JT’s DAILY (WEEKLY as of 12/9/2013) BLOG for Month Of June 2015
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.
All times are Eastern Time - same as the NYSE
1st Posting for Week Beginning Monday 06/29/2015
Posted Sunday 06/28/2015 05:30 PM
Stocks posted a modest net decline over the week just ended, after averaging out the up and down days. And, surprise, surprise, the Greek debt crisis was NOT resolved, same as the previous umpteen weeks. While the market and economic news was minimal, the dullness was somewhat livened up Friday by two huge decisions announced by the Supreme Court, one upholding Obamacare and the other over-ruling the states by declaring that marriage is no longer confined to the union of a man and a women, at least legally. While this is a financial blog, not a political one, I have to admit I was surprised, especially by the Obamacare decision. Whatever happened to the concept of a “government of laws, not of men”? It was clear that the ruling was not based on either the statute as written nor by the intent. This was a cave-in by Chief Justice Roberts to political expediency, no doubt. But, as far as the effect on the markets, I don’t believe either decision will have much impact, at least not in the near term.
Oh well, at least my stocks are still paying dividends, even if yields are not too exciting these days, as quality stocks continue to go up in price. Ex-dividend dates occurring this week are as follows:
Realty Income (O), 6/29/2015, yield 5.07%. O pays monthly.
Raytheon (RTN), 6/29/2015, yield 2.74%.
Main Street Capital (MAIN), 6/29/2015, yield 6.44%. MAIN pays monthly.
General Dynamics (GD), 6/30/2015, yield 1.07%.
Sysco (SYY), 6/30/2015, yield 3.13%. Sysco is often referred to as “the other Sysco”, the food company being less well-known than the network gear firm.
Cisco Systems (CSCO), 7/1/2015, yield 2.97%.
Kimco Realty (KIM), 7/01/2015, yield 4.15%.
The only stock on my lists reporting last week was Darden Restaurants (DRI), which beat estimates on both the top and bottom lines, thus continuing to amaze, at least me. See my comments on DRI from last week as to why I’m surprised at the current outperformance.
This week, three of my stocks will be reporting:
ConAgra (CAG) on 7/1/2015.
General Mills (GIS), on 7/1/2015.
Paychex (PAYX), also on 7/1/2015.
Finally, it is time to recap stocks on my lists receiving upgrades / downgrades last week:
ConAgra (CAG) was upgraded from Neutral to OverWeight at JP Morgan.
AT&T (T) was upgraded from Equal Weight to OverWeight at Barclays.
Vodafone (VOD) was upgraded from Neutral to Buy at Nomura.
Home Properties (HME) was upgraded from UnderWeight to Equal Weight at Morgan Stanley.
Molson Coors (TAP) was downgraded from Buy to Neutral at Nomura.
Hercules Technology Growth Capital (HTGC) was initiated at Buy at Compass Point.
Newmont Mining (NEM) was initiated at OutPerform at Credit Suisse.
ENI SpA (E) was upgraded from Hold to Buy at Kepler.
AT&T (T) was upgraded from Neutral to Buy at BofA/Merrill.
CenturyLink (CTL) was downgraded from OverWeight to Neutral at JP Morgan.
GlaxoSmithKline (GSK) was upgraded from Sell to Hold at Liberum.
The week at hand will likely be a quiet week, with the markets closing July 3rd in observance of the Independence Day holiday. Anyone care to take a bet that the Greek financial crisis will be solved this week? I’ll give good odds. Of course, what we should be thinking about how to solve is the American financial crisis, not Greece or any other country. But, as per a famous movie quote which is likely politically incorrect these days, “I’ll worry about that tomorrow”.
1st Posting for Week Beginning Monday 06/22/2015
Posted Sunday 06/21/2015 09:00 PM
Stocks managed to eke out a modest gain for the week just ended, in spite of a minor dip on Friday. The Greek tragedy continues to play out in the Euro-Zone, with the markets reflecting the general unease over the potential consequences. The economic releases from last week yielded no surprises, with the readings indicating continued, if muted, progress.
Stocks on my lists going ex-dividend this week are as follows:
Phillip Morris (PM), 6/23/2015, yield 4.84%.
Solar Capital LTD (SLRC), 6/23/2015, yield 8.47%.
Medtronic (MDT), 6/25/2015, yield 1.98%.
MFA Financial (MFA), 6/25/2015, yield 10.09%.
National Health Investors (NHI), 6/26/2015, yield 5.15%.
