JT’s DAILY (WEEKLY as of 12/9/2013) BLOG for Month Of April 2016
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 04/25/2016
Posted Sunday 04/24/2016 08:30 AM
Stocks mostly churned in place last week, ending the week with a slight gain on the blue chip averages, and a slight loss on the NASDAQ. Crude oil managed to move up a bit, with West Texas Intermediate staying above $43 from mid-week on into the weekend. Earnings season is in full swing, with the results thus far not as bad as expected overall, with the exception of technology stocks, as bellwethers Intel and MicroSoft both reported disappointing results. The WinTel monopoly is definitely over, it seems.
The line-up of firms on my lists going ex-dividend this week is a bit longer than last week, as follows, by date, with yield as of Friday’s close indicated:
Enterprise Products Partners LP (EPD), 5.90%.
American Capital Agency (AGNC), 12.91%.
Plains All American Pipeline LP (PAA), 11.44%.
Alliant Energy (LNT), 3.42%.
Prospect Capital (PSEC), 13.37%. PSEC pays monthly.
ConAgra (CAG), 2.25%.
Unilever (UL), 2.79%.
STAG Industrial (STAG), 7.04%.
Noble Corp PLC (NE), 0.70%. NE finally succumbed to the oil price reality and cut the quarterly dividend from 15 cents to two cents.
Blackstone Group LP (BX), 7.51%.
Magellan Midstream Partners LP (MMP), 4.51%,
ONEOK Partners LP (OKS), 8.75%.
Kinder Morgan Inc (KMI), 2.75%. The payout is somewhat shy of what was so glowingly promised less than a year ago, but better than nothing.
Realty Income (O), 4.05%. The yield, under 5%, reflects the sky high valuation.
Enerplus (ERF), 0.80%. The one cent CAN being paid, generating a yield of nearly 1%, also reflects valuation, LOW valuation. The Canadian producers continue to languish, affected by low oil prices, plus a decline in the exchange rate of CAN dollars vs US dollars.
That’s it. With five days in the week, all the ex-dividend dates are clustered around just two days.
Earnings reports are coming out at a furious pace. One report that came out last week that I missed in my recap was Kinder Morgan Inc. (KMI), which reported on 4/22/2016. It wasn’t a disaster, but there are definitely some dark clouds on the horizon for KMI at the moment. Another change to last week’s list of reports expected was American Electric Power (AEP), which is now slated to report this week on 4/28/2016, not last week as listed.
With the exception of AEP, all firms listed in last week’s posting as reporting did so as scheduled. For specifics, see 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.
As for this week, an avalanche of reporting is coming our way, as earnings season moves into high gear. Reports expected from firms on my lists are as follows, by date.
America Capital Agency (AGNC).
3M Co (MMM), Entergy (ETR), Freeport-McMoRan (FCX), Potlatch (PCH), Procter & Gamble (PG), Reynolds American (RAI), AT&T (T), Realty Income (O).
DrPepper Snapple (DPS), General Dynamics (GD), Northrop Grumman (NOC), NuStar Energy LP (NS), Southern Company (SO), Blackrock Capital Investment (BKCC), Kimco Realty (KIM), Martin Midstream Partners LP (MMLP), Noble Corp PLC (NE), Washington Real Estate Investors Trust (WRE), GlaxoSmithKline (GSK), Statoil (STO), Total S A (TOT). Note that WRE is a new addition to Tier2.
Ensco PLC (ESV), Altria (MO), American Electric Power (AEP), Colgate Palmolive (CL), Conoco Phillips (COP), Diebold (DBD), Enterprise Products Partners LP (EPD), Iron Mountain (IRM), Linn Energy LP (LINE), NextEra Energy (NEE), SCANA (SCG), Waste Management (WM), Alliant Energy (LNT), Raytheon (RTN), Digital Realty (DLR).
Chevron (CVX), Eaton (ETN), Exxon Mobil (XOM), Public Service Enterprise Group (PEG), Ventas (VTR), Sanofi (SNY).
After posting last week, I realized I missed listing the week’s upgrades/downgrades on my stocks. I’m always interested to learn of analysts’ opinions of stocks I follow, although they are to be taken with a grain (or a whole shaker) of salt. The ratings at the high or low end (Buy or Strong Buy or UnderPerform or Sell) are invariably late. If you haven’t bought or sold by the time the ratings to do so are out, you are way too late. 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 ratings are of passing interest or amusement, no more, and certainly are not to be treated as actionable recommendations. That being said, here are the ratings from the week before last:
Exelon (EXC) was initiated at Neutral at Goldman.
MFA Financial (MFA) was downgraded from Market Perform to UnderPerform at Wells Fargo.
