JT’s DAILY BLOG for Month Of November 2013
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. For a time, the last week of the prior month will be retained here, for continuity.
All times are Eastern Time - same as the NYSE
1st Posting for Friday 11/29/2013 09:30 AM
Stocks managed to generate gains Wednesday, allowing the bullish mood to carry over into the holiday. Overnight, and also for the previous session, Asian markets mostly generated gains as well. European markets also gained while we focused on turkey and football, and are also trading up today, at this moment. There are no economic releases scheduled for today. U.S. futures are positive, as we get ready for a shortened session. The stock market will close early, at 1:00 PM Eastern Time. For true trading addicts, the after-market trading will be from 1:15 PM to 5:00 PM.
None of my stocks, or for that matter hardly any stocks, received any upgrades / downgrades today.
I’m just about done picking up bargains in Realty Income (O), HCP Inc (HCP) and Health Care REIT (HCN), as these REITs have declined more than I expected. Of course, if I had known how low they were going to go, I would have waited a bit to buy. The sector is oversold, in my opinion, but no doubt it can always become more oversold.
There continues to be numerous articles warning that stocks are over-bought, even in bubble territory, with a decline imminent, while others maintain that stocks are just getting started, with the bull having a lot of life yet. Both cite numerous facts and figures to support their theses. The best way forward, in my opinion, is to be very selective on buys, consider taking some money off the table where you can, and be ready for a decline if it comes, with a reasonable cash level, say 25% to 30%. Just be aware that the bull run will probably end when few expect it, and if that is the case, it may not come for a while yet.
1st Posting for Wednesday 11/27/2013 09:30 AM
Stocks did little again on Tuesday, with the blue chip averages ending flat, while the NASDAQ and small caps posted modest gains. Overnight, Asian markets ended mixed, with Japan, India, and Singapore down, Hong Kong and Shanghai up, with movement in both directions somewhat modest. European markets are showing green on the screen at this hour, by decent margins in most cases. There will be quite a lot of economic data coming out today to think about over the holiday; the Weekly Unemployment Claims, Durable Orders, Chicago PMI, University of Michigan Sentiment, Leading Indicators, and finally, Oil and Natural Gas Inventories. The Unemployment Claims numbers have already come out, under expectations at 316K. Also out are Durable Orders, declining, but not as much as expected. U.S. futures are positive, with only a short time to go to the open.
Only one of my stocks has received any analyst attention on this pre-holiday Wednesday, as Intel (INTC) was downgraded from OutPerform to Sector Perform at RBC Capital.
While not on my lists, Hewlett Packard (HPQ) made news yesterday with a better than expected earnings report, and today received an upgrade from Evercore, to Equal Weight, from UnderWeight..
Today should be a slow day, and Friday as well. I have picked up three preferreds (actually exchange traded debt securities in two of the three cases) recently, at substantial discounts from the redemption value, which is $25 in all three cases:
General Electric Capital 4.875% Notes (GEB), callable 10/15/2017, for $21.03., rated AA+ by S&P.
Health Care REIT 6.50% Series J Cumulative Preferred Stock (HCN-J), callable 3/7/2017, for $23.75, rated BB+ by S&P.
NextEra Energy 5.00% Series J Junior Sub Debentures (NEE-J), callable 1/15/2018, for $18.72, rated BBB by S&P.
I’m running late, time to publish.
1st Posting for Tuesday 11/26/2013 08:30 AM
Stocks put in a slow day Monday, with the result being minimal movement, both up and down, on the major averages. Overnight, Asian markets ended with losses, but none over 1%. European markets are similarly not doing much at this hour, with Britain and France showing modest declines, Germany, Italy, and Spain showing modest advances. Several reads on the state of the housing market will be coming out today; Building Permits, the Case-Shiller Index, and the FHFA House Price Index. Also, the latest Consumer Confidence reading will be out at 10:00 AM. U.S. futures are flat with a slight positive bias, with over an hour to go to the open.
A flood of initiations into coverage on my stocks came out today from RBC Capital, along with a couple of additional upgrades / downgrades:
Wal-Mart (WMT) was initiated at whatever at UBS. The Fly on the Wall recap of upgrades / downgrades, available from MarketWatch, says it was initiated, but the text merely says Wal-Mart is set up better than Target for the holiday season, and does not give a rating.
CocaCola (KO) was initiated at OutPerform at RBC Capital.
Reynolds American (RAI) was initiated at Sector Perform at RBC Capital.
Procter & Gamble (PG) was also initiated at Sector Perform at RBC Capital.
Pepsico (PEP) was initiated at Sector Perform at RBC Capital.
Kraft Foods (KRFT) was initiated at OutPerform at RBC Capital.
Kellogg (K) was initiated at Sector Perform at RBC Capital.
General Mills (GIS) was initiated at OutPerform at RBC Capital.
Dr Pepper Snapple (DPS) was initiated at Sector Perform at RBC Capital.
ConAgra Foods (CAG) was initiated at Sector Perform at RBC Capital.
Colgate Palmolive (CL) was initiated at OutPerform at RBC Capital.
Campbell Soup (CPB) was initiated at Sector Perform at RBC Capital.
Altria (MO) was initiated at OutPerform at RBC Capital.
Will this ever end? RBC Capital has initiated nearly the whole market, at least most of the major blue chips, at Sector Perform, with just a couple of OutPerforms thrown in. Not one of the more daring calls I have seen.
Prospect Capital was initiated at OutPerform by BMO Capital.
Freeport McMoran (FCX) was downgraded from Buy to Neutral at Goldman.
As we move towards the Thanksgiving Holiday, the market action will probably continue to diminish. Occasionally, a favorable buy or sell opportunity can come along in a thin market.
1st Posting for Monday 11/25/2013 08:00 AM
Stocks continued their inexorable climb higher Friday, with all of the major averages finishing the day, and the week, with healthy, though not spectacular, gains. Overnight, Asian markets ended mixed, with Japan, India, and Singapore up, Hong Kong and Shanghai down. European markets are all trading with gains. U.S. futures are positive. The only economic release scheduled for today is Pending Home Sales for October, due out at 10:00 AM.
Only a couple of upgrades / downgrades have come out so far this morning on my stocks:
CenturyLink (CTL) was upgraded from UnderPerform to Neutral at Macquarie.