Nucor (NUE), 6/26/2015, yield 3.14%.
Prospect Capital (PSEC), 6/26/2015, yield 12.95%.
American Capital Agency (AGNC), 6/26/2015, yield 12.11%. AGNC pays monthly.
Annaly Capital (NLY), 6/26/2015, yield 12.13%.
Windstream Holdings (WIN), 6/26/2015, yield 7.83%.
Enerplus (ERF), 6/26/2015, yield 6.14% est. ERF pays $.05 CAN monthly, so the yield for U.S. holders can vary with US/Canadian dollar exchange rates.
None of my stocks are scheduled to report earnings this week, and only one firm reported last week. Darden Restaurants (DRI) reported FQ3 EPS of $.99, beating estimates by fifteen cents, while revenue came in at $1.73B, also better than expected. I must admit I am a bit surprised by DRI’s resilience, I was very pessimistic about the company’s prospects in this crowded sector in a so-so economy with limited discretionary spending capacity. I guess the moral of the story is never underestimate the U.S. consumer’s ability to spend (over-spend?) on discretionary items no matter what they should be doing with surplus funds, especially when the spending is on food.
The pace of upgrades / downgrades regarding my stocks slowed a bit last week, but there were a few of note:
Breitburn Energy Partners LP (BBEP) was initiated at Hold at Wunderlich.
Legacy Reserves LP (LGCY) was initiated at Buy at Wunderlich.
Memorial Production Partners LP (MEMP) was also initiated at Buy at Wunderlich.
Chevron (CVX) was upgraded from Hold to Buy at Societe Generale.
Frontier Communications (FTR) was upgraded from Market Perform to OutPerform at Raymond James.
Digital Realty (DLR) was upgraded from Sell to Hold at Cantor Fitzgerald.
Enterprise Products Partners LP (EPD) was initiated at Buy at Sun Trust Rbsn Humphrey.
Kinder Morgan (KMI) was initiated at Buy at Sun Trust Rbsn Humphrey.
Amerigas Partners LP (APU) upgraded from Hold to Buy at Jeffries.
American Capital Agency (AGNC) was downgraded from Neutral to UnderPerform at BofA/Merrill.
Pfizer (PFE) was initiated at OverWeight at Piper Jaffray.
Merck (MRK) was initiated at Neutral at Piper Jaffray.
Ares Capital (ARCC) was upgraded from Market Perform to OutPerform at Keefe Brayette.
Colgate Palmolive (CL) was upgraded to Hold at Canaccord Genuity.
Royal Dutch Shell (RDS.A, RDS.B) was upgraded from Sector Perform to OutPerform at RBC Capital Markets.
Energy Transfer Partners LP (ETP) was upgraded from Neutral to Buy at BofA/Merrill.
NuStar Energy LP (NS) was upgraded from Neutral to Buy at BofA/Merrill.
Reynolds American (RAI) was initiated at OverWeight at Barclays.
The week coming up should be relatively quiet on the domestic front. The situation with Greece will likely dominate the economic news flow, as things seem to coming to a conclusion. But don't count on it. Extend and pretend is not just a U.S. phenomenon. It is universal, because it is so much easier than dealing with the reality of the situation.
1st Posting for Week Beginning Monday 06/15/2015
Planned Posting Sunday 06/14/2015 08:00 PM
Actual Posting Tuesday 06/16/2015 5:00 PM
As noted, the following regular weekly update was not posted until late Tuesday afternoon, due to a weather-related internet outage.
Ho-Hum, another week, another batch of “market crash” predictions, another week of status quo, wherein stocks advance, at least slightly, while nothing much economically happens elsewhere. The Dow Industrials edged above 18000 by Thursday, but then slipped just below that level with Friday’s sell off. Crude Oil (WTI) edged above $60 by the middle of the week, then slipped just below that level by Friday’s close. The US Dollar Index slipped a bit over the period, ending the week below 95. Gold and Silver remained in a funk, going nowhere. The major economic development of the week was that the possibility of a Greek default was being discussed more openly than previously, as no solution could be found to pending debt payments that the country cannot meet.
Meanwhile, my stocks just continue to keep on paying out, with several more coming up to the firing line this week, as follows:
Blackrock Capital Investment (BKCC), 6/16/2015, yield 8.74%.
Greif (GEF, GEF.B), 6/17/2015, yield 4.29% (GEF) and 5.29% (GEF.B).
Gladstone Investment (GAIN), 6/17/2015, yield 9.62%. GAIN pays monthly.
