JT’s DAILY (WEEKLY as of 12/9/2013) BLOG for Month Of December 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 Week Beginning Monday 12/30/2013 08:00 AM
The stock rally continued last week, with all of the major averages registering gains every day until Friday, which ended flat, on very low volume. Asian and European markets mostly performed likewise, with the exceptions of Hong Kong and Shanghai, which were a little more erratic. With the New Year holiday coming at mid-week, activity will likely be subdued this coming week as well. The ISM reading for December, due out Thursday, is the most significant economic release on the schedule. The December Jobs report will not be coming out until the following week, on January 10th.
It was a very slow week for upgrades / downgrades on my stocks, with only one to report; Plains All American Pipeline (PAA) was initiated at Buy at Wunderlich.
Then, early Monday morning, Entergy (ETR) was resumed into coverage by Goldman with a Neutral rating.
Several of my stocks will be going ex-dividend this week:
Realty Income (O), 12/30/2013, yield 5.77%. O pays monthly.
Raytheon (RTN), 12/30/2013, yield 2.42%.
Kimco Realty (KIM), 12/30/2013, yield 4.47%.
Sysco (SYY), 12/31/2013, yield 3.15%.
Medtronic (MDT), 12/31/2013, yield 1.95%.
Cisco Systems (CSCO), 1/2/2014, yield 3.09%.
As usual at this time of year, there are numerous articles prognosticating about the coming year, and what may be in store for investors in stocks. The conventional wisdom seems to be that 2014 will not see the markets advance like they did in 2013, but that a collapse is not likely. A vocal minority, however, makes the point that current conditions are reminiscent of a market top, and caution is warranted. My view remains that a diversified dividend portfolio is the way to go, with some cash held in reserve, and that new positions or add-ons must represent value, with a margin of safety, to be attractive. Thus, terrific companies, such as Johnson & Johnson (JNJ), Procter & Gamble (PG), or Colgate Palmolive (CL), which today command terrific prices, are sadly, off the radar. REITs are buyable, with the caveat that they should not make up more than around 15% of the portfolio. A couple of gold and silver miners are worthy of speculation, maybe up to 2% of a portfolio, as long as you are prepared to wait it out a couple of years. Also, some select MLP’s, such as Kinder Morgan (KMP), represent decent value in this over-valued market. Until we have that long-predicted, never materializing 10% to 15% stock market correction, there is very little to buy just now.
Time to publish and get ready for the New Year.
1st Posting for Week Beginning Monday 12/23/2013 08:00 AM
Stocks last week rallied on Monday, then traded flat up until the Fed announcement came out Wednesday afternoon. The news that the Fed would trim asset purchases by 10% triggered a huge rally, and the momentum carried through to the end of the week. The implication was that the Fed believed the economy was recovering enough to allow them to take such a step, or at least that was how it was interpreted. The gains for the week outpaced the prior week’s declines, such that the major averages ended the week at new all-time highs. European markets mostly mirrored the U.S. action, while Asian markets were more varied. Japan, India, and Singapore roughly followed the U.S. script, but Shanghai and Hong Kong registered declines, which accelerated towards the end of the week.
Looking forward to the week ahead, it’s Christmas – time to get serious about my Christmas shopping! But aside from that, there will be a few economic releases of note: Personal Income and Spending for November on Monday, Durable Orders for November and a couple of housing-related reads on Tuesday, the usual Weekly Claims for Unemployment on Thursday, and delayed weekly readings on petroleum and natural gas supplies on Friday.
Upgrades / downgrades on my stocks that came out last week after my Monday posting were:
Medtronic (MDT) was upgraded from Neutral to Buy at Goldman.
Magellan Midstream Partners LP (MMP) was upgraded from Hold to Buy at Deutsche Bank.
Plains All American Pipeline LP (PAA) was downgraded from Buy to Hold at Deutsche Bank.
GlaxoSmithKline (GSK) was downgraded from Buy to Hold at Deutsche Bank.
Pan American Silver (PAAS) was upgraded from UnderWeight to Neutral at JP Morgan.
Plains All American Pipeline LP (PAA) was resumed at Buy at Citigroup.
Buckeye Partners LP (BPL) was initiated at Sector Perform at RBC Capital.
Windstream (WIN) was initiated at UnderPerform at Jeffries.
