JT’s DAILY (WEEKLY as of 12/9/2013) BLOG for Month Of July 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 07/27/2015
Posted Sunday 07/26/2015 09:00 PM
Forget about the positive week ended 7/17/2015, as a slate of disappointing earnings and cautious outlooks generated significant stock market declines every day last week from Tuesday onward, while Monday was at best neutral. The result is that most of the major averages are below where they were when the month began. The NASDAQ is an exception, as positive reports from a couple of big names buoyed the index, which is affected in a major way by a few big tech names. Still, the NASDAQ declined four out of five days last week, just not as much as the blue chip averages. Firms’ dependent upon commodity pricing, particularly energy and mining stocks, are getting killed, dragging the market averages down as they decline. While precipitous commodity declines in the oil patch are nothing new, the current crash may set new records, and end up as the worst ever if it keeps going down.
The best medicine to alleviate this pain is to note the companies on my lists going ex-dividend this week, listed below by date, with current yield indicated:
ConAgra (CAG), 2.29%.
Enerplus (ERF), 7.10% est. ERF pays $0.05 CAD monthly, which is roughly $0.04 US at current exchange rates.
Alliant Energy (LNT), 3.71%.
Enterprise Products Partners LP (EPD), 5.55%.
Kinder Morgan (KMI), 5.62%.
Plains All American Pipeline (PAA), 6.88%.
Molson Coors (TAP), 2.34%.
Prospect Capital (PSEC), 13.93%. This BDC pays monthly.
American Capital Agency (AGNC), 12.88%. This MREIT also pays monthly.
Legacy Reserves LP (LGCY), 16.75%.
Eaton (ETN), 3.60%.
Realty Income (O), 4.84%. O pays monthly.
Paychex (PAYX), 3.64%.
ONEOK Partners LP (OKS), 10.44%.
Noble Corp PLC (NE), 12.23%. So far, this offshore drilling contractor has held steady on the dividend, but one has to wonder, for how much longer?
Calumet Specialty Products Partners LP (CLMT), 10.10%.
Stocks on my lists that were scheduled to report last week all did so as planned. While most played the game well, as far as meeting or beating the analysts’ consensus predictions for EPS and revenue, which are usually set as low as they can get away with and still maintain some credibility, the guidance and outlook proffered is what really causes the stocks to react. And in most cases the outlook is viewed as “challenging”, to put it mildly. Especially so for energy stocks. In lieu of repeating information abundantly available elsewhere, I refer readers wanting specifics to other resources. Details are available from the firm’s websites, the financial press, brokerage websites, or from the site I consider the most convenient, Seeking Alpha (http://seekingalpha.com), which frequently makes available transcripts of earnings conference calls, along with other summations and articles. Three long-time dividend favorites, all big names, which seem to be facing intractable, long-term declines are McDonalds (MCD), MicroSoft (MSFT), and Intel (INTC). MCD is under stress from declining popularity and strong competition, as their mostly unhealthy fare is becoming increasingly out of favor. MSFT and INTC are facing the fading of the “WinTel” monopoly that has long been the mainstay of both firms’ profits, as Windows PCs with “Intel Inside” are in an irreversable sales decline in favor of tablets and smartphones, and the trend seems ever more unlikely to swing back in favor of PCs.
Earnings season will reach a zenith this week, as an avalanche of earnings reports will be released. Stocks on my lists that will be contributing to that avalanche are listed as follows, by date:
Norfolk Southern (NSC), RPM International (RPM), Gladstone Investment (GAIN).
Merck (MRK), Pfizer (PFE), Statoil (STO), United Parcel Service (UPS), Kimco Realty (KIM), Potlatch (PCH), Reynolds American (PCH).
Eaton (ETN), General Dynamics (GD), Altria (MO), Northrop Grumman (NOC), Realty Income (O), Southern Company (SO), Exelon (EXC), Total S A (TOT), Williams Partners LP (WPZ), Mid America Apartment Communities (MAA), BlackRock Capital (BKCC), Martin Midstream Partners LP (MMLP), Noble Corp PLC (NE).
Conoco Phillips (COP), Colgate Palmolive (CL), Royal Dutch Shell (RDS.B), SCANA (SCG), Digital Realty (DLR), Diebold (DBD), Enterprise Products Partners LP (EPD), Home Properties (HME), Linn Energy LLC (LINE), Ensco PLC (ESV).