Plains All American Pipeline (PAA) was reinstated into coverage with a Buy rating at Goldman.
In going through my usual week-end review of my stocks for issues going ex-dividend in the coming week, I noticed I missed a couple or three last week. Better late than never, so here are stocks on my lists that went ex-dividend last week:
Main Street Capital (MAIN), ex-dividend 11/19/2013, yield 6.23%. MAIN normally pays monthly. Note that MAIN has already announced December’s dividend, with an ex-dividend date of 12/26/2013, and in addition, has announce a special supplemental dividend of $0.25 per share, with an ex-dividend date of 12/17/2013, payable 12/24/2013. Merry Christmas, all you MAIN shareholders!
3M Company (MMM), ex-dividend date 11/20/2013, yield 1.94%.
Vodafone (VOD), ex-dividend date 11/20/2013, yield 4.38%. VOD pays semi-annually.
CenturyLink (CTL), ex-dividend date 11/21/2013, yield 7.04%.
Pan American Silver (PAAS), ex-dividend date 11/21/2013, yield 4.78%.
Now, moving on, here are stocks on my lists going ex-dividend this week, presented in order by ex-dividend date:
NextEra Energy (NEE), yield 3.05%.
Molson Coors (TAP), yield 2.39%.
Prospect Capital (PSEC), yield 11.53%. PSEC is a monthly dividend payer.
Coca Cola (KO), yield 2.77%.
McDonalds (MCD), yield 3.3%.
Kellogg (K), yield 2.95%.
Northrop Grumman (NOC), yield 2.18%.
Safety Insurance Group (SAFT), yield 4.23%.
Realty Income (O), yield 5.63%. This REIT, which bills itself as “the Monthly Dividend Company”, pays monthly.
Medical Properties Trust (MPW), yield 6.29%. This REIT, specializing in hospitals, recently raised the dividend 5%, after many years with no increases (but no decreases or suspensions, either).
As can be seen from the yields above, most stocks are priced at levels such that yields are in the unexciting 2% to 3% range, or even below 2% in some extreme cases of over-valuation. For example, 3M (MMM) is undoubtedly a great company, but with the stock price at an all-time high above $130, and a yield under 2%, it is no longer a viable candidate for a dividend-based investment strategy, and probably not for any long stock investing strategy, even though it may yet go higher in the near term.
None of my stocks will be reporting earnings this week:
There are many similarities between the current conditions and a market top, just as in the late 1990’s, or perhaps 2006-2007. The fact is, no one knows whether a fall is imminent, or months, even years, away. As a value investor, I insist on value and a margin of safety before I am tempted to buy, features lacking for most stocks at this time. The best values these days are REITs, some BDCs, some smaller, less well-known MLPs, and precious metals miners. Quality REITs are acceptable for as much as 15% to 20% of an income portfolio, while the others are mostly into the realm of speculation, and suitable for only a small per cent of a conservative income portfolio. Another category which offers some attractive candidates for income investors are high-yielding preferreds, which in some cases are available substantially under the call prices. I tend to avoid bank preferreds, even though there are a lot of them to choose from. To me, the preferreds of utilities like NextEra (NEE), quality REITs like Health Care REIT (HCN), and industrials like General Electric (GE) are the safer bets. I intend to comment further on preferreds later on this week, as I am tiring of sitting on too much cash, waiting for the stock swoon that just refuses to happen, and I am considering buying a couple of preferreds. To be attractive to me, a preferred must yield at least in the 5% to 6% range, must be priced substantially under the call price, at least by 10% to 15%, and must be rated investment grade, BBB- or higher by S&P, or Baa3 or higher by Moody’s. If you can find preferreds meeting these criteria, consider them for 5% to 10% of a portfolio.
1st Posting for Friday 11/22/2013 08:30 AM
Stocks managed a turnaround Thursday after two down days, with all of the major averages posting solid gains. The venerable Dow Industrials Index closed above 16000, giving headline writers some material. Overnight, Asian markets ended mixed, with Japan, Hong Kong, and Singapore up, Shanghai and India down. European markets are likewise trading in mixed fashion, with Britain and Italy down slightly, Germany, France, and Spain up slightly. While it is early, with over an hour and a half to go to the open, U.S. index futures are flat to slightly negative.
None of my stocks have received any analyst upgrades / downgrades so far today.
I went back in on a couple of mining stocks yesterday, buying Pan American Silver (PAAS) at $10.35, Yamana Gold (AUY) at $8.75, and Newmont (NEM) at $25.80. I also bought a preferred issue, for the first time in a long while. I was inspired by a Seeking Alpha article to buy General Electric Capital Corp 4.865% (GEB), which is actually not a preferred stock, but rather an exchange traded debt security. The series is not callable until 2017, at the face value of $25. With a purchase price of $21.03, the actual yield is 5.79%. See my article in Seeking Alpha for a primer on preferreds. This situation represents the conditions where preferreds make sense, when they can be bought at a substantial discount to the nominal value, the issuing firm is strong, and an effective yield in excess of 5% or more can be realized. Also, consider the fact that, excluding REITs, most stocks are at sky-high valuations just now. This issue was ideal for inclusion in an IRA, since the dividends are actually interest in the case of a debt security, and do not qualify for favorable tax treatment as qualified dividends. I plan to investigate preferreds a little more in the near term, and I may add one or two more.
1st Posting for Thursday 11/21/2013 08:30 AM
Stocks posted a second down day Wednesday, making it two in a row. Still, the declines were modest. The Fed minutes, which came out at 2:00 PM, triggered a sell off, as the members were revealed to be considering reducing asset purchases sooner rather than later. Overnight, Asian markets mostly declined, with Japan being an exception, up nearly 2%. European markets, now at the half way point in the European market day, are flat in Britain, down by small margins in France and Germany, and up by small margins in Italy and Spain. As for economic releases, today we will see the Weekly Claims for Unemployment data and October PPI, both out at 8:30 AM, and then the Philadelphia Fed Business Activity Index at 10:00 AM. U.S. index futures are positive, with over an hour to go to the open.
Several upgrades / downgrades have come out this morning on stocks I follow:
JM Smucker (SJM) was downgraded from OverWeight to Neutral at JP Morgan.
Plains All American Pipeline LP (PAA) was upgraded from Neutral to OutPerform at RW Baird.