CenturyLink (CTL) was initiated at UnderPerform at Jeffries.
Consolidated Communications (CNSL) was initiated at Buy at Jeffries.
Frontier Communications (FTR) was initiated at UnderPerform at Jeffries.
AT&T (T) was initiated at Buy at Jeffries.
Verizon (VZ) was initiated at Buy at Jeffries.
Calumet Specialty Products Partners LP (CLMT) was initiated at Neutral at Goldman.
3M Company (MMM) was upgraded from UnderWeight to Neutral at JP Morgan.
Prospect Capital (PSEC) was initiated at Buy at Deutsche Bank.
Then this morning, Plains All American Pipeline LP (PAA) was initiated at Buy at Wunderlich.
Two of my stocks reported earnings last week, both on Wednesday:
General Mills (GIS) reported FQ2 EPS of $0.83, missing by five cents. Revenue was $4.88B, missing by $0.07B. The stock declined on the news, but with the big rally that came afterwards, it had recovered most of the lost ground by the end of the week.
Paychex (PAYX) reported FQ2 EPS of $0.43, beating by a penny. Revenue was $610.5M, up 7% Y/Y, beating by $11.61M. PAYX is now seriously over-valued, in my opinion. I thought it was over-valued at $40, and sold. This sleepy payroll processor has been discovered, apparently, spoiling the party for long-time holders like me, selling above value, then unable to get back in at anything close to a reasonable price.
Stocks on my lists going ex-dividend during Christmas week are as follows:
Altria (MO), yield 4.98%.
Philip Morris (PM), yield 4.40%.
Main Street Capital (MAIN), yield 6.05%. MAIN pays monthly.
Prospect Capital (PSEC), yield 11.70%. PSEC also pays monthly.
Windstream (WIN), yield 12.14%.
National Health Investors (NHI), yield 5.16%.
Nucor (NUE), yield 2.85%.
Annaly Capital Management (NLY), yield 11.88%. The five cent cut was perhaps less than had been priced in. I added to my position last week, just above $10.
American Capital Agency (AGNC), yield 13.09%. I bought back in around $22, a bit too soon, obviously, but I’m seriously considering adding to my small position this week, if I can get more shares around $19.50 or so.
MFA Financial (MFA), yield 10.96%.
All three mortgage REITs (NLY, MFA, AGNC) are selling below book value while sporting double-digit yields, both conditions reflecting the severe market price declines in these names over the past several months. With the Fed committed to holding interest rates down for a long time to come, they may be priced for a poorer environment than will reasonably be experienced any time soon. I own all three, and I consider them to be a reasonable speculation for a small share of my total portfolio. Just be aware, you are not investing in Chevron (CVX), Johnson & Johnson (JNJ), or Procter & Gamble (PG) here. You are reaching for double-digit yields, rather than the sub-3% yields offered by safe blue chips, and are definitely further out on the risk spectrum with these names. Mortgage REITs have more in common with hedge funds than they do with property REITs, their (very) distant cousins. The skills and experience (maybe also luck) of their management teams are key to their success. That is true to some extent for all companies, but is more so for mortgage REITs than most other firms.
None of my stocks will be reporting earnings this week. It should be a quiet week in the markets, with Christmas day coming right in the middle of the week. Asian markets have begun the week with gains overnight, European markets are likewise mostly in the green at this hour (7:45 AM 12/23/2013), and U.S. futures are positive, so it appears the “Santa Claus Rally” will continue on, for now at least.
1st Posting for Week Beginning Monday 12/16/2013 08:00 AM
Stocks began to decline on Monday, and the slide accelerated on through the week until Friday, when a feeble rally attempt ended in a draw, with minimal movement from the Thursday closing levels. Both Asian and European markets mirrored the U.S. on the week, declining in similar fashion. The economic releases during the week presented no big surprises, although an up tick in the weekly Claims for Unemployment, to 368K, was a bit of a disappointment.
