JT’s DAILY (WEEKLY as of 12/9/2013) BLOG for Month Of January 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 01/29/2018
Posted Sunday 01/28/2018 05:30 PM
Another week, another closing high for the Dow Industrials, and as well as most, if not all, general indexes. The bears have either gone into hiding or have been converted, as stocks just keep on going up. The political rancor continues, but it doesn’t seem to have any effect on the market.
This week’s list of stocks I follow that are going ex-dividend soon is much more encouraging than last week, with 16 payers identified, as follows:
Conagra Brands (CAG), formerly ConAgra Foods, 1/29/2018, yield 2.23%.
Enterprise Products Partners L P (EPD), 1/30/2018, yield 5.84%.
AGNC Investment (AGNC), 1/30/2018, yield 11.02%. AGNC pays monthly.
Plains All American Pipeline L P (PAA), 1/30/2018, yield 5.27%.
Enerplus (ERF), 1/30/2018, yield 0.28%. ERF pays $0.0081 CAN monthly.
Tanger Factory Outlet Centers (SKT), 1/30/2018, yield 5.38%.
STAG Industrial (STAG), 1/30/2018, yield 5.47%. STAG pays monthly.
Alliant Energy (LNT) 1/30/2018, yield 3.32%.
Kinder Morgan (KMI), 1/30/2018, yield 2.66%.
Prospect Capital (PSEC), 1/30/2018, yield 10.53%. PSEC is a monthly payer.
Realty Income (O), 1/31/2018, yield 4.83%. As everyone knows, O pays monthly.
Paychex (PAYX), 1/31/2018, yield 2.91%.
Williams Partners (WPZ), 2/01/2018, yield 5.57%.
Pfizer (PFE), 2/01/2018, yield 3.65%.
Norfolk Southern (NSC), 2/01/2018, yield 1.94%.
Magellan Midstream Partners L P (MMP), 2/01/2018, yield 4.92%.
All 16 stocks listed last week as scheduled to report did so as expected. See last week’s posting for the names and dates. Rather than repeat here information that is abundantly available elsewhere, I point the reader desiring specifics to the firms’ press releases, available on their web sites, compilations of articles on brokerage web sites, the financial press web sites, or my preferred resource, Seeking Alpha. In many cases a transcript of the earnings teleconference with analysts is available on Seeking Alpha.
As for the week ahead, another 18 firms are scheduled to report, listed as follows by date:
McDonalds (MCD), Nucor (NUE), Pfizer (PFE).
Enterprise Products Partners L P (EPD), Pitney Bowes (PBI).
Altria (MO), Blackstone Group L P (BX), ConocoPhillips (COP), Eaton (ETN), Hershey Co (HSY), Magellan Midstream Partners L P (MMP), Royal Dutch Shell (RDS.A, RDS.B), United Parcel Service (UPS), Valero (VLO).
Chevron (CVX), ExxonMobil (XOM), Merck (MRK).
Another batch of upgrades / downgrades on my stocks came out last week, as follows:
Royal Dutch Shell (RDS.A, RDS.B) was reiterated at OutPerform at Cowen.
Freeport McMorAn (FCX) was downgraded from Sector OutPerform to Neutral at CIBC.
American Electric Power (AEP) was upgraded from Neutral to OutPerform at Macquarie.
Public Service Enterprise Group (PEG) was upgraded from Neutral to OutPerform at Macquarie.
Verizon (VZ) was upgraded from Sector Perform to Sector OutPerform at Scotia Howard Weil.
General Electric (GE) was downgraded from Buy to Neutral at BofA/Merrill.
Southern Co (SO) was downgraded from Buy to Neutral at Mizuho.
3M Co (MMM) was initiated at Neutral at UBS.
McDonalds (MCD) was reiterated at Buy at Nomura.
Chevron (CVX) was reiterated at Neutral at Credit Suisse.
Duke Energy (DUK) was upgraded from Neutral to OutPerform at Credit Suisse.
Ensco (ESV) was downgraded from OutPerform to Neutral at Macquarie.
Sanofi (SNY) was downgraded from Equal Weight to UnderWeight at Barclays.
Eaton (ETN) was initiated at Neutral at UBS.
General Electric (GE) was initiated at Neutral at UBS.
MicroSoft (MSFT) was reiterated at Buy at Stifel.
