JT’s DAILY (WEEKLY as of 12/9/2013) BLOG for Month Of September 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 09/28/2015
Posted Sunday 09/27/2015 6:00 PM
The market experienced some up days and some down days last week, with the advantage going to the downs. Still, considering the news from Volkswagon (VLKAY), and the extent of the selloff in the shares, the overall market losses for the week were modest. Friday received a boost from the revised Q2 GDP estimate of +3.9%, released before the open.
Stocks on my lists going ex-dividend this week, or the following Monday, are as follows:
First, to repeat from last week:
National Health Investors (NHI), yield 5.82%.
Phillip Morris (PM), yield 5.02%.
Nucor (NUE), yield 3.70%.
Annaly Capital Management (NLY), yield 11.57%.
Windstream Holdings (WIN), yield 8.67%.
In addition, two more stocks announcing 9/28 as the ex-dividend date are:
Prospect Capital (PSEC), yield 12.77%.
American Capital Agency (AGNC), yield 12.38%.
Both of these are monthly payers.
Sysco (SYY), yield 3.02%.
Kimco Realty (KIM), yield 3.98%.
Raytheon (RTN), yield 2.53%.
All three of my stocks scheduled to report on 9/22/2015 did so, as ConAgra (CAG), Darden Restaurants (DRI), and General Mills (GIS) all beat estimates on EPS, and CAG and DRI beat revenue estimates as well. GIS increased revenue from the prior year comparable quarter, but fell short of analyst’s estimates. See the firms’ websites or Seeking Alpha (SA) for details.
Only one of my stocks is scheduled to report this week. Paychex (PAYX) will be reporting on 9/30/2015.
Upgrades / downgrades from last week on my stocks were:
Chevron (CVX) was upgraded from Hold to Accumulate at Tudor Pickering.
Molson Coors (TAP) was upgraded from Hold to Buy at Societe Generale.
HCP Inc. (HCP) was downgraded from Neutral to Sell at Goldman.
Total S A (TOT) was downgraded from Buy to Accumulate at Tudor Pickering.
Royal Dutch Shell (RDS.B) was initiated at OutPerform at Macquarie.
Total S A (TOT) was also initiated at OutPerform at Macquarie
Raytheon (RTN) was upgraded from Market Perform to OutPerform at Bernstein.
Intel (INTC) was upgraded from UnderPerform to Market Perform at Bernstein.
Entergy (ETR) was downgraded from Neutral to Sell at UBS.
Breitburn Energy Partners LP (BBEP) was downgraded from Buy to UnderPerform at BofA/Merrill.
Exelon (EXC) was upgraded from Neutral to Buy at Guggenheim.
Intel (INTC) was upgraded from Market UnderPerform to Market Perform at JMP Securities.
Coca Cola (KO) was reinstated at Buy at Deutsche Bank.
3M Co (MMM) was upgraded from Neutral to OutPerform at Credit Suisse.
Unilever (UN, UL) was upgraded from Hold to Buy at Berenburg.
Now is not the time to go all-in on anything, nor to sell out. My strategy is to take advantage of opportunities to add to positions of quality stocks, but only incrementally. No “back up the truck” action is warranted, with the world economy (especially China) slowing, Europe in recession, and the U.S. in limbo. My only action of the week was a modest addition to Spectra Energy (SE), a natural gas utility. While I keep a buy list, the prices required to pry loose any cash from my modest reserves are substantially below the market in most cases.
1st Posting for Week Beginning Monday 09/21/2015
Posted Sunday 09/20/2015 8:00 PM
Last week was looking like it would finish with a gain until Friday, when the market tanked, surprisingly, after digesting the news that the Fed choked, failing to raise the discount rate after indicating otherwise. Investors have to wonder if the Fed knows something investors do not, regarding the relative health of the economy. The question is, how long can the ZIRP last, and what can the Fed due to help the economy in a future downturn if rates are never allowed to rise?