Crestwood Midstream Partners LP (CMLP) was also upgraded from Neutral to OutPerform at RW Baird.
BreitBurn Energy LP (BBEP) was likewise upgraded from Neutral to OutPerform at RW Baird.
Westar Energy (WR) was upgraded from Neutral to Buy at UBS.
Phillip Morris (PM) was downgraded from Conviction Buy to Neutral at Goldman.
MarketWatch has a headline article stating that Goldman says the S & P 500 could drop 10% in 2014, but after reading the article, they refer to a drop during the year, after which a recovery to new highs is expected. Goldman is not alone in predicting a correction of 5% to 10% will occur sometime in the next few months. It would be unusual not to have one after a market run like we have had this year.
1st Posting for Wednesday 11/20/2013 09:00 AM
Stocks finally had a down day Tuesday, as all of the major averages posted modest declines. Asian markets ended mixed, with Japan, India, and Singapore down, Hong Kong and Shanghai up. European markets are all trading in the red at this hour. A raft of economic data will be released this morning, to include Retail Sales, CPI, and Existing Home Sales, all for October, plus Business Inventories for September, the weekly Oil Inventory Report, and finally, at 2:00 PM, the latest FOMC Meeting Minutes. U.S. stock index futures are slightly negative for the blue chips, slightly positive for the NASDAQ.
Only two upgrades / downgrades to report this morning on my stocks:
Medtronic (MDT) was downgraded from Buy to Hold at Argus.
ONEOK Partners LP (OKS) was upgraded from Sell to Neutral at Goldman.
I have just received and started to read John Mauldin’s new book, co-authored with Jonathan Tepper, entitled “Code Red”. The phrase refers to the authors’ characterization of the world economic situation since the financial crisis of 2008, and the extreme responses of central banks world-wide to it, as they strive to deal with the sovereign debt loads, aging populations, and other issues affecting the economies of nearly all developed nations. I will comment further after I have read the book. Hint; the outlook for winding things down calmly to “normalcy”, with minimal disruption, is not very promising.
Back to more mundane matters. Yesterday, I added to my position in HCP Inc (HCP), a health facility REIT. The REIT sector continues to be in the doldrums, and is in fact the only sector where prices are not out of my buy range, with the possible exception of mining stocks. I'm taking what the market is offering, but I'm close to being maxed out on REITs. No matter how much I like a sector, I have to apply some limits, to avoid over-concentration, in case my interpretation of value turns out to be wrong.
1st Posting for Tuesday 11/19/2013 09:00 AM
Stocks meandered through a sluggish session on Monday, with most of the major averages ending with small losses. The restructured Dow Industrial Index was an exception, ending with a slight advance. It was headline news yesterday that the average broke 16000, but it did not hold into the close. Overnight, Asian markets mostly ended with small declines, with India being an exception, posting a modest gain. European markets are all trading in the red at this hour. The only economic release scheduled for today is the Q3 Employment Cost Index, to come out at 8:30 AM. U.S. futures are slightly negative, with less than an hour to go to the open.
Upgrades / downgrades out his morning on my stocks are as follows:
HCP Inc (HCP) was downgraded from Buy to Hold at Stifel.
Intel (INTC) was initiated at Buy at Mizuho.
Kimco Realty (KIM) was initiated at Hold at MLV & Co.
Crestwood Midstream Partners LP (CMLP) was initiated at Buy at Ladenburg.
Walgreen (WAG) was downgraded from OutPerform to Market Perform at Raymond James.
As for earnings, I have reports from two of my stocks:
AmeriGas Propane LP (APU) reported yesterday after the close that FQ4 EPS was a loss of $0.63. Revenue of $531.97M, up 4.2% Y/Y, still missed by $53.45M. APU needs a cold winter to boost revenues and earnings.
Medtronic (MTD) reported this morning that FQ2 EPS was $0.91, beating by a penny. Revenue of $4.19B, up 3.3% Y/Y, beat by $0.01B.
Yesterday, I sold a cash-covered put for March 2014 on Realty Income (O), with a strike of $40, for $1.80. As this was in an IRA (no margin), I must keep $4000 in cash available for the duration of the trade, in case the put is exercised. I explained the strategy in a Seeking Alpha article published last year, if you are not familiar with it. The strategy is about as close to a perfect strategy as one can get in the stock market. If O goes up or stays where it is now, the option expires worthless, and I pocket $180, for an annualized gain of around 12% on the $4000 that I must keep available. If O goes down enough to cause the put to be exercised, I will buy 100 shares at $40. I still get to keep the $180, so my effective price is $38.20, ignoring commissions. Even though it will not seem like a winner if O declines significantly, I’m still ahead by $180 or more from where I would be if I had just purchased O on the day I sold the put, for around $40.50. Of course, in this scenario I would also have collected several monthly dividends of $.18 per share, easing the pain a bit. The only reason I don’t use the put selling strategy more often is that I would hate to have all of my cash committed to buying stock at above-market prices if a major correction should ensue. Thus, I seldom have more than one or two of these trades on at any one time.
1st Posting for Monday 11/18/2013 08:30 AM
Stocks managed to post fairly substantial gains on all of the major averages Friday. With earnings mostly reported, for the quarter just ended, the focus now will be on the economy, and for retailers, on holiday sales. Overnight, Asian markets mostly posted strong gains, over 2% for Hong Kong, Shanghai, and India. Singapore had a small gain, and Japan posted a fractional loss. European markets are trading in the green at this hour. There will be minimal economic data coming out today, Long Term TIC Flows at 9:00 AM, and the NAHB Housing Index at 10:00 AM. U.S. futures are slightly positive for the blue chips, and flat for the NASDAQ.
Upgrades / downgrades this AM on my stocks are as follows:
Diebold (DBD) was upgraded from Hold to Buy at KeyBanc.
MicroSoft (MSFT) was downgraded from Neutral to UnderPerform at BofAMerrill.
Nucor (NUE) was downgraded from Buy to Neutral at Citigroup.
Only a couple of my stocks will be going ex-dividend this week:
MicroSoft (MSFT), 11/19/2013, yield 2.96%.
Johnson & Johnson (JNJ), 11/22/2013, yield 2.80%.
A few stragglers will be reporting earnings this week, as well:
Amerigas Partners LP (APU), 11/18/2013, after market hours.
Medtronic (MDT), 11/19/2013, before market hours.