MicroSoft (MSFT) was reiterated at Neutral at JP Morgan.
Intel (INTC) was reiterated at Buy at Stifel, Mizuho, and Needham.
Raytheon (RTN) was reiterated at Buy at Stifel.
Crestwood Equity Partners L P (CEQP) was upgraded from Equal Weight to OverWeight at Capital One.
Intel (INTC) was upgraded from Neutral to OutPerform at Credit Suisse.
CenturyLink (CTL) was upgraded from Sector Perform to OutPerform at RBC Capital Markets.
Novartis (NVS) was reiterated at Market Perform at Leerink Swann.
General Dynamics (GD) was reiterated at OutPerform at Wells Fargo, and at Neutral at Citigroup.
Norfolk Southern (NSC) was reiterated at OutPerform at Cowen.
General Electric (GE) was reiterated at Buy at Citigroup.
Johnson & Johnson (JNJ) was reiterated at Hold at Stifel.
Kimberly Clark (KMB) was reiterated at Sell at Citigroup.
MicroSoft (MSFT) was initiated at Buy at Nomura.
ExxonMobil (XOM) was reiterated UnderWeight at Morgan Stanley.
Norfolk Southern (NSC) was upgraded from UnderPerform to Sector Perform at RBC Capital Markets.
ConocoPhillips (COP) was reiterated at Equal Weight at Morgan Stanley.
Chevron (CVX) was reiterated at OverWeight at Morgan Stanley.
Valero (VLO) was reiterated at Neutral at Citigroup.
3M Co (MMM) was upgraded from Neutral to Buy at Hilliard Lyons.
Statoil (STO) was upgraded from UnderPerform to OutPerform at Credit Suisse.
I made one trade this past week, buying back my June 2018 SO call, strike price $50, for 15 cents, having sold it on October 9, 2017 for $1.60. Net gain after commissions $129.55, with no cash at risk, just my 100 SO shares. If I could do that well on an option trade more often, I would be doing well indeed. At least I took advantage of last fall’s price run-up in Southern Co (SO) without giving up my shares. This was as close to “free money” as one is likely to find in the stock market. It’s great when it works!
1st Posting for Week Beginning Monday 01/22/2018
Posted Sunday 01/21/2018 05:30 PM
The market was only open four days last week, but that was enough for the Dow Industrials index to pass and hold the 26000 threshold. This is all the more amazing considering it occurred less than 10 trading days after passing the 25000 level. The fiasco in Washington may end up throwing cold water on the party, but still, no one predicted a New Year surge like this. The sentiment has been that stocks are seriously over-valued, and a correction would be coming along any day now.
Dividends aren’t nearly as exciting as skyrocketing valuations, but are much more predictable and dependable. That said, this week’s list of stocks on my lists going ex-dividend in the next few days is pretty anemic, only three names:
Colgate Palmolive (CL) 1/22/2018, yield 2.09%.
ONEOK (OKE), 1/26/2018, yield 5.30%.
ConAgra Foods (CAG), 1/29/2018, yield 2.29%.
Only one of my stocks reported last week, Kinder Morgan (KMI) on 1/17/2018. Results were respectable and on track, but a dividend increase was absent. Still, KMI is on the mend, and the dividend will eventually reflect the continuing recovery, barring another energy market collapse.
As for the upcoming week, a number of firms I track will be reporting earnings results, as listed following, by date:
Johnson & Johnson (JNJ), Kimberly Clark (KMB), Procter & Gamble (PG), Verizon (VZ).
General Dynamics (GD), General Electric (GE), Norfolk Southern (NSC), Novartis (NVS), Crown Castle International (CCI).
3m Co (MMM), American Electric Power (AEP), Freeport McMoRan (FCX), Raytheon (RTN), Intel (INTC).
Colgate Palmolive (CL), NextEra Energy (NEE).
The only stocks that aren’t priced to the moon these days are REITs, Utilities, BDCs, and distressed firms, such as General Electric (GE). Speaking of GE, just when you thought the worst was over, a torrent of bad news was delivered at an investor presentation 1/16/2018, related to insurance charges and funding requirements associated with GE Capital. Seeking Alpha has numerous news release summaries and articles on this latest development. I have mentioned before about selling some GE shares above $30 some time ago, congratulating myself for that, while at the same time berating myself for not selling all my shares. But who woulda thunk it? Just after I sold, I figured it would be another case of selling too soon, eager to get my hands on some cash, and then watching further gains occur. Not this time. In December, I sold a put with a strike price of $15. The position is still open. I will be OK with it if I end up buying more at $15, but to tell the truth, I would rather not. Recovery is not assured, and even if it occurs, it will take a long time. The GE experience shows why diversity is the only defense. Any stock can tumble, no matter how revered and long-standing.
