Added 12/15/12: I linked this post in a Silicon Investor post: Income Investing Message Board - Msg: 28606496 The link to Rule 604 below no longer provides the information. This is a link to Rule 604 found in the Code of Federal Regulations which is actually written in plain English: Code of Federal Regulations The same provision can also be found at the Cornell Law School: 17 CFR 242.604 - Display of customer limit orders. | LII / Legal Information Institute
Dodge & Cox has started shorting the 10 year treasury in part as a hedge against its long corporate bond position.
Dodge & Cox has started shorting the 10 year treasury in part as a hedge against its long corporate bond position.
1. Display of ALL OR NONE Orders: Yesterday, the hapless OG was trying to sell 100 shares of a TC at the limit price of $20.09, with the condition "All or None". Given the light trading in many of the TCs, I did not want a partial fill which sometimes happens when the order is placed without the All or None condition. The order was routed by Fidelity through Knight Trading. For the entire afternoon yesterday, my offer to sell 100 shares at $20.09 was the best ask price, but was not being displayed. Instead, a number of round lot transactions took place at prices higher than my asking price. After I placed the order, several thousand shares traded above my asking price, and some traded as high as $20.41, without my order being filled by Knight. My order was invisible. It is also unfortunate that at least one buyer paid more than necessary yesterday due to my order being invisible.
When I use a broker other than Fidelity, who routinely routes most of my orders through Knight, my AON order is displayed and I have never had a problem similar to the one experienced yesterday for NYSE or Nasdaq listed issues. This is a problem unique in my experience to Fidelity. This kind of problem has occurred on occasion in the Grey Market for non-listed securities, where nothing is displayed. I checked the rules and apparently Rule 604 does not require a AON order to be displayed. Rule 604 --Display of Customer Limit Orders
2. Added 50 FSBK at $9.81 (Regional Bank Stocks' basket strategy)(see Disclaimer): The regional banks have not been performing well lately and their prices have experienced considerable price volatility, apparently due to increasing concerns about the economic recovery. A number of the smaller banks, which did not cut their dividends during the Near Depression period, have fallen to such an extent that their dividend yields have increased to over 5% in many cases. Several of those are comfortably earning more than enough to cover the dividend payout. FSBK is not earning its current payout however.
The dividend yield of FSBK rose to almost 8% based on the $9.81 price paid yesterday. First South Bancorp Inc NC, FSBK Stock Quote Previously, I bought 50 shares at 10.15 in January of this year and the shares rose thereafter to a high of $14.84 in May, FSBK Stock Charts First South is a small bank headquartered in North Carolina, and its market capitalization is around 96 million at the current price. This is a link to a map of its 30 Branch Locations in Eastern North Carolina.
There is a possibility of a dividend cut. In fact, I think that it would be advisable for the bank to cut the dividend to 10 cents per quarter. In the last quarter, FSBK earned just 16 cents and paid out 20 cents in dividends. www.sec.gov _10q. The net interest margin was good at 4.54% as of 6/30/2010 "At June 30, 2010, the Bank's regulatory capital ratios were in excess of all regulatory requirements and were the following: Total Risk-Based Capital – 13.62%; Tier 1 Risk-Based Capital – 12.37%; and Tier 1 Leverage Capital – 9.99%." (page 13).
First South did not participate in TARP (page 34: 2009 Annual Report). The share price hit a high of $34.72 in 2006: First South Bancorp Inc Share Price Chart | FSBK The bank did cut the dividend from an annual rate of 99 cents per share for the 2008 calender year to an 80 cent annual rate in 2009. Prior to 2008, the bank had raised the dividend since 2002, when the annual rate was at 28 cents per share.
3. Modification of Regional Bank Stock Strategy: After seeing several thousand dollars of unrealized appreciation go up in smoke, I am going to adopt a slightly more aggressive trading strategy for the regional bank basket. Fortunately, I did take some profits before the recent downturn in prices, but not enough in retrospect. The largest realized gain was in EWBC. The EWBC shares were bought at $ 5.7 and then sold at $19.04. I also harvested some decent percentage gains in Wilmington Trust, selling 100 shares at $14.13, and in Southwest Bancorp. Bought 50 OKSB at 6.84 Sold 50 OKSB at 13.19 And I realized a quick 100% in Wainwright after it received a cash acquisition offer. Sold 50 Wain at $18.7-Being Acquired Still, focusing on the long term has its disadvantages and the primary one is that decent gains have a tendency to evaporate from time to time which has happened in this particular strategy over the past few weeks.