JM Smucker (SJM), 11/20/2013, before market hours.
The market seems likely to continue to advance in the near-term, barring some unnerving geo-political development. While I had believed a 10% or so correction would occur during the political stand-off, it did not happen, and at the moment there is nothing on the horizon to interrupt the rally, at least that I can see. Of course, when everyone’s confidence is sky high, that’s when trouble usually occurs.
1st Posting for Friday 11/15/2013 08:30 AM
Stocks continued to climb on Thursday, with most of the major averages posting decent, but not huge, gains. The small cap Russell 2000 Index was the exception, ending with a tiny decline. Overnight, Asian markets rallied strongly, up over 1% in most cases. European markets are mostly trading up, though not as strong, with gains limited to the .2% to.3% range. Italy is an exception, trading down .5%.
Several economic releases are on tap this morning. Once again, Import and Export Prices for October are scheduled, along with the Empire Manufacturing Index for November, Industrial Production and Capacity Utilization for October, and lastly, Wholesale Inventories for September. U.S. futures are positive, with over an hour to go to the open.
A few upgrades / downgrades of interest that have come out this morning are:
Kellogg (K) was downgraded from Equal Weight to UnderWeight by Barclays.
NextEra Energy (NEE) was upgraded from Neutral to Buy at UBS.
Amerigas Partners LP (APU) was initiated at Buy at UBS.
Cisco Systems (CSCO) indeed opened down around three dollars yesterday, and basically traded sideways all day from that point, on huge volume. With a yield of more than 3%, at this price, I had to take the plunge and buy. The next dividend won’t be coming along until next year, so if CSCO makes back some of the loss fairly soon, I will probably sell for a quick gain. If not, I will hold for the dividend. I concur that CSCO has a few headwinds just now, but this giant isn’t going to go away anytime soon, and with the resources available to the firm, will likely turn around sooner or later.
1st Posting for Thursday 11/14/2013 08:45 AM
U.S. stocks rose yet again on Wednesday, contrary to overseas markets. Asian markets followed the U.S. lead, gaining overnight, led by Japan, up 2.12%. European markets are trading mixed, with Britain, France, and Germany up, Italy and Spain in the red. U.S. futures are positive for the blue chips, but negative for the NASDAQ. The Import and Export Price statistics disappeared from the E*Trade economic calendar yesterday after the morning, so no report on those items. Today, we have the usual Weekly Unemployment Claims numbers, due out at 8:30 AM, along with Q3 Productivity and Unit Labor Costs.
Upgrades / downgrades on my stocks since yesterday are:
TICC Capital (TICC) was downgraded from Buy to Neutral at Ladenburg.
Hercules Technology Growth Capital (HTGC) was downgraded from Buy to Hold at Wunderlich.
Statoil (STO) was initiated at Neutral at Credit Suisse.
Total S.A, (TOT) was initiated at OutPerform at Credit Suisse.
ENI S. p. A. (E) was initiated at UnderPerform at Credit Suisse.
Royal Dutch Shell (RDS.B) was initiated at OutPerform at Credit Suisse.
Cisco Systems (CSCO) was downgraded from Conviction Buy to merely Buy at Goldman.
CSCO was downgraded from OutPerform to Neutral at Wedbush.
CSCO was also downgraded by Deutsche Bank, from Buy to Hold.
Now on to earnings:
Cisco Systems (CSCO) reported after the close yesterday that FQ1 EPS was $0.53, beating by two cents. Revenue of $12.1B, up 2% Y/Y, missed by $0.25B. But what rocked the stock and inspired the downgrades was significantly lowered guidance for FQ2, and indeed for all of FY14. The stock tumbled more than 10% in after-hours trade, and is likely in for a rough day today.
Also yesterday evening, PennantPark Investment (PNNT) reported FQ4 EPS of $0.26, in-line
Wal-Mart (WMT) reported this morning that Q3 EPS was $1.14, and revenue was $115.67B, up 1.7% Y/Y, missing by $1.08B. The firm also lowered Q4 guidance to $1.60 - $1.70 vs. $1.69 consensus. WMT is down slightly in the pre-market trading.
Pan American Silver (PAAS) reported Q3 EPS of $0.08, beating by six cents. Revenue of $213.6M beat by $14.86M. PAAS is on my speculative list because I believe the mining stocks are a good speculation, if they can be bought low enough. PAAS also pays a dividend yielding over 4% at current prices. I would be a buyer anytime PAAS gets below $10, or even close to it.
Well, today might be a good day to go back in on CSCO. The question is, how low will it go, and how long will it take to get there? It might get there today, in reaction selling, or it may take several days. I would say wait until it seems to find a bottom today, pick up a few shares there, then be prepared to add more if it goes down further in the next few days.
1st Posting for Wednesday 11/13/2013 08:45 AM
Stocks declined slightly Tuesday, on a slow day with minimal news flow affecting the market. Overnight, Asian markets posted declines, led by Shanghai and Hong Kong, both down nearly 2%. European stocks are likewise trading with losses at this hour. U.S. futures are negative, indicating the market will begin the day here on a down note as well.
At least today we have a trickle of economic data, with Import and Export Prices for October coming out at 8:30 AM, and the latest Treasury report on the current deficit, also for October, coming out this afternoon.
Two upgrades/downgrades have come out so far today on my stocks:
JM Smucker Co (SJM) was initiated at Neutral at Credit Suisse.
NuStar Energy LP (NS) was upgraded from UnderPerform to Neutral at Credit Suisse. .
Speaking of NuStar, the MLP reported yesterday that Q3 EPS was $0.28, missing by three cents. Revenue was $780.01M, missing by $164.84M. Not to worry, apparently, as management was able to put a positive spin on the results, and the market apparently bought the story, as NS gained $3 yesterday after the release. In the conference call, the theme was that the turnaround was on track, with DCF to support the dividend becoming a reality next year. The NS reaction just goes to show that for the market, it is all about expectations, and how the results relate to expectations. These results were not great, but they were evidently better than many expected. Fine with me, as I hold what for me is a fairly large position.
Time to get ready for the day.
1st Posting for Tuesday 11/12/2013 08:30 AM
Stocks went nowhere Monday, which was the Veteran's Day Holiday, as trading volumes were at extreme lows for a full day session. Asian markets ended mixed, with Japan and Shanghai up, Hong Kong, India, and Singapore down. European markets are all trading in the red at this hour, as the European trading day is just past the half way mark. U.S. futures are slightly negative. Again, there are no economic releases due out today.
