JT’s DAILY (WEEKLY as of 12/9/2013) BLOG for Month Of December 2018
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.
1st Posting for Week Beginning Monday 12/24/2018
Posted Sunday 12/23/2018 09:00 AM
Note that this will be my last posting for 2018. I will be updating my stock lists and buy/sell prices at year-end, in time for my first 2019 posting. Based on the declines which have occurred in recent weeks, a number of my stocks will have recommended pricing reduced considerably from my last update, which was in September 2018.
Stocks declined last week four days out of five, with the market on track to post the worst December in many years. The carnage is somewhat reminiscent of the 2008-2009 financial crisis. Cash may not pay much, but at least it doesn’t lose value, at least in the short term. An exclamation point to a dismal week was provided by the stand-off in Washington, with a partial government shutdown effective at midnight Friday. No Santa Claus rally this year, for sure.
As for the stocks on my lists, there will be a few dividends coming early in the New Year, as per the following ex-dividend dates:
Main Street Capital (MAIN), ex-dividend date 12/28/2018, yield 7.06%. MAIN pays monthly.
Spirit Realty Capital (SRC), ex-dividend date 12/28/2018, yield 6.98%.
STAG Industrial (STAG), ex-dividend date 12/28/2018, yield 5.72%. STAG is also a monthly payer.
B&G Foods (BGS), ex-dividend date 12/28/2018, yield 6.32%.
Pattern Energy Group (PEGI), ex-dividend date 12/28/2018, yield 8.99%.
Nucor (NUE), ex-dividend date 12/28/2018, yield 3.06%.
Kimco Realty (KIM), ex-dividend date 12/31/2018, yield 7.59%.
Prospect Capital (PSEC), ex-dividend date 12/31/2018, yield 7.06%. PSEC pays monthly.
Realty Income (O), ex-dividend date 12/31/2018, yield 4.13%. O pays monthly as well.
None of my stocks will be reporting earnings in the remaining days of 2018.
Upgrades/downgrades on my stocks from the week just ended are as follows:
Emerson Electric (EMR) was downgraded from OverWeight to Equal Weight at Barclays.
Crestwood Equity Partners LP (CEQP) was upgraded to Buy at Goldman. CEQP is on my Tier4 list, as a consequence of reorgs and splits which generated big losses. As I have noted before, since all that activity has been completed, CEQP has been a decent investment. Of course, with energy in general and MLPs in particular being out of favor, now is probably a good time to buy in, or buy more, if one can forgive the past.
General Electric (GE) was reiterated at OverWeight at Barclays. When I think of GE, I am definitely not in a forgiving mood. About the only positive I can say is now would certainly be a better time to buy GE than at any time in the last 10 or so years. GE may or may not recover, but if not buying until now, at least you wouldn’t lose as much.
MFA Financial (MFA) was upgraded from Market Perform to OutPerform at JMP Securities.
Intel (INTC) was reiterated at Buy at MKM Partners.
Phillip Morris (PM) was downgraded from Neutral to UnderPerform at Credit Suisse.
Medical Properties Trust (MPW) was downgraded from Buy to Hold at Sun Trust.
Washington Prime Group (WPG) was downgraded from Neutral to Sell at Goldman. The current yield for the troubled REIT is over 20%. Chances of the payout staying at the current level are slim to none, no doubt.
Royal Dutch Shell (RDS.B) was initiated at OutPerform at Wells Fargo.
Darden Restaurants (DRI) was upgraded from Neutral to Buy at BTIG Research, and from Hold to Buy at Maxim Group.
Hershey Co (HSY) was upgraded from UnderPerform to Buy at Bank of America.
Hi Crush Partners LP (HCLP) was downgraded from Neutral to UnderWeight at Cantor Fitzgerald. HCLP has been crushed itself by the crude price decline, as well as the general market decline.
Wheaton Precious Metals (WPM) was downgraded from OutPerform to Neutral at Credit Suisse.
Tanger Factory Outlet Centers (SKT) was downgraded from Neutral to UnderWeight at JP Morgan.