So, I am going to be more amenable toward trading positions in the regional bank basket, particularly in selling higher cost shares after I average down. This is a typical trading strategy for a long term secular bear market and a Unstable Vix Pattern, and stocks are currently in both patterns. The general idea is to make an effort to use volatility for my benefit. As one trading tool, I will slice orders into small increments, and then selectively average down on certain securities. When and if the price pops above the first buy by some sum deemed not inconsequential, I will sell the higher cost shares and keep the lower cost ones using FIFO accounting. This cycle may repeat itself many times over. This kind of trading is discussed in several older posts from the Dark Period where I implemented that trading strategy with some success:
4. Rounded IDE to 100 Share Round Lot by Buying 50 shares at $16.85 (see Disclaimer): This CEF has been falling in value and was down 55 cents from my first 50 share purchase at 17.4 last week. As of last Friday's close IDE was selling at a 7.93% discount to its NAV. ING Infrastructure, Industrials and Materials Fund - Overview
As I mentioned in my prior post discussing the earlier buy, this is a new CEF that just went public earlier this year. The price to the public was $20 per share. www.sec.gov I would never buy an IPO of a CEF. For one, it will not be that long usually before it sells at a discount to net asset value and below the offering price. And the fund only received $19.06 for every share sold which means that everyone who bought the IPO paid a premium to the fund's NAV. The underwriters took ninety cents out of the $20 as their sales fee.
The fund is currently paying a dividend of $.45 per quarter. Distributions I would doubt that the fund will earn that dividend in its first year of operation. The sources of income are dividends, short and long term capital gains, and income from writing call options. If the market cooperates, and the prices of the securities owned by IDE do well, it is possible that the fund may earn in its current fiscal year sufficient income from short and long term capital gains to cover the dividend payout, and hopefully some income will be earned by successful call writing. Dividends will be insufficient by themselves, and part of the income is eaten up by the funds expenses.
I would anticipate that some part of the dividend distribution will be classified as a return of capital for the current year. I am willing to give a new fund some time and leeway in earning the dividend, possibly as much as two years, before making a decision to sell it based on the undesirable amount of dividends being supported by returning my capital to me.
I would note that one of the firms holdings as of the period ending in May was 45,000 shares of Potash, then valued at 4.463 million or around $99.19 per share. www.sec.gov I have no idea what the fund paid for POT which closed yesterday at $150.35 since it is in play. WSJ The yearly high was around $127 in March before BHP made an offer.
At the 45 cent quarterly rate, the dividend yield would be about 10.68% at a total cost of $16.85.
5. Porter Bancorp (PBIB)(owned): Porter cut its quarterly dividend in half, reducing it to 10 cents. Given the problems at this bank, with two out of the last three quarters marked by substantial surprises on loan losses after a market close on a Friday, it is not surprising that Porter cut the dividend and failed to mention that it was reducing the regular dividend when making the dividend declaration. SEC Filed Press Release Porter is by far my largest loss in the regional bank basket, and my initial reaction after the first surprise was to sell my position based on the cockroach theory of investing. Item # 6 PBIB & Item 9 Sold 50 PBIB at 14.7 The bank then led me to believe that everything was kosher so I bought 100 shares. Bought 50 PBIB at 13.27 And, my first reaction was the right one in retrospect. I do not trust the management of this bank, and it would not be rational to have any confidence in them based on events over the past year. Still, I am not ready yet to take my medicine.
6. Northrim BanCorp (NRIM)(own): Although I have recently lost my unrealized gain in NRIM, it is clear that NRIM is a far better managed bank than Porter. Northrim, based in Alaska, raised its dividend from 10 cents per quarter to 12 cents. Northrim BanCorp Increases Quarterly Cash Dividend 20%
Northrim last earnings report (10-Q) can be accessed at the SEC's site. (see prior discussions at Bought 50 NRIM; Item #4 NRIM; & Item # 7 NRIM)
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