Only a couple or three of my stocks will be going ex-dividend this week, so I am going to include four more which will be going ex-dividend on the following Monday. In fact, I may make including stocks going ex-dividend the following Monday a regular feature, since they will have to be bought by the end of the day on the preceding Friday anyway, to get the dividend. So, here are stocks on my lists going ex-dividend from September 21 through September 28:
9/22/2015 (none go ex-dividend 9/21/2015)
Solar Capital LTD (SLRC), yield 9.53%.
Total S A (TOT), yield 6.03%. Note that the yield is before 30% withholding on payments to U.S. holders applied by France.
MFA Financial (MFA), yield 11.16%.
National Health Investors (NHI), yield 5.82%.
Phillip Morris (PM), yield 5.02%.
Nucor (NUE), yield 3.70%.
Annaly Capital Management (NLY), yield 11.57%.
Windstream Holdings (WIN), yield 8.67%.
Three of my stocks will be reporting earnings this week, all on 9/22/2015: ConAgra (CAG), Darden Restaurants (DRI), and General Mills (GIS).
It was another slow week for upgrades / downgrades on my stocks:
Exelon (EXC) was upgraded from Neutral to Buy at SunTrust Robinson Humphrey.
CenturyLink (CTL) was initiated at UnderWeight at Barclays.
Kimberly Clark (KMB) was upgraded to Buy at Deutsche Bank.
ONEOK Partners LP (OKS) was upgraded to Buy at Citigroup.
GlaxoSmithKline (GSK) was upgraded from UnderPerform to Neutral at Exane BNP Paribas.
Raytheon (RTN) was upgraded to Top Pick at RBC Capital.
Freeport-McMoran (FCX) was initiated at Market Perform at FBR Capital.
Newmont Mining (NEM) was initiated at Market Perform at FBR Capital.
Pan American Silver (PAAS) was initiated at OutPerform at FBR Capital.
Mid-America Apartment Communities (MAA) was initiated at Buy at DA Davidson.
Entergy (ETR) was initiated at Neutral at Citigroup.
Exelon (EXC) was initiated at Sell at Citigroup.
Public Service Enterprise Group (PEG) was initiated at Neutral at Citigroup.
The week ahead does not have any major scheduled events, such as a Fed meeting, to impact the markets. Of course, it is usually the unscheduled, shock events that move the markets the most, and no one knows if any of these events are coming. We are still a few weeks away from the next earnings reporting cycle, for the majority of firms. Geopolitical events are probably the most likely source of significant near-term market-moving happenings. While we are definitely in a market correction phase, it is unknown whether the down move has mostly run its course, or has barely gotten started. My advice is to hold back some “dry powder” (cash) just in case another leg down occurs, and if that happens, selectively initiate or add to identified positions as attractive prices become available.
1st Posting for Week Beginning Monday 09/14/2015
Posted Sunday 09/13/2015 8:30 PM
Note to followers of this site, if there are any: I realize I have not updated my lists for nearly two years. I plan to rework the lists, plus add a 4th “tier”, to be entitled Tier4, which will represent stocks I no longer recommend, even as speculation, but that were on one of my other lists at some point. I will continue to track these stocks, or in some cases successor firms. In addition to firms which have “fallen from grace”, my new Tier4 will also become a home for stocks which have such a low yield that they no longer qualify as dividend stocks. While I do not have a definite target date for completion, the reworked lists will be available before the end of this year. To reiterate, the purpose of the website is to present market commentary and useful information from the standpoint of a defined income investment approach, implemented via a specific universe of income stocks.
Last week we had three up days and only one down day, with the result being a modest gain for the week. The drama continues as the debate goes on regarding the Fed, which is will they begin, finally, to move towards normalcy, whatever that is, by raising the discount rate from effectively zero, where it has been since the financial crisis. Oil prices and related stocks took a hit last week as Goldman came out with a gloomy price prediction, saying WTI could descend into the twenties. The political season continues to dominate the news flow, while the latest world crisis is an invasion of Middle Eastern refugees descending upon Europe.
Meanwhile, dividends continue to be paid by most of my holdings. Upcoming ex-dividend dates are as follows:
Potlatch (PCH), 9/14/2015, yield 4.71%.
