JTís DAILY (WEEKLY as of 12/9/2013) BLOG for Month Of February 2020

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 02/10/2020

Posted Sunday 02/09/2020 05:00 PM

For the third time since starting this blog in 2011, I will be suspending my weekly publication until after the Income Tax Filing Season, April 15, 2020. I will continue to monitor the markets and the stocks on my lists, and the website will remain online. I remain convinced that the strategy espoused by OPTIMUMSTOCKINVESTING.COM remains the correct strategy for the patient investor, particularly if retired or nearing retirement. My anticipated time frame for restarting weekly posting is May 2020, although this might slip to June or even later, depending upon events. In closing, I will reiterate what this website and the investing strategy espoused is, and what can be expected when I resume weekly posting.

So, what is WWW.OPTIMUMSTOCKINVESTING.COM all about?  Namely, to present a comprehensive approach to investing in stocks, with dividends as the foundation, complemented by occasional trades and speculations. A conservative approach to improving returns using options is also incorporated into the 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 over 120. Tier1 stocks are the safest, strongest firms, the least likely to cut their dividends or go bankrupt, and to experience precipitous declines. 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, telecoms other than Verizon and AT&T, metals miners, and less substantial MLPs. If hard times strike, these firms will likely cut or eliminate their dividends, and may go bankrupt. Tier4 stocks are the ďwalking deadĒ, 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 is no longer recommended, but will be followed for as long as it exists. 

My web site explains the approach I follow in detail, and contains a wealth of information and resources. My acquisition approach is based on the value investing approach outlined by Ben Graham in his classic works, updated a bit for the modern era, with just a hint of a traderís mindset incorporated. I advocate acquiring a position in a stock incrementally, averaging down with subsequent acquisitions, and limiting holdings in any one stock or sector to a pre-defined maximum. The key take-away I want viewers to gain from my presentation 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!

Regarding analyst ratings, my standard admonition on upgrades / downgrades and such, is that while Iím always interested to learn of analystsí opinions of stocks I follow, they are to be taken with a grain (or sometimes 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 havenít bought or sold by the time the ratings to do so are out, you are probably way 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. Still, most ratings terms are more or less self-explanatory. But some 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 Ė it means nothing at all. The best I can do with these non-committal ratings is to consider them equivalent to Neutral. All of these ratings, Hold, Neutral, Market Perform, Sector Perform, and Perform are basically no-calls Ė as if the analyst cannot come to a conclusion on what the prognosis really is for the stock. Regardless, 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 rating 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 the stocks I follow. 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 analystsí thinking, which can be useful information.    

The focus of my weekly postings, also shown on my Facebook Page, is to present new information regarding the stocks I follow, such as upcoming ex-dividend dates, earnings reports, analyst upgrades, downgrades, and reiterations of ratings, plus initiations and resumptions of coverage. I also highlight any other significant developments regarding the stocks on my lists, such as acquisitions or stock splits. I also share information of moves I have made, in line with my strategy.

So, until springtime brings my return, stay informed, stay cautious, but donít be afraid to take advantage of opportunities when they are presented.

JT

1st Posting for Week Beginning Monday 02/03/2020

Posted Sunday 02/02/2020 10:00 PM

Stocks declined three out of five days last week, and the rebound days were nowhere near enough to offset the down days. The result was a substantial decline overall for the week, per all of the major averages.

Stocks on my lists scheduled to go ex-dividend in the upcoming week are as follows:

MPLX LP (MPLX), ex-dividend 2/3/2020, yield 11.54%.

NGL Energy Partners LP (NGL), ex-dividend 2/6/2020, yield 11.54%.

Martin Midstream Partners LP (MMLP), ex-dividend 2/6/2020, yield 8.59%.

Magellan Midstream Partners LP (MMP), ex-dividend 2/6/2020, yield 6.64%.

Crestwood Equity Partners LP (CEQP), ex-dividend 2/6/2020, yield 8.41%.

Energy Transfer LP (ET), ex-dividend 2/6/2020, yield 9.55%.

NuStar Energy LP (NS), ex-dividend 2/7/2020, yield 8.51%.

American Electric Power (AEP), ex-dividend 2/7/2020, yield 2.69%.

ExxonMobil (XOM), ex-dividend 2/10/2020, yield 5.37%.

Senior Housing Properties Trust (SNH) changed its name to Diversified Health Care Trust (DHC), and now trades on the NASDAQ effective 1/1/2020. The first ex-dividend date for DHC was 1/24/2020, and with the share price at $7.72, the yield is 7.56%. The firm remains on Tier4 (not recommended) for now.

Two CEFs on my CEF list will go ex-dividend next week, both are monthly payers:

BlackRock Debt Strategies Fund (DSU), ex-dividend not announced, but expected next week,

yield 7.29%.

First Trust Intermediate Duration Preferred & Income Fund (FPF) ex-dividend 2/3/2020, yield 6.60%.

Earnings season continues. Stocks on my lists reporting next week are listed following, by date.

2/3/2020

PotlatchDeltic (PCH).

2/4/2020

Eaton (ETN), Emerson Electric (EMR), Pitney Bowes (PBI), Apollo Investment (AINV), Plains All American Pipeline LP (PAA).

2/5/2020

NuStar Energy LP (NS), Omega Health Investors (OHI), Prospect Capital (PSEC).

2/6/2020

Kellogg (K), Medical Properties Trust (MPW), NGL Partners LP (NGL), Phillip Morris (PM), Sanofi (SNY).

Upgrades, downgrades, etc. from last week on my stocks by the various ratings analysts, as tallied by E*TRADE, were as follows:

NextEra Energy (NEE) was downgraded from OutPerform to InLine at Evercore ISI.

ONEOK (OKE) was initiated at Sector OutPerform at Scotiabank.

General Electric (GE) was upgraded from Neutral to Buy at Bank of America.

Nucor (NUE) was downgraded from Hold to Sell at Deutsche Bank.

Altria (MO) was upgraded from Neutral to OverWeight at Aper Sandler.

Nucor (NUE) was downgraded from Buy to Neutral at Goldman.

Vermillion Energy (VET) was downgraded from Sector Perform to UnderPerform at National Bank Financial.

AT&T (T) was downgraded from Buy to Neutral at UBS.

McDonalds (MCD) was reiterated at OutPerform at Telsey Advisory Group.

United Parcel Service (UPS) was reiterated at OutPerform at Barrington Research.

The market decline picked up steam last week, punctuated by a 600 point Dow drop on the last day of 2019. The news is dominated by the new Coronavirus outbreak, which has the potential to become a pandemic, and the potential damage it may wreak on the world economy is the driving force behind the market decline. Better buy prices are already appearing, but if the virus is not brought under control soon, much better prices may be coming. My advice is to commit capital very cautiously. As for selling, it is already too late, in my opinion. You should have sold in December, or by mid-January at the latest.

JT