An article in the WSJ summarizes the efforts of Hewlett-Packard and Juniper to take market share away from Cisco in its switching business. According to the journalist, HPQ offered a small business its switch for $361 whereas Cisco's switch was priced at $4,987. One of the comments to the article points out that Cisco has switches that cost less, and consequently the comment author claims that the foregoing comparison is specious.
The technical analyst for Barrons points out that a number of commodity stocks have started to break down.
MOU's second annual period ended yesterday with the Russell 2000 closing at 799.65. Java Chart - WSJ That number will be the ending value for MOU's second annual interest period and the starting value for the third annual period. If the Russell 2000 has one close above 1095.52 during the third annual period, which started yesterday, there will be a reversion to MOU's 3% guarantee. The third coupon period ends on 2/23/2012. Pricing Supplement If the index does not gain more than 3% during the third annual period, then MOU will pay the 3% guarantee as its coupon for that period. But, if there is a gain of more than 3% in the Russell 2000 index and no reversion back to the 3% guarantee caused my a maximum level violation, then MOU will once again pay the percentage gain over the starting value of 799.65 as its coupon payment for the third annual period.
For the second annual period, there was no maximum level violation. The Russell 2000 gained 27.93% during the second annual period, based on a starting value of 625.07 in the Russell 2000. I calculate that MOU will make an interest payment of $279.30 on its $10 par value per 100 shares, or 27.93%, on March 2nd. (see for further information: Bought 100 MOU at $10.12 (April 2010); Item # 8 Update on MOU (February 2011); Item # 1 Principal Protected Notes (April 2010); Item # 2 Principal Protected Notes (May 2010). Since MOU is a senior unsecured note, its distributions will be classified as interest income.
Fidelity prohibits its customers from buying exchange traded principal protected notes.
MOU's second annual period ended yesterday with the Russell 2000 closing at 799.65. Java Chart - WSJ That number will be the ending value for MOU's second annual interest period and the starting value for the third annual period. If the Russell 2000 has one close above 1095.52 during the third annual period, which started yesterday, there will be a reversion to MOU's 3% guarantee. The third coupon period ends on 2/23/2012. Pricing Supplement If the index does not gain more than 3% during the third annual period, then MOU will pay the 3% guarantee as its coupon for that period. But, if there is a gain of more than 3% in the Russell 2000 index and no reversion back to the 3% guarantee caused my a maximum level violation, then MOU will once again pay the percentage gain over the starting value of 799.65 as its coupon payment for the third annual period.
For the second annual period, there was no maximum level violation. The Russell 2000 gained 27.93% during the second annual period, based on a starting value of 625.07 in the Russell 2000. I calculate that MOU will make an interest payment of $279.30 on its $10 par value per 100 shares, or 27.93%, on March 2nd. (see for further information: Bought 100 MOU at $10.12 (April 2010); Item # 8 Update on MOU (February 2011); Item # 1 Principal Protected Notes (April 2010); Item # 2 Principal Protected Notes (May 2010). Since MOU is a senior unsecured note, its distributions will be classified as interest income.
Fidelity prohibits its customers from buying exchange traded principal protected notes.
1. Hewlett-Packard Co (HPQ) (own: Large Cap Valuation Strategy): After the bell on Tuesday, Hewlett-Packard reported GAAP earnings per diluted share of $1.17 for its fiscal first quarter ending on 1/31/2011. The adjusted number, which excludes after-tax costs of 19 cents per share, was reported at $1.36, up 26% from a comparable number of $1.07 in the year ago quarter. Revenues for the F/Y 1st quarter were reported at 32.3 billion, a 4% y/y increase. HP generated 3.1 billion in cash flow during this last quarter. However, sales from HP's personal systems group (PCs mostly) fell 1% and sales by the services segment declined by 2%. (see Tiernan Ray's comments at Barrons)
The company raised its full F/Y GAAP E.P.S estimate to a range between $5.2 to $5.8 per share but trimmed the fiscal year's revenue estimate to a range of 130 to 131.5 billion. HP's guidance for the next quarter was below the street's consensus of $1.31 on 32.6 billion in revenues. HP gave a range of $1.19 to $1.21 on revenues of 31.4 billion to 31.6 billion.
After trading HPQ, I have now decided to hold my shares for at least a year, and may add to the my current 50 share position when and if the shares fall below $40. Bought 50 HPQ at 41.57 Prior to that purchase, I had bought 50 shares at $38.2 last September and sold those shares within a month on a pop @ 43.11.
After trading HPQ, I have now decided to hold my shares for at least a year, and may add to the my current 50 share position when and if the shares fall below $40. Bought 50 HPQ at 41.57 Prior to that purchase, I had bought 50 shares at $38.2 last September and sold those shares within a month on a pop @ 43.11.
A discussion of this report can be found at Bloomberg.