Chevron (CVX), Public Service Enterprise Group (PEG), Exxon Mobil (XOM).
It will be interesting to hear what several of the energy stocks’ management teams have to say about the outlook going forward and the prospects for their respective firms.
Considering last week was in the middle of earnings season, the upgrade / downgrade action was fairly light, at least as far as my stocks are concerned. Notable ratings coming out were as follows:
General Mills (GIS) was upgraded from Sector Perform to OutPerform at RBC Capital Markets.
Mid America Apartment Communities (MAA) was initiated at Buy at Sun Trust Robinson Humphrey.
Coca Cola (KO) was initiated at Buy at Sterne Agee.
Colgate Palmolive (CL) was initiated at Buy at Sterne Agee.
DrPepper Snapple (DPS) was initiated at Buy at Sterne Agee.
Kimberly Clark (KMB) was initiated at Neutral at Stern Agee.
Pepsico (PEP) was initiated at Buy at Sterne Agee.
Procter & Gamble (PG) was initiated at Neutral at Stern Agee.
Kimco Realty (KIM) was initiated at Buy at Canaccord Genuity.
Enterprise Products Partners LP (EPD) was initiated at Buy at DA Davidson.
Realty Income (O) was initiated at Buy at Da Davidson.
Spectra Energy Partners LP (SEP) was upgraded from Hold to Buy at Jeffries, and was initiated at Buy at Da Davidson.
Newmont Mining (NEM) was initiated at Sector OutPerform at CIBC. It wouldn’t be saying much to OutPerform the metals mining sector these days.
Yamana Gold (AUY) was initiated at Sector Perform at CIBC.
Well, I must ponder what action, if any, I might consider this week. Certainly, the energy and precious metals sell off has turned out much worse than I originally expected when it first started, and numerous “bargains” that I jumped on turned out to be premature. To my credit, I sold several names at or near the highs, most notably BBEP at $23.50, but then I went back in too quickly, again with BBEP as an example, at $8.50. It’s pretty much “baked into the cake” that BBEP and LINE will have to cut their dividends further, or even more likely, eliminate them entirely. But if you can add more at truly depressed levels, say BBEP under $3, or LINE under $5, and are willing to hold on, it might be a great speculation. If the firms survive, they will reinstate payouts at some point in the future, and the share prices will recover as well, although it may be a long while getting back near their recent highs. Another speculation is Legacy Reserves (LGCY), which I judge to be slightly less distressed than BBEP and LINE, but still facing a grim outlook, as are all energy stocks. As for the majors, the energy report that came out a couple of weeks ago from Goldman cited Exxon Mobil (XOM) as the best bet. It will be awhile before XOM is a “single digit midget” like the three upstream MLPs just mentioned, but if it can be bought below $80, it should turn out well as an investment. With the energy prospects being what they are just now, I would take an incremental acquisition approach even with XOM, it certainly may fall further, if WTI (West Texas Intermediate) dips below $40, which some are predicting. For energy stocks, we are definitely at or at least approaching the moment when it is time to buy, as per the famous Rothschild quote, “Buy When There’s Blood in the Streets”. And frankly, in that scenario, it probably would be smarter to buy XOM in lieu of BBEP, LINE, or LGCY.
1st Posting for Week Beginning Monday 07/20/2015
Posted Sunday 07/21/2015 09:00 PM
Stocks gained on all of the major averages last week, as the Greek saga faded from the front pages, being supplanted by politics and a new eruption of violence in Tennessee, as a heretofore unknown revealed himself to be an Islamic extremist, acting suddenly upon his apparently well-hidden sympathies. Also, there was the “peace in our time” agreement with the Islamic fascist regime in Iran which also took up a certain amount of news flow space. But at any rate, earning season is now well under way, with the results once again “surprising” to the upside, at least so far.
The tally of stocks on my lists going ex-dividend this week is almost as brief as last week’s list:
Colgate Palmolive (CL), 7/21/2015, yield 2.25%.
Procter & Gamble (PG), 7/22/2015, yield 3.22%.
Gladstone Investment (GAIN), 7/22/2015, yield 9.11%. GAIN pays monthly.
Conoco Phillips (COP), 7/23/2015, yield 5.10%.
