Sunday, May 3, 2015

Sold: 100 WHARF (WARFY) at $14.53 and Sold 51+ Highest Cost FISI shares at $24.1

Anyone interested in the reasons why there will be no posts after 5/3/2015 has had sufficient time to read my explanation, so I have eliminated it from this blog.

My last full length blog published here was this one: Stocks, Bonds & Politics: OHI Update/HTGZ Partial Redemption Proceeds Received/Bank Earnings: WTBA, LBAI, FNB, TRMK/Bought 50 CORRPRA at $24.95-Roth IRA/Bought 50 EWI at 14.915/


My last full length SeekingAlpha Instablog was this one: Added To BANC At $12.4-Regional Bank Basket Strategy - South Gent | Seeking Alpha

1. Sold 100 WARFY at $14.53 (see Disclaimer):

Snapshot of Trade:



Snapshot of Profit:

2015 Sold 100 WARFY +$161.67


2. Pared FISI: Sold 51+ Highest Cost Shares at $24.1-Satellite Taxable Account (REGIONAL BANK BASKET STRATEGY)(see Disclaimer)

Snapshot of Trade:




Snapshot of Profit:

2015 51+ Shares +$254.18 LT 

Published an SA Instablog re: Added to BANC at $12.4;


I am not sure why I am fooling with SA Instablogs. I am not sure why I am writing here either. 

SA readers pepper me with personal critiques as my reward for the time and effort consumed in writing a post.

Needless to say, I am not writing the posts for my own edification or to generate income since I receive zilch. I do not need instruction from myself, or I at least hope that is a fair statement, nor have I ever received a penny for writing anything here or at SeekingAlpha.

I have been accused at SA by one commenter of fomenting a "pump and dump" scheme by discussing a 50 ADR share purchase of one of the largest financial institutions in the world. I have been accused of being mentally deranged and worse. I was even accused of manufacturing the snapshot of a 30 share purchase of GE. A commenter felt obliged to make their first ever comment at SA making that accusation, claiming that there were no trades at the price shown in the snapshot. I pointed out that every major financial service including Yahoo Finance had my executed price within the price range that day. 

A more common complaint, appearing virtually daily now, is that my writing is too hard to read. Why? Just way too many details and facts which caused one reader to  just throw up  and to develop a headache, the kind of pithy comment that received 13 likes so far at Seeking Alpha.  

Maybe I will be sued for causing those physical ailments. Those kind of comments thrown at me pass muster with SA's moderator who was offended by my comment, where I made fun of my own inability to learn a foreign language after five years in response to a comment made by a non-native English speaker in the same article as several snarky comments with no substantive content was hurled remain present and viewed as completely acceptable.  

I may reach the point soon where I cease all public writing, maybe after I publish a couple of pending posts, without warning to anyone I will just quit trying to help investors with less experience become better at it. I am already far beyond thoroughly disgusted. Once that decision is made, it will be irreversible. I certainly have no need for further aggravation at my age. 

So if you do not see another blog post after Tuesday this week, the reason will be that the posts have stopped forever. 


Saturday, May 2, 2015

OHI Update/HTGZ Partial Redemption Proceeds Received/Bank Earnings: WTBA, LBAI, FNB, TRMK/Bought 50 CORRPRA at $24.95-Roth IRA/Bought 50 EWI at 14.915/

Added: The number of gratuitous personal slams that I receive at SeekingAlpha is just stunning. Even though I am not being paid for writing posts here or there, many of the SA readers feel compelled to say nothing about the content of the article, but simply want to complain about me or to slam me in some gratuitous way. Then that gratuitous slam receives a number of likes. 

An example is a comment just made in a SA Instablog discussing the disposition of 300 BHK and 300 ACG. I was asked a question and spent a great deal of time responding as I always do. 

The response was that my posts were not "deep' or "very enticing" and my analysis was not for the really intelligent people. Pared Interest Rate Risk Exposure In Roth IRA: Sold 300 AllianceBernstein Income Fund Shares At $7.81 And 200 BlackRock Core Bond Trust Shares At $13.86 | Seeking Alpha

I would recommend reading the first paragraph of that reader's comment and perhaps someone can explain to me what he is talking about in the really "deep" analysis. The Twitter Generation is just so smart, just ask them, and they will gladly confirm it.   

Stable Vix Pattern (Bullish):
Links to SeekingAlpha Instablog, Articles and Comments:

South Gent's Instablog | Seeking Alpha

South Gent's Articles | Seeking Alpha

South Gent's Comments | Seeking Alpha

*********************

Recent Developments:

The government reported last week that first quarter real GDP grew only at a .2% annualized rate, compared the 1% consensus forecast. News Release: Gross Domestic Product This report will be revised as the government acquires mores data. Current dollar GDP increased by .1% due to a negative inflation rate for the first quarter. Real domestic consumer purchases increased 1.5% vs. 3.2% in the last quarter. The personal savings rate was 5.5%. Disposable personal income increased by $132.2 billion or 4.1%, up from 3.2% in the prior quarter.  

I thought the most important development last week was the rapid acceleration in German government bond yields.

That was picked up in Randall Forsyth's column titled "German Bunds: The Short of the Century" and published at Barron's (subscription required to view). I note below that the German 10 year was at 4.5% back in June 2008 and was yielding .07% on 4/20/15 before starting to move up. There was blow back into the U.S. treasury market.

********************
Omega Healthcare: Update

I bought 100 share of OHI as part of my REIT Basket Strategy during December 2013 and still own those shares. Bought:  100 OHI at $29.85 (snapshot: purchase date 12/16/13)

OHI reported 1st quarter funds available for distribution of $87.5 million or $.65 per share. Adjusted FFO was reported at $.71. I will use the FAD number of $.65.

2015 Guidance:


The 2015 FAD guidance is currently $2.75-2.81 per share. The midpoint is $2.78. Assuming a $37 price, the forward P/FAD is 13.3. Using the midpoint for FFO at $3, the P/FFO would be lower at 12.33 based on that $37 assumed price.

Omega Announces First Quarter 2015 Financial Results; Adjusted FFO of $0.71 Per Share for the First Quarter

The last quarterly dividend was $.53, so the dividend is well covered by the estimated funds available for distribution. Using the midpoint of annual FAD at $2.78, the quarterly estimated number for 2015 would be $.695.

Omega Healthcare Investors, Inc. - Dividends

At a total cost of $29.85 and a $.53 per share quarterly rate, the current yield would be about 7.1%.

Other recent news items include the following:

Omega Completes Combination with Aviv REIT

Omega Healthcare Investors Declares Prorated Dividend for Remainder of Quarter in Connection with Acquisition of Aviv REIT, Inc. and Announces 2015 Guidance | Business Wire

I left a number of comments dealing with OHI in particular and interest rate risks in general to this Seeking Alpha article.

********************
Partial Redemption By Issuer: Hercules Technology Growth Capital Inc. 7% Sr. Notes due 2019 (HTGZ )


Taxable Account:

The quarterly interest payment was received on the same day. Fidelity broke the interest payment for the 100 share lot into two parts, representing the interest payment the 24 shares redeemed that day and a separate entry for the payment made on the remaining 76 shares.