Looking towards the week ahead, Asian markets overnight resumed the slide, led by China and Japan, both down over 1.5%. European stocks, in contrast, are all trading with substantial gains at this hour. The week ahead will see a lot of economic releases. Some of the major ones which might affect stocks are: Monday, Unit Labor Costs and Productivity, Q3, Revised, plus November Industrial Production and Capacity Utilization; Tuesday, November CPI; Wednesday, November Housing Starts and Building Permits, plus the Fed Meeting concludes; Thursday, the weekly Claims for Unemployment, November Existing Home Sales and Leading Indicators; and finally, on Friday, the Third Estimate of Q3 GDP and the GDP Deflator, the latter being a measure of inflation pressure. U.S. futures are positive, with an hour and a half to go to the open.
There were a few upgrades / downgrades on my stocks last week after Monday, as follows:
Spectra Energy (SE) was initiated at Sector Perform at CIBC.
Royal Dutch Shell (RDS.B) was upgraded from UnderWeight to Neutral at JP Morgan.
Cisco Systems (CSCO) was initiated at Sell at Citigroup.
Cisco (CSCO) was resumed at Neutral at Mizuho.
3M (MMM) was upgraded from Neutral to Buy at Nomura.
General Dynamics (GD) was upgraded from Sell to Fair Value at CRT Capital.
ENI S P A (E) was downgraded from Buy to Hold at Deutsche Bank.
Entergy (ETR) was downgraded from Buy to Hold at Deutsche Bank.
Chevron (CVX) was initiated at Sector Perform at RBC Capital Markets.
Exxon Mobil (XOM) was initiated at OutPerform at RBC Capital Markets.
Then, this morning we have one more:
Exxon Mobil (XOM) was upgraded from Neutral to Buy at Goldman.
There are not many stocks on my lists going ex-dividend this week. In fact, there are only four:
Solar Capital (SLRC), ex-dividend date is 12/17/2013, yield 7.08%. The dividend was reduced from $0.60 per quarter to $0.40 some months ago, and the yield has only been maintained via a decline in the stock price.
BlackRock Kelso Capital (BKCC), ex-dividend 12/18/2013, yield 10.77%.
PennantPark Investment (PNNT), ex-dividend 12/18/2013, yield 9.54%.
General Electric (GE), ex-dividend 12/19/2013, yield 3.28%. The announcement only came out Friday, along with notification of a 16% increase in the payout, from $0.19 per quarter to $0.22. GE continues to progress back to dividend respectability. With a yield exceeding 3%, most would agree it has already achieved said respectability.
General Mills (GIS) will be reporting earnings on 12/18/2013, before market hours. The period will be for the 2nd QTR of fiscal year 2014. Needless to say, GIS is on a different reporting schedule than most corporations.
I have finally gotten around to updating my stock lists, a task not undertaken since May, 2013. I have grudgingly increased most buy levels, reflecting the reality of the (mostly) over-valued market. It is depressing to see how many of my top industrial firms have yields barely above 2%. REITs are certainly an exception. For income investors, REITs are currently the most attractive sector, closely followed by utilities. But keep in mind that diversification is still necessary, and no one sector should account for more than 10% to 15% of a portfolio.
Changes by Tier are as follows:
Tier1 – Excel Energy (XEL) added, Vodafone (VOD) dropped. VOD has risen from the $25 level to $37 or more, and will be making a distribution of cash and Verizon (VZ) stock in early 2014. As always, I sold VOD too soon. But if I held it now, I would sell at the current inflated price, and move on.
Tier2 - PVR Partners (PVR) dropped. PVR is being acquired by Regency Energy Partners (RGP), and will soon cease to exist. I sold upon the initial euphoria, which so far has seemed to have been a good move, as the price has dropped back somewhat since the announcement.
Tier3 - Inergy (NRGY) was acquired by the Crestwood companies, so it goes away. I added Crestwood Midstream Partners (CMLP) to Tier3. I also added two other small MLPs with outsized yields to Tier3, Memorial Production Partners (MEMP), and Calumet Specialty Products Partners (CLMT). MEMP is a producer, thus is subject to commodity risk. CLMT is somewhat unique, and has numerous issues that I won’t get into here. It is higher risk, having declined from more than $40 to today’s level, barely above $25. With a yield exceeding 10%, if CLMT can hold on and see even a modest recovery, it will turn out to have been an attractive speculation at these levels.
Also, Barrick Gold (ABX) no longer meets my yield criteria, following a 75% dividend cut from $0.20 per quarter to $0.05, so it goes off my Tier3 list. This was one case where I got out while the getting was good, above $20, in late October or so, before the cut was announced. ABX has been reacting aggressively to the gold price collapse, and I think the company will survive to prosper again, just not with me on board.