1st Posting for Week Beginning Tuesday 01/16/2018
Posted Sunday 01/14/2018 06:30 PM
The stock rally continued on through the second week of the New Year, with the Dow Industrials Index coming within 200 points of 26000, the next major level, just a week after moving above the 25000 level. Bears are becoming harder to find, and when found are not too vocal. Of course, the conventional wisdom is the rally will continue until all the bears are extinct, nowhere to be found, and the enthusiasm reaches a crescendo. We are definitely getting closer, but we are not there yet.
Stocks on my lists going ex-dividend in the week ahead are as follows:
RPM International (RPM), 1/16/2018, yield 2.39%.
General Dynamics (GD), 1/18/2018, yield 1.63%.
Procter & Gamble (PG), 1/18/2018, yield 3.06%.
Main Street Capital (MAIN), 1/18/2018, yield 5.98%. MAIN pays monthly.
Gladstone Investment (GAIN), 1/19/2018, yield 6.96%. GAIN also pays monthly.
Horizon Technology Finance (HRZN), 1/19/2018, yield 10.74%. HRZN is another monthly payer.
Colgate Palmolive (CL), 1/22/2018, yield 2.15%.
None of my stocks reported last week, and none are scheduled to report this week.
Upgrade / downgrade actions last week regarding my stocks were as follows:
United Parcel Service (UPS) was reiterated at Buy at Deutsche Bank.
CenturyLink (CTL) was upgraded from Sell to Neutral at Goldman.
ONEOK (OKE) was initiated at OutPerform at Credit Suisse.
Potlatch (PCH) was upgraded to OutPerform at Raymond James.
Horizon Technology Finance (HRZN) was downgraded from Market Perform to UnderPerform at Wells Fargo.
Paychex (PAYX) was downgraded from Buy to Neutral at BofA/Merrill.
Darden Restaurants (DRI) was reiterated at Buy at Maxim Group.
Digital Realty Trust (DLR) was upgraded from Hold to Buy at Deutsche Bank.
Medical Properties Trust (MPW) was downgraded from Buy to Hold at Deutsche Bank.
3M Co (MMM) was reiterated at Hold at Deutsche Bank.
Statoil (STO) was upgraded from UnderPerform to Neutral at Macquarie.
Hershey (HSY) was downgraded from Equal Weight to UnderWeight at Morgan Stanley.
Cisco Systems (CSCO) was resumed at OverWeight at Piper Jaffray.
Crestwood Equity Partners L P (CEQP) was upgraded from Market Perform to OutPerform at Wells Fargo.
Triangle Capital (TCAP) was upgraded from UnderPerform to Market Perform at Raymond James.
ONEOK (OKE) was upgraded from Market Perform to OutPerform at Wells Fargo.
Duke Energy (DUK) was downgraded from Buy to Neutral at Goldman.
Southern Co (SO) was downgraded from Neutral to Sell at Goldman.
Crestwood Equity Partners L P (CEQP) was reiterated at Buy at Stifel.
Southern Co (SO) was initiated at UnderWeight at JP Morgan.
Solar Capital (SLRC) was upgraded from Market Perform to OutPerform at Keefe Bruyette.
Johnson & Johnson (JNJ) was reiterated at OutPerform at Wells Fargo.
Coca Cola (KO) was upgraded from Inline to OutPerform at Evercore ISI.
Blackstone Group (BX) was upgraded from Neutral to OverWeight at JP Morgan.
MicroSoft (MSFT) was reiterated at OverWeight at Barclays, and at OutPerform at Wells Fargo.
Phillip Morris (PM) was reiterated at OverWeight at Piper Jaffray.
I suppose the news cycle will start to be dominated next week by the threat of a “government shutdown”, as it is starting to look like we may be at an impasse on extending the debt ceiling. Most reasonable Americans would probably be OK with a permanent shutdown of all but essential services, which is all the government should be doing in the first place. At any rate, the Washington circus will certainly continue. It would be interestingly hilarious to observe if we were visitors from another planet, merely watching for amusement. Unfortunately, we inhabit this country on this planet, and we cannot detach ourselves, since we will affected by the results, or lack thereof. Someday the markets are going to realize we are in deep d__ d__, and then, watch out below. Until then, conserve cash and be ready for anything, since anything could happen.