Item # 4 Bought 100 HTGZ at $24.63 (5/4/12 Post)(acquired 4/30/12)

The total annualized return would be slightly above the 7% coupon rate.

The same redemption occurred for the 100 shares owned in a Roth IRA account. Item # 3 Bought 100 HTGZ at $24.6-ROTH IRA (5/25/12 Post)

When HTGC announced this partial call for this exchange traded bond, it further announced that it intended to make additional partial calls this year. Hercules Technology Growth Capital Announces Intention to Partially Redeem its 7.00% Senior Unsecured Notes due 2019 (NYSE:HTGC) There is nothing to do except watch it happen.

*********************



1. Bought 50 CORRPRA at $24.95-Roth IRA (Equity REIT Common and Preferred Stock Basket Strategy (see Disclaimer):

Snapshot of Trade: 


Stocks, Bonds & Politics: REIT CUMULATIVE PREFERRED LINKS IN ONE POST/Advantages & disadvantages

Security and Company Description: The CorEnergy Infrastructure Trust Inc. Preferred Series A (CORR.PA) is an equity preferred stock that pays cumulative and non-qualified dividends at a 7.375% fixed coupon rate on a $25 par value. Prospectus

CORR has the option to call this preferred stock at par value plus any accrued dividends on or after 1/27/20, unless there is a change of control provision that activates an earlier redemption time.

In a period of declining interest rates, that five year window after the IPO data provides some interest rate risk protection to its owner. The interest rate risk balance is nonetheless asymmetric between the issuer and the owner.  The owner of a preferred stock bears more than 50% IMO of the interest rate risk and all of the credit and other risks described below.

At the end of the five year period, the issuer will refinance when and if it is in its interest to do so. The most likely reason for a redemption, as shown by recent history, is that the issuer can refinance at a lower rate. The owner is then left with the redemption proceeds that will likely lead to a lower yield when reinvested in a security of the same quality due to that decline in rates.  That result is one kind of interest rate risk.

The flip side of interest rate risk is a rise in rates that causes the preferred stock to lose value. In that scenario, the issuer will be unable to refinance at a lower rate and will gladly allow the existing owners to continue owning a security going down in value and providing less yield than alternative investments. The owner is then faced with the option of taking the loss on the lower yielding vintage preferred stock or losing the benefit of a higher yielding one for the funds tied up in the vintage preferred issue.

Many low yielding preferred stocks issued in the 1950s are still around. CORRPRA, like virtually all equity preferred stocks (a few exceptions) are potentially perpetual.

I say non-qualified which is normally the case for both REIT common and preferred shares. None of my REIT preferred stocks paid a penny in qualified dividends last year. CORR's common stock did nor pay any qualified dividends in 2014. SEC Filing That is typical for a pass through entity that avoids taxation at the corporate level.

Occasionally, some part of a distribution may receive a qualified classification depending on issues that may vary among REITs and the same REIT year-to-year.  REIT.com


This preferred stock was first offered last January. CORR announced last week the first ex dividend date for those shares. CorEnergy Declares 2015 First Quarter Increase in Common Stock Dividend and Initial Preferred Stock Dividend  The initial dividend will include more than a 3 month period. The amount will be $.635069444 per share.

The annual rate is $1.84375 per share or slight more than $.46 per quarter.


CorEnergy recently completed the $125M acquisition of MoGas Pipeline in November 2014. The MorGas pipeline system has about a 264 mile intra-state natural gas pipeline that primarily serves two utilities in the greater St. Louis region and Omega Pipeline which is another CORR subsidiary that serves Ft. Leonard Wood. That army post is in the middle of nowhere Missouri and is named after Leonard Wood. General Wood would have been President of the U.S. if he was willing to accept a bribe offered in connection with the 1920 GOP Presidential nomination process. Instead, he threw the bribe offerer (representing oil interests)  out of a his hotel room.  Warren Harding was more receptive to the offer, and that led to the Teapot Dome scandal.

The MorGas acquisition was discussed in an article published at Benzinga.

To finance that purchase in part, CorEnergy sold $13M in stock at $.8. The underwriter's paid $6.443 per share, Prospectus The underwriter's exercised the entire over allotment option of 1.95 million shares bringing the total offering to 14.95M shares sold at $6.8. After that offering, CORR had 46,598,904 shares outstanding.

Another important acquisition in 2014 was the $40M purchase of the Portland Terminal Facility, a rail/marine facility adjacent to the Willamette River in Portland, Or. The site has 84 tanks capable of storing 1.466M barrels. The facility is leased to Arc Terminals, a subsidiary of Arc Terminal Holdings LLC pursuant to a triple net lease. The lease is subject to an inflation adjustment after 5 years.

The largest infrastructure asset is the Liquids Gas and Gathering System acquired from Ultra Petroleum (UPL) in 2012 for $205M in cash plus about $24M in securities. Those assets are operated by UPL under a triple net lease.

The preceding assets and others are discussed in CORR's recently SEC filed Annual Report: CORR-2014.12.31-10K (pages 56-58 and starting at page F-16)

CorEnergy December 2014 Fact Sheet.pdf

Press Release Fiscal 2014 Results

SEC Filings for CORR

Prior Trades: None

Related Trades: I first bought the common shares, (CORR), as a Lottery Ticket. Lottery Ticket Basket Strategy-Bought 40 CORR At $7 -Seeking Alpha

Due to the price decline thereafter and subsequent developments including the MoGas acquisition and a 2015 dividend increase flowing therefrom, I elevated CORR to a much higher risk category which allowed for a 100 share purchase.  Item # 2 Elevated CORR from LT Basket to REIT Basket: Added 100 at $6.5 (12/3/14 Post).

The Lottery Ticket Basket is a risk category that permits only a $300 exposure. The REIT basket permits up to a $10,000 out-of-pocket investment in the securities from one REIT (e.g. common and preferred stock +bonds).

Brad Thomas selected the CORR common shares as his underdog pick for 2015. I would simply refer anyone interested in the common or to a description of CORR's then existing businesses to that SA article.

Recent Earnings Report: The first quarter earnings report is not scheduled for release until 5/11. The last earnings report was for the year ending on 12/31/14.



Sourced: SEC Filed Press Release

When researching a possible equity preferred stock purchase, I will review earnings releases. Instead of attempting to assign a fair value range for a common stock purchase, I am attempting to make a rational judgment about the issuer's ability to pay the preferred stock dividend. To make that assessment, I need to review the earnings reports and that research material is reviewed also for a common stock purchase.

There are risks here as summarized below.

Rationale For REIT Preferred Stocks In General and CORRPRA in Particular:  The main reason for buying CORRPRA in the Roth IRA is to receive tax free income at near the coupon rate of 7.375% based on my total cost.

Before inflation and with no taxes to consider under present Roth IRA law, money doubles in about 9.73 years at that rate. Estimate Compound Interest


The equity preferred shareholder has a superior claim to income than the common shareholder. The preferred dividend may not be deferred unless a common cash dividend is first eliminated; and the common dividend can not be eliminated when the REIT has net income (assuming the company wishes to maintain its REIT's tax status).