If HP had a 4% dividend, a history of providing shareholders with a meaningful and rising cash dividend, this kind of volatility in the share price could be muted considerably in my opinion. Unfortunately, HPQ pays a measly 8 cents per quarter. I agreed with a column written by Andrew Bary last September who maintained that HPQ needs to dramatically raise its dividend. Item # 1 Explaining Low Valuations of Large Cap Tech Stocks
I will simply vote against the Board until such time as HPQ implements a reasonable distribution given its size, financial resources and growth prospects. I received my proxy yesterday, and voted against every member of the Board of Directors last night.
HPQ fell $4.64 or 9.62% in trading yesterday, closing at $43.59. The stock fell as low as $42.57. Over 96 million shares were traded, well above the average volume of 17+ million. I thought that the decline was just absurd.
2. RVT and RMT (own): RVT and RMT are two stock CEFs that I have own through the Dark Period, adding to positions occasionally, and I am reinvesting the dividends. Some of the discussions concerning these two CEFs, both specializing in smaller companies, can be found in the following posts: Added to RVT at 9.69 (August 2009) Added to CEF RMT at 7.64 (Jan 2010) Bought RJA and RMT at 6.73 (August 2009) Added 50 ADX at 9.7 and 50 RMT at 7.82 with Cash Flow (July 2010)
Until 2008, however, both funds have done well over the years and I have a favorable opinion of their managers from the Royce mutual fund group. Royce Value Trust (RVT) Royce Micro-Cap Trust (RMT) Small and micro caps have recently been out performing large caps, but these smaller companies will crater hard during a recession as selling accelerates and buyers disappear.
Both of these funds ceased paying their managed distributions during the Near Depression period, as their unrealized capital gains turned into unrealized and realized capital losses. It was a rough period for small cap funds, but I had a small feeding frenzy buying shellacked companies with cash flow being generated during that period.
I supported the funds' decisions to cease paying dividends back in early 2009, since the distributions had to be supported almost entirely by capital gains to avoid a return of capital classification. I would prefer to be paid nothing than to have a dividend classified as a return of capital. Unfortunately, one result of the dividend elimination was that many individual investors sold their positions, an erroneous response to a dividend cut under those circumstances in my view. Many undoubtedly sold at the worst possible time as the funds' net asset values plummeted during the Dark Period, and further losses were caused by the widening of the discounts to NAV, the so called double whammy effect. (the "triple whammy" can occur for CEFs that use leverage)
As a consequence, these funds started to sell at greater than normal discounts to their respective net asset values. The net asset values and discounts can be found at the sponsor's web site or at the Closed-End Fund section at the WSJ under "General Equity Funds". The discounts are still quite large compared to the average discounts prevailing before the Near Depression. As of 2/23/2011, RVT closed at 13.44% discount, and RMT at a 14.5% discount, to their respective net asset values. WSJ
As a consequence, these funds started to sell at greater than normal discounts to their respective net asset values. The net asset values and discounts can be found at the sponsor's web site or at the Closed-End Fund section at the WSJ under "General Equity Funds". The discounts are still quite large compared to the average discounts prevailing before the Near Depression. As of 2/23/2011, RVT closed at 13.44% discount, and RMT at a 14.5% discount, to their respective net asset values. WSJ
I did not notice until recently that both funds have resumed a managed distribution policy, though at lower levels than the policy in existence before 2008. The new policy will result in quarterly distributions equal to 1.25% of the firms net asset value or 5% annually. Royce Closed-End Funds to Resume Managed Distribution Policy While I am not sure, I believe the prior policy was for 10% annually. I use those dividends to buy more shares.
3. SOLD 50 FTE AT 22.27 (SEE DISCLAIMER): This sale was due to my ongoing stock re-allocation. I recently bought those shares at $20.8.
4. United Refining (own senior bond only: Junk Bond Ladder Strategy): I noticed in a recent SEC Filing that United Refining intended to commence a private offering of $350 million of senior secured notes and to use the proceeds to repurchase or redeem the 10 1/2% senior notes maturing in 2012. I own the 2012 note. Bought 1 United Refining Senior Bond at 95.5 I recently received a semi-annual interest payment. I checked the prospectus, and United may redeem the 2012 note now at par value plus accrued interest. (see page 32: Form S-4). So I will likely need to find a replacement in my Junk Bond Ladder Strategy relatively soon. I will of course wait for the redemption proceeds rather than attempting to sell 1 bond.
5. Sold 50 FRD at $10 (LOTTERY TICKET strategy)(see Disclaimer): I bought my shares in Friedman Industries at $5.76 over 1 year ago ($5.95 cost with commission). With the dividends, including one special 50 cent per share dividend (FRD), the total realized gain was over 70%:
Earnings for this mini-cap have been trending up in recent quarters, but I nonetheless decided to harvest my profit while I still had one. Form 10-Q
5. Sold 50 FRD at $10 (LOTTERY TICKET strategy)(see Disclaimer): I bought my shares in Friedman Industries at $5.76 over 1 year ago ($5.95 cost with commission). With the dividends, including one special 50 cent per share dividend (FRD), the total realized gain was over 70%:
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