Only one upgrade/downgrade to report on my stocks so far today, as Intel (INTC) was downgraded from Buy to Neutral at MKM Partners.
Vodafone (VOD) reported in the wee hours (here, not London) that H1 EBITDA dropped 4.1%, to £6.6B, but still bested the consensus of £6.4B. Revenue was up 1.2% to £22.03B, but on an organic basis, was down -3.2%. Pretax profit was £1.51B.
I am somewhat anxiously awaiting the report from NuStar (NS), expected this morning, but not yet available. The current outsized dividend was confirmed on 10/31/2013 for the next payment, ex-dividend date 11/7/2013, so hopefully that means performance has been ok.
Activity should pick up today. The only sector where I can see some decent buys available is the REIT group. I listed my picks in the group yesterday. These stocks, currently out of favor, irrationally so in my opinion, could still go lower in the short run. I have had a low-ball order in on Realty Income (O) for awhile, so far not filled, although it has come close.
1st Posting for Monday 11/11/2013 08:00 AM
Stocks rallied yet again on Friday, following a surprisingly strong Jobs Report for October. One sector that was an exception was REITs, which dropped on concerns that interest rates would rise in the near future. Overnight, Asian markets mostly ended with gains, with India being a laggard, posting a loss. European markets are all trading with gains at this hour. U.S. futures are slightly positive. There are no economic releases scheduled for today.
Only one upgrade/downgrade has come out so far today on my stocks, as Westar Energy (WR) was upgraded from Hold to Buy at Gabelli.
Stocks on my lists going ex-dividend this week are as follows, by date:
Emerson Electric (EMR), yield 2.57%.
GlaxoSmithKline (GSK), yield 4.54%.
Royal Dutch Shell PLC (RDS.B), yield 5.34%.
Smucker J M (SJM), yield 2.14%.
Diebold (DBD), yield 3.91%.
Exelon (EXC), yield 4.38%. The good news is EXC is now yielding over 4%, following the dividend cut of some months ago. The bad news is it is because of a huge decline in the stock price, from the $40’s to the $20’s since 2011.
Fifth Street Finance (FSC), yield 11.24%. FSC pays monthly.
Chevron (CVX), yield 3.30%.
Walgreen (WAG), yield 2.11%.
United Parcel Service (UPS), yield 2.49%.
Hercules Technology Growth Capital (HTGC), yield 6.90%.
Now on to earnings. First, a couple from last week that I missed were:
Universal (UVV) reported on 11/5/2013 that Six-Month Diluted EPS was $2.95, up 18%. Segment operating income was $56M, down 55%. Second Quarter EPS was $0.90, and income was $49M. The results included a gain of $1.96 per share from a favorable litigation gain. UVV’s fiscal 2nd Quarter ended 9/30/2013.
Gladstone Investment (GAIN), also on a fiscal schedule with the 2nd Quarter ending 9/30/2013, reported on 11/6/2013 that NII was $0.15 per share for the quarter just ended, a 54% gain. The outsized increase was due to an asset sale. Excluding the one-time gain, NII increased 5.2% for the quarter.
Now, earnings expected this week are listed following, by date. Unless otherwise noted, earnings will be released before the market opens on the indicated date.
NuStar Energy LP (NS).
Cisco Systems (CSCO), Pennantpark Investment (PNNT). CSCO will report after the market closes.
Wal-Mart Stores (WMT), Pan American Silver (PAAS).
As I survey the market, most sectors are too richly valued for purchase these days, with the exception of most property REITs, some utilities, and mining stocks. Many BDCs are also at less than nosebleed levels, as are mortgage REITs. My best recommendations for income investors today are three top quality property REITs: Health Care REIT (HCN), HCP Inc (HCP), and Realty Income (O). I have added to positions in all three in recent days.
Earnings season is winding down. The aggregate result this quarter was slightly better than expected, with every effort having been made to lower expectations, so such would be the case. Still, at this point, earnings are pretty darn good, as companies have mostly shed jobs and cut costs, as opposed to adding capacity. Managements across all sectors are playing it somewhat conservative, not surprising in light of the sluggish world economy, political dysfunction in Washington, and uncertainties over health care changes.
1st Posting for Friday 11/08/2013 09:00 AM
Stocks endured a broad-based sell off on Thursday, as all of the major averages ended the session with declines of 1% or more. Overnight, Asian markets followed the U.S. lead, all posting losses. Then, at about the half-way mark, European markets are likewise trading in the red. Today is the day for the October Monthly Jobs Report. With the numbers possibly skewed from the government shut down, it probably will not be a catalyst for a renewed market advance. Personal Income and Spending data for September will also be coming out, plus a reading on sentiment from the University of Michigan Survey. U.S. futures are flat, with a slight positive bias, as the market awaits the economic data.
A few upgrades/downgrades have come out today on my stocks:
Triangle Capital (TCAP) was downgraded from OutPerform to Market Perform at Raymond James.
Calumet Specialty Products Partners LP (CLMT) was upgraded from UnderPerform to Neutral at Credit Suisse. CLMT was down nearly $3 yesterday after a disappointing report. The stock is not on my lists, but I have been following it. I held off on taking a position, fortunately. It could be a value opportunity at this point, but the outlook is none too promising in the medium term. I’m going to think about it some more.
BlackRock Kelso (BKCC) was upgraded from UnderPerform to Market Perform at Wells Fargo.
Darden Restaurants (DRI) was initiated at Sector Perform by RBC Capital Markets.
McDonalds (MCD) was initiated at Sector Perform by RBC Capital Markets.
Now, on to yesterday’s earnings reports from stocks on my lists:
Alliant Energy (LNT) reported Q3 EPS of $1.56, beating by $0.23. Revenue of $866.6M beat by $163.4. LNT is a top-performing utility, with a price and yield (under 4%) unfortunately reflecting that assessment. I can’t get excited about a utility yielding less than 4%.
BlackRock Kelso (BKCC) reported Q3 EPS of $0.27, in-line, and declared the next dividend at $0.26, thus continuing to yield over 10%. The stock was upgraded by Wells Fargo after the report. I hold a small position in the BDC.