I could not find a "stopper" clause where there is a specific prohibition on the payment of a cash dividend to common shareholders as a prerequisite to a deferral of the preferred stock dividend. That is the first time that I have not been able to find that specific clause.

Instead, I could only find a statement at page S-16 that the Series A preferred stock is senior to common stock with "respect to the payment of dividends" and claims to assets in liquidation or dissolution (e.g. bankruptcy).

One REIT recently eliminated its common dividend and deferred its preferred stock dividend. Campus Crest Communities (CCG)

The eliminated common stock dividend is just lost, while the cumulative preferred dividend is merely deferred and has to be paid in full when the company initiates a common dividend.

Strategic Hotel (BEE) eliminated its common share dividend and deferred the cumulative preferred stock dividends for several quarters. The preferred shareholders received their deferred dividends, without any interest paid on the deferred amounts, when the common share dividend was reinitiated by the REIT. Strategic Hotels & Resorts - Press Release

The CORRPRA prospectus also has a change of control provision, which is summarized in detail starting at page S-20 of the prospectus. These provisions were not found in most REIT prospectus until the preferred shareholders of Innkeepers were left hanging after a leveraged buyout. The common shareholders received a nice premium for their shares, while the preferred shareholders had their stock delisted and the dividend later went into deferral. The preferred shares became worthless when the REIT filed for Bankruptcy.

Generally, when the change of control provision is activated, the REIT has to buy back the preferred stock at par value. If that option is not pursued, then the preferred shareholders have the right to convert their stock into common shares and participate in the takeover offer using a predefined conversion calculation.

A REIT preferred investor would want to see a change of control provision in the prospectus. You do not want to be left hanging with another company does a leveraged buyout. The immediate response when more debt is piled onto the capital structure, without a change of control provision, is to take the preferred share price way down.


Risks: The company discusses risks incident to its operations starting at page of its recently SEC filed 2014 Annual Report: CORR-2014.12.31-10-K

Risks relating specifically to this preferred stock are discussed starting at page S-10 of the Prospectus.

1. Concentration Risks: 

I would highlight the significant exposure to Ultra Petroleum due to this 2012 transaction where CORR paid $225 for pipeline assets that serve UPL's operation  CorEnergy 

UPL Interactive Stock Chart
UPL 2014 10-K
UPL 10-Q for Q/E 3/31/15

I would highlight and emphasize that concentration risk. CORR notes this risk exposure as the first item in its risk summary: Page 12 CORR-2014.12.31-10 (47% of assets as of 12/31/14)

That concentration risk will cause me, without any other consideration, to take only a small position in CORR securities.

CORR may benefit with an improvement in UPL's profitability which may provide me down the road an opportunity to liquidate the small common stock position.

Every investor needs to familiarize themselves with the risk summaries in both documents.

For me, the primary risks factors relating to an equity preferred stock are as follows:

2. Interest Rate Risk: This preferred stock is of recent vintage and was consequently not around when interest rates rose between May and December 2013. The ten year treasury went from one extremely low level (1.66%) to an abnormally low level of 3.04% as of 12/31/13.

I have linked some charts below of how REIT preferred stocks reacted to that rate rise, and that is nothing compared to someone who has actually had to invest money in the 1970s and 1980s. I included these REIT preferred stocks in my rotation into REITs starting slowly in September 2013:

NNN.PD Stock Chart
Bought:  50 NNNPRD at $22.63 November 2013

EPR.PF Stock Chart
Item # 1 Bought Roth IRA: 50 EPRPRF at $22.5

DLR.PG Stock Chart
Bought: 100 DLRPRG at $19.95

After many of those issues corrected 15% to 30% in price, I started to buy and have since sold almost all of them. There is a lot of risk in an equity preferred stock selling at over its par value, where the issuer has the option to redeem at par generally five years after the IPO.

I decided to nibble on CORRPRA after selling even riskier and lower yielding securities.

I have been discussing recently interest rate risks in several SA articles and comments.

Pared Interest Rate Risk Exposure In Roth IRA: Sold 300 AllianceBernstein Income Fund Shares At $7.81 And 200 BlackRock Core Bond Trust Shares At $13.86 | Seeking Alpha

An Analysis Of The Risk/Reward Balance For Intermediate And Long Term Treasuries | Seeking Alpha

Comment This Weekend: Seeking Alpha

I am keeping a very close eye now on German government bonds. The 10 and 30 year bunds started to spike up on 4/20/14: Germany 10 Year German 30 Year

The U.S. ten and 30 year treasuries have spiked in tandem. The ten year treasury closed on Friday April 17th at 1.87% and at 2.12% last Friday. Daily Treasury Yield Curve Rates

The German 10 year was yielding over 4.5% in June 2008. German Ten Year Bond  On April 20, 2015, the yield was .07%. The 1950-2014 average inflation rate for Germany is 2.45% and the rate was at  2.04% in 2012 and remained positive in 2014 even with the collapse in crude prices. The April flash estimate for German inflation, released late last week, was .3% versus a .2% estimate. What will be the impact on inflation when the deliberately torpedoed Euro has to buy crude priced in USDs.

3. Credit Risk: Given the lowly status in the capital structure, I would anticipate generally a 0% to 30% recovery of the principal amount in a bankruptcy. REITs have a lot of debt that has priority over equity preferred and common stock holders.The fact of a bankruptcy indicates significant financial distress, possibly a liquidity crunch and a forced sell of assets at an inopportune time. Owners of mortgages would likely take possession of their collateral leaving senior unsecured creditors fighting for what is left.

As seen in the recent Near Depression, the fear of a collapse can cause the preferred stock to crater in price. Quality REIT preferred shares with $25 par values could be purchased at greater than 50% discounts to par in late 2008 and early 2009.

Just to highlight this downside risk, I would just link blog discussions of some REIT preferred buys made during that period. All of the foregoing have been called by their issuer at par value and did not miss a dividend payment:

Buy 50 LXPPRD (7.44% coupon) at $7 in Roth IRA March 2009 (called at $25-2013)

Bought GRTPRF (8.75% coupon at $2.9 (October 2008)(called at $25-2012)

Bought SLGPRC  (7.625% coupon) at $10.5 March 2009(called at $25-2013)

Bought FRPRK (7.25%) at $8.4 February 2009 Regular IRA(called at $25-2013)

Bought of CUZPRA (7.75% coupon) at $11.5 December 2008 (called at $25-2013)

Bought  50 BDNPRC (7.5% coupon) at $9.25 February 2009 (called at $25-2012)

That period was a wake up call for preferred stockholders. No doubt, many just rode the shares down from over par value to the single digits and back.

And, that sorta worked this last time, once the risk of lost opportunity and total return calculations are just ignored and frequently are viewed as irrelevant.

The world's financial system came very close to a total collapse in 2008, where junior securities for a wide variety of leveraged issuers would not have made it far into what would have been the Second Great Depression.

Even with the comeback in price, the risk of lost opportunity was on steroids during that period, for those hold through thick and thin, satisfied with those dividend checks even though the yield of GRTPRF bought at $2.9 (October 2008) was 75% per annum, Needless to say, the yield was much lower for those who bought at over $25 before 2008. Which is better? 75% or 8.85%? One of my Right Brain's many quizzes where the investor receives either an A+ or a F-.