TICC Capital (TICC), 9/14/2015, yield 16.98%.
Medical Properties Trust (MPW), 9/15/2015, yield 7.99%.
Greif (GEF, GEF.B), 9/16/2015, yield for GEF 4.87%, yield for GEF.B 5.50%
BlackRock Capital Investment (BKCC), 9/16/2015, yield 8.96%.
General Electric (GE), 9/17/2015, yield 3.69%.
Gladstone Investment (GAIN), 9/17/2015, yield 10.18%. GAIN pays monthly.
PennantPark Investment (PNNT), 9/17/2015, yield 14.81%.
Apollo Investment (AINV), 9/17/2015, yield 12.53%.
Eni S p A (E), 9/18/2015, yield 6.37%. Note that the yield is before applying a 20% Italian withholding tax on the proceeds, unless the rate has increased since I last received a dividend from E. Also note that E pays twice a year, with this payment being the second this year. Thus it will be next spring before the first 2016 payment.
None of my stocks reported last week, nor are any scheduled to report this week.
Upgrades / downgrades on my stocks that came out last week were as follows:
Realty Income (O) was upgraded from Hold to Buy at Stifel Nicolaus.
Procter & Gamble (PG) was upgraded from Neutral to Buy at SunTrust Robinson Humphrey.
American Electric Power (AEP) was upgraded from Neutral to Buy at Guggenheim. GlaxoSmithKline PLC (GSK) was upgraded to Neutral at Bank of America/Merrill.
Breitburn Energy Partners LP (BBEP) was downgraded to Sell at UBS.
Legacy Reserves LP (LGCY) was also downgraded to Sell at UBS.
Note that BBEP has a current yield of $20.08%, closing Friday at $2.49, while LGCY currently yields 27.83%, closing at $5.03. Granted, their distributions are at risk, but considering the current unit prices, if owned, why sell now?
Intel (INTC) was initiated at Buy at Sterne Agee CRT.
Emerson Electric (EMR) was initiated at Neutral at Sterne Agee CRT.
Spectra Energy (SE) was initiated at OutPerform at Raymond James.
Chevron (CVX) was upgraded from Neutral to OverWeight at JP Morgan.
Memorial Production Partners LP (MEMP) was downgraded from Neutral to Sell at Goldman. MEMP currently yields 38.00%, and closed Friday at $5.79. Same situation as BBEP and MEMP.
Norfolk Southern (NSC) was upgraded from Neutral to Buy at Bank of America/Merrill.
Plains All American Pipeline LP (PAA) was downgraded from Neutral to Sell at Goldman.
ONEOK Partners LP (OKS) was downgraded from Neutral to Sell at Goldman.
Public Service Enterprise Group (PEG) was initiated at Neutral at JP Morgan.
Spectra Energy (SE) was upgraded from Neutral to Buy at Goldman.
Statoil (STO) was downgraded from Hold to UnderPerform at Jeffries.
Freeport-McMoRan (FCX) was initiated at Buy at Gabelli & Co.
There are definitely some opportunities for acquiring stocks right now, with accompanying risks, of course. The question in all cases is whether the current sell off has resulted in great values, or just a bunch of great value traps. As far as subsequent losses go, if buying one of the extremely depressed entities at these levels, about the only way to lose much is if the firm goes bankrupt or is acquired for a song by a competitor. Of course, no one should be buying in for the fantastic yields, these are definitely at risk. Buying extremely depressed energy production partnerships, contract drillers, or precious metals miners at this point is a wager that the subject will survive the current commodity bust to prosper again someday. Right now, that recovery looks to be about as far off as imaginable, and most pundits are predicting it will get worse rather than better in the near term, and possibly longer. A safer way to play the energy bust would be to go with pipeline MLPs, or the integrated major oil companies, but even these may represent value traps, per some pundits. Another group where yields are stratospheric these days are BDCs, many of which are priced as if 2008 Redux is around the corner. Unfortunately, that may very well be the case. Many REITs are presenting value these days, although the strongest, such as Realty Income (O) or Health Care REIT (HCN), are only slightly down from their mid-summer highs. Another opportunity sector are several international cyclicals, such as Emerson Electric (EMR), Eaton (ETN), and Greif (GEF), GEF.B). Of course, if the world economy is about to collapse, now is not the time to go with cyclicals. My take is that one should cautiously and selectively begin to buy in, considering the risks and one’s own tolerances of same, and spread the bets across several sectors. Define ahead of time what the game plan is going to be if further declines materialize, either sell and take the loss, or hold on and wait it out. Just be aware that declines can be severe and rapid if adverse developments occur, with little or no opportunity to get out before a huge decline.