Medical Properties Trust (MPW) was upgraded from Neutral to OverWeight at JP Morgan.
Washington Real Estate (WRE) was downgraded from Neutral to UnderWeight at JP Morgan.
General Electric (GE) was upgraded from Hold to Buy at Vertical Research.
AGNC Investment (AGNC) was upgraded from Neutral to OverWeight at JP Morgan.
Kinder Morgan (KMI) was upgraded from Hold to Buy at Jeffries.
Ensco (ESV) and Noble Corp PLC (NE) were both downgraded from Buy to Hold at Societe Generale.
Enerplus (ERF) was downgraded from OverWeight to Equal Weight at Capital One.
HCP Inc (HCP) was upgraded from Sector Weight to OverWeight at KeyBanc Capital Markets.
Magellan Midstream Partners LP (MMP) and Plains All American Pipeline LP (PAA) were both upgraded from Hold to Buy at Jeffries.
Greif (GEF) was downgraded from OutPerform to UnderPerform at BMO Capital Markets, and from OutPerform to Market Perform at Wells Fargo.
Greif (GEF) was reiterated at OutPerform at Barclays, and at UnderWeight at KeyBanc.
Altria (MO) was downgraded from Neutral to Sell at Citigroup.
After a year of new market high after new market high, it all appears to be coming apart at year-end. While the economy remains strong, based on most data points, there is a general recognition that we are due for a downturn in the next year or two. Also, the state of our national politics contributes to the general sense of unease. I have been preparing for just this scenario, raising cash by selling over-extended positions, and refusing to pay up for popular stocks that were selling at a premium. Even so, I am affected by the decline in value of my holdings, and I certainly did not think it would fall so far so fast, or I would not have bought into some positions last fall that seemed like good values at the time, that have seriously declined since I entered. I was more ready than most investors for what is happening, because I was expecting this to happen, and still I am lamenting the situation and regretting that I wasn’t even more fearful than I apparently was. That just underscores that you might think you are ready for a downturn, but when it hits, you realize you are not as ready for it as you thought you were. At this point, my advice remains to conserve cash, be very cautious about committing capital, and be prepared for a long winter-it may be several years before we see a bull market again.
1st Posting for Week Beginning Monday 12/17/2018
Posted Sunday 12/16/2018 09:00 AM
Through the first four days last week, it was looking like at least a modest stock market gain for the week would be registered. Then Friday happened, with the headline Dow Industrials giving up nearly 500 points. Oh, well. The primary cause was said by some to be worries about a global slowdown. I believe it was a number of things, not the least of which is the continuing state of our national politics, and the lack of any progress whatsoever on our long-term economic problems, nor even any acknowledgement of same by our political leadership. The only politicians who speak responsibly are those leaving Washington, it seems, after failing to be re-elected.
The week ahead will see a number of my favorite stocks going ex-dividend, all with decent yields, as follows:
Main Street Capital (MAIN), ex-dividend date 12/17/2018, yield 6.24%. MAIN is a monthly payer.
Greif (GEF), ex-dividend date 12/17/2018, yield 4.02%.
BlackRock Capital Investment (BKCC), ex-dividend date 12/17/2018, yield 12.52%.
Horizon Technology Finance (HRZN), ex-dividend date 12/17/2018, yield 10.13%. HRZN pays monthly.
PotlatchDeltic (PCH), ex-dividend date 12/17/2018, yield 4.58%.
Gladstone Investment (GAIN), ex-dividend date 12/19/2018, yield 8.28%. GAIN is also a monthly payer.
Washington Real Estate (WRE), ex-dividend date 12/19/2018, yield 4.61%. I sold WRE in mid-2017 above $30, as I had a nice gain, and it looked to be topping out. It has since retreated to less than $26, now might be a good time to get back in.
Solar Capital LTD (SLRC), ex-dividend date 12/19/2018, yield 8.00%. I have often been tempted by this BDC, but have never pulled the trigger. It has held up well, and it remains on my Tier3 list (as do all BDCs I follow). I might finally start a small position this week.
