JT’s DAILY (WEEKLY as of 12/9/2013) BLOG for Month Of May 2022
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 2022 Beginning Monday 05/23/2022
Posted Sunday 05/22/2022 12:30 PM
I am finally resuming my weekly posting effective 5/23/2022. I have updated my stock lists, eliminating stocks that no longer meet my criteria, usually because they are at a price or a yield such that they are unlikely to be an attractive acquisition in any time frame that matters to me. Granted, some great companies have been dropped. Great companies frequently outgrow their dividends, as the share price explodes upwards. Many of these have stayed on the lists for too long. An objective of reducing the number of stocks followed has been accomplished, with the remaining stocks being viable dividend candidates for acquisition.
A summary of changes by Tier grouping follows.
Tier1 - Dropped because of too high a price, too low a yield, or both: ADP, EMR, ETN, HSY, NEE, PAYX, SNY. Added OGE. Moved UL to Tier2.
Tier2 – Dropped because of too high a price, too low a yield, or both: BEP, CCI, DLR, ETR, EXC, GEF, GSK, MAA, NUE, PCH, PFE, TTFNF, WRE. Dropped because of performance: COLD, IIPR. Added from Tier3: MPLX, SHEL, VTR.
Tier3 – ET has recovered sufficiently to be moved from Tier4 to Tier3. HMLP, MFA moved to Tier4. All mining stocks dropped, moved to Tier4: FCX, GOLD, NEM, PAAS, WPM.
Tier4 – I dropped most Tier4 stocks, I have decided to only keep these on Tier4 for a limited time, in case they recover. The mining stocks have been moved to Tier4, I've frankly lost interest in these.
I added two new CEFs to my CEF list, RFI and THQ.
The website will remain online, and weekly postings are planned for the indefinite future. I'm expecting to see some buy opportunities appear, based on the consensus that a recession is imminent. My cash position is over 50%, I'm hopeful that better prices will be available soon. The financial press jumped the gun, in my opinion, with Friday's headline stating that the S&P 500 had declined 20%, and therefore we are in a "Bear Market". I will be waiting for at least a 30% decline from the recent highs before I can get enthused. But we shall see. Just to document where we are at, for the four major stock averages, the peak date and reading, the current reading as of 5/20/2022, the point decline and per cent from the peak are as follows:
Dow Jones Industrial Average: Peak was 36952, reached on 1/5/2022, Friday's close was 31261, the point decline is -5691, which is a 15.4% decline.
New York Composite Average: Peak was 17442, reached on 1/13/2022, Friday's close was 15081, the point decline is -2361, which is a 13.5% decline.
The Standard & Poors 500 Index: Peak was 4818, reached on 1/4/2022, Friday's close was 3901, the point decline is -917, which is a 19.0% decline.
The NASDAQ Composite Index began it's decline sooner, and has fallen further: Peak was 16212, reached on 11/22/2021, Friday's close was 11354, the point decline is -4858, which is a 29.9% decline.
Next, as is my practice, I will list stocks on my (updated) lists going ex-dividend in the week ahead and the current annualized yield. Assume frequency is quarterly unless otherwise indicated.
Ex-dividend Date 5/23/2022:
ETY, Eaton Vance Tax-Managed Diversified Equity Income Fund, 9.42%. This CEF pays monthly.
JNJ, Johnson & Johnson, 2.55%.
PRU, Prudential Financial, 4.86%.
WELL, Welltower, 2.79%.
Ex-dividend Date 5/26/2022:
PSEC, Prospect Capital, 9.74%. PSEC pays monthly.
GOLD, Barrick Gold, 1.93%.
KHC, Kraft Heinz, 4.17%.
Ex-dividend Date 5/27/2022:
AGNC, AGNC Investment, 2.29%. AGNC pays monthly.
STAG, STAG Industrial, 4.53%. STAG is also a monthly payer.
LUMN, LUMN Technologies, 9.04%.
Three of my stocks are scheduled to report next week, all on 5/25/2022. They are ORCC, Owl Rock Capital, UVV, Universal, and last, and certainly least, HMPL, Hoegh LNG Partners LP, which is on my Tier4 list, not recommended.
Next week I will resume reporting any ratings changes on my stocks that have been issued during the previous week.
Certainly, some stocks are coming into buying range, as the market continues to decline. It may be a bit early, so my guidance is to go in incrementally if you buy, leave some room to add more if the decline continues. That is what I'm doing. With the elimination of commissions, there is no reason to buy more than a few shares at a time these days.
Following is a recap of my approach, as embodied in the website and companion Facebook Page.
Namely, it is 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 103. 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, plus K-1s are definitely out of favor. Tier3 stocks are high-yield, 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, 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. Stocks are also occasionally dropped from the active lists (tiers 1, 2, and 3) when their dividend yield drops below what I expect, and I can no longer consider them a dividend stock. Usually this happens when the firm has become too successful, and the stock price has increased dramatically, shrinking the yield. In these cases, I will no longer follow the firm on the website. Since the firms are successful, just too richly valued, they do not go to Tier4.
I also added a new category a year or so ago, Closed-End Funds (CEFs), and selected fifteen CEFs that I own, to follow. Evaluating CEFs is a challenge, and I do not necessarily recommend the funds I’m tracking. But CEFs, with their superior yields, are an asset class that an income investor should consider. I wrote an introductory article on CEFs a year or so ago, published on Seeking Alpha, and there are many other Seeking Alpha authors writing about CEFs. Further, as noted in my CEF article, there are a couple of informative websites devoted to CEFs.
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 trader’s 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 I’m always interested to learn of analysts’ 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 haven’t 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 – 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 – 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 analysts’ 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.