1st Posting for Week Beginning Monday 01/08/2018
Posted Sunday 01/07/2018 04:30 PM
Stocks gained every day of the short week just concluded, and the gains were all substantial. For example, the venerable Dow Industrials stock average jumped up by triple digits on three days last week, and by 99 points on the “off” day, Wednesday. Further, the stock average crossed the 25000 threshold by midweek, and held it on into the weekend. Even a mildly disappointing “Jobs” report on Friday could not dampen the market’s enthusiasm.
Meanwhile, not as exciting, but certainly as profitable in the long run, another batch of stocks on my lists announced upcoming dividend payments, with ex-dividend dates occurring in the week ahead:
Verizon (VZ), 1/9/2018, yield 4.49%.
Darden Restaurants (DRI), 1/9/2018, yield 2.56%.
General Mills (GIS), 1/9/2018, yield 3.30%. GIS has rebounded in the last three months, up over $8 in that time period.
AT&T (T), 1/9/2018, yield 5.26%. The endless debate continues, which is better, VZ or T? I say why debate it? With yields like these, buy both.
Mid America Apartment Communities (MAA), 1/11/2018, yield 3.82%.
Consolidated Communications Holdings (CNSL), 1/11/2018, yield 12.02%. I have owned CNSL for most of the last ten years, enjoying steady dividend payments throughout that time. I sold at nearly $27 in November 2016, and then bought back in during June 2017. If CNSL delivers similar results over the next ten years, it will be seen in hindsight as a screaming bargain at today’s price, in a market with very few screaming bargains available. Of course, there are no guarantees, but I’m not selling, and I even added to my position when it dipped further in November 2017.
As for earnings, RPM International (RPM) did report decent results on 1/4/2018, as scheduled, and subsequently announced the next dividend payment to come, with an ex-dividend date of 1/16/2018. The yield of 2.44% is not too exciting, but RPM is a solid firm, and the stock price has been above $50 most of the time since early in 2016.
None of my stocks are scheduled to report in the week ahead.
The analysts returned from their holiday vacations, and we have had an avalanche of upgrades, downgrades, reiterations, and initiations of coverage on my stocks in the first week of the New Year, as follows:
AT&T (T) and Verizon (VZ) were both reiterated at Sector Weight at KeyBanc Capital Markets.
Statoil (STO) was upgraded from Sector Perform to OutPerform at RBC Capital Markets.
Washington Real Estate (WRE) was downgraded from Hold to Sell at Stifel. I sold WRE when it got above $30, planning to buy it back later, but I later concluded selling was a mistake, since it just stayed up, and never offered a good re-entry point. This rating seems a bit extreme. A Sell rating should mean either severe over-valuation, or doomsday (for the stock) is at hand, and I don’t believe either applies to WRE just now.
Consolidated Communications (CNSL) was upgraded to Buy at Drexel Hamilton.
Johnson & Johnson (JNJ) was downgraded from OverWeight to Neutral at JP Morgan. If you look at a stock chart of JNJ, you have to wonder if it will ever pull back and offer a decent entry point.
Windstream Holdings (WIN) was downgraded from Neutral to UnderWeight at JP Morgan. UnderWeight indeed! With no dividend, a sub-$2 share price, with minimal prospects for recovery, this stock is a poster child for my Tier4 grouping, stocks no longer recommended.
Greif (GEF) was upgraded from Neutral to Buy at BofA/Merrill.
Potlatch (PCH) was upgraded from UnderPerform to Neutral at BofA/Merrill.
American Electric Power (AEP) was downgraded from Neutral to Sell at Guggenheim.
McDonalds (MCD) was reiterated at Buy at BTIG Research.
General Mills (GIS) was upgraded from UnderWeight to Neutral at Piper Jaffray.
Waste Management (WM) was upgraded from Neutral to OutPerform at Macquarie.
Eaton (ETN) was upgraded from Neutral to OutPerform at Robert W Baird.
Valero (VLO) was initiated at Neutral at Credit Suisse.
Transocean (RIG) was upgraded from Hold to Buy at Jeffries.