Calumet Specialty Products Partners LP (CLMT) was downgraded from OutPerform to UnderPerform at Credit Suisse.
Entergy (ETR) was downgraded from Buy to Neutral at BofA/Merrill.
Novartis (NVS) was downgraded from Equal Weight to UnderWeight at Morgan Stanley.
Nucor (NUE) was downgraded from Buy to Hold at Standpoint Research.
Norfolk Southern (NSC) was initiated at Neutral at BofA/Merrill.
McDonalds (MCD) was Resumed at UnderPerform at Credit Agricole.
Pepsico (PEP) was downgraded from Buy to Hold at Stifel Nicolaus.
Kimco Realty (KIM) was initiated at Neutral at Mizuho.
Paychex (PAYX) was initiated at Sell at Compass Point.
Now, here are the ratings from last week:
Iron Mountain (IRM) was upgraded from Hold to Buy at Stifel Nicolaus.
Calumet Specialty Products Partners LP (CLMT) was downgraded by everyone; to UnderPerform at Raymond James, to Sector Perform at RBC Capital, to Market Perform at Wells Fargo, and to Neutral at Janney Capital.
Then, the next day, Calumet Specialty Products Partners LP (CLMT) was downgraded from Buy to UnderPerform at DA Davidson.
Ensco (ESV) was upgraded to Hold at Deutsche Bank.
Exelon (EXC) was downgraded from Buy to Hold Deutsche Bank.
Pfizer (PFE) was reinstated at Neutral at Goldman.
Enerplus (ERF) was upgraded from Equal Weight to OverWeight at Barclays.
WPX Energy (WPX) was initiated at OutPerform at Northland Capital.
Vodafone (VOD) was upgraded from Neutral to Buy at BofA/Merrill.
Intel (INTC) was downgraded from OutPerform to Market Perform at Northland Capital.
Phillip Morris (PM) was upgraded from Sell to Hold at Societe Generale.
Conoco Phillips (COP) was downgraded from Hold to OutPerform at Jeffries.
Norfolk Southern (NSC) was upgraded from Neutral to OutPerform at Credit Suisse, and from Neutral to Buy at UBS.
Calumet Specialty Products Partners LP (CLMT) was downgraded from Buy to Neutral at Ladenburg Thalman.
Mid-America Apartment Properties (MAA) was downgraded from Buy to Hold at Jeffries.
Nucor was downgraded from OutPerform to Sell at Credit Agricole.
You will see an increase in ratings during earnings season, as the analysts over-react to the latest earnings reports.
So, where are we now, as far as the market is concerned? Overvalued mostly, and in some cases, extremely so. Energy stocks are still at “bargain” levels if you believe that a) energy prices will recover, and b) the subject firm will make to the other side. I hate to admit it, but I took a flyer on Linn Energy LP (LINE) about a year ago. I had sold years earlier in the mid-30s, and had avoided the somewhat shaky MLP, but I fell for a sub-9.00 dollar price in early 2015, and bought in. I knew it was a rank speculation, but at the time I thought the odds looked good. Of course, I did not foresee the depth of the oil price decline, nor how long it would last. Also I was misled by the supposed value of LINE’s hedging strategy, thinking LINE wouldn’t be in trouble until late in 2016, if prices stayed down that long. I threw in the towel this week, as I agree with Seeking Alpha contributor Paulo Santos that you can lose more than everything you have invested in the snake-pit that LINE has become. Specifically, if LINE’s debt default results in Cancellation of Debt Income (CODI) for limited partners (as per K-1 Box 11 Code E), this flows directly to the limited partner’s 1040 Line 21. If held in an IRA, CODI is Unrelated Business Taxable Income, which is taxable at punitive rates if it exceeds $1000, regardless of the fact that the holding is in an IRA. Buying ConocoPhillips (COP), Exxon Mobil (XOM), or Chevron (CVX) at bargain prices during the oil price slide was probably a smart move, but buying LINE was definitely not. That satisfies my speculative urge for hopefully a long time to come. Right now I only want quality, quality, quality! If Josh Peters, editor of Morningstar Dividend Investor, doesn’t recommend it, forget it, as far as I’m concerned!
1st Posting for Week Beginning Monday 04/18/2016
Posted Sunday 04/17/2016 09:00 AM
The rally continued last week, as all the major averages posted gains on the week. Oil prices held the gains achieved in previous weeks, but did not advance further, as the potential for a production limiting agreement within OPEC, and including Russia, seems less likely.
This week will be a slow week for dividends, at least for the stocks I follow, as only three go ex-dividend:
Colgate Palmolive (CL), 4/20/2016, yield 2.20%.