Apollo Investment (AINV), ex-dividend date 12/19/2018, yield 12.6%. AINV shareholders endured a 1:3 reverse split effective 12/3/2018. The resource I referred to indicated the dividend would be tripling as well, so unlike most reverse splits, it will be a benign event. I’ve owned this BDC since 2010, it has been a steady payer. I plan to hold, it seems management is working to improve the quality of their holdings, which will be a good thing with the way 2019 is starting to look.
Phillip Morris (PM), ex-dividend date 12/19/2018, yield 5.41%. This surviving international spinoff of Altria (MO), which retained the original famous name (Phillip Morris), isn’t going away soon, but based on the long-term outlook, I moved both PM and MO to my Tier2 list from Tier1 some months ago. For me, the yields in both cases are not high enough to be worth buying at today’s prices, but if I owned either, I doubt if I would sell.
PennantPark Investment (PNNT), ex-dividend date 12/20/2018, yield 9.89%. PNNT is another BDC I’ve held for several years. Even considering the stock price decline, I’m ahead on this holding, considering cumulative dividends received. That is the nature of investing in a BDC or MREIT; if the firm can continue the high payout year after year, they can work out well. Just don’t expect any share price appreciation, you are being paid currently.
Altria (MO), ex-dividend date 12/24/2018, yield 5.93%.
Three stocks on my lists will be reporting earnings next week, Darden Restaurants (DRI) on 12/18/2018, and both General Mills (GIS) and Paychex (PAYX) on 12/19/2018. GIS will be of particular interest, considering the stock price has declined from over $70 in mid-2016 to under $40 currently, primarily due to perceived underperformance. In just one of the many ways our youth are failing us, they just aren’t wolfing down the Cheerios at the same pace as my generation. We’ll see if GIS is coming up with any answers when they report next week.
In other news regarding my stocks, REIT Spirit Realty Capital (SRC) split 1:5 effective 12/13/2018. A reverse split is usually not good news, but in this case, similar to AINV, it appears to be benign, with the dividend increasing proportionally, keeping the yield above 6%.
Upgrades / downgrades on my stocks from last week were as follows:
Digital Realty (DLR) was upgraded from Hold to Buy at Jeffries.
Unilever (UL, UN) was downgraded from Neutral to UnderWeight at JP Morgan.
HCP Inc (HCP) was initiated at OutPerform at Scotia Bank.
Procter & Gamble (PG) was reiterated at Buy at Citigroup.
Ventas (VTR) was initiated at Sector Perform at Scotia Bank.
Pfizer (PFE) was downgraded from OverWeight to Neutral at JP Morgan.
Sanofi (SNY) was upgraded from Hold to Buy at Jeffries.
Total S A (TOT) was upgraded from Neutral to Buy at Bank of America.
GlaxoSmithKline (GSK), Roche Holdings LTD (RHHBY), and Novartis (NVS) were all resumed at Buy at Jeffries. All I can say is Jeffries is much more optimistic about the prospects for “Big Pharma” than I am. Of course, my pessimism is for the long-term, and these names may do just fine in the near-term, which is the horizon that most stock analysts generating ratings are considering.
AT&T (T) was initiated at Sector Weight at KeyBanc, and was upgraded from Neutral to Buy at Citigroup. T has a tremendous yield these days, over 6%, but analysts have been concerned over the sustainability of the payout, considering the debt the firm is carrying. I have the same concerns, so I am holding, not buying more, even considering the current bargain stock price of barely $30.
Medical Properties Trust (MPW) was upgraded from UnderPerform to Market Perform at Wells Fargo. I have owned MPW off and on since 2007, and just this week I was sold out of my position via an option assignment of a covered call. I sold the $16 strike option for $125 when MPW went parabolic just recently, exceeding $17, so as to not waste the opportunity if MPW went back down. It did decline slightly, but not enough to avoid assignment. My goal was to NOT fail to cash in on the price run-up, but keep my shares if possible. As it worked out, I only did slightly better than if I had just sold the shares instead of selling a covered call on that same date, but if MPW had gone down below $16 in the three weeks I held the option position, the option strategy would have been a very clever move. So it was a win or break-even proposition, in my estimation. Of course, if MPW had gone UP another dollar or more from $17 during the three weeks, then it would have been a somewhat dumb move to make. But by my calculus, the chances of that happening were very slim indeed.