General Electric (GE), 6/18/2015, yield 3.36%.
None of my stocks reported earnings last week, and only one firm on my lists is scheduled to report this week. Darden Restaurants (DRI) is scheduled to report on 6/18/2015.
Upgrades / downgrades of interest coming out last week were as follows:
Energy Transfer Equity LP (ETE) and Energy Transfer Partners LP (ETP) were both reinstated at OverWeight at Barclays.
Greif (GEF, GEF.B) was upgraded to Market Perform at GMO Capital.
Vodafone (VOD) was upgraded to Neutral at BAC/Merrill. VOD will be added to my Tier2 list when I get around to updating my lists.
Wal-Mart Stores (WMT) was upgraded to Equal Weight at Morgan Stanley.
MicroSoft (MSFT) was initiated at Hold at Wunderlich.
Wal-Mart Stores (WMT) was initiated at Neutral at Macquarie, Sysco (SYY) was initiated at OutPerform at Macquarie.
Frontier Communications (FTR) was upgraded from Hold to Buy at Gabelli & Co.
Colgate Palmolive (CL) was upgraded from Sell to Hold at Societe Generale. CL is a top-performing firm, I have to believe the Sell rating was based on valuation.
Digital Realty (DLR) was upgraded from UnderPerform to OutPerform at Macquarie, and also to OutPerform at Cowen & Company.
Colgate Palmolive (CL) was downgraded from OverWeight to Equal Weight at Morgan Stanley.
Newmont Mining (NEM) was upgraded from Sector Perform to OutPerform at RBC Capital Markets.
Enerplus (ERF) was upgraded from Hold to Buy at TD Securities. The one-time Canadian Trust is trading at multi-year lows, reflecting the effects of the oil price decline.
Ensco (ESV) was initiated at Equal Weight at Barclays.
Noble (NE) was initiated at UnderWeight at Barclays.
Transocean (RIG) was initiated at UnderWeight at Barclays.
Digital Realty (DLR) was upgraded from Hold to Buy at Canaccord Genuity.
HCP Inc (HCP) was upgraded from UnderPerform to Neutral at Mizuho.
Darden Restaurants (DRI) was upgraded from Neutral to OutPerform at Credit Suisse.
That was quite a lot of upgrade/downgrade action for such a dull week.
Speaking of dull week, another one might be in store, with little in the way of scheduled events likely to generate much excitement. Of course, it is always the unscheduled events that really drive market movement. As for myself, I did add to my modest holding of Procter & Gamble (PG), as a standing order at $77.25 got filled. The stock then reversed course and nearly reached $80 before dropping Friday along with most other stocks. While buying in at a multi-month low felt good, it really won’t matter much in the long run whether it was bought at $77 or $79.
A new article on Seeking Alpha panning Kinder Morgan (KMI) was published this week, which drew a lot of comments. The author pointed out that KMI has high debt levels, and the touted dividend growth may be difficult to achieve. I’m not selling, but it is always useful to consider an opinion that goes against the crowd, to perhaps be aware of potential pitfalls. Just keep in mind that the last time a major player (HedgeEye) published warnings about KMI, the firm reorganized, eliminating three MLPs, which were folded into the C-Corp, and the stock erupted, causing any investors who acted on the advice to lose big.
Finally, my Seeking Alpha article on MLP taxation continues to receive comments, as ever-more exotic scenarios and possible tax ramifications are discussed by readers using the convenient back-and-forth commenting capabilities of Seeking Alpha, which I view as a major positive feature of the site.
1st Posting for Week Beginning Monday 06/08/2015
Posted Sunday 06/07/2015 08:00 PM
Stocks declined modestly over the week just ended, with the headline Dow Industrial average dropping below the 18000 level for the first time since mid-April. While most economic readings have been just so-so, the second estimate of first quarter GDP from the Friday before last, of a negative 0.7%, was below the so-so level. That set the tone for the week just ended. Even a better than expected monthly Jobs report last Friday was not able to rescue the week, or even the day. The reasons why the market has stalled are many; lackluster economic readings, over-valued stocks, Euro-Zone problems, Middle East turmoil, Fed rate hike pending, take your pick. Not only stocks are down, but oil dropped below $60 again for WTI, and gold is down below $1200 after a brief time above that level. And don’t even think about bonds, a doomed asset class if there ever was one.
It’s a good thing I have dividends; otherwise, there would be nothing in the investment world to feel good about. Stocks on my lists going ex-dividend this week are as follows:
Triangle Capital (TCAP), 6/8/2015, yield 9.55%.