4 Volatility Risk: This risk can be manifested whenever concerns increase about credit and/or interest rate risks. In the 2011 summer, there was substantial volatility to the downside in preferred stocks that some may attribute to credit risks concerns. Maybe those concerns played a role. I would assign the downside action to "preferred stocks" starting to be less "bond like" and more "common stock like".  Individual investors panic and sell and the word "stock" has more importance than "preferred" when that happens. The S & P 500 fell quickly almost 20% during the 2011 summer.

I noted in an August 2011 that junior securities, including preferred stocks and various types of junior bonds, had around 15% to 20% intra-day moves in just one day.

Scroll to Item # 1
Fear and Enhanced Volatility in Certain Classes of Income Securities (8/9/11)


5. Risk of Lost Opportunity: Except for the wealthy, or those with substantial assets and a lucrative and safe pension other than just SS, buying and selling opportunities need to be seized. One of the clearest selling opportunities in my lifetime occurred in 1999.

I asked an "income" investor whether they would have sold 200 shares of GE at $59 in 2000 (a P/E in excess of 30 times estimated 2015 earnings!). The answer was no since GE was still paying a dividend and was then raising it.

After noting that 2000 price and that the almost $12,000 in proceeds could have been used to buy about 600 GE in 2002 (much more in the most recent meltdown when the price fell below $10), I then inquired whether 600 GE shares generated more income than 200 GE shares. The answer was still no. The vast majority of households in the U.S. can not afford to think like that.

Many will say GE is a bad example. MO worked for a buy and hold investor through thick and thin. I congratulate anyone who has been able to do pick the ones that actually worked and had the discipline to hold, plus no need to sell shares to buy a house, pay for a kid's college education and the myriad of other expenses that seem to crop up for most folks, though never for many others apparently.

All of my financial issues could have been resolved when I called my "full service" broker in 1974 to place an order to buy 100 BRK at $16 as I recall. While the phone was ringing, I hung up since I was afraid of losing money and the market was then having one of its really bad spills.

While I am old enough to dispel that kind of reaction now, I would still have to deal with holding that 100 share lot over the years, rather than selling and using it to pay some extraordinary expense.

Of greater importance for me, I would have had to resist the incredibly powerful urge to sell a stock bought at $16 at $100, then $1,000, or $10,000 per share a few years thereafter,  and now at $215,800 per share or $21,580,000. Needless to say, I could have made an abundance of mistakes if I had just bought those shares in 1974 and kept them until now.

Future Buys: I am not likely buy more of CORRPRA unless the price corrects at least 10%. Then I would just average up to 100 shares. I would then consider selling the highest cost lot profitably when and if given the opportunity. I would consider selling the 50 share lot with a spike over $26 after receiving a couple of dividends, an admittedly small ball approach. I view small ball as consistent with my opinions about interest rate risk now.

I am fine with an annualized, tax free rate of return at the coupon level. The tax free character, of course, is due to its purchase in the ROTH IRA.

I view this security to be at best a marginal buy at $24.95. I have zero interest in it at a higher price.

With the recent increase in the quarterly common dividend to $.135 , the yield at last Friday's closing price of $6.88 is about 7.85%.

I generally prefer coupling the preferred when it increases my blended rate rather than decrease it. Item # 1 Bought Roth IRA: 50 BPFHP at $23.35 and 50 BPFH at $12.35 (5/10/14 Post)



2. Bought 50 of EWI at $14.915 (see Disclaimer):

Snapshot of Trade:




Prior Trades: None

Security Description: The iShares MSCI Italy Capped ETF (EWI) is another country specific stock ETF.

MSCI Fact Street for its Italy Index (forward P/E=15.59, TTM P/E 29.09, both as of 3/31/15)

The fund currently owns 28 stocks.

I took a snapshot of the major holdings as of 4/27/15.



Sourced: iShares MSCI Italy Capped ETF | EWI

I just look at the Bloomberg pages for a few major holdings:

ENI:Brsa Italiana

ISP:Brsa Italiana

UCG:Brsa Italiana

LUX:Brsa Italiana

I was not impressed.

Rationale: The rationale is the same as several recent single country buys, including the last one.  I would just reference my discussions in three recent SA articles implementing the same strategy:

Bought iShares MSCI United Kingdom ETF at $18.55-ROTH IRA

Bought The Global X MSCI Norway ETF at $12.74

Bought iShares MSCI Poland Capped ETF (With An Investment Strategy Discussion Introduction) at $24.45

(1) Italy's stocks are priced in Euros and the Euro has cratered in value against my USDs. I am buying securities using a strong currency that are priced now in a weak one.

(2) I am buying country ETFs where the Shiller P/E is below 12 and there is one other appealing valuation metric.

One money manager calculates the Shiller P/E for the Italian stock index at 9.8 with a Price to Book of 1.3 and a Price to Sales of .5. 

The forgoing blue highlight sums up the rationale.

Sourced: Global Stock Market


Risks and Disadvantages: Currency risks is always important when buying a USD priced owning foreign securities. The EUR/USD exchange rates can provide a wild ride up and down.

A single country fund has concentrated "country risks".

Italy does not have good economic numbers. The GDP growth rate has been negative for several years. Government debt to GDP is over 130%.

Sourced Trading Economics: Italy GDP Annual Growth Rate | 1961-2015Italy Government Debt to GDP | 1988-2015Italy - European Commission

The EC report on Italy points to the same problems over and over again (structural problems; lack of competitiveness, lack of productivity growth, etc. and so). 2015_Italy.pdf It would not be rational to expect any material changes in any of the negative factors. It is what it is.

The dividend yield based on the TTM payments is below my threshold of 3%.

The TTM P/E is high. The three year standard deviation is reported at 24.72% which is way too high for me.

The sponsor discusses risks starting at page S-3 of the Prospectus.

Future Buys or Sells: I lack confidence in the long term future of these Italian companies. I will not buy more than 50 share and will likely sell when and if there is a pop.


BANK EARNINGS: 


A. Lakeland Bancorp (LBAI): Actual $.22 vs. $.2 Estimate



NIM= 3.56%


Lakeland Bancorp Reports 16% Increase in Net Income and Raises Cash Dividend

LBAI is a recent addition to the basket:

Lakeland Bancorp Inc. (LBAI)-Stock Quote

The current E.P.S. estimate for 2015 is $.9 and $.99 in 2016. LBAI Analyst Estimates

Bought 100 LBAI at $10.91 (3/13/15 Post)

B. FNB:  Actual $.22 vs. $.21 Estimate




F.N.B. Corporation Reports Record Net Income and 16% Increase In Operating Earnings Per Share

F.N.B.  (FNB)-Stock Quote

The consensus E.P.S. estimate is $.89 for this year and $.99 for 2016. FNB Analyst Estimates

I currently own 100 shares: Added 50 FNB at $7.8 (7/20/2010 Post)Bought 50 FNB at $11.25 (7/24/13 Post)

Prior to buying that 50 share lot in 2013, I had sold my highest costs lots using FIFO accounting and had kept the shares bought at $7.8 which I still own. Bought 50 FNB at $8.42 (May 7, 2010 Post) Bought 50 FNB at $9.36 (April 27, 2010 Post)-Pared FNB: Sold 50 at $10 and 50 at $10.18 (December 23, 2010 Post)

C. Trustmark (TRMK): Actual $.43 vs. $. 39 Estimate










I have been trading this one since 2009. 