1st Posting for Week Beginning Tuesday 09/08/2015
Posted Monday 09/07/2015 10:30 AM
It has definitely been a “cruel summer” for investors, and as we head into the fall, it does not seem to be getting any better. Stocks manage to rally here and there, but overall, the trend has been down, with the major averages all down more than ten percent from recent highs. And of course, most energy firms are down considerably more than ten percent. The big issue right now, at least as far as the U.S. is concerned, is whether the Fed will finally raise the discount rate by even a teeny, tiny bit this month. It seems so silly to agonize over such a miniscule increase of a quarter of a percent, but apparently it may affect the markets, according to some gurus. Either way, the near-term outlook is grim, with more than the usual chorus of doomsayers saying that the “day of reckoning” for the consequences of the extreme “easy money” policies of the past few years is close at hand.
What to do? Keep on collecting dividends, I say. Stocks on my lists going ex-dividend in this shortened week are as follows:
SCANA (SCG), 9/08/2015, yield 4.29%.
Reynolds American (RAI), 9/08/2015, yield 3.44%.
Newmont Mining (NEM), 9/08/2015, yield 0.64%. (NEM has slashed the dividend to $0.025 per quarter, reacting to the drop in gold prices.)
Waste Management (WM), 9/10/2015, yield 3.08%.
DrPepper Snapple (DPS), 9/10/2015, yield 2.53%.
Coca Cola (KO), 9/11/2015, yield 3.43%.
Merck (MRK), 9/11/2015, yield 3.49%.
Altria (MO), 9/11/2015, yield 4.31%.
Digital Realty (DLR), 9/11/2015, yield 5.47%.
Ventas (VTR), 9/11/2015, yield 5.21%.
Ares Capital (ARCC), 9/11/2015, yield 9.86%.
Fifth Street Finance (FSC), 9/11/2015, yield 11.15%. FSC pays monthly.
Frontier Communications (FTR), 9/11/2015, yield 7.79%.
As can be seen, even with the decline in stock prices, you have to go to a REIT, BDC, or rural telecom to get an exciting yield. Of course, energy stock yields in a few cases are up there, but the oil price outlook clouds the issue for these stocks. Linn Energy LLC (LINE), as an example, sported a 60% plus annualized yield on the day of the 1000 point Dow opening drop that occurred a few days ago. The firm announced recently that the dividend will be suspended after the third quarter 2015, so holders will receive their final payout, for a while at least, this month.
As for earnings last week, Greif (GEF, GEF.B) beat on earnings, but fell short on revenue, while Medtronic (MDT), beat estimates on both metrics. See the firms’ websites or Seeking Alpha (SA) for details. SA has transcripts of the earnings conference calls available for both firms.
None of my stocks are scheduled to report this week.
As for analyst upgrades / downgrades from last week on my stocks, there weren’t many. Here they are:
Intel (INTC) was upgraded from Market Perform to OutPerform at Northland Securities.
Freeport McMoran (FCX) was downgraded from Buy to Neutral at Citigroup.
Apollo Investment (AINV) was downgraded from Buy to Hold at Cantor Fitzgerald.
Gladstone Capital (GLAD) was also downgraded from Buy to Hold at Cantor Fitzgerald.
Procter & Gamble was Assumed at Equal Weight at Morgan Stanley.
General Mills (GIS) was Upgraded to Equal Weight at Morgan Stanley.
AT & T (T) was upgraded to Buy at Citigroup.