Hercules Technology Growth Capital (HTGC) reported Q3 NII (Net Investment Income) of $0.35, beating by six cents. A dividend increase to $0.31 was also announced. I don’t own it now, unfortunately.
Main Street Capital (MAIN) reported Q3 NII per share of $0.51, inline. Net asset value per share was $20.01, up 8% YTD.
TICC Capital (TICC) reported Q3 NII of $0.28, beating by a penny.
The BDCs are all doing well. Just keep in mind that there is risk in these names, the price to be paid for the high yields, which can become apparent when the economy slows.
Consolidated Communications (CNSL) reported Q3 EPS of $0.30, beating by nine cents. Revenue of $150.8M beat by $0.58M. CNSL has been long been one of the best performers in the beaten-down rural telecom group. I have owned it since 2007, and the dividends have never stopped coming. While there has not been an increase during that time, with a yield north of 8%, I can’t complain.
Windstream (WIN) reported Q3 EPS of $0.08, missing by a penny. Revenue of $1.45B, down 3% Y/Y, missed by $0.06B. I have been tempted by the double-digit yield available from WIN on more than one occasion, but have always passed, fearful it will become another Frontier (FTR). It has not thus far declined as much as FTR, but there is nothing on the horizon that I can see to suggest WIN will soon advance out of the single-digit range, as far as the stock price is concerned.
So, of the four rural telecoms on my high-risk (Tier3) list, all of which reported this week, CNSL is the only one that seems to be holding up.
Crestwood Midstream Partners LP (CMLP) reported Q3 EPS of $6.3M, and revenue of $71.1M. CMLP yields 7.75% currently.
Memorial Production Partners LP (MEMP) reported EBITDA increased 23% to $40.5M for the quarter, vs. $32.9M for the comparable 2012 quarter. The dividend was increased to $0.55 per unit. The yield is currently over 10%. I recently purchased MEMP. So far, I have secured one dividend at the new rate, and the stock is up slightly. With some of the oldest and largest MLPs exhibiting characteristics of their own success, by which I mean high prices and low yields, I believe the best opportunities in the space are some of the newer, smaller MLPs, such as MEMP. Just keep in mind all MLPs are on my Tier2 list (slightly more risk than Tier1) for a reason. They operate closer to the edge, and rely on performance to fund their payouts. Plus, there is always the risk of a change in tax policy which currently favors the sector.
Enerplus (ERF), the former Canadian Trust, reported Q2 EPS of $0.26, beating by a penny. To reiterate my point regarding MLPs, recall that ERF was a $50 stock during the Canadian Trust glory days, prior to the “Halloween Massacre” of 2006, whereby the Canadian government announced an end to the favorable tax treatment for the trusts, after promising that the tax policy would not change. ERF is a mid-teens stock today.
After going through the earnings, I see that the Payroll numbers have come out, better than expected, with the headline jobs gain at 204K. Time to get ready to see how the market reacts.
1st Posting for Thursday 11/07/2013 09:00 AM
Stocks gained Wednesday for the most part, with the Dow Industrials registering a triple-digit advance, and the S & P 500 up 7 points. The NASDAQ, however, declined 8 points, as a swoon by Tesla weighed on the index. The small cap Russell 2000 index also posted a small decline. Overnight, all of the major Asian bourses declined. Not so in Europe, as all of the major bourses are showing gains at this hour, and fairly substantial gains at that. Economic reports on tap today are the Weekly Claims for Unemployment, an advance read on 3rd Quarter GDP, and this afternoon, Consumer Credit. U.S. futures are positive, pre-market.
None of my stocks have received any upgrades/downgrades so far this morning.
Earnings from yesterday from my stocks were as follows
Molson Coors Brewing (TAP) reported Q3 EPS of $1.45, beating by six cents. Revenue of $1.17B, down 2% Y/Y, missed by $0.05B.
Triangle Capital (TCAP) reported Q3 EPS of $0.61, beating by three cents. Revenue of $27.3M beat by $1.6M.
CenturyLink (CTL) reported Q3 EPS of $0.63, in-line. Revenue of $4.52B, down 1% Y/Y, beat by $10M.
BreitBurn Energy Partners LP (BBEP) reported Q3 EPS of -$0.25.
Annaly Capital (NLY) reported Q3 EPS of $0.28, missing by six cents. Book value per share of $12.70 slipped from $13.03 at end of Q2.
I did manage to pick up some shares of Health Care REIT (HCN) at $62.90, which turned out to be a good buy level, for one day at least, as the shares spent most of the day above $63, closing at $63.27.
Time to see what today brings. Not much in the way of bargains, I suspect.
1st Posting for Wednesday 11/06/2013 08:30 AM
Stocks started off Tuesday with a major swoon, but then after 10:00 AM began a slow, methodical recovery that took the major averages close to break even, and even a bit more in the case of the NADSAQ. Overnight, Asian markets mostly ended with losses, with Japan being the exception, gaining .78%. European markets are all trading with fairly decent gains at this hour. U.S. futures are positive, with over an hour to go to the open. The only economic release on tap is Leading Indicators for September, due out at 10:00 AM.
Only one upgrade/downgrade to report on my stocks so far today, as Unilever (UL) was downgraded from Buy to Neutral at Nomura.
Upon reviewing Health Care REIT (HCN) for possibly adding to my position, I noticed that my Monday posting had incorrectly stated the upcoming ex-dividend date as 11/8/2013. It is shown on E*Trade as 11/7/2013. I plan to buy a few shares today, as HCN is one of the few stocks available at a reasonable price.
I missed reporting earnings from Spectra Energy (SE), which reported on Monday that Q3 EPS was $0.42, beating by nine cents. Revenue of $1.14B missed by $0.09B.
Now to get caught up on earnings from yesterday:
Emerson (EMR) reported FQ4 EPS of $1.10, missing by a penny. Revenue of $6.81B, up 2% Y/Y, beat by $0.05B.
Energy Transfer Equity LP (ETE) reported Q3 EPS of $0.54, missing by four cents. Revenue of $12.49B, up 493.4% Y/Y, beat by $560M. That revenue % is not a misprint, ETE had low revenue last year, I suppose.
Energy Transfer Partners LP (ETP), companion to ETE, reported Q3 EPS of $0.51, missing by twelve cents. Revenue of $11.9B, up 560.5% Y/Y, beat by $460M.