My last purchase was last January: Bought Back TRMK at $22.25-Regional Bank Basket Strategy (snapshots aggregated)

Prior trades are linked in that post. Total realized gains currently stands at $674.13.

D. West Bancorp: $.32 per share vs. $.27 in the year ago quarter

The Board increased the quarterly dividend to $.16 from $.14. That brings my dividend yield at my $11.75 total cost per share up to 5.45%.  Bought 100 WTBA at $11.67 (6/29/13 Post)

West Bancorporation, Inc. Announces Record First Quarter Net Income, Increases Quarterly Dividend




WTBA Interactive Stock Chart 

Friday, May 1, 2015

Thursday, April 30, 2015

AT & T SA Instablog Published as an Article

I have given SeekingAlpha permission to published my Instablogs as articles without payment of any compensation to me. 

A frequent criticism of my blogs here and at SA is their length and wordiness. Mr. Oregon Man has expressed that sentiment here more than once. 

So it is not surprising that the first four readers comments were not complimentary.  


Admittedly, I have a tendency to cover a subject with factual details; and my posts are not for the Twitter Generation who wants everything condescend to a few words. A proper analysis can not be done in a manner to suit them,  and I am only summarizing some of the main bullet points.  

The focus of that article is more on how AT & T's stock fits into my financial goals and needs. The answer to that issue is not very well. The stock has some bond characteristics, yielding now more than AT & T's long term debt as noted in the article, and that was the primary reason for buying a 30 share lot in the ROTH IRA.  

SA Instablog Published: Sold 200 BHK at $13.86 and 300 ACG at $7.81-ROTH IRA

Tuesday, April 28, 2015

Dividends: Roche, GE, Swedbank, Zurich Financial/SOLD 100 ARCC at $17.195/Bought 100 Canadian Utilities at C$40/Regional Bank Earnings: MBVT, NBTB, FMER, UBSI, AMNB

Stable Vix Pattern (Bullish):
Links to SeekingAlpha Instablog, Articles and Comments:

South Gent's Instablog | Seeking Alpha

South Gent's Articles | Seeking Alpha

South Gent's Comments | Seeking Alpha

*********************

Recent Developments:  While many may be pleased by the upward jaunt in U.S. stocks, with no correction since the 2011 summer, this kind of enthusiasm for any risk asset give the OG the shakes.

S & P 500 Closes:
October 3, 2011: 1,099.23 Historical Prices | S&P 500
April 28, 2015: 2,114.76

However, notwithstanding that emotional predicament, I recognize a powerful bull when I see one. I have noted frequently over the past year or so that I will require two pre-conditions before significantly reducing my stock allocation:

1. Trigger Even in my Vix Asset Allocation Model: The last one occurred in August 2007: Stocks, Bonds & Politics: VIX Chart from 2007: Alerts and Triggers Major Disruption of Cyclical Stable Bull VIX Pattern


AND

2. A 5% decline below the 200 day SMA line for the S & P 500.

The Case-Schiller index for the 10-City Composite Index increased by 4.8% Y-O-Y and 4.3% for the 20-City Composite. The largest 1 year positive change was Denver at 10%.

****************
General Electric: I quit reinvesting the dividend several years ago. My last discussion about GE was made in a SA article when I bought just 30 shares in an IRA: Bought General Electric In Roth IRA At $23.86 - General Electric Company (NYSE:GE) | Seeking Alpha

Taxable Account GE Dividend:


********************
Zurich Insurance Dividend:

I received my annual distribution from the Swiss company Zurich Insurance last week.

No Swiss withholding tax was paid since the dividend was not sourced from earnings but from capital surplus. The dividend is consequently treated as a return of capital that is not currently taxed by the U.S. but lowers my cost basis by an equivalent amount.  That has been the case since I bought 100 shares at $24.72 (2/4/12)(symbol later changed to ZURVY from ZFSVY at the time of purchase)


I have now received 4 annual distributions. Given the ROC dividend classification, my cost basis is now slightly over $17.

The $2 fee is paid to the ADR custodian.

******************

Roche Dividend:


Dividend Amount: $50.19
Tax: $7.53
Tax Rate: 15%

Switzerland 's Tax Treaty with the U.S. (15% Tax Rate in Article 10)

Brokers had until 3/19/15 to file the necessary documentation asserting treaty rates for their customers. The ex dividend date was 3/6/15. Roche DTCC Notice

That needs to be contrasted with what the Swedes are doing to U.S. citizens, as noted below, effectively undermining Sweden's Tax Treaty with the U.S.


***************************************

Swedbank Annual Distribution Received Minus 30%:

Swedbank joined the list of Swedish companies who have withheld a 30% in contravention of Article 10 of the Alleged Tax Treaty Between Sweden and the United States. Sweden's Alleged Tax Treaty with the U.S.



I will receive on or about 5/1/16 the annual dividend Svenska Cellulosa AB ADS (SVCBY). Once I see the withholding rate for that one, I intend to publish an Instablog discussing the Swedish Problem.  The origin of the Swedish Problem is disclosed in the DTCC notice for Swedbank's 2014 dividend: Swedbank The broker has to compile and file in Sweden the necessary documents asserting the applicable treaty rate by 5 P.M. after the ex-dividend date. The broker can not start compiling that information until it knows the identity of customers who owned the stock on the ex-dividend data.  This is basically a way for Sweden to collect more revenues from U.S. citizens.

I will not buy more shares of any Swedish company where I am denied treaty benefits. I will look for an opportunity to sell the existing 50 share positions in both Swedbank and Svenska Handelsbanken.
***********************

1. Sold 100 ARCC at $17.195 (see Disclaimer):


Snapshot of Trade:



Snapshot of Profit: For an externally managed BDC, any share profit will do.

2015 ARCC 100 Shares +$116.36

Bought 50 ARCC At $15.41-A Typical Small Lot Purchase Of An Externally Managed BDC Stock - South Gent | Seeking Alpha (10/19/14 Post); Item # 3 Bought: 50 of the BDC ARCC at $16.17 (1/21/11 Post)

Total Return Calculations: I used a website to calculate total return numbers without reinvestment of the dividends:

The lot purchased in October 2014 had an annualized total return of 33/82% and a total return of 17.79%:


The 50 shares lot bought in 2011 had an annualized total return of  11.36% and a total return of 58.05%.


Sourced: Profit Snapshot on Trade Date Plugged into DRIP Returns Calculator | Dividend Channel.


Prior Trades: I have managed to realized my primary objective for BDCs, with one minor trade exception, when trading ARCC.  I have harvested a total return in excess of the dividend yield.

The share profit on this last transaction was the largest. The total return from the prior transaction originated by the dividend payments which were not diminished through profitable share sales.