Chevron (CVX) was downgraded from Buy to Neutral at BofA/Merrill.
Buckeye Partners L P (BPL) and Magellan Midstream Partners L P were both initiated at UnderPerform at Credit Suisse.
Plains All American Pipeline L P (PAA), Williams Partners L P (WPZ), and Enterprise Products Partners L P (EPD) were all initiated at OutPerform at Credit Suisse.
Energy Transfer Equity L P (ETE), Energy Transfer Partners (ETP), and Kinder Morgan Inc (KMI) were also all initiated at OutPerform at Credit Suisse.
Spectra Energy Partners L P (SEP) and Boardwalk Pipeline Partners L P (BWP) were both initiated at Neutral at Credit Suisse.
Medical Properties Trust (MPW) was downgraded from OutPerform to Neutral at Robert W Baird.
HCP Inc (HCP) and Senior Housing Properties Trust (SNH) were both reiterated at Neutral at Robert W Baird.
Cisco Systems (CSCO) was upgraded from Neutral to Buy at BofA/Merrill.
SCANA (SCG) was initiated at Neutral at Credit Suisse.
Based on the past several month’s action, I finally succumbed, this first week of the New Year, to the reality that the big selloff was not imminent, as I proceeded to make a couple of buys at reasonable, but not bargain, prices. Specifically,I bought Iron Mountain (IRM) at $37, after having sold it at $37.95 last August; I bought American Midstream Partners L P (AMID) at $13.85, after having sold it at $14.45 last August; and I added to my position in CEF Cohen & Steers Quality Realty Fund (RQI) at $12.50, a little above my initial buy price of $11.75. IRM yields over 6%, AMID over 13%, and RQI over 7%, so these prices are not excessive, at least based on the historical yields. And RQI is still trading at a discount to NAV, so it meets my key purchase requirement of a Closed-End Fund (CEF), which is that it be bought at a discount to Net Asset Value (NAV) of the fund’s holdings.
1st Posting for Week Beginning Tuesday 01/02/2018
Posted Saturday 12/30/2017 09:30 AM
For this first posting of the New Year, I will include a considerable amount of explanatory comments regarding what my Facebook Page and my related web site (www.optimumstockinvesting.com) are all about. In addition to these beginning comments, I will include additional explanations in several subsections regarding my approach. My usual weekly posting omits this explanatory material, as my recurring visitors, if there are any, are aware of these basics.
So, to begin, the purpose of the OPTIMUMSTOCKINVESTING web site and related Facebook page is to present a comprehensive approach to investing in stocks, utilizing primarily dividend-paying stocks, and a value-based investing strategy. I have an identified subset of stocks I follow, categorized into four lists, or tiers. I originally decreed that the number of stocks followed would be capped at 100, but currently the total is about 130. Tier1 stocks are the safest, strongest firms, the least likely to cut their dividends or go bankrupt. Tier1 yields are usually in the low single digits. Tier2 stocks are less safe, with risk factors that Tier1 stocks do not have, and while dividend cuts may occur, the firms are unlikely to go bankrupt, barring a severe economic downturn, or more likely, disastrous management decisions, such as an ill-advised acquisition. For example, MLPs are by definition in this category, as they have a built-in risk factor of an adverse change in the tax code. Tier3 stocks are either high-yield or high potential for capital gains, and can do very well if the economy remains strong or the fundamentals change for the better in their sector. Included here are BDCs, MREITs, rural telecoms, metals miners, and less substantial MLPs. Obviously, if hard times strike, these firms will cut or eliminate their dividends, and may go bankrupt. Tier4 stocks are the “walking dead”, stocks previously on the other lists, but now their dividends are absent or reduced, and bankruptcy is a real possibility. I have given up on these firms, but I will continue to track them as an exercise in masochism, as long as they continue to hang on. There is even a remote chance they may recover and get back to at least my Tier3 list. Also, occasionally a stock that is being acquired will move to Tier4, since it will no longer be recommended, but will be followed for as long as it continues to exist.
My web site explains the approach I follow in detail, and contains a wealth of information and resources. My approach is based on the value investing strategy outlined by Ben Graham in his classic works, updated a bit for the modern era, with just a hint of a trader’s mindset incorporated. The key take-away I want viewers to gain from my admonitions is an understanding of the risks inherent in stocks, as well as the rewards, and the need for caution and diversification, and most of all, the realization that ANYTHING can happen, nothing is 100% safe or guaranteed in the stock market.