Realty Income (O) was upgraded from Sell to Neutral at Citigroup. Hard to believe Citigroup had a Sell on O, it must have been because of valuation, which indeed is why I sold O a few weeks ago, a parting I described at the time as painful but required.
Emerson Electric (EMR) was downgraded from Buy to Hold at Gordon Haskett.
Verizon (VZ) was downgraded from OverWeight to Equal Weight at Morgan Stanley.
ONEOK (OKE) was initiated at OutPerform at Wolf Research.
Coca Cola (KO) was downgraded to Neutral at UBS.
Procter & Gamble (PG) was upgraded from Neutral to Buy at Bank of America.
General Electric (GE) was upgraded from UnderWeight to Neutral at JP Morgan.
Pepsico (PEP) was initiated at Neutral at UBS.
Transocean (RIG) was reinstated at OutPerform at Credit Suisse.
AGNC Investment (AGNC) and Annaly Capital Management (NLY) were both upgraded from Equal Weight to OverWeight at Barclays. It seems Barclays believes the demise of the MREITs is not as imminent as some believe in today’s rising rate environment.
Cisco Systems (CSCO) was downgraded from Buy to Neutral at Nomura. I can remember when I wrote an article for Seeking Alpha several years ago proclaiming that CSCO, Intel (INTC), and MicroSoft (MSFT) were all now value stocks, with respectable yields exceeding 3%. That was then, not now.
Procter & Gamble (PG) was upgraded from Equal Weight to OverWeight at Morgan Stanley.
GlaxoSmithKline (GSK) was initiated at Hold at SunTrust Robinson Humphrey. GSK is the highest-yielding drug stock, over 5%, but many pundits question the sustainability of the payout, yours truly among them.
Only a couple of weeks to go in 2018. I’m in no hurry to get to 2019. Like many market watchers, I wonder if I may be happier not knowing what is coming. Even though I’m conserving cash, I made a couple of buys where I thought the bargain price justified the move. I started a new position in Amerigas Partners LP (APU), at around $32, which was a more than five year low, pushing the yield to double digits. My thinking was to act quickly before the bargain price evaporated. Three days later, I added more at $27, in disbelief at the swoon, based on no news that I could find. APU is regarded as the superior firm in the propane distribution space, which certainly is a challenging business, but not that challenging, I surmised. Another move I made was I added to my position in Royal Dutch Shell PLC (RDS.B) at slightly over $59, beating my initiating price of $62 or so from just a few days earlier. RDS.B is the highest-yielding integrated oil major by far, at over 6%, and by going with the “B” shares, foreign tax withholding is avoided. My recent experience underscores the reality that in trading and investing, forget about ego. If you haven’t made a stupid move lately, you probably haven’t made any moves lately. In fact, it is worse than that. Sometimes, you feel stupid when you have done nothing, such as when you contemplate a move, but just never got around to pulling the trigger, then watched as the move you could have made would have been really smart, if only you had actually made it. The solution to remaining sane is to have a rules-based approach that you believe in, and follow it faithfully, and know why you are taking an action, or perhaps not taking an action, and know that even if you could have violated your rule and gotten away with it this time, realize that over the long term, your rules will keep you out of serious trouble if your ego tries to assert itself.
1st Posting for Week Beginning Monday 12/10/2018
Posted Sunday 12/09/2018 08:00 AM
After a brief rally on Monday, stocks posted big declines the rest of the week, interrupted only by the Wednesday pause to honor former President Bush. From the high reached intraday on 10/03/2018, the Dow Industrials Index has declined over 2500 points, as of Friday’s close. The other general stock averages I track have all declined by similar percentages. The closely watched monthly Jobs report issued Friday, while still showing a remarkable 3.7% unemployment rate, failed to generate any relief, as some of the data in the report and in other economic releases suggests the economy is slowing. Of course, the continuing rancor in Washington adds to the general sense of unease.