All five stocks on my lists scheduled to report last week did so. That would be Johnson & Johnson (JNJ) on 7/14/2015, Intel (INTC) and Kinder Morgan (KMI) on 7/15/2015, Phillip Morris (PM) on 7/16/2015, and General Electric (GE) on 7/17/2015. To reiterate my reporting policy, I will only note stocks that reported, and when. Instead of repeating information abundantly available elsewhere, I refer readers wanting specifics to other resources. Details are available from the firm’s websites, the financial press, brokerage websites, or from the site I consider the most convenient, Seeking Alpha (http://seekingalpha.com), which frequently makes available transcripts of earnings conference calls, along with other summations.
The pace of reporting picks up considerably this week, with reports expected indicated as follows, by date:
MicroSoft (MSFT), Novartis (NVS), and Verizon (VZ).
Coca Cola (KO), Newmont Mining (NEM).
American Electric Power (AEP), Kimberly Clark (KMB), 3M Co (MMM), Raytheon (RTN), AT&T (T), Waste Management (WM), Dr Pepper Snapple (DPS), Nucor (NUE), and Freeport-McMoran (FCX).
Ventas (VTR), NuStar Energy LP (NS).
Upgrades / downgrades of note from last week were:
Intel (INTC) was downgraded from Market Perform to UnderPerform at Bernstein.
General Dynamics (GD) was initiated at OverWeight at JP Morgan.
Northrop Grumman (NOC) was initiated at UnderWeight at JP Morgan.
Raytheon (RTN) was initiated at Neutral at JP Morgan.
Coca Cola (KO) was upgraded from Neutral to Buy at UBS.
Vodafone (VOD) was downgraded from Buy to Neutral at Goldman.
Health Care REIT (HCN) was initiated at Buy at Sun Trust Rbsn Humphrey.
Intel (INTC) was initiated at Neutral at Mizuho.
Intel (INTC) was upgraded from Hold to Buy at Needham.
Frontier Communications (FTR) was upgraded from Hold to Buy at Jeffries.
Statoil (STO) was upgraded from Neutral to Buy at Citigroup.
ONEOK Partners LP (OKS) was upgraded from Perform to OutPerform at Oppenheimer.
Walgreens Boots Alliance (WBA) was upgraded from Neutral to OutPerform at Credit Suisse.
Norfolk Southern (NSC) was downgraded from OverWeight to Equal Weight at Barclays.
Paychex (PAYX) was downgraded from Buy to Neutral at Goldman.
Intel (INTC) was upgraded from Neutral to OutPerform at Wedbush, and from Sell to Hold at Acendiant.
Triangle Capital (TCAP) was initiated at OverWeight at Stephens and Co.
Another week, another round of defeats for the forces of truth and justice, or so it seems week after week, as the dreadful news just keeps on coming. Perhaps it only seems that way because I am over-allocated to the energy sector. There certainly are some bargains at this time in that space. I sold a $7.50 strike put on Legacy Reserves LP (LGCY) Friday for $0.60, which if exercised will provide an effective buy price under $7.00. And this was a $32 stock just one year ago. One has to have true grit to buy in at this point, but there may never be a better time. Then again, next week may be a better time. While the near-term prognosis for oil prices is grim, I just cannot believe the age of petroleum is over. For perspective, note that LGCY declined from a high just above $30 in May 2007, declined to a low of $6.50 in November 2008, then gained steadily to $33 and change in April 2011, bounced around in the $25 to $30 range for the next three years, then declined precipitously from July 2014 to the present. So there is a precedent for a recovery from these levels. It just depends upon oil prices recovering at some point, and on the firm surviving until that occurs. Buying in now on any of several beaten-down energy stocks gives one a chance of a serious gain in hopefully two or three years. But you can’t bet the ranch on it; just your speculative capital that if you lose, so be it, life will go on. If not, then don’t do it. There is no such thing as a sure thing in the market, just odds and probabilities, but not the kind that can be predicted with mathematical certainty, such as a gambler’s odds at the roulette wheel – the true odds are like the future itself – unknown.
1st Posting for Week Beginning Monday 07/13/2015
Posted Sunday 07/12/2015 09:00 PM
Like many others, I am very weary of the Greek saga. It would be so much more inspiring if the Greeks had Leonidas as their leader, and if he told the banksters, IMF, etc. that if they wanted their money, “come and take it”. All I can say is hang tough, it’s not over yet. The markets gyrated furiously last week as the Greek saga continued, spurred on by a huge stock sell off in China, but by the end of the week, the venerable Dow Industrial average actually closed up slightly for the week. The other major averages were mostly down for the week, but not by much. The focus will hopefully now shift to earnings, as the parade gets into gear. As always, or so it seems, the forecasts are dire, so as to set the stage for a relief rally as results come in “less bad” than predicted.