Sold 100 ARCC at $17.54-IRAs in Two 50 Share Lots (9/13/12 Post)-Item # 4 Added 50 ARCC at $16.9-Regular IRA (5/21/11 Post) and Item # 3 Bought 50 ARCC at $16.89 (12/3/2010 Post)

Item # 3 Sold 100 ARCC Roth IRA at $17.05 (2/25/15 Post)(profit Snapshot: $17.05 +$157 in dividends)

In that last post, I made the following comment:

"I have decided to gradually eliminate BDCs from my IRAs, now viewing their many disadvantages to be inconsistent with the capital preservation emphasis in those accounts.

My tipping point was reached when both FSC and PSEC slashed their dividends and continued to report significant declines in their respective net asset value per share as the external managers feasted on more income for themselves. These two BDCs and several others exist to enrich the external managers. Their relatively high dividend yields are the honey to attract individual investors, desperate for yield, to buy shares, a necessary precondition to the wealth generation for the external managers. Many of those mom and pop investors fail to notice that assets are being incinerated over time that results in a lower share price gradually working its way to zero."




Security Description: Ares Capital Corp. (ARCC) is one of the oldest and largest Business Development Corporations.

A BDC is a pass through entity, like a REIT, where taxes are avoided at the corporate level for income distributed to shareholders.

BDCs make investments throughout the capital structure mostly to private companies. Most of the investments are generally loans that are either first and second lien loans similar to the bank loans that are bought by funds specializing in that area including mutual funds, closed end investment companies and ETFs.

A question to ask and answer for oneself is why are these privates companies dealing with BDCs rather than a consortium of banks. The BDC may have pieces of some bank originated loans, while others are generated internally or acquired through participations in other BDC originated loans either initially or in the secondary market.

One important characteristic found in many of these junk loans is an increase in the coupon tied to a short term rate, mostly the 3 month Libor which is currently near zero. Most of the loans of recent origin have a Libor floor that must be exceeded before the coupon can be increased through that floating rate mechanism. A typical floor would be in the 1% to 1.5% range. Consequently, short term rates would be rising for awhile before the borrower suffers an increase in the coupon.

BDC's loans would generally fall into my junk categories of high risk and extreme high risk which are reflected in the interest rates paid by the borrowers. A measure of common sense needs to be exercised when looking at a description of those investments. What does a 14% secured loan tell you about credit risk, particularly in today's low interest rate environment when a 10 year treasury yields less than 2% and most investment grade bonds maturing in ten years or less are likely to produce negative real rates of return before taxes.


Rationale: I have turned even more negative than usual to externally managed BDCs.

I view that business structure as inherently flawed. For the most part, I have nothing positive to say about the competence level of managers running most externally managed BDCs and a few internally managed ones.

The externally managed BDCs exist to enrich their external managers. Sooner or later, many individual investors will reach that conclusion or at least the ones who are actually paying attention to dividend cuts, destruction of net asset value per share, stock offerings below net asset value, historical total return performance that can be fairly characterized as PATHETIC IMO, and incentive and base fees paid in large quantities to produce all or most of the foregoing.

The high dividend yields are simply the honey used to lure investors into buying shares, a necessary prerequisite to outlandish fee generation for performance ranging from mediocre (rare) to net asset value destruction and poor total return performance. (more common)

ARCC is probably the best externally managed BDC. The returns from this BDC are far better than from other ones that were in existence prior to 2008 as shown below. The past may not be prologue however.

All BDCs are suffering from yield compression now. ARCC's weighted average yield on income producing investments has declined every year since 2010.

The economy has been generally favorable since the recent Near Depression measured by job and GDP growth. A recession will happen and loans losses will accelerate raising the specter of dividend cuts and many externally managed ones have already cut their dividends in an expansion. PSEC's last cut took the monthly rate below where it was in 2005 (the 2005 4th quarter rate was $.28, and the monthly rate after the last slash is currently  $.08333 or $.24999 per quarter)

I achieve a decent total return, as noted in the snapshots above.

I also succeeded in selling the shares at above the net asset value per share which is becoming an increasingly rare possibility for externally managed BDCs

The last reported ARCC net asset value per share was $16.82, up from $16.46 as of 12/31/13: SEC Filed Press Release

I have noted in the past, IMO, that ARCC is probably the best of the externally managed BDCs given its track record that includes importantly the Near Depression period.

The following total returns were calculated starting on 1/3/2005 through 4/24/15:

Total Annualized
ARCC: 13.04%
PSEC: 5.35%
AINV: 3.07%
GLAD: -.03%
ACAS: -6.21
TICC: 3.69%

In that grouping, the only one working IMO is ARCC. I would view the rest as ranging from failures to mild disasters.
Some brain dead index ETFs have outperformed the Masters of the Universe by not being as brilliant as those Masters claim to be.

SPY: 7.98% SPDR S&P 500 ETF
IWM: 8.85%  iShares Russell 2000 ETF
TLT: 7.9%  iShares 20+ Year Treasury Bond ETF 
IYY: 8.39% IYY iShares Dow Jones U.S. ETF
VTI: 8.34% Vanguard Total Stock Market ETF
XLP: 11.13% Select Sector SPDR-Consumer Staples
XLV: 11.41% Select Sector SPDR-Health Care Fund 
VNQ: 7.96% Vanguard REIT ETF

Sourced: Dividends

After preparing that list, I looked at some regular "C" corporations that pay dividends though at a lower yield than the BDCs.  I typed whatever symbol that popped into my head:

Annualized Total Returns: 
MMM: 9.26%
UTX: 10.91%
PEP:    8.46%
GIS:   10.73%
NVS:  11.45%
MRK: 11.67%
JNJ:      7.42%
BA:     13.31%
MSFT:  8.39%
AAPL: 36.93%
UNP:   23.64%

Then, I wanted to see how some REITs did during that period. REITs are also bought by individual investors for their dividends and are pass through entities like BDCs.

O:       13.74%
SLG:   11.32%
AVB:  13.61%
ESS:    15.75%
OHI:    20.53%
VTR:   15.71%
EPR:    10.49%
DLR:    21.69%
HCP:    10.84%
HIW:    11.83%
EQR:    13.84%

While conditions change, I am not hopeful that externally managed BDCs will produce acceptable total returns, with limited exceptions, and their performance will get worse when the next recession hits.

Most of the currently traded BDCs have not yet been tested by a Near Depression. I doubt that any of them will do better than the ones that existed prior to 2007.

Future Buys: I will wait until I see a market price at least 5% and preferably over 10% below the last reported net asset value before considering a repurchase.


I am also going to downsize the small positions in the taxable account when I can sell shares profitably.

I just averaged down yesterday on one of them with a 100 PSEC share purchase that will hopefully give me a better opportunity to escape with a share profit.  I am not going to discuss that trade here, since I start to become ill when thinking about the managers of that company and what they have done to earn their compensation.  (See my PSEC comments to this Seeking Alpha article.)



I reduced my average cost to $8.82 per share.


PSEC 230+ Shares/Ave. Cost Per Share: $8.82

PSEC went ex dividend for its monthly distribution the day after my purchase. Prospect Capital Corporation I suspect that dividend reinvestment will lower the average cost per share some. So I would just be waiting for a small pop before saying adieu (so few have been paid so much for so little, disgusting is way too kind of a description)




2. Bought 100 Canadian Utilities at C$40 (CU:CA) (Canadian Dollar (CAD) Income Strategy)(see disclaimer):

Snapshot of Trade:


The ordinary shares can be purchased using USD on the pink sheet exchange. However, volume is very light. Canadian Utilities Ltd. (CDUAF) Only 976 shares traded on 4/23 versus almost 110,000 in Toronto.