Gladstone Investment (GAIN), 4/20/2016, yield 10.71%. GAIN pays monthly.
Main Street Capital (MAIN), 4/19/2016, yield 6.86%. MAIN also pays monthly.
Also, last week’s list omitted a key dividend payer, Procter & Gamble (PG), which went ex-dividend 4/14/2016, yielding 3.27%.
My posting last week had Reynolds American (RAI) scheduled to report 4/15/2016, but my source must have been mistaken. In checking, I see that RAI last reported earnings on 2/11/2016, missing Q4 EPS estimates by two cents, but beating revenue estimates by $10M.
Earnings season is now upon us, with a number of my stocks scheduled to report, listed as follows, by date:
Intel (INTC), Johnson & Johnson (JNJ), Phillip Morris (MO).
Coca Cola (KO), Newmont Mining (NEM).
American Electric Power (AEP), MicroSoft (MSFT), Novartis (NVS), Verizon (VZ), Norfolk Southern (NSC), Nucor (NUE), Crown Castle International (CCI).
General Electric (GE), Kimberly Clark (KMB), McDonalds (MCD).
As we move into earnings season, the consensus of market followers has been that weak earnings will cause investors to lose confidence, and a market decline will result. In a front page article on MarketWatch, market strategist Jeffrey Saut predicts that earnings will come in better than expected, and no decline will occur. Saut correctly predicted the current rally. Others have suggested that weak earnings are already priced in, and even if the earnings come in as expected (that is, not good), a decline will not occur. Of course, firms long ago perfected the art providing low guidance, or announcing earnings warnings ahead of reporting, thus setting the stage for “meeting or beating” expectations. That scenario may indeed be what plays out. Thus, if waiting for expected bargains after earnings shortfalls are reported is your strategy, you might want to rethink the game plan. As for me, I never have a game plan based on just one future playing out – my game plan is to take what comes, and execute the strategy alternative that I have defined beforehand that is called for based on the conditions that are occurring.
All times are Eastern Time - same as the NYSE
1st Posting for Week Beginning Monday 04/11/2016
Posted Sunday 04/10/2016 09:00 AM
Stocks gyrated last week, with the declining days outweighing the advancing days, resulting in a modest loss for the week overall being posted by the major averages. Oil prices bottomed on Tuesday, then advanced steadily the rest of the week, as prospects of a production limitation agreement among the major players seemed to improve. Saudi Arabia, Iran, and Russia do not agree on much, but all three, among others, would certainly like to see the supply glut trimmed and an increase in oil prices.
Stocks on my lists going ex-dividend this week are as follows:
Kayne Anderson Energy Development (KED), 4/13/2016, yield 12.70%.
Fifth Street Finance (FSC), 4/13/2016, yield 14.06%. FSC pays monthly.
Mid-America Apartment Communities (MAA), 4/13/2016, yield 3.22%.
Consolidated Communications (CNSL), 4/13/2016, yield 3.22%.
RPM International (RPM), 4/14/2016, yield 2.27%.
Stocks on my list scheduled to report last week all did so as expected. The firms reporting were Darden Restaurants (DRI, Walgreen Boots Alliance (WBA), RPM International (RPM), and ConAgra Foods (CAG). Results were mixed, but overall not all that bad.
For specifics, see 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. Some analysts have been predicting an earnings “drought” is coming, as firms find it increasingly difficult to maintain, much less improve, margins. The upcoming earnings reporting season will be scrutinized closely, as always, to see how tough it really is in this economy for corporate America.
As for this week, only one firm in my lists is reporting, Reynolds American (RAI), on 4/15/2016.
Upgrades / downgrades coming out last week on my stocks were as follows:
Energy Transfer Partners LP (ETP) was downgraded from Buy to Hold at Stifel Nicolaus.
Magellan Midstream Partners LP (MMP) was downgraded from Buy to Hold at Wunderlich.
Consolidated Communications (CNSL) was downgraded from Neutral to UnderPerform at DA Davidson.
Eaton (ETN) was downgraded from Buy to Neutral at Longbow.
General Electric (GE) was downgraded from OutPerform to Market Perform at Bernstein.
Intel (INTC) was downgraded from OutPerform to Neutral at Exane BNP Paribas.
Cisco Systems (CSCO) was downgraded from Buy to Neutral at BofA/Merrill.
NextEra Energy (NEE) was downgraded from Buy to Neutral at Macquarie.
General Dynamics (GD) was initiated at Buy at Guggenheim.
Northrop Grumman (NOC) was initiated at Buy at Guggenheim.
Raytheon (RTN) was initiated at Buy at Guggenheim.
Verizon (VZ) was initiated at Neutral at Macquarie.