In times like this, steady dividend payers in the portfolio are greatly appreciated. Stocks on my lists going ex-dividend in the week ahead are as follows:
Medical Properties Trust (MPW), ex-dividend date 12/12/2018, yield 5.72%.
Ares Capital (ARCC), ex-dividend date 12/13/2018, yield 9.34%.
Monroe Capital (MRCC), ex-dividend date 12/13/2018, yield 12.42%.
Oaktree Specialty Lending (OCSL), ex-dividend date 12/13/2018, yield 8.17%.
Crown Castle International (CCI), ex-dividend date 12/13/2018, yield 3.83%.
Williams Companies (WMB), ex-dividend date 12/13/2018, yield 5.54%.
Digital Realty Trust (DLR), ex-dividend date 12/13/2018, yield 3.46%.
Oxford Square Capital (OXSQ), ex-dividend date 12/14/2018, yield 12.33%.
Iron Mountain (IRM), ex-dividend date 12/14/2018, yield 7.11%.
Merck (MRK), ex-dividend date 12/14/2018, yield 2.81%.
Total S A (TOT), ex-dividend date 12/14/2018, yield 5.43%. The yield is BEFORE 30% or so withholding by France. Based on the news, it looks like they need the money.
Main Street Capital (MAIN), ex-dividend date 12/17/2018, yield 6.18%. MAIN pays monthly.
Greif (GEF), ex-dividend date 12/17/2018, yield 3.91%.
BlackRock Capital Investment (BKCC), ex-dividend date 12/17/2018, yield 12.46%.
Horizon Technology Finance (HRZN), ex-dividend date 12/17/2018, yield 10.46%. HRZN is a monthly payer.
None of my stocks will be reporting earnings in the upcoming week.
Upgrades / downgrades on my stocks from last week were as follows:
Senior Housing Properties Trust (SNH) was upgraded from UnderPerform to OutPerform at Wells Fargo.
AT&T (T) was upgraded to OutPerform at Cowens & Co, and from Neutral to OverWeight at JP Morgan.
Verizon (VZ) was downgraded from OverWeight to Neutral at JP Morgan.
Crown Castle International (CCI) was downgraded from Buy to Neutral at MoffettNathanson.
NGL Energy Partners LP (NGL) was initiated at Buy at Guggenheim.
Waste Management (WM) was upgraded from Sell to Buy at Goldman.
United Parcel Service (UPS) was reiterated at UnderWeight at Morgan Stanley.
Intel (INTC) was downgraded from Market Perform to UnderPerform at Northland Capital.
Apollo Investment (AINV) was reiterated at Equal Weight at Barclays, and at OutPerform at Raymond James. AINV had a 1:3 reverse split effective 12/03/2018, resulting in a new stock price of $15.05, as of Friday’s close. It appears that the dividend amount tripled as well, to $0.45, maintaining the yield at 11.96%. Usually reverse splits are bad news, but in this case it seems benign, and the outlook for the BDC remains positive.
Spirit Capital (SRC) was downgraded from Market Perform to UnderPerform at Raymond James.
Darden Restaurants (DRI) was reiterated at Market Perform at Wells Fargo.
Southern Co (SO) was reiterated at UnderPerform at Credit Suisse.
Greif (GEF) was reiterated at OutPerform at Wells Fargo.
Altria (MO) was reiterated at OverWeight at Barclays.
General Mills (GIS) was reiterated at Neutral at Bank of America.
Taking advantage of the market decline last week, I started new positions in Blackstone Group LP (BX) and Amerigas Partners LP (APU). As per my strategy, I start cautiously, only buying a portion of the shares I would consider a full position, leaving room to add more at a lower cost basis if the market decline continues. Illustrating my acquisition strategy further, I added to existing positions in Kraft Heinz (KHC) and Buckeye Partners LP (BPL), at a lower cost per share than my initial purchases of these holdings. If the New Year plays out as many are predicting, with major turbulence ahead, I will be continuing to gradually acquire stock at reduced prices. That’s how a value investor is supposed to react to market declines. I can’t say I like it when it happens, but I accept it as necessary at times, and look to take advantage of it when it occurs.