Health Care REIT (HCN) reported Q3 FFO of $0.97. Revenue of $786.93M beat by $151.21M. Guidance for 2013 FFO and FAD was raised two cents, to $3.74 - $3.80 and $3.29 - $3.35, respectively. I cannot see why the shares dropped after the report, unless investors were unnerved by the stated 79% payout ratio. But it was even higher a year ago at 81%. I was asleep at the switch yesterday on HCN, but if the market allows me to buy today under $63, I’ll be a buyer.
ONEOK Partners (OKS) reported Q3 EPS of $0.35, missing by $0.29. That is a pretty big miss. The stock only lost $0.75 on the day, not much for a $50 plus stock. Sometimes investors can be somewhat forgiving, I guess.
Ares Capital (ARCC) reported FQ4 EPS of $0.48, beating by nine cents. ARCC is one of the larger BDCs, and is my largest BDC holding. I have owned shares for over 7 years, with a lot of dividends pocketed.
Frontier Communications (FTR) reported Q3 EPS of $0.06, in-line. Revenue of $1.185B, down 5% Y/Y, still beat by $5M. Free cash flow of $232.2M vs. net income of $56.5M was reported, and 2013 free cash flow and capex guidance were reaffirmed. This was a better report than we have seen in recent quarters from the beaten-down rural telecom. I have owned it since it was Citizens, not Frontier, Communications. With dividends, I’m close to even in spite of the stock price decline, but it has not been a stellar investment, no doubt.
Medical Properties Trust (MPW) reported Q3 FFO of $0.25, in-line. Revenue of $60.45M missed by $1.1M. MPW is a health facility REIT that is unique in that they only invest in hospitals. I have owned it since 2007. The dividend has never been increased, but the stock yields over 6%, and never missed a payment throughout the financial crisis.
Exterran Partners LP (EXLP) reported FQ3 EPS of $0.16, missing by ten cents. Revenue of $115.8M missed by $1.59M.
E*Trade now shows Annaly (NLY) will be reporting today, after the close. The mortgage REITs have been under pressure for some time now, and I doubt if the report from NLY is going to improve the outlook for the sector.
Time to publish and get ready for Wednesday, as the camel in the ad says, do you know what day it is? It’s hump day!
1st Posting for Tuesday 11/05/2013 08:30 AM
Stocks posted another day of solid, though not spectacular, gains on Monday, with all major indexes participating, including the small caps. Overnight, Asian markets ended mixed, with Japan, Shanghai, and Singapore up, Hong Kong and India down. European markets are all trading with losses at this hour. The headline story on MarketWatch states that the reason is gloomier growth forecasts for the region. U. S. futures are negative. The only economic release scheduled for today is ISM Services for October, to be released at 10:00 AM.
A couple of late-day upgrades/downgrades from yesterday on my stocks were:
Linn Energy LLC (LINE) was upgraded from Neutral to Buy at Janney Capital. LINE announced that the deal to acquire Berry Petroleum was sweetened, reflecting stock movements since the original announcement, and reiterated that both managements are committed to the deal, now expected to close after year-end.
Magellan Midstream Partners LP (MMP) was downgraded from Buy to Neutral at Ladenburg.
Then, this morning, a few more upgrades/downgrades on my stocks have come out:
Southern Company (SO) was initiated with a Fair Value rating by CTR Capital.
SCANA (SCG) was also initiated with a Fair Value rating by CRT Capital.
Linn Energy LLC (LINE) was downgraded from Buy to Neutral at Goldman.
Kellogg (K) was downgraded from Buy to Hold at Deutsche Bank.
Earnings out yesterday on my stocks were as follows:
Kellogg (K) reported Q3 EPS of $0.95, beating by six cents. Revenue of $3.72B beat by $0.01B. K also announced that close to 7% of its workforce over the next three years.
Sysco (SYY) reported FQ1 EPS of $0.49, beating by two cents. Revenue of $11.7B, up 5.7% Y/Y, beat by $0.08B. The stock gained $1/40 yesterday after the report.
Spectra Energy LP (SEP) reported Q3 EPS of $0.47, beating by nine cents.
Plains All American Pipeline LP (PAA) reported Q3 EPS of $0.53, beating by three cents. Revenue of $10.7B, up 14.4% Y/Y, beat by $1.13B.
Safety Insurance Group (SAFT) reported Q3 EPS of $1.14, beating by a whopping $0.34. The report was after the close. SAFT should have a good day today.
Prospect Capital (PSEC) reported FQ1 net investment income of $0.32, missing by a penny. NAV per share was reported as $10.72, slightly under the market price.
MFA Mortgage (MFA) reported Q3 EPS of $0.18, missing by two cents. Book value per share was reported at $7.85.
National Health Investors (NHI) reported 3rd Quarter FFO increased 17.2%. Normalized FFO was $0.94 per diluted share, and Normalized FAD for the quarter was $0.91. FAD is Funds Available for Distribution. The dividend of $0.73 seems safe.
NLY is now shown by E*Trade as reporting Tuesday. No disasters so far this week, as far as reported earnings are concerned. But the week is not over.
1st Posting for Monday 11/04/2013 08:00 AM
Stocks gained on Friday, with most of the major averages posting modest gains. The small cap Russell 2000 Index was an exception, ending slightly down. Crude oil slipped to the lowest point seen in several months, to $94 and change for WTI (West Texas Intermediate). Gold also declined, threatening to go below $1300 an ounce. The key Monthly Jobs Report will be coming out Friday. Other than that, there are only a few routine economic releases coming out this week, such as Factory Orders, ISM Services, Leading Indicators, and the like. Although earnings, which continue to be released, will continue to weigh on the market, the Jobs Report is the most significant anticipated event likely to affect stocks. Barring some unexpected “Black Swan” event, trading should be subdued before Friday.
Overnight, Asian markets started the week with mixed results, as Japan and Hong Kong posted losses, while Shanghai, India, and Singapore posted gains. European markets are all trading in the green at this hour, which is about to the half-way point for European bourses. U.S. stock index futures are positive, with nearly two hours to go to the open. The only economic release for today is Factory Orders at 10:00 AM, to include two months, September and August, the latter being a delayed report which was missed during the shutdown.
So far, only one of my stocks has received any analyst action this morning, as Digital Realty (DLR) was downgraded from OutPerform to Neutral at RW Baird.