AT&T (T) was initiated at OutPerform at Macquarie.
Novartis (NVS) was initiated at Hold at Argus Research.
Cisco Systems (CSCO) was upgraded from UnderWeight to Neutral at JP Morgan.
Duke Energy (DUK) was downgraded to Hold at Argus Research.
Exelon (EXC) was resumed at Equal Weight at Morgan Stanley.
Merck (MRK) was initiated at Buy at Societe Generale.
Verizon (VZ) downgraded from Buy to Hold at Jeffries, and from OutPerform to Market Perform at Bernstein.
Boardwalk Pipeline Partners LP (BWP) was initiated at Buy at Drexel Hamilton.
Intel (INTC) was initiated at Buy at Brean Capital.
Pfizer (PFE) was resumed at OverWeight at JP Morgan.
Molson Coors (TAP) was initiated at Neutral at Citigroup.
Pan American Silver (PAAS) was upgraded from Sector Perform to Sector OutPerform at CIBC.
Transocean (RIG) was initiated at Reduce at Nomura.
Ensco (ESV) was initiated at Reduce at Nomura.
Noble Corp PLC (NE) was initiated at Reduce at Nomura.
The economic release schedule for the upcoming week is fairly light, with perhaps the most revealing being March Industrial Production and Capacity Utilization, scheduled for release on Friday. Also slowly getting under way will be first quarter earnings reporting, as Alcoa (AA), reporting on 4/11/2016, kicks off the official start of “earnings season” for 2016 Q1.
As for what to do, sometimes the best advice is to do nothing. Most stocks I track are too high to buy, too low to sell, and too uncertain to short or speculate in either direction using long calls or puts. In other words, situation normal. While I always watch for opportunities, at this point I plan to take my own advice, and do nothing.
1st Posting for Week Beginning Monday 04/04/2016
Posted Sunday 04/03/2016 09:00 PM
Stocks posted a modest gain for the week just ended, punctuated with a triple-digit (barely) advance of the Dow Industrials on Friday, as the monthly “jobs” report indicated the job market seemed to be holding up reasonably well. Overlooking the quality of the jobs, the stagnant wages, and the huge numbers of working-age people no longer in the workforce, the headline employment numbers would seem to indicate a healthy job market, as long as you don’t dig too deeply into the details.
Meanwhile, my dividend payers just keep on paying. Stocks on my lists going ex-dividend this week are as follows:
Cisco Systems (CSCO), 4/4/2016, yield 3.74%.
Raytheon (RTN), 4/4/2016, yield 2.16%.
General Dynamics (GD), 4/6/2016, yield 2.31%.
AT&T (T), 4/6/2016, yield 4.90%.
Verizon (VZ). 4/6/2016, yield 4.18%.
General Mills (GIS), 4/7/2016, yield 2.90%.
Darden Restaurants (DRI), 4/7/2016, yield 3.02%.
Universal (UVV), 4/7/2016, yield 3.66%.
Nestle S A (NSRGY), 4/8/2016, yield 3.05%. This is an annual dividend.
Only one of my stocks reported last week, as Paychex (PAYX) reported FQ3 EPS of $.50, in-line with estimates. Revenue of $752.6M beat by $1.4M, up 6.9% Y/Y.
See the firm’s website or Seeking Alpha for details.
Stocks on my lists scheduled to report this week, by date, are:
Darden Restaurants (DRI), Walgreen Boots Alliance (WBA).
RPM International (RPM).
Upgrades / downgrades coming out last week on my stocks were:
Ensco (ESV) was downgraded from Equal Weight to UnderWeight at Barclays, and from Neutral to Negative at Susquehanna.
Novartis (NVS) was downgraded to Neutral at Citigroup.
GlaxoSmithKline (GSK) was upgraded from Neutral to Buy at Citigroup.
Freeport-McMoran (FCX) was initiated at Equal Weight at Barclays.
Wal-Mart Stores (WMT) was resumed at Equal Weight at Barclays.
Welltower (HCN) was downgraded from OutPerform to Sector Perform at RBC Capital Markets.
Entergy (ETR) was upgraded from Neutral to Buy at Goldman.
The week ahead will be light on economic releases, with only Factory Orders, ISM Services, and Wholesale Inventories coming out, other than the usual weekly announcements. It may be the calm before the storm, as first quarter earnings reporting will be starting soon. Most predictions are that upside surprises will be rare indeed, and that tighter margins will begin to take a toll and earnings will disappoint the market. And you know how the market reacts to disappointment. But if it happens, it won’t be as soon as next week. In fact, the political news will likely dominate the headlines, especially the Wisconsin primary. Now is a good time to get positioned for a market decline, which though overdue, will likely come along soon.