1st Posting for Week Beginning Monday 12/03/2018
Posted Sunday 12/02/2018 10:00 AM
Stocks ended up about where they started the month after the dust settled for November, but not without some drama, as evidenced by the Dow Industrials posting triple-digit moves up or down on 18 out of 21 trading days in the month. Included were 2 days up over 500 Dow points, and also 2 days down over 500 points. Talk about a yo-yo market! The latest on what is probably the number one investor concern, the trade friction with China, Trump and Chinese President Xi announced after their closely-watched meeting at the G-20 Summit that effectively there will be a truce, with negotiations to continue. My expectation is that there will not be a blow-out rally on this news, but that there will not be a big drop, either, as there would have been of there was no positive news.
The first week of December is a bit light on dividend announcements, as far as the stocks I track are concerned, but there are a few to report, as follows:
Gladstone Investment (GAIN), ex-dividend date 12/05/2018, yield 9.05%. Note that this dividend of 6 cents is a special dividend, in addition to the regular monthly dividend of 7 cents, which has an ex-dividend date of 12/19/2018. The annualized yield is thus calculated considering twelve 7 cent payments and one 6 cent payment, and Friday’s closing price of $9.04 for GAIN.
Newmont Mining (NEM), ex-dividend date 12/05/2018, yield 1.73%. NEM is a speculation on gold and silver prices, and is not recommended as an income stock, but it is nice to get something while waiting for a rebound in precious metals.
Public Service Enterprise Group (PEG), ex-dividend date 12/06/2018, yield 3.30%. While the yield is slightly less than I expect from a utility, holders of PEG have been somewhat insulated from the recent market turmoil, proving once again that utility stocks are less volatile than most in an agitated market.
Kimberly Clark (KMB), ex-dividend date 12/06/2018, yield 3.48%. Consumer staples are another good place to be when the market goes crazy, as KMB has demonstrated in the month just ended.
Pepsico (PEP), ex-dividend date 12/06/2018, yield 3.14%. Another good hiding place, no one has lost money yet when betting on Americans making poor diet choices. This soda and snack food giant proved that once again in November.
Pitney Bowes (PBI), a high-risk, high-yield firm that I have on my Tier3 list, was missed a couple of weeks ago. PBI went ex-dividend 11/19/2018, and currently yields 8.99%. PBI is trying to branch out from being just a mail products firm, to stop the slide towards oblivion, as “snail-mail” usage continues to decline.
Only one firm I follow will be reporting earnings next week, Greif (GEF), on 12/05/2018. GEF is an international packaging products and services firm, with operations in over 45 countries. With solid financials and a dividend yield of 3.52% currently, GEF is a solid Tier1 stock in my universe.
Upgrades / downgrades on my stocks from last week were as follows:
Novartis (NVS) was upgraded to OutPerform at Cowen & Co..
AT&T (T) was upgraded from Sell to Neutral at Moffett Nathanson. T is heavily indebted, and there is a concern that the dividend may not be sustainable over the long term. The concurrent decline in the share price since 2016 from the low-40s to the low-30s reflects that concern, but it hasn’t happened yet, as evidenced by the current 6.54% yield.
Pattern Energy Group (PEGI) was downgraded from Buy to Hold at Desjardins Group. PEGI is a “yield-co”, which is a company that is formed to own operating assets that produce a predictable cash flow, primarily through long term contracts. PEGI currently yields over 8%.
Buckeye Partners LP (BPL) was reiterated at Neutral at Citigroup. Like most MLPs, BPL is down somewhat from highs reached in 2015, and currently yields almost 10%.
Darden Restaurants (DRI) was reiterated at OverWeight at Barclays. DRI has defied gravity for such a long time in the hyper-competitive restaurant chain sector, it seems Barclays believes it will continue for a while yet, and indeed they may be right.
Intel (INTC) was downgraded to Hold at DZ Bank.