On the day of my purchase, the ordinary shares priced in USD rose 1.38% to close at $32.97.

The CAD priced ordinary shares traded in Toronto closed  down .1%.  CU.TO Historical Prices

And what does that tell you about the exchange rates that day. Was the Canadian dollar moving up or down in value against the USD?

CAD/USD Interactive Chart

I took a snapshot of the currency values before a placed the trade, but deleted it. I took the following snapshot later on 4/23:



The conversion value is really important when I am buying the ADR or ordinary shares using USDs. I do not view it as important when I am using what I view as a permanent CAD position to fund a purchase in Toronto. The relevance exist only when I sell the security and the broker uses the conversion values from CADs into USDs (both purchase and sell) to calculate the profit reportable to the IRS.

I decided to use my CAD stash to buy the ordinary shares in Canada preferring to draw down my CADs rather than USDs at that moment in time.  I am earning zilch on both cash amounts unless one is inclined to call a Fidelity MM rate of .01% a return and I would just as soon earn zero which is what my idle CADs throw off.


Prior Trades: None. First Purchase.

Company Description: I would describe Canadian Utilities as a diversified electric utility company with significant  energy infrastructure assets.



Sourced: Investor Quickfacts

MW stands for "Megawatts", which is defined as 1 million watts or 1,000 kilowatts and is generally enough electricity to power about 600 homes.

KMS stands for Kilometers. (86,000 KMS of power lines equals  53,437.92+ Miles)

PJ = Petajoule   (46 PJ=423215224.42992 hundred cubic feet of natural gas)

The company operates through a number of subsidiaries in Canada, Australia and Mexico:


ATCO power's businesses includes the supply of electricity  from natural gas, coal-fired and hydroelectric generating facilities located in Western Canada and Ontario. About 80% of the generating capacity is located in Alberta. A map of those facilities can be found in the 2014 Annual Report (page 30)

ATCO electric owns and operates electrical transmission and distribution facilities in Alberta. ATCO Pipelines operates about 4,000 KM of natural gas pipelines in Alberta.


Both of those operations have a significant exposure to an economy that is significantly dependent on oil exploration and production. There was as of 12/31/14 about 11,000 KM of transmission lines and 69,000 KM of distribution lines. Transmission lines are those large and tall structures that carry electricity at high voltages over long distances (see pictures at page 13) They are expensive too build. Power is supplied to about 224,000 customers in 245 communities.

The significant exposure to Alberta can have benefits and risks. It would be better to have that exposure through Canadian Utilities that has a diverse customer base rather than a leveraged oil sands energy company.

ATCO Australia owns 299MW of generating capacity and has 13,700 KM of natural gas distribution pipelines serving 700,000 customers.

Sourced: Corporate Structure2014 Annual Report and Management Discussion 2014 Annual.pdf

Company Page for Shareholders: Investors

Company Website: Welcome to Canadian Utilities Limited

Investor Returns

The ordinary shares closed at C$40.62 last Friday. At that price and as of 4/26/15, Bloomberg shows the TTM P/E at 18.0785 and a P/E of 17.6916 based on estimated 2015 earnings. The five year dividend growth rate is shown at 8.87%. The dividend yield was then 2.91% based on a quarterly dividend of C$.295.

The company's debt is rated "A" by DBRS and S & P.  Credit Ratings

Dividend History: The dividend growth has been good over the years. Before taxes and inflation, money will double in about 8.16 years at 8.87%: Estimate Compound Interest

40 Years of Growth:

Dividends & Share Splits

I will receive the dividend payment's in CADs. As a U.S. taxpayer, however, I have to report to the IRS in USDs and consequently I will not be taxed on the CAD amount of the dividend but its value in USDs.  I will receive the CAD dividend payment after a 15% withholding tax. I am a very long term holder of CADs so I do not mind paying less tax due attributable to a decline in the CAD's value.

An owner of the USD priced ordinary shares will receive payment in U.S. dollars after conversion at the then existing exchange rate and also after a 15% withholding tax.

The owner of that security in effect receives a dividend cut when the CAD loses value and a dividend raise when the CAD rises in value using the exchange rate in existence at the time of purchase.

A far more important impact on the USD priced shares is their share value. A 20% decline in the CAD/USD from 1 to .8 will decrease the USD priced shares by 20% compared to the ordinary shares priced in CADs. A rise from .8 to 1 will cause a 25% outperformance in the USD priced shares.

Online Calculator:  Percentage Increase or  Decrease 

The CAD/USD (1 CAD= ) was at 1.05 in July 2011, hit 1.02 in September 2012; .99 in May 2013; and declined to .78 in mid-March 2015 before rallying some.  That is a bad result for an owner of a USD priced Canadian security.

The .78 rate was near a ten year low for the CAD/USD: CAD/USD Interactive Chart

Chart: I took a snapshot of a two year chart comparing the performance of the ordinary shares priced in  CADs (traded in Toronto) and the ordinary shares priced in USDs (traded on the U.S. pink sheet exchange). The disparity is caused by the decline in the CAD's value against the USD.

Based on what I just said, the reader has to already know the answer to this question. Did the CAD priced shares outperform the same ordinary shares priced in USDs over the past two years?


Two Year Comparative Chart: CAD Priced CU:CA vs. USD Price CDUAF


For a new buyer of the USD priced shares last Friday, the last date shown in the chart, the only certainty is that such a CDUAF buyer missed the adverse impact on price cause by the CAD's decline that is reflected in the preceding chart. The investor assumes the risk of a further decline and is likewise exposed to the potential benefit flowing from the CAD gaining strength after the purchase. Simply put,  a return to parity (1CAD=$1) would cause the USD priced shares to close at $40.62 (rather than $33.33 as of 4/25/15), assuming that the CAD priced shares were then at last Friday's closing price of C$40.62.  That currency gain resulting from a future hypothetical would be 21.87% with the Toronto shares remaining at the very same price.

2014 vs. 2013 Financials:  E.P.S. increased 20% Y-O-Y. Dividends per share rose 10.31%.



Sourced from 2014 Annual Report .pdf

The foregoing includes some extraordinary items as shown below.



Rationale: I am going to keep this section really simple.

For a utility, the earnings and dividend growth rates have been excellent. I would emphasize the past tense used in the prior sentence.

My Canadian Dollar stash earns zero until I invest it. Being a turtle, I am only gradually putting to work CADs raised in a bout of profit taking during 2014.

The five year chart looks good to me: CU Stock Chart


Risks: I recently discussed interest rate risk as applied to utilities in this SA article: A Word Of Caution About New Purchases In The Utility Sector | Seeking Alpha

I am mindful of those risks when I elected to limit my exposure to 100 shares.

The yield based on my cost is not viewed  favorably and could be looked upon with more disfavor during an interest rate spike.

The CU E.P.S. and dividend growth is better than the 2.3% earnings growth rate shown for U.S. utilities owned by the Vanguard-Utilities ETF.