My Weekly Blog consists of a few introductory comments regarding the week just ended, a recap of stocks on my lists that will be going ex-dividend in the week ahead, a recap of stocks on my lists scheduled to report earnings in the week ahead, a tally of upgrades / downgrades / initiations of coverage / reiterations of ratings on stocks on my lists, and then some closing remarks. In closing, I frequently relate any trades I have made, any changes in my stock lists, my view of the state of the market and concerns, recognition of recent articles that I found particularly relevant and on target, and anything else that comes to mind that I want to share regarding the investment outlook. My goal is to keep things apolitical, although I will admit to some personal biases which occasionally creep in.
Now, reverting back to my regular format, here are my opening remarks on the week just ended.
The last trading week of the year was definitely a ho-hum affair, as expected, with most of the major averages finishing flat or slightly down. Even Bitcoin ended the week about where it was one week ago, after an extremely volatile month. The Christmas shopping season appears to have been significantly better than in recent years, and it seems the “death of retail” has at least been postponed for a while. The major news was the approval and signing into law of the new Income Tax bill, which offers businesses some tax relief, and will benefit a large swath of taxpayers in the middle to lower middle income levels, especially those with children, with increased Standard Deduction and Child Tax Credit amounts.
Stocks on my lists scheduled to go ex-dividend in the week ahead are tabulated next. I include ex-dividend dates coming up in the entire week ahead, plus the following Monday, since any readers wanting to receive the dividend for a firm going ex-dividend on Monday will have to acquire the stock before the end of trade on the previous Friday. Assume the frequency is quarterly unless otherwise indicated. The yield is an annualized yield, and assumes the payout continues for the year at the current rate and frequency. Occasionally I offer some editorial comments at this point on a particular stock, in addition to the basic information.
Raytheon (RTN), 1/2/2018, yield 1.69%. RTN used to have a respectable yield, but with the stock price in the $180 range, the dividend has not kept pace, resulting in a yield under 2%.
Cisco Systems (CSCO), 1/4/2018, yield 3.01%. CSCO has, like many stocks, exploded upwards in price in recent months, but the yield is still pretty good for a solid blue chip.
Sysco (SYY), 1/4/2018, yield 2.36%. Often called “the other Cisco”, SYY is another solid firm with a sky-high stock price, resulting in a historically low yield.
Kayne Anderson Energy Development (KED), 1/4/2018, yield 9.23%. KED is a closed-end fund (CEF), focused on oil and gas firms, including MLPs. To learn more about CEFs, see my most recent Seeking Alpha article; Yield, Value, Safety: Available With Closed-End Funds?
Universal Corp (UVV), 1/5/2018, yield 4.19%. UVV is, of course, a tobacco stock, a leaf tobacco supplier to cigarette firms. I’m not too keen on any of the tobacco stocks, because I see them as permanently declining businesses, but they can have a place in a yield-focused portfolio.
My last posting on 12/18/2017 listed four stocks on my lists as scheduled to report earnings in the (for that posting) upcoming two weeks. All four firms reported as scheduled, Darden Restaurants (DRI) on 12/19/2017, General Mills (GIS) on 12/20/2017, and ConAgra Foods (CAG) and Paychex (PAYX), both on 12/21/2017. Rather than repeat here information that is abundantly available elsewhere, I point the reader desiring specifics to the firms’ press releases, available on their web sites, compilations of articles on brokerage web sites, the financial press web sites, or my preferred resource, Seeking Alpha. In many cases a transcript of the earnings teleconference with analysts is available on Seeking Alpha.
As for the upcoming week, only one firm on my lists is scheduled to report, RPM International (RPM) on 1/4/2018.