NuStar (NS) was reiterated at Neutral at Citigroup. I wrote a Seeking Alpha article about NS a few years ago, and NS did recover from an earlier decline, as I had expected. After rebounding and earning its distribution for a few quarters, the MLP, along with its peers, dropped substantially starting in 2015, and cut the dividend by nearly 40%. Even so, NS still yields almost 10%, and I have no plans to sell anytime soon.
Plains All American Pipeline LP (PAA) was reiterated at Buy at Citigroup. PAA has fared about the same as the rest of the MLP sector in recent years, and also had to reduce the distribution. If I owned it I would hold on, but I don’t, and the current 5% yield is not enough to entice me to buy it at this point.
Cisco Systems (CSCO) was resumed at OutPerform at Baird. CSCO is a solid performer, but the price has gone up almost exponentially since I wrote an article for Seeking Alpha wherein I described CSCO as a value stock. That was then, not now.
Enterprise Products Partners LP (EPD) was reiterated at Buy at Citigroup. If not the safest, strongest MLP available, EPD has to be in the top two or three. If a risk-averse investor wants to take the plunge and buy an MLP right now, EPD, yielding 6.58%, would be an excellent choice.
McDonalds (MCD) was upgraded from Equal Weight to OverWeight at Morgan Stanley. I’ll say this, MCD would be my choice for my portfolio before it would be my choice for lunch.
ONEOK (OKE) was upgraded from Neutral to Buy at Citigroup. OKE absorbed its related MLP OKS some time ago, and without the tax complications of an MLP, it yields over 5%, and continues to prosper.
Total S A (TOT) was upgraded from UnderWeight to Neutral at JP Morgan. TOT is based in France, and the 5.35% yield advertised is BEFORE foreign tax withholding of 30% or so. While TOT is a solid firm, I would go with Chevron (CVX), Royal Dutch Shell (RDS.B), or ExxonMobil (XOM) instead of TOT if I wanted to add shares of an integrated oil major to my portfolio.
Amerigas Partners LP (APU) was upgraded from Hold to Buy at Jeffries. APU is on my short list of stocks to buy before the next ex-dividend date, probably in January 2019.
General Electric (GE) was reiterated at Hold at Deutsche Bank. The hits just keep on coming for GE. At one time my largest holding, I sold nearly half when it got above $30 at the end of 2016, which was a chance to exit at break-even. At the time, I really believed it would continue to go up, but I felt that I should take the opportunity to take some money off the table. Unfortunately, I held the rest into the current slide. In November I sold half of what I still owned at $9 and change, to get a tax loss useable when I file taxes next year. At the time, I really did not think it would go down much further, but guess what – WRONG AGAIN! GE is a poster child for what can happen to a great company when a series of bad decisions are made by management, and poor practices and complexity mask the reality of what is happening until it really falls apart. No greater case for diversity in portfolio holdings can be made than the example of GE.
The outlook for December is mixed, but there is at least a chance we could have at least a mild Santa Claus rally. If so, it just means minimal buy opportunities will come along, so I don’t expect I’ll be doing much. As for next year, there are definitely some storm clouds on the horizon. My approach is to use the lull, if there is one, to get ready for a challenging 2019. I suggest others do the same.
1st Posting for Week Beginning Monday 11/26/2018
Posted Sunday 11/25/2018 07:00 AM
Stocks continued their descent during the holiday-shortened week just ended, led by the so-called “FANG” technology stocks, complemented by a collapse in oil prices resulting in the energy sector also taking it on the chin. The contrast between the frantic “Black Friday” shopping frenzy and the “we’re all gonna die” climate change report released, strangely enough, on that same date, gives one an eerie feeling that we may be at the precipice of an economic cliff that most (excepting stock investors) are failing to recognize.
For the time being, at least, my dividend payers are continuing to spit out the expected payments, providing some consolation for securities holders experiencing price declines. Stocks on my lists going ex-dividend the final week of November are as follows, with ex-dividend date and annualized yield as of Friday’s close shown. Assume payouts are quarterly unless otherwise noted.
Johnson & Johnson (JNJ), 11/26/2018, 2.54%.