The list of stocks that I follow going ex-dividend this week is a pretty short one, but here they are:
Fifth Street Finance (FSC), 7/13/2015, yield 11.01%. FSC pays monthly.
Consolidated Communications (CNSL), 7/13/2015, yield 7.52%.
Main Street Capital (MAIN), 7/17/2015, yield 6.53%. MAIN also pays monthly.
Two of my stocks reported last week, both on 7/9/2015. Walgreens Boots Alliance (WBA) beat estimates on FQ3 EPS, but missed on revenue, while Pepsico (PEP) beat on both measures. See Seeking Alpha, or numerous other sites, including the firm’s own pages, for details.
As noted in the intro, the pace of earnings reports continues to accelerate this week, as five more of my stocks are scheduled to report; Johnson & Johnson (JNJ) on 7/14/2015, Kinder Morgan (KMI) and Intel on 7/15/2015, Phillip Morris (PM) on 7/16/2015, and General Electric (GE) on 7/17/2015.
In other news, albeit a couple of weeks late, Heinz acquired Kraft Foods, completing the deal on 7/2/2015, and the new firm will trade publicly under symbol KHC. This replaces the Kraft Foods (KRFT) on my lists.
Upgrades / downgrades coming out last week on my stocks were as follows:
Altria (MO) was upgraded to OutPerform at CLSA.
NextEra Energy (NEE) was initiated at OutPerform at Bernstein.
Annaly Capital (NLY) was upgraded to OutPerform at Wells Fargo.
Statoil (STO) was upgraded from Neutral to OutPerform at Exane BNP Paribas. I sold STO a couple of months ago, they were too coy, in my opinion, about their dividend schedule.
AT&T (T) was assumed into coverage at Buy at Stifel Nicolaus.
Unilever (UL, UN) was upgraded to Hold at Jeffries.
Walgreens Boots Alliance (WBA) was upgraded from Market Perform to OutPerform at Raymond James.
Unfortunately, the market news cycle is likely going to be dominated by Greece again this week. It just may be that the end-game is near, although I certainly wouldn’t put money on it. The late-week rally on Friday seemed to be inspired by the belief that a deal was in the works, so if that turns out to untrue, the week might start off on a down note. With the exception of several out-of-favor sectors, we would have to have a succession of down days to see any decent buy prices on blue chips. I’m not predicting that, nor even hoping for it, but if it occurs, I will be ready to pick up some bargains.
1st Posting for Week Beginning Monday 07/06/2015
Posted Sunday 07/05/2015 09:00 PM
Stocks took a major hit on Monday last week, as the Greek crisis bubbled back up to the surface. While the market stabilized over the remainder of the week, even as the Greek soap opera continued, the lost ground was not recovered. With the Greek drama (hopefully) reaching a climax with today’s referendum, next week will likely see more volatility. Supposedly the damage from the Greek default will be contained, or “ring fenced” as the term du jour expresses it, but there is always the underlying fear of a “Lehman moment”, a phrase which defines the situation in 2008 where the authorities thought the fallout from Lehman’s failure would be contained, and made the decision to let the firm collapse as it deserved to. What happened was a near world-wide financial collapse instead, as the contagion broke through all of the “fire breaks”, and disaster was only narrowly avoided by an unprecedented infusion of liquidity into the financial system by the Fed and an equally unprecedented stimulus package passed (barely, with Treasury Secretary Paulson on bended knees begging legislators to pass it) by Congress. Few expect a “Grexit” (term meaning a Greek default and exit from the Euro) to generate a similar firestorm, but we won’t really know the consequences until it happens.
Meanwhile, several more of the firms I track have declared dividends, with ex-dividend dates this week as follows:
General Mills (GIS), 7/8/2015, yield 3.09%.
AT&T (T), 7/8/2015, yield 5.26%.
Verizon (VZ), 7/8/2015, yield 4.66%.
Darden Restaurants (DRI), 7/8/2015, yield 3.13%.
Kayne Anderson Energy Development (KED), 7/8/2015, yield 8.45%.
RPM International (RPM), 7/9/2015, yield 2.12%.