Analyst actions coming out on my stocks since my last posting are next. But first, a few comments on the nature of analyst upgrades / downgrades, and so on. My standard admonition on analyst ratings is, while I’m always interested to learn of analysts’ opinions of stocks I follow, they are to be taken with a grain (or a whole shaker) of salt. That is, do not treat the ratings as actionable advice. For one thing, the ratings changes usually come far too late to be useful. If you haven’t bought or sold by the time the ratings to do so are out, you are likely too late. Also, note that the ratings focus almost exclusively on the near-term expectation of the stock price movement, not the long-term value as an investment, with dividends considered. Another confusion factor is the fact that each firm has its own ratings terms and meanings, and sometimes different firms attach different nuances or meanings to the same term. I am also amused by the ratings that are effectively no rating, such as Neutral, Hold, Equal Weight, Sector Perform, Market Perform, or just plain old Perform. Perform? Yes the stock will Perform in some fashion, but such a rating is ridiculous – it means nothing at all. The best I can do with it is to consider it equivalent to Neutral. Most ratings terms are more or less self-explanatory. Hold, Neutral, Market Perform, Sector Perform are basically no-calls – it is as if the analyst cannot come to a conclusion on what the prognosis really is for the stock. Still, I always find it to be of interest when a firm indicates a view of a stock I am following, whatever the view. For upgrades/downgrades, I give the prior rating if available from my source. I formerly skipped reiterations, since these are not ratings changes, but now I include them, as they represent a new evaluation result, even if the review did not result in an upgrade or downgrade. Thus, I now present all available new ratings on my stocks. Sometimes it is possible to view the complete analyst report, either via brokerage websites or online sleuthing, if a rating is of enough interest that one desires to determine what is behind the rating. The full ratings report can indicate the analysts’ thinking, which can be valuable information.
With that being said, here are the ratings actions occurring during the last two weeks on stocks I track:
General Mills (GIS) was upgraded from Market Perform to OutPerform at Wells Fargo. So far, at least, the stock has done just that, gaining about $4 in the last two weeks.
Hershey Co (HSY) was upgraded from Sell to Hold at Berenberg.
Martin Midstream Partners L P (MMLP) was resumed at Buy at B. Riley FBR Inc.
NuStar Energy L P (NS) was resumed at Neutral at B. Riley FBR Inc.
Colgate Palmolive (CL) was upgraded from Neutral to OutPerform at Macquarie.
Altria (MO) was upgraded from Hold to Buy at Berenberg.
Wal-Mart Stores (WMT) was upgraded from Neutral to Buy at Citigroup.
Nucor (NUE) was upgraded from Neutral to Buy at Longbow.
National Health Investors (NHI) was downgraded from Sector Weight to UnderWeight at KeyBanc Capital Markets.
Chevron (CVX) was reiterated at OutPerform at Cowen & Co.
General Mills (GIS) was reiterated at OutPerform at Wells Fargo. This came out only a few days after their upgrade to OutPerform. Maybe Wells Fargo had concerns that the public did not believe in the upgrade for the perennially under-performing GIS, so they reiterated it as if to say, we really mean it.
Darden Restaurants (DRI) was upgraded from Hold to Buy at Argus.
Digital Realty (DLR) was upgraded from Market Perform to OutPerform at Wells Fargo.
ConAgra (CAG) was reiterated at Buy at Stifel Nicolaus.
Intel (INTC) was reiterated at Buy at Mizuho.
Well, the New Year is at hand. The consensus seems to be that stocks are near, if not already into, “bubble territory”, based on most if not all historical measures, such as PE, Price to Book, Price to Sales, Price to Cash Flow, current dividend yield vs historical, and so on. As a yield-seeking investor, I certainly don’t see much value available. Still, there are some sectors presenting value, such as REITs and Energy MLPs. CEFs focusing on these sectors also present value, and like any fund, entail less risk than a specific stock. And what about General Electric (GE), which experienced a dramatic decline in 2017? I believe GE has value at today’s price for the patient investor, and in fact I had a limit order which came with a penny of being executed on the last trading day of 2017. Arghh! GE had been my largest holding at this time last year, and I sold 40% of my shares in early 2017, above $30. Not that I was prescient, I sold because I was over-weighted on GE, based on my diversification rules. I never imagined it would crash like it did. Obviously, I wish I had sold it all! But now, I plan to buy some GE back early in the New Year. As for MLPs, two that I believe offer value worth the risk are American Midstream Partners L P (AMID), yield 14.26%, and Energy Transfer Partners L P (ETP), yield 12.54%. Just be aware, like any double-digit yielder, you are not buying Johnson & Johnson (JNJ) or 3M Co (MMM), you are buying a stock that is underpriced for a reason, the market believes the dividend is at risk. If that is not the case, you will have taken advantage of a terrific bargain. If the dividend doesn’t hold up, the investment will have turned out to be a classic “value trap”.