I would emphasize once again the currency risk for investors who are not long term owners of Canadian Dollars.

I would note the tax risk and potential benefits, particularly for an investor like myself who is trying to increase my CAD stash over time through trading profits and dividends. I purchased CU with CADs and will receive CADs when I sell the position. My profit or loss from selling those shares will not determined based on my CAD profit or loss.

Both the purchase and sell are converted into USDs for tax reporting purposes. When the CAD falls in value after my purchase, and I have a profit realized in CADs, the profit in USDs will be lower and possibly even wiped out for tax reporting purposes.

The example that I give to highlight this tax issue is my sell of 300 ARTIS that generated  a C$367 profit but only a $6+ reportable profit.  The reverse can happen where the CAD gains in value after my purchase.  A lower profit adjustment was made in connection with selling my Healthlease units only because I held them for a short period when the CAD was declining against the U.S.D.

Stocks, Bonds & Politics: SOLD: 300 HLP-UN:CA at C$14.17 and 300 AX-UN:CA at C$15.71 (9/26/14)(Healthlease CAD profit at C$1,244.35 vs. USD Profit of $1,123.65)

I am fine with that result. Another possibility is that my USD profit will higher than my CAD profit due to the CAD rising in value after purchase. That may be more of a risk now with the CAD rising after plummeting in value.

It is important to simply be aware of these kind of tax issues. The tax result for buying the ordinary shares priced in USDs and in CADs is basically the same for a U.S. taxpayer before taking into account differences in commission costs and currency exchange fees. If I had bought the Artis ordinary shares price in USDs rather than the ordinary shares priced in CADs, I would have had the same USD profit before those two expenses.

The usual assortment of risks incident to operations are summarized starting at page 38.

Future Buys and Sells: I am not likely to buy more. I do not have a sell target price. One purpose of the Canadian Dollar strategy is simply to generate income paid in Canadian dollars that can be aggravated with the payments made by other securities, including Canadian REITs that pay monthly, that increase my CAD position for diversification purposes. I prefer increasing the CAD stash through trading profits and income rather than converting more USDs to CADs and incurring a 1% fee.


3. Bank Earnings: I am not going to discuss bank earnings in any detail unless I am buying or selling a position. I will simply provide snapshots of what I view as core metrics and an editorial opinion on certain aspects of each report.

I also look at other numbers that will not be reflected in the snapshot, including loan and deposit growth.

A. American National (AMNB): Actual $.40 vs. $.4 estimate (3 analysts)



American National Bankshares Inc. Reports First Quarter 2015 Earnings

AMNB was a recent tepid and at best marginal buy: Bought: 50 EROL at $24.45 and 50 AMNB at $22.07  (4/23/15). I am hoping for an average annual total return of about 8% with one-half provided by the dividend, assuming no dividend increases.

B. Merchant's Bankshares (MBVT): Actual $.53 vs. Estimate $.52


NPL ratio remains the lowest in my basket. The coverage ratio is the highest. MBVT is probably my most conservative bank.

Merchants Bancshares Eyes Growth Opportunity Through Agreement To Acquire Nuvo Bank & Trust Company (April 27, 2015)

MBVT is currently paying a quarterly dividend of $.28 per share.

Nuvo is a privately owned state chartered bank based in Springfield, Mass. NOVO's shareholders can choose to receive $7.15 per share or .2416 MBVT shares "subject to the total consideration being comprised of approximately 75% stock and 25% stock". The $7.15 cash price is about 133% of NUVO's tangible book (which is fine) and "51.9 times NUVO's last twelve month's earnings" (say what?)

MBVT's branches are located in Vermont. It is the "largest Vermont-based" bank with 32 branches statewide. The NUVO acquisition will be the first banking office in Mass.  Branch Listing | Locations

I currently own 50 share bought at $26.25.

In 2011, I sold a 50 share MBVT lot for a $160.1 profit (profit snapshot in the preceding linked post and in the Regional Bank Gateway Post)

SOLD 50 MBVT at $26.5

C. NBT Bancorp (NBTB): Actual $.41 vs. $.42 estimate

E.P.S. is stagnant. NIM is stable Y- O-Y. NIM compression is a prevalent and meaningful problem for banks. Return on tangible equity remains good. The charge-off ratio is near the current national average. The coverage ratio is good. The capital ratios are okay.  I am not impressed by this report.




NBT Bancorp Inc. Announces Net Income of $18.2 Million for the First Quarter of 2015; Announces 5% Dividend Increase

The quarterly dividend was raised the quarterly rate to $.22 per share from $.21. My total cost per share is currently $22.95, and I am not reinvesting the dividend. Item # 2 Bought: 50 NBTB at $22.76 (2/17/14 Post)

This dividend increase raises my yield to 3.87%.

Link to March 2015 Article about NBTB, published at Seeking Alpha, and written by Dallas Salazar.

D. First Merit (FMER): Actual $.33 vs. $.33 estimate

Efficiency ratio is okay. The charge off, coverage and NPA ratios are good. E.P.S. was increased to $.33 from $.31 in the 2014 first quarter. NIM plummeted Y-O-Y, probably due to lower accretion from acquired loans as those balances decrease. I discuss that issue in a recent SA article dealing with Trustmark: Regional Bank Basket Strategy: Bought Back Trustmark At $22.25 - Trustmark Corporation (NASDAQ:TRMK) | Seeking Alpha





FirstMerit Reports First Quarter 2015 EPS of $0.33 Per Share

After selling my 100 highest cost shares, I currently own 141+ at an average cost per share of $14.52: Item # 2 Bought 30 FMER at $11.35 (August 2011)Item # 2 Added 50 FMER at $15.2 (September 2012)Item # 3 Added 50 FMER at $15.09 (February 13, 2013 Post) The foregoing purchases account for 130 of the 141+ shares with shares purchased with dividends accounting for the remainder.

E. United Bankshares (UBSI): Actual $.5 vs. $.49 Estimate



United Bankshares, Inc. Announces Increase in Earnings | Business Wire

Based on my dividend yield of 7.66%, UBSI is become a bond like income generator.  I would not buy shares at the current price.

The bank did not cut its dividend during the last banking debacle but the rate of dividend growth is really slow and is not increased every year. United Bankshares, Inc. (UBSI) Dividend History

My dividend yield is not high based on dividend increases. The rate was $.29 in 2009 and is now $.32. My yield is due far more to buying at $16.56 and then just holding onto those shares bought at a favorable price. The dividend yield at the time of the November 2009 purchase was around 7%.

I bought this 50 share lot on 11/17/09:


The total return without dividends reinvested is 166.11% or an average annual return of 19.71%. With dividends reinvested, the total return would be 189.78% through last Monday's close.

Dividend Channel

The difference in those two numbers could narrow based on the return generated by a cash dividend. Keeping the cash in a money market fund since November 2009, which would have earned at most a few pennies, would simply mean that the differentials shown above would be very close to the actual differences between reinvesting the UBSI dividend or receiving the dividend in cash and leaving those funds in a .01% MM account.

Update For Regional Bank Basket Strategy As Of 4/20/15 | Seeking Alpha