Universal (UVV), 7/9/2015, yield 3.63%.
Three of my stocks reported last week. To reiterate my reporting policy, I will only note stocks that reported, and when. Instead of repeating information abundantly available elsewhere, I refer readers wanting specifics to other resources. Details are available from the firm’s websites, the financial press, brokerage websites, or from the site I consider the most convenient, Seeking Alpha (http://seekingalpha.com), which frequently makes available transcripts of earnings conference calls, along with other summations. The three stocks reporting were ConAgra (CAG) on 6/30/2015, and General Mills (GIS) and Paychex (PAYX), both on 7/1/2015.
We are now in the “quiet time” just before the second quarter earnings reporting season. Even so, two of my stocks are already scheduled to report this week. They are Pepsico (PEP) and Walgreens Boots Alliance (WBA), both on 7/9/2015.
Several of my stocks received upgrades / downgrades / initiations of coverage / resumptions of coverage this week. I will note the prior rating if it was given by my information source. Stocks receiving notice were as follows:
CenturyLink (CTL) was upgraded to OutPerform at Raymond James.
Sysco (SYY) was downgraded from Buy to Hold at Deutsche Bank.
Apollo Investment (AINV) was initiated at Buy at Jeffries. AINV is not currently on my lists, but I have owned the BDC since 2007, and I will be adding it to my Tier3 list on my next rework.
PennantPark Investment (PNNT), another BDC, was also initiated at Buy at Jeffries.
Darden Restaurants (DRI) was initiated at Neutral at Goldman.
Windstream Holdings (WIN) was upgraded from UnderWeight to Equal Weight at Morgan Stanley.
Apollo Investment (AINV) was initiated at Buy at Cantor Fitzgerald.
Ares Capital (ARCC) was initiated at Buy at Jeffries.
BlackRock Capital Investment (BKCC) was initiated at Buy at Cantor Fitzgerald.
Gladstone Capital (GLAD) was initiated at Buy at Cantor Fitzgerald.
Hercules Technology Growth Capital (HTGC) was initiated at Buy at Jeffries.
Triangle Capital (TCAP) was initiated at Hold at Jeffries.
Medley Capital (MCC) was initiated at Buy at Jeffries.
Fifth Street Finance (FSC) was initiated at Hold at Cantor Fitzgerald.
Full Circle Capital (FULL) was initiated at Hold at Cantor Fitzgerald.
Gladstone Investment (GAIN) was initiated at Hold at Jeffries.
PennantPark Investment (PNNT) was initiated at Hold at Cantor Fitzgerald, and also at Jeffries.
Prospect Capital (PSEC) was initiated at Hold at Cantor Fitzgerald.
Kimco Realty (KIM) was upgraded from Neutral to Buy at Citigroup.
ConAgra (CAG) was upgraded from Equal Weight to OverWeight at Morgan Stanley.
Verizon (VZ) was initiated at Neutral at Buckingham Research.
AT&T (T) was initiated at Buy at Buckingham Research.
Cantor Fitzgerald and Jeffries have certainly given a lot of attention to firms in the BDC space recently. The recent declines of these stocks are attributable, in my opinion, to the pressure all high-yielders are under because of the expectation that interest rates will soon be going up, and also from the concerns of a stagnating (or worse) economy, which will threaten the earnings and related high dividends of these stocks more than most. Certainly their yields, at or near double-digits, are very attractive at the moment, especially when compared to the yields of most notable “blue chips”, which have sunk to 3% or less. While I own many of these (BDC) names, I will caution investors that these stocks are not Johnson & Johnson (JNJ) or 3M Co (MMM), to name two of the bluest of the blue chips. BDC’s will be affected if the economy turns bad. But I believe they have a place in an income portfolio, as long as the overall exposure to the space is limited to around the 15% range, and the exposure to any one firm is limited to 1% to 2%.
There are definitely better buys available today than we have seen for a while in four high-yield sectors; BDCs, REITs, Telecoms, and Energy, especially MLPs and firms more closely aligned with E&P activities. Another sector which has really been hammered has been resource stocks, especially gold, silver, and copper producers. Any high yields in this sector have long since disappeared, however, as the firms hunker down to survive. My approach has been to selectively take advantage of bargains in all of these areas, yet hold off for the most part, as it appears even better prices (for buying, that is) may be coming. Thus, I have a high allocation to cash in my brokerage accounts at this time.
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”.