Stocks on my lists going ex-dividend this week are, by date, as follows:
PVR Partners LP (PVR), yield 8.47%. I sold after the acquisition by Regency Energy Partners LP was announced, as there was some question if the distribution would be continuing while waiting for the merger to be finalized. Apparently, the answer is that it will continue during the interim.
Intel (INTC), yield 3.70%.
Boardwalk Pipeline Partners LP (BWP), yield 7.07%.
Entergy (ETR), yield 5.10%.
Magellan Midstream Partners LP (MMP), yield 3.73%. When an MLP yields less than 3%, you know it is over-valued.
Martin Midstream Partners LP (MMLP), yield 6.66%.
Crestwood Midstream Partners LP (CMLP), yield 7.39%.
QR Energy LP (QRE), yield 10.85%.
American Electric Power (AEP), yield 4.25%.
Pfizer (PFE), yield 3.08%.
Unilever (UL), yield 3.48%.
Amerigas Partners LP (APU), yield 7.45%.
Spectra Energy (SE), yield 3.45%.
Exterran Partners LP (EXLP), yield 6.77%.
Exxon Mobil (XOM), yield 2.81%.
NuStar Energy LP (NS), yield 9.76%. The jury is still out on NuStar’s recovery, but so far it seems to be on track, with the stock recovering slightly, enough such that the yield is not into double-digits any more.
Breitburn Energy Partners (BBEP), yield 10.04%. After a brief distribution suspension at the height of the financial crisis, BBEP has remained at or near a double-digit yield, as investors remain fearful of the risk.
Health Care REIT (HCN), yield 4.71%.
Note that occasionally one of my stocks does not get listed in my Monday wrap-up of stocks going ex-dividend in the coming week. I do the review each Sunday, and if a company does not announce until after the weekend and the ex-dividend date is in that same week, it will be missed. Usually, firms announce well ahead of the ex-dividend date, but some are almost secretive about it, announcing just before the date. I can only guess that they handle it that way so dividend seekers won’t buy their stock and then turn right around and sell after the dividend is secured.
Now on to earnings. We are now in the middle of the deluge, with a number of stocks to list.
First, on Friday, Chevron (CVX) reported Q3 EPS of $2.57, missing by fourteen cents. Revenue of $58.5B missed by $0.83B. The oil giant’s shares dropped nearly two dollars in Friday trading after the disappointing release.
Now, for the upcoming week, we have quite a few more. Companies reporting, by date, are listed following. Unless otherwise noted, earnings will be released before the market opens on the indicated date.
Kellogg (K), Sysco (SYY), National Health Investors (NHI), Spectra Energy Partners LP (SEP), Plains All American Pipeline LP (PAA), Safety Insurance Group (SAFT), Prospect Capital (PSEC), Annaly Capital (NLY), and MFA Financial (MFA). PAA, PSEC, and NLY will all report after the close. Neither NHI nor SAFT specified a time.
Emerson Electric (EMR), Energy Transfer Equity LP (ETE), Energy Transfer Partners LP (ETP), Health Care REIT (HCN), ONEOK Partners LP (OKS), Universal (UVV), Ares Capital (ARCC), Frontier (FTR), Medical Properties Trust (MPW), and Exterran Partners LP (EXLP). ETE, ETP, OKS, and UVV will all report after the close.
Molson Coors (TAP), Gladstone Investment (GAIN), Triangle Capital (TCAP), CenturyLink (CTL), Breitburn Energy Partners LP (BBEP), and QR Energy LP (QRE). Neither GAIN nor QRE specified a time. TCAP will report after the close.
Alliant Energy (LNT), Westar Energy (WR), BlackRock Kelso Capital (BKCC), Hercules Technology Growth Capital (HTGC), Main Street Capital (MAIN), TICC Capital (TICC), Consolidated Communications (CNSL), Windstream (WIN), Crestwood Midstream Partners LP (CMLP), and Memorial Production Partners LP (MEMP). WR and HTGC will both report after the close. Neither MAIN nor MEMP specified a time.
Enerplus (ERF), the one-time Canadian Trust in its glory days, will report on Friday, no time specified.
To recap, with the flood of earnings reports approaching high tide, and the October Jobs Report coming out on Friday, this week should be an exciting week for traders, with a lot happening to drive the markets.
1st Posting for Friday 11/01/2013 08:30 AM
Stocks ended the month Thursday with a whimper, posting a second down day in a row, but still ending the month with gains on all the major averages. Overnight, Asian markets ended mixed, with Japan and Singapore down, Hong Kong, Shanghai, and India up. European markets are mostly trading in the red at this hour, with only Britain holding on to a small gain. U.S. futures are positive, as traders await the October ISM reading of economic activity.
Only a minimal level of activity today to report on analyst upgrades / downgrades:
Solar Capital (SLRC) was downgraded from OutPerform to Market Perform at Wells Fargo.
Royal Dutch Shell (RDS.B) was downgraded from OutPerform to Neutral at Macquarie. The stock dropped over $3 yesterday after a disappointing earnings report. The stock was also downgraded from Buy to Hold at Societe Generale.
Now on to earnings:
Realty Income (O) reported Thursday that FQ2 AFFO was $0.60, missing by a penny. Revenue of $199.3M, up 70.2% Y/Y, beat by $7.52M.
Also Thursday, Magellan Midstream LP (MMP) reported Q3 EPS of $0.54, missing by four cents. Revenue of $443.84M beat by $19.24M.
Lastly from Thursday, Newmont Mining (NEM) reported Q3 EPS of $0.46, beating by eleven cents. Revenue was $1.98B, down 20% Y/Y, missing by $20M.
This morning, NextEra Energy (NEE) reported FQ3 EPS of $1.43, beating by four cents. Revenue of $4.39B missed by $0.08B.
Also this morning, Buckeye Partners LP (BPL) reported Q3 EPS of $0.72, missing by eleven cents. Revenue of $1.09B missed by $0.01B.
Chevron (CVX) has not yet come out, but is expected this morning.
A new month beckons. Halloween is over, it is time to start thinking about the holidays, and perhaps rising stock prices, as the next few months are traditionally the most kind to investors. If that happens, it may be the calm before the storm, as numerous headwinds will hammer the economy in 2014, not the least of which is ObamaCare.