Reynolds American (RAI), 6/8/2015, yield 3.71%.
SCANA (SCG), 6/8/2015, yield 4.30%.
Newmont Mining (NEM), 6/9/2015, yield 0.37%.
Medical Properties Trust (MPW), 6/9/2015, yield 6.57%.
Vodafone Group PLC (VOD), 6/10/2015, yield 4.67%. VOD is a semi-annual payer.
Digital Realty (DLR), 6/11/2015, yield 5.28%.
Fifth Street Finance (FSC), 6/11/2015, yield 10.42%. FSC pays monthly.
Ares Capital (ARCC), 6/11/2015, yield 9.23%.
Altria Group (MO), 6/11/2015, yield 4.31%.
Coca Cola (KO), 6/11/2015, yield 3.29%.
Merck (MRK), 6/11/2015, yield 3.05%.
Dr Pepper Snapple Group (DPS), 6/11/2015, yield 2.60%.
PennantPark Investment (PNNT), 6/11/2015, yield 11.56%.
TICC Capital (TICC), 6/12/2015, yield 16.20%.
Two of my stocks reported last week, Medtronic (MDT) on 6/2/2015, and Greif (GEF, GEF.B) on 6/4/2015. MDT reported decent results, while GEF missed estimates, then followed up with reduced guidance, which caused the stock to sell off 13%.
None of my stocks are scheduled to report this week.
Stocks on my lists receiving upgrades / downgrades last week were:
Statoil (STO) was upgraded from Sell to Neutral at Swedbank. As near as I can tell, the quarterly (supposedly) dividend with ex-dividend date 5/19/2015 was only announced at the annual meeting on that same date. I guess STO doesn’t want any holders just buying in temporarily for the dividend.
Breitburn Energy Partners LP (BBEP) and Linn Energy LLC (LINE) were both initiated at Equal Weight at Morgan Stanley, while a third upstream MLP, Memorial Production Partners LP (MEMP), was initiated at OverWeight.
Intel (INTC) was downgraded from OutPerform to Market Perform at BMO Capital.
Frontier Communications (FTR) was upgraded from Neutral to Buy at DA Davidson. Things seem to have improved recently for FTR, at one time considered a bankruptcy candidate.
Cisco Systems (CSCO) was initiated at Neutral at Nomura.
AT&T (T) was upgraded from Neutral to OverWeight at JP Morgan.
Diebold (DBD) was upgraded from UnderWeight to Neutral at JP Morgan. This 100-year old firm has stabilized since I wrote an article about it several years ago, available on Seeking Alpha.
Frontier Communications (FTR) was upgraded from Market Perform to OutPerform at Raymond James. Another upgrade for FTR, as noted above.
Procter & Gamble (PG) was upgraded from Neutral to Long-Term Buy at Hilliard Lyons. PG has declined from $93 to under $78 this week. I’m about ready to add to my position in PG, if it drops below $77, or maybe even if it doesn’t.
Verizon (VZ) was downgraded from OverWeight to Neutral at JP Morgan. Interesting, it seems JP Morgan is picking AT&T over Verizon.
GlaxoSmithKlein (GSK) was downgraded from OverWeight to Equal Weight at Morgan Stanley. GSK was one of the more favorably-rated drug companies in my article on 'Big Pharma’, available on Seeking Alpha. The firm navigated the “patent cliff” successfully, and the dividend yield is an impressive 5.95%. One could do worse.
As can be seen, there are some attractive yields available today, over-valued market or not. The question to ask before buying for the yield is whether it will hold up if another economic storm similar to 2008 occurs. Depending upon the severity, some will, and some won’t. When the crunch comes, management won’t hesitate to cut a dividend if in their judgement it is necessary, especially if other firms are doing likewise. For recent examples, consider the off-shore contract drillers, Seadrill (SDRL), Transocean (RIG), and Ensco (ESV). Of the high-dividend payers in this sector, only Noble (NE) has (so far) held steady on the dividend. NE currently yields 8.78%.
1st Posting for Week Beginning Monday 06/01/2015
Posted Sunday 05/31/2015 08:00 PM
Stocks ended the month of May about where they began, thanks to a string of declines that occurred over four of the last five trading days on the month. The coup de grace was the release of the 2nd estimate of 4th Quarter GDP on Friday, which indicated a 0.1% decline in US economic activity occurred during the quarter. There seems to be no shortage of doomsayers, as the international situation continues to deteriorate, economic data continues to disappoint, and the initial Fed rate hike seems ever more imminent. Still, even though declining a bit recently, stock prices remain stubbornly high. The time to buy big has not yet arrived, but it may be moving closer.