Enerplus (ERF), 11/28/2018, 0.93%. ERF pays monthly.
AGNC Investment (AGNC), 11/29/2018, 12.34%. AGNC also pays monthly.
Wheaton Precious Metals (WPM), 11/29/2018, 2.21%.
Coca Cola (KO), 11/29/2018, 3.20%.
Waste Management (WM), 11/29/2018, 2.04%.
STAG Industrial (STAG), 11/29/2018, 5.30%. This REIT pays monthly.
NextEra Energy (NEE), 11/29/2018, 2.52%.
Prospect Capital (PSEC), 11/29/2018, 10.56%. This BDC pays monthly.
Realty Income (O), 11/30/2018, 4.16%. The “monthly dividend company” pays, you guessed it, monthly.
Safety Insurance Group (SAFT), 11/30/2018, 3.69%.
Ensco (ESV), 11/30/2018, 0.61%.
Kellogg (K), 11/30/2018, 3.62%. I was seriously considering starting a new position in K, but a somewhat convincing recent Seeking Alpha article warning that K was down for good reason(s) has given me pause. It’s no secret that the cereal business is hyper-competitive, with a number of trends working against the main players in the sector. The firm that invented corn flakes and the entire concept of ready-to-eat packaged cereals is not immune to these negative trends.
McDonalds (MCD), 11/30/2018, 2.54%. MCD continues to prosper, against all odds.
Washington Prime Group (WPG), 11/30/2018, 15.77%. This REIT is either a terrific buy or doomed, depending on what happens – a yield of 15% is not sustainable. Either the stock price will recover, along with the company, or the dividend, and perhaps the company, will disappear. All I can say to investors thinking of buying WPG at these levels is the famous quote from a Clint Eastwood film, “do you feel lucky, punk?”
Two firms on my lists will be reporting earnings next week. Smucker JM (SJM) on 11/28/2018, and Hoegh LNG Partners LP (HMLP) on 11/29/2018.
There were minimal new stock ratings issued last week, reflecting the holiday slowdown. Those I noticed regarding the stocks I follow are listed following:
American Electric Power (AEP) was reiterated at OverWeight at Barclays.
Duke Energy (DUK), Exelon (EXC), NextEra Energy (NEE), and Southern Company (SO) were all reiterated at Equal Weight at Barclays, which apparently just completed a review of several major utilities.
Frontier Communications (FTR) was reiterated at Equal Weight at Morgan Stanley.
3M Co (MMM) was reiterated at UnderWeight at Barclays.
Novartis (NVS) was upgraded to Conviction Buy at Goldman.
Windstream Holdings (WIN) was reiterated at Equal Weight at Morgan Stanley. Hard to see any reason for holding either FTR or WIN, with no dividend and dismal prospects, but apparently an analyst at Morgan Stanley is not as pessimistic on these telecoms as I am.
CenturyLink (CTL) was reiterated at Sell at MoffettNathanson. CTL is certainly not without a lot of risk, but with a heady dividend yielding 12% currently, it surely deserves a higher rating than FTR and WIN, in my opinion.
Emerson Electric (EMR) and Eaton (ETN) were both initiated at OverWeight at Stephens & Co.
ExxonMobil (XOM) was downgraded from Market Perform to UnderPerform at Raymond James.
Iron Mountain (IRM) was initiated at Neutral at Bank of America.
Frontier Communications (FTR) was reiterated at Sell at Citigroup.
Alliant Energy (LNT) was downgraded from Neutral to UnderPerform at Bank of America.
The market has declined steadily since the election, possibly because of the better than (initially at least) expected performance of the Democrats and the minimal prospects for economic progress and maximum prospects for political rancor that is now in the offing for the next two years, if not longer. The latest missive from John Mauldin reiterating our cumulative debt problems and the likelihood of another debt crisis or two, with eventually a “great reset” being required, makes for sobering reading indeed. Add to that the latest report on climate change that was issued Friday, and there certainly is plenty to worry about. Investors globally are aware of these concerns, and are preparing for tough times to come. I’m doing the same, and that is my recommendation for my readers, if there are any.