Digital Realty (DLR) was upgraded from Market Perform to OutPerform at Raymond James.
Emerson Electric (EMR) was downgraded from Neutral to Sell at Goldman.
Three stalwart cyclicals on my lists, Emerson Electric (EMR), Eaton (ETN), and Greif (GEF, GEF.B) are all down considerably the last few months, as concerns mount over the health of the U.S. and world economy. Now is probably a good time to buy. I was surprised by the Goldman downgrade to Sell on EMR, which seems overdone, regardless of the economic outlook.
Speaking of the outlook, the financial media headlines are full of dark prognostications for September. While things can certainly get worse, often the best time to buy is when the preponderance of opinion is just that, things are going to get worse. Certainly, numerous mega-cap blue chips are available now at more attractive entry points than have been seen since the 2008-2009 financial crises. My approach is, now is a good time to start a position, but don’t go “all in”, save some “dry powder” to add to positions just in case the pundits are right, and the sell off continues.
1st Posting for Week Beginning Monday 08/31/2015
Posted Sunday 08/30/2015 08:00 PM
What a week we had last week! The summer doldrums actually ended on Wednesday of the prior week (August 19), with every trading day since then (with one exception, Friday 8/28/2015) presenting huge intraday moves, ending mostly towards the downside. The Dow Industrial Stock Average declined 300+ on 8/20, 500+ on 8/21 & 24, then a “mere” 200+ on 8/25, then the market reversed course, and the same stock average advanced 600+ on 8/26, and another 300+ on 8/27. A number of pundits have suggested the Fed would likely hold off on a September rate increase in light of the market turmoil, but an unexpectedly strong Q2 GDP report on Thursday 8/27 might change that assessment.
Stocks on my lists going ex-dividend this week are as follows:
Kimberly Clark (KMB), 9/2/2015, yield 3.27%.
Pepsico (PEP), 9/2/2015, yield 3.00%.
Ensco PLC (ESV), 9/2/2015, yield 3.52%.
CenturyLink (CTL), 9/3/2015, yield 8.08%. The announcement was overdue, but it seems, for the moment at least, that a cut is not imminent.
Public Service Enterprise Group (PEG), 9/4/2015, yield 3.81%.
Triangle Capital (TCAP), 9/4/2015, yield 12.10%.
Earnings came out as scheduled last week for JM Smucker (SJM) and Prospect Capital (PSEC), with both firms reporting better than expected results.
For the week upcoming, there are two firms (that I follow) on the schedule to report again. Greif (GEF, GEF.B) and Medtronic (MDT), both on 9/3/2015.
It was a very slow week for upgrades / downgrades. Ratings coming out on my stocks were as follows:
Nestle S A (NSRGY) was upgraded from Hold to Buy at Kepler.
Royal Dutch Shell (RDS.B) was upgraded from Hold to Buy at Jeffries.
Chevron (CVX) upgraded from UnderPerform to Neutral at BofA/Merrill.
Plains All American Pipeline LP (PAA) was initiated at Sector OutPerform at Scotia Howard Weil.
Eaton (ETN) was upgraded to Buy at Vertical Research.
Emerson Electric (EMR) was also upgraded to Buy at Vertical Research.
Spectra Energy (SE) was upgraded to Buy at UBS.
Ares Capital (ARCC) was upgraded from Market Perform to OutPerform at Raymond James.
Intel (INTC) was Resumed at Sector Perform at RBC Capital Markets.
It will be interesting to see what happens this coming week. I had several orders entered before the open Monday, as the futures indicated stocks would begin with a huge decline, which did happen. But my limit order was too low, in all cases but one, to get filled. I added to my position in Exxon Mobil (XOM) at a little over $67, while my buy order for Procter & Gamble (PG), at a little over $66, was a no go. In hindsight, I wish I had bought more XOM, but certainly the trade was fortuitous, at least at this juncture, as the stock has gained to slightly above $75 as of Friday’s close. Before I beat myself up too much for excess timidity, when I consider how it looked Monday morning, I will give myself some credit for buying at least a few shares at a steal price.