Added 100 MRO at 28.15-Replacing 100 IGE/Bought 50 HTGC at 9.8/PSEC Husky Greece Activision

1. Bought 100 MRO at $28.15 Yesterday (See Disclaimer): In yesterday's post, I mentioned that I would buy a stock in the energy sector as a substitute for the 100 shares of IGE sold on Tuesday. /Sold 100 IGE at 32.5 I decided to add another 100 of Marathon Oil (MRO) Wednesday morning. This will improve my dividend yield on those funds, since MRO has close to a 3.4% dividend yield at my cost and IGE has a significantly lower yield. It is also important to me that MRO pays quarterly whereas the ETF IGE pays on a semi-annually basis. Sooner and more frequent payments are always more preferable to me.

I will be reinvesting the dividends to buy additional shares, which means that MRO is now a core holding in my energy and natural gas portfolio. I discussed Marathon in an earlier post: Bought 100 MRO at 31.68 Morningstar has MRO currently rated 4 stars with a fair value of $44. As with other large integrated oil companies, Marathon was hurt last year by poor refining margins. I recently sold Valero after it became apparent that refining margins would likely be weak longer into 2010 than I previously expected just a few weeks ago. Sold VLO at 18.85 While MRO has large refining operations, it did benefit last year from its upstream production. Unlike many of its peers, MRO did increase production available for sale last year by 9%.

The completion of its expenditures on its Garyville refining will allow Marathon to increase its upstream investment in 2010 by 24% to 2.9 billion, while significantly decreasing capital investment in its refineries. The 2010 capital budget for MRO is discussed in this press release: Marathon

Marathon will have wide swings in its earnings depending on the energy prices and refinery margins. It is almost useless to try and predict earnings in 2011 but I will mention that the 2011 estimate is for an E.P.S. of $5.09, up from $3.48 in 2010: MRO: Analyst Estimates for MARATHON OIL CORP The revenue estimate for 2011 is 90.57 billion. The last earnings report for the Q/E 12/31/09 is discussed in this report from Zacks.

The stock price recently fell below its 200 day moving average and has been moving in a channel between $25 to $35 since March 2009: MARATHON OIL CORP Share Price Chart The price peaked at around $67 in 2007, adjusted for a 2 for 1 split. Just before the Lehman bankruptcy, MRO was trading in the mid 40s, which would be my price target for a pare ($42 to $46). Most likely, I will keep reinvesting the dividend until the price exceeds $38.

The stock is ex dividend tomorrow. At the current price and revenues, price to book is .92 and price to sales is .42: MRO: Key Statistics for MARATHON OIL CORP Exxon, which I also own, has a price to book at 2.89 and Chevron is at 1.58 currently.

2. Husky Energy (HSE.TO)(owned): Husky Energy announced earlier in the week that its Husky Oil China subsidiary found its third significant gas discovery in the South China Sea.

3. 10 Year Treasury Auction/Yesterday's bond prices/LQD: Treasury notes fell in price and rose in yield yesterday after Bernanke outlined in general terms the Fed's exit strategy. The demand for the 10 year note auction was less than the previous auction and the yield was greater than the when-issued yield. The yield was 3.692%: www.treasurydirect.gov/ pdf The ETF for the 20 year treasury fell yesterday .92%, TLT, and the ETF for investment grade corporate bonds ( LQD) declined .79%.

I traded LQD successfully several times last year and in 2008, and no longer have a position. sold lqd again lqd and pom buys of cpb lqd syy xkk / sold lqd The sponsors web site for LQD shows that there are currently 382 holdings, far more than when I last owned this ETF, with an expense ratio of .15%. iShares iBoxx $ Investment Grade Corporate Bond Fund (LQD): Overview The current effective duration is 7.06 years and the 30 day SEC yield was 4.72% as of 2/9/2010. That yield will generally go up as the price goes down. When I first described this ETF in November 2008 the ETF had a .15% expense ratio, which is good of course, and it had 101 investment grade corporate bonds. LQD AND POM

My primary reason for buying LQD late in 2008 and into early 2009 was the abnormally large spread in yields between treasuries and investment grade corporate bonds which then existed. I thought that it was likely that the spread would narrow, which would lead to gains in corporate bond prices, and consequently a higher LQD price, even if treasury yields remained flat or even increased some. This is what happened. Corporate bonds did rally and the spread subsequently narrowed, which led to gains in LQD, while treasury bonds fell in price over the course of 2009. The spread between treasuries and corporates is too small now for me to attempt implementing this strategy now. So, I would have to justify a purchase of LQD based just on the hope of earning the dividend yield without losing anything on the share price. While the yield is better than short term funds like bank CDs or money market, I am still finding better opportunities with individual securities. And, I believe that it is more probable than not that I would suffer a loss buying those shares now, and the possibility of that loss exceeding my dividend payments will grow greater in my estimation the longer that I hold this kind of security going forward.

4. Greece: A more positive story about Greece's fiscal woes can be found in this WSJ article. By positive, I am referring to the claim made by the author that the Greek population has at least waken up to recognize their problem, and polls indicate that 60% of the population support the austerity measures proposed by the new Socialist government. Reuters reported today that the EU leaders had reached an agreement on providing assistance to Greece. As reported today in the WSJ, the agreement appears to be mostly mush, something like providing coordinated assistance if needed.

