12/13/2013

Chevron (CVX) was initiated at Sector Perform at RBC Capital Markets.

Exxon Mobil (XOM) was initiated at OutPerform at RBC Capital Markets.

Then, this morning we have one more:

Exxon Mobil (XOM) was upgraded from Neutral to Buy at Goldman.

There are not many stocks on my lists going ex-dividend this week. In fact, there are only four:

Solar Capital (SLRC), ex-dividend date is 12/17/2013, yield 7.08%. The dividend was reduced from $0.60 per quarter to $0.40 some months ago, and the yield has only been maintained via a decline in the stock price.

BlackRock Kelso Capital (BKCC), ex-dividend 12/18/2013, yield 10.77%.

PennantPark Investment (PNNT), ex-dividend 12/18/2013, yield 9.54%.

General Electric (GE), ex-dividend 12/19/2013, yield 3.28%. The announcement only came out Friday, along with notification of a 16% increase in the payout, from $0.19 per quarter to $0.22. GE continues to progress back to dividend respectability. With a yield exceeding 3%, most would agree it has already achieved said respectability.

General Mills (GIS) will be reporting earnings on 12/18/2013, before market hours. The period will be for the 2^nd QTR of fiscal year 2014. Needless to say, GIS is on a different reporting schedule than most corporations.

I have finally gotten around to updating my stock lists, a task not undertaken since May, 2013. I have grudgingly increased most buy levels, reflecting the reality of the (mostly) over-valued market. It is depressing to see how many of my top industrial firms have yields barely above 2%. REITs are certainly an exception. For income investors, REITs are currently the most attractive sector, closely followed by utilities. But keep in mind that diversification is still necessary, and no one sector should account for more than 10% to 15% of a portfolio.

Changes by Tier are as follows:

Tier1 – Excel Energy (XEL) added, Vodafone (VOD) dropped. VOD has risen from the $25 level to $37 or more, and will be making a distribution of cash and Verizon (VZ) stock in early 2014. As always, I sold VOD too soon. But if I held it now, I would sell at the current inflated price, and move on.

Tier2 - PVR Partners (PVR) dropped. PVR is being acquired by Regency Energy Partners (RGP), and will soon cease to exist. I sold upon the initial euphoria, which so far has seemed to have been a good move, as the price has dropped back somewhat since the announcement.

Tier3 -  Inergy (NRGY) was acquired  by the Crestwood companies, so it goes away. I added Crestwood Midstream Partners (CMLP) to Tier3. I also added two other small MLPs with outsized yields to Tier3, Memorial Production Partners (MEMP), and Calumet Specialty Products Partners (CLMT). MEMP is a producer, thus is subject to commodity risk. CLMT is somewhat unique, and has numerous issues that I won’t get into here. It is higher risk, having declined from more than $40 to today’s level, barely above $25. With a yield exceeding 10%, if CLMT can hold on and see even a modest recovery, it will turn out to have been an attractive speculation at these levels.

Also, Barrick Gold (ABX) no longer meets my yield criteria, following a 75% dividend cut from $0.20 per quarter to $0.05, so it goes off my Tier3 list. This was one case where I got out while the getting was good, above $20, in late October or so, before the cut was announced. ABX has been reacting aggressively to the gold price collapse, and I think the company will survive to prosper again, just not with me on board.

I have just released my long-promised update (on Seeking Alpha) to my article series on Stocks, Options, Taxes. The new article is Part VII, with links imbedded to all of the preceding articles in the series. It can be accessed from this website under the Articles heading.    

As we advance towards Christmas, the market will likely slow down a bit, as attention turns towards the spirit of the season.

JT

Stocks staged a pretty decent rally Friday, after several down days in a row. The encouraging Monthly Payrolls/Unemployment Report, also known as merely the Jobs Report, for November was the primary catalyst for the upbeat mood, according to most pundits. Overnight, Asian markets mostly posted gains, led by Japan, up over 2%. European markets are trading mixed at this hour, with Britain and France down by modest margins, while Germany, Italy, and Spain are all up by slightly larger, but still modest, margins. U.S. futures are flat to slightly positive. There are no economic reports due out today.

Only one of my stocks received any analyst action this morning, as Memorial Production Partners LP (MEMP) was initiated at Buy at UBS. MEMP is in my Tier3 high yield, high risk group, yielding over 11% currently. It is high risk because it is a production MLP, subject to commodity risk as well as the ever-present risk of taxation changes..

Several of my stocks will be going ex-dividend this week:

Triangle Capital (TCAP), 12/9/2013, yield 7.29%.

Mercury General (MCY), 12/10/2013, yield 4.95%.

Digital realty (DLR), 12/11/2013, yield 6.78%. The yield reflects the battered share price, as the data center REIT has declined more than most in the recent REIT sell off.  Suffering DLR holders will certainly appreciate this payment.

Total S A (TOT), 12/11/2013, yield 5.25%. Note that the yield does not take into account France’s 30% tax withholding, unrecoverable for shares held in an IRA.

Merck (MRK), 12/12/2013, yield 3.56%. My view of “Big Pharma” at this point is that it isn’t time to panic, but it is a sector to underweight in a portfolio.

DrPepper Snapple (DPS), 12/12/2013, yield 3.10%.

Reynolds American (RAI), 12/12/2013, yield 4.92%.

Ares Capital (ARCC), 12/12/2013, yield 8.32%. The yield is per the regular quarterly dividend, currently $0.38 per share. ARCC has also announced a special, year-end dividend of $0.05 per share, with the same ex-dividend date as the regular dividend.

Gladstone Investment (GAIN), 12/12/2013, yield 9.56%. GAIN pays monthly.

Potlatch (PCH), 12/13/2013, yield 3.46%.

TICC Capital (TICC), 12/13/2013, yield 10.86%.

One of my stocks will be reporting this week, as Greif Inc. is on a different reporting cycle than most firms. Greif (GEF, GEF.B) will report earnings on 12/9/2013, after market hours. As noted, Greif has two classes of common shares. The GEF shares yield 3.07%, while the GEF.B shares yield 4.30%. The GEF.B trading volume has become almost neglible, however. I held the ‘B’ shares back when I owned Greif, but I do not own it currently.

It will be interesting to see if the market can build on Friday’s advance, or instead resumes the slide.

I am going to cut back on my postings on this blog for the time being, to once a week. I will still follow the market every trading day, but I am starting a new endeavor that will limit my available time for market musing / blogging. I will still develop my usual Monday morning posting, noting upcoming ex-dividend dates and earnings on the stocks I follow, along with other observations. I will also include a recap of any noteworthy developments from the prior week on my stocks, and any other observations about the market or the economy that may be of interest. But I will only post during the week when something extraordinary comes up regarding my stocks, or the market in general.  

JT