I have just released my long-promised update (on Seeking Alpha) to my article series on Stocks, Options, Taxes. The new article is Part VII, with links imbedded to all of the preceding articles in the series. It can be accessed from this website under the Articles heading.
As we advance towards Christmas, the market will likely slow down a bit, as attention turns towards the spirit of the season.
1st Posting for Week Beginning Monday 12/09/2013 08:00 AM
Stocks staged a pretty decent rally Friday, after several down days in a row. The encouraging Monthly Payrolls/Unemployment Report, also known as merely the Jobs Report, for November was the primary catalyst for the upbeat mood, according to most pundits. Overnight, Asian markets mostly posted gains, led by Japan, up over 2%. European markets are trading mixed at this hour, with Britain and France down by modest margins, while Germany, Italy, and Spain are all up by slightly larger, but still modest, margins. U.S. futures are flat to slightly positive. There are no economic reports due out today.
Only one of my stocks received any analyst action this morning, as Memorial Production Partners LP (MEMP) was initiated at Buy at UBS. MEMP is in my Tier3 high yield, high risk group, yielding over 11% currently. It is high risk because it is a production MLP, subject to commodity risk as well as the ever-present risk of taxation changes..
Several of my stocks will be going ex-dividend this week:
Triangle Capital (TCAP), 12/9/2013, yield 7.29%.
Mercury General (MCY), 12/10/2013, yield 4.95%.
Digital realty (DLR), 12/11/2013, yield 6.78%. The yield reflects the battered share price, as the data center REIT has declined more than most in the recent REIT sell off. Suffering DLR holders will certainly appreciate this payment.
Total S A (TOT), 12/11/2013, yield 5.25%. Note that the yield does not take into account France’s 30% tax withholding, unrecoverable for shares held in an IRA.
Merck (MRK), 12/12/2013, yield 3.56%. My view of “Big Pharma” at this point is that it isn’t time to panic, but it is a sector to underweight in a portfolio.
DrPepper Snapple (DPS), 12/12/2013, yield 3.10%.
Reynolds American (RAI), 12/12/2013, yield 4.92%.
Ares Capital (ARCC), 12/12/2013, yield 8.32%. The yield is per the regular quarterly dividend, currently $0.38 per share. ARCC has also announced a special, year-end dividend of $0.05 per share, with the same ex-dividend date as the regular dividend.
Gladstone Investment (GAIN), 12/12/2013, yield 9.56%. GAIN pays monthly.
Potlatch (PCH), 12/13/2013, yield 3.46%.
TICC Capital (TICC), 12/13/2013, yield 10.86%.
One of my stocks will be reporting this week, as Greif Inc. is on a different reporting cycle than most firms. Greif (GEF, GEF.B) will report earnings on 12/9/2013, after market hours. As noted, Greif has two classes of common shares. The GEF shares yield 3.07%, while the GEF.B shares yield 4.30%. The GEF.B trading volume has become almost neglible, however. I held the ‘B’ shares back when I owned Greif, but I do not own it currently.
It will be interesting to see if the market can build on Friday’s advance, or instead resumes the slide.
I am going to cut back on my postings on this blog for the time being, to once a week. I will still follow the market every trading day, but I am starting a new endeavor that will limit my available time for market musing / blogging. I will still develop my usual Monday morning posting, noting upcoming ex-dividend dates and earnings on the stocks I follow, along with other observations. I will also include a recap of any noteworthy developments from the prior week on my stocks, and any other observations about the market or the economy that may be of interest. But I will only post during the week when something extraordinary comes up regarding my stocks, or the market in general.
1st Posting for Friday 12/06/2013 09:00 AM
I am back online after an outage that began Monday evening and extended to Thursday afternoon. Other than that, I’ll spare the details; otherwise this posting will run to multiple pages. As most market watchers are aware, stocks have declined every day so far this week, but the index futures are positive as we await the November Jobs Report. Asian and European markets have likewise been on a downward slope all week.
The Jobs Report has come out, and the numbers are a little better than the (low) expectations, with the Unemployment Rate coming in at 7%. Personal Income and Spending for October have also been released, with Income below expectations at a negative 0.1%, perhaps indicative of the low-wage economy.