Moving on to more cheery observances, stocks on my lists going ex-dividend this week are as follows:
Waste Management (WM), 6/3/2015, yield 3.10%.
Pepsico (PEP), 6/3/2015, yield 2.91%.
Ventas (VTR), 6/3/2015, yield 4.75%.
Kimberly Clark (KMB), 6/3/2015, yield 3.23%.
Total S A (TOT), 6/3/2015, yield 5.68%. Be aware that this yield is before a 30% haircut is administered, compliments of French foreign tax withholding.
Breitburn Energy Partners LP (BBEP), 6/4/2015, yield 9.40%. BBEP has been punished more than most energy production MLPs, as concerns over debt and distribution coverage mount. BBEP is a monthly payer.
Ensco PLC (ESV), 6/4/2015, yield 2.55%. ESV is in the group most severely impacted by the crude oil glut, the contract offshore drillers.
Potlatch (PCH), 6/4/2015, yield 4.13%.
Public Service Enterprise Group (PEG), 6/4/2015, yield 3.66%.
Westar Energy (WR), 6/4/2015, yield 3.93%.
Although not going ex-dividend until next week, on 5/8/2015, Tier3 BDC Triangle Capital (TCAP) has announced that an additional special dividend of $0.05 will be paid along with the regular quarterly dividend of $0.54 this quarter. With the regular dividend generating a yield of 9.78%, TCAP seems to be doing well in spite of the numerous economic headwinds. Even though not a bargain, based on historical prices, it might be a good time to enter into a small position in TCAP, before the week is done.
The only stock on my lists reporting last week was ill-fated contract drilling firm Seadrill (SDRL), which reported surprisingly decent numbers. The full impact of the oil glut and associated price decline has yet to be fully reflected in the numbers thus far, but few if any expect things to get better from here. Note that SDRL, along with the other drillers, remains on my Tier3 speculative stock list, even though none are currently “high yield”, following various cuts. A buyer at these prices is definitely going against conventional wisdom, as there will be little reward until and unless a recovery in oil prices comes along.
As for earnings next week, on Tuesday, 6/2/2015, two of my stocks will be reporting; Medtronic (MDT) and Greif (GEF, GEF.B).
Several upgrades / downgrades of interest came out last week:
Health Care REIT (HCN) was upgraded from Neutral to Buy at Misuho.
Hercules Technology Growth Capital (HTGC) was upgraded from Neutral to OutPerform at Macquarie.
Frontier Communications (FTR) was upgraded from UnderWeight to OverWeight at Morgan Stanley.
Greif (GEF, GEF.B) was downgraded from Buy to Neutral at DA Davidson.
Reynolds American (RAI) was upgraded from Market Perform to OutPerform at Cowen & Company.
Exterran Partners LP (EXLP) was initiated at Sector Perform at RBC Capital Markets.
Molson Coors Brewing (TAP) was upgraded from Equal Weight to OverWeight at Morgan Stanley.
United Parcel Service (UPS) was initiated at Neutral at Nomura.
Noble Corp PLC (NE), Transocean (RIG), and Ensco PLC (ESV) were all intiated at UnderWeight at JP Morgan, as the firm begins coverage of these well-known names in the beaten-down offshore contract drilling sector.
Greif (GEF, GEF.B) was downgraded from Neutral to UnderPerform at BofA/Merrill.
Darden Restaurants (DRI) was initiated at Buy at Deutsche Bank.
McDonalds (MCD) was also initiated at Buy at Deutsche Bank.
The “summer doldrums” seem to have arrived a bit early this year. Wait, I said the exact same thing last week. Saying it again doesn’t rate high on the originality scale, but perhaps makes up for it on the accuracy scale. There just isn’t much to get excited about as an investor these days. With so much doom and gloom and predictions of a drastic market decline in the financial press / blogosphere, up to and including the financial collapse of the US and the end of the dollar, it’s hard to generate much enthusiasm for investing, especially with so few bargains available. Plus, with so many fearing and / or predicting dire developments, the likelihood of such events coming to pass is nil. Markets have a way of failing to deliver what many are expecting. Until the drop comes, I will be awaiting better buy opportunities in most cases, and only then for either high quality blue chips or terrific, albeit likely temporary, yields.