5. Prospect Capital (owned): Maybe the management of this BDC needs to focus more on its business rather than pursuing a hostile bid for Allied Capital. I do not think that I have ever read such a long sour grapes letter, where, near the end, PSEC announced a slightly increased offer to acquire Allied who has repeatedly spurned its overtures in favor of Ares. I actually found the letter to be amusing in a perverse kind of way: exv99w1 Why would I say that PSEC needs to focus more on its existing business, possibly try and do better with what they already own? That comment was based on a review of PSEC's 4th quarter report: 10-Q Net asset value ended the quarter at $10.06, down from $12.4 just three months ago (page 3). The nav as of 12/31/2008 was $14.58 (page 3: www.sec.gov)

The BDC did report net investment income of 29 cents during the Q/E 12/31/2009. Part of the gain in the 4th quarter was due to an accounting gain of 5.714 million connected with the Patriot acquisition. (see note 5: page 3010-Q)

This is what the company had to say about its realized gains and losses: "We experienced a net realized and unrealized loss of $33,778 or approximately $0.59 per share in the three months ended December 31, 2009." (page 52: 10-Q) " Net realized (loss) gains were ($51,229) and $16 for the three months ended December 31, 2009 and December 31, 2008, respectively. Net realized (loss) gains were ($51,229) and $1,661 for the six months ended December 31, 2009 and December 31, 2008, respectively. The net realized loss of $51,229 for the three and six months ended December 31, 2009 was due primarily to the impairment of Yatesville." (page 55).

In its press release, PSEC announced that net investment income for the current quarter would be 24 to 32 cents: Prospect Capital The estimate at YF as of yesterday was 34 cents: PSEC: Analyst Estimates for Prospect Capital Corporation The stock fell almost 5% in yesterday's trading. I currently own 200 shares. The price has fallen from $13.2 on 1/20/2010, when PSEC's management decided to make a hostile bid for Allied, to $10.45 yesterday, or close to a 21% plunge, wiping out my unrealized profit. I am not pleased and intend to cast my vote against the Board in the upcoming elections.

I do not believe that PSEC's managers are earning their generous fees { "The base management fee was $3,176 and $2,940 for the three months ended December 31, 2009 and December 31, 2008, respectively .. . For the three months ended December 31, 2009 and December 31, 2008, we incurred $4,231 and $2,990, respectively, of income incentive fees", see page 54}(add 000) Maybe they will earn their generous fees in some other year in the hopefully not too distant future.

There were nine loans on a nonaccrual basis as of 12/31/2009:

"At December 31, 2009, nine loan investments were on non-accrual status: AEH, Coalbed, Deb Shops, ICS, Iron Horse, Nupla, Sidump’r, Wind River Resources Corp. and Wind River II Corp. (“Wind River”), and Yatesville. At June 30, 2009, five loan investments were on non-accrual status: AEH, Coalbed, ICS, Wind River and Yatesville. The loan principal of these loans amounted to $146,376 and $92,513 as of December 31, 2009 and June 30, 2009, respectively. The fair values of these investments represent approximately 5.7% and 7.3% of our net assets as of December 31, 2009 and June 30, 2009, respectively." (see page 29)

6. Bought 50 HTGC at 9.8 Yesterday in Regular IRA (See Disclaimer): Hercules appears to me to be a better managed BDC than Prospect Capital. I previously sold my shares of HTGC in July 2009 at $8.67 at a good profit: /Sold HTGC As with other BDCs, the attraction is the dividend yield at over 12% based on the prior 12 months distribution rate. I placed this purchase in the regular IRA, which also has 50 shares of PSEC and a recently added 50 shares of TAXI, and I have enough cash to add 50 more shares in one of those BDCs. Since the stocks of these companies can jump around and can be volatile, I have placed them in the regular IRA rather than the Roth, so I have the option of including any of them in a Roth conversion in event of a significant further downdraft in price. The 3 BDCs in the regular IRA are all around my original purchase price. As previously mentioned, the general strategy is to keep them for several quarters capturing the large dividends, and then sell them for whatever profit I can muster no matter how small. I probably should have sold PSEC when it crossed $13 but I had just bought those shares at 10.48.

Hercules Technology will report results later today for its 4th quarter. It invests mostly in private technology and life science companies. The portfolio of investments are described at its web site: HTGC : Portfolio As a BDC it is required to distribute 90% of its taxable income to its shareholders as dividends.herculestech.com/PDFs/SpecialDividend

7. Activision (ATVI)(owned-2010 Speculative Category): Activision Blizzard reported a GAAP loss for the 4th quarter of 23 cents and 4 cents without a charge for the valuation of intangible assets. On a non-GAAP basis, the company earned 49 cents a share beating expectations by 5 cents. Activision reports revenues on a GAAP and non-GAAP basis. The non-GAAP number for the quarter was 2.5 billion compared to 1.56 billion GAAP. The non-GAAP includes deferred revenue from the sale of certain game titles. The company authorized a buyback of up to 1 billion in stock and initiated an annual dividend of 15 cents per share. The company ended the year with almost 3.3 billion in cash and investments. This report is discussed in the following articles: MarketWatch Reuters My purchase is around $100 or so under water based on the after market price yesterday: Bought 100 Activision My 2010 Speculative Category would be under water so far but for the $1000+ unrealized gain in the Berkshire shares which offsets the unrealized losses in NDAQ, Corning, Anika, Yahoo, Skillsoft, and Activision.2010 Speculative Strategy-Gateway Post So in that sense, I am doing better than the market with that strategy so far in 2010, but I am not pleased with the results.