While I was gnashing my teeth at AT&T/U-Verse regarding the outage, a few upgrades/downgrades of interest came out.
Statoil (STO) was upgraded from Market Perform to OutPerform at Bernstein.
Spectra Energy (SE) was downgraded from Accumulate to Hold at Tudor Pickering.
Enerplus (ERF) was upgraded from Market Perform to OutPerform at BMO Capital.
Pfizer (PFE) was downgraded from Conviction Buy to merely Buy at Goldman.
Prospect Capital (PSEC) was initiated at Hold at Wunderlich.
Annaly Capital (NLY) was initated at Sell at Goldman.
American Capital Agency (AGNC) was initiated at Sell at Goldman.
Realty Income (O) was initiated at Neutral at Goldman.
Exxon Mobil (XOM) was downgraded from Strong Buy to OutPerform at Raymond James.
AT&T (T) was downgraded from OverWeight to Neutral at JP Morgan.
McDonalds (MCD) was initiated at Neutral at Buckingham.
Friday, 12/6/2013, i.e. today:
All six major oil firms on my lists were initiated into coverage by HSBC Securities, with ratings as follows: Chevron (CVX), Royal Dutch Shell (RDS.B), and Total (TOT) all at OverWeight; ENI (E) at Neutral; and Exxon Mobil (XOM) and Statoil (STO) at UnderWeight.
The futures have increased even more since the Jobs Report, so the market will apparently end the slide today, at least at the start.
1st Posting for Monday 12/02/2013 06:30 AM
Stocks ended a truncated session Friday with minor losses on the Dow Industrials and the S & P 500, and minor gains on the NASDAQ and the small cap Russell 2000. Although the day ended with middling results, all of these averages ended the month of November with solid gains. Overnight, Asian markets are trading mixed at this hour, at roughly the three quarter mark. I am posting early this morning, as I have to take our Thanksgiving guests to the airport. European markets are all in the red, as the European trading day approaches the half way point. U.S. futures are slightly negative for the blue chips, and slightly positive for the NASDAQ.
I only have one analyst action to report so far this AM, as Westar Energy (WR) was upgraded from Neutral to Buy at Goldman.
MarketWatch has an ominous headline article this morning, “Robert Shiller worried about U.S. Stock Market”. The famed Yale economist, who called the 1999 stock bubble and the 2005 housing bubble, gets plenty of press when he gives his views on stocks. This is not a good sign for the start of a new month.
Stocks on my lists going ex-dividend this week are as follows:
Waste Management (WM), ex-dividend 12/2/2013, yield 3.20%.
Newmont Mining (NEM), ex-dividend 12/3/2013, yield 3.22%. NEM has a variable dividend, based upon the firm’s realized gold price average during the preceding quarter.
Kimberly Clark (KMB), ex-dividend 12/4/2013, yield 2.97%.
Public Service Enterprise Group (PEG), ex-dividend 12/4/2013, yield 4.41%.
Pepsico (PEP), ex-dividend 12/4/2013, yield 2.69%.
Wal-Mart (WMT), ex-dividend 12/4/2013, yield 2.32%.
Westar Energy (WR), ex-dividend 12/5/2013, yield 4.34%.
Frontier Communications (FTR), ex-dividend 12/5/2013, yield 8.55%.
SCANA (SCG), ex-dividend 12/6/2013, yield 4.30%.
None of my stocks are scheduled to report earnings this week.
An interesting article came in recently from John Mauldin’s “Outside the Box” free newsletter. The “Outside the Box” series is in addition to John’s own writings in “Thoughts from the Frontline”, his other regular free newsletter. The “Outside the Box” series presents articles of interest from other authoritative sources, by permission. Anyway, the latest missive was a reprint of an “Open Letter to the FOMC” from John P. Hussman of Hussman Strategic Advisors, whereby a compelling case was made regarding the risk of a bubble in equities being exacerbated by the current Fed policies. The likelihood of sub-par returns from equity investments entered into at current valuations, as presented in the article, was very sobering indeed. Any investor desiring to stay informed on the macro economic situation has to be subscribing to John’s free email newsletters. To sign up, go to his website at:
Time to buckle up and get ready for the first trading day of December.
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.