Tuesday, January 31, 2012

Snapshots of Coin Sales In January 2012/Added to Janus Balanced/ Washington Trust/FNFG UBSI FFBC /Sold 50 BAX at $56.39/Bought 40 SVU as LT at $6.98

The market came to a realization yesterday, once again after several weeks of forgetfulness, that Greece is hopeless. Germany is becoming frustrated that more money has poured into Greece without much in the way of fundamental change. The finance minister for Germany basically told the Greeks that some outsider needs to be put in charge of Greece's budget, which is not going to happen. The market did recover some from its initial selloff.

The Commerce Department reported that personal income increased $61.3 billion or .5%, and disposable personal income increased .4%, in December. The inflation adjusted increase in disposable personal income was .3%. The savings rate rose to 4% from 3.5% in November. News Release: Personal Income and Outlays, December 2011

1. Added to Janus Balanced Mutual Fund Last Friday: I added to my position in the Janus Balanced mutual fund. I had eliminated or substantially pared my mutual fund holdings in 2007, except for the Permanent Portfolio which I kept intact and continued to buy more. In 2008, that fund declined only 8.36%. By paring, I am referring to selling shares down to 100.

The first mutual fund that I bought during the Near Depression period was the Janus Balanced T. Since I view the ability to manage money during downturns to be more important than riding the wave of a long term bull market, I was impressed with how this fund was doing in 2008. The total loss that year was 15.22%, so I invested some money and have added to it since that initial investment.

Morningstar gives this fund a 5 star rating. The fund category is moderate allocation. The expense ratio is .83%. The bond allocation is over 40%. Based on the Fed's decision to continue its Jihad until the end of 2014, bonds look better to me now than they did a few days ago. I would hope that the fund pares its large allocation to U.S. treasuries before the worm turns and carnage and destruction is visited upon those who hold those securities.

Janus includes all or at least most  of its funds in one thick shareholder report. The last filed Form N-Q, which lists holdings, has the Balanced fund portfolio starting at page 13, nvcsr.

Janus Balanced Fund T (JABAX) closed at $25.5 yesterday, down 2 cents.

2. Washington Trust (own: REGIONAL BANK BASKET STRATEGY): WASH reported 4th quarter net income of $7.8 million or 47 cents per share, up from 44 cents in the year ago quarter.  SEC Filed Press Release The consensus estimate was 47 cents. 

As of 12/31/2011, NPAs to total assets stood at .81%; the allowance for loan losses to non-accrual loans was at 140.33%; the net interest margin was 3.22%; the tangible equity to assets ratio was at 7.21%; and the total risk based capital ratio was at 12.86%. 

I still own 50 shares of the 100 bought at $15.26. The other 50 shares were sold @ $20.01. The stock is now trading at over $24. Washington Trust Bancorp 

Washington Trust Bancorp closed yesterday at $24.83.

3. First Financial Bancorp (own: REGIONAL BANK BASKET STRATEGY): FFBC reported 4th quarter net income of $17.9 million or 31 cents per share, up from 27 cents in the year ago quarter.  SEC Filed Press Release Recently, this bank has been paying dividends equal to its diluted earnings per share. In this latest earnings release, the FFBC Board announced that the next quarterly dividend will consist of the regular 12 cents per share plus a variable dividend of 19 cents per share (equaling the 31 cent E.P.S. reported for the 4th quarter).

As of 12/31/2011,  the net interest margin was 4.32%; NPLs to total loans stood at 2.57%; the allowance for loan losses to non-accrual loans was 96.83%; tangible equity to tangible assets ratio was 9.58%; and the total capital ratio was estimated to be 18.75% (10 > well capitalized).

First Financial Bancorp closed at $17.4 yesterday. Bought 50 FFBC @ 16.85 ADDED 50 FFBC at $14.87

4. Sold 50 Baxter International (BAX) at $56.39 Last Thursday (see Disclaimer): I reviewed Baxter's 4th quarter report, released before the market opened last Thursday, and did not comprehend why investors were taking the stock up over $2 per share. I consequently entered a market order to sell the 50 shares recently bought at $49.79. Bought 50 BAX at $49.79 (1/12/2012 Post).  The shares did close at $55.65 last Thursday, up $1.28.

The 4th quarter earnings report was okay. SEC Filed Press Release It illustrates a problem common to many large cap companies selling at relatively low multiples. The company reported an adjusted E.P.S. of $1.17, in line with expectations, on a 3% increase in revenues. The guidance for 2012 of $4.47 to $4.57 was lower than the consensus forecast of $4.62. Management estimated 2% sales growth in 2012. For the 1st quarter, Baxter estimated an E.P.S. of $.98 to $1 and the consensus was at $1.04.

2012 Baxter 50 Shares +$314.04
Baxter International closed at $55.3 yesterday.

5. First Niagara (own: REGIONAL BANK BASKET STRATEGY): FNFG reported adjusted net income of 24 cents ($.19 GAAP), in line with expectations. First Niagara Reports Record 2011 Results

As of 12/31/2011, the efficiency ratio was 59.61%; the net interest margin was 3.48%; NPLs to total loans stood at .55%; the allowance for loan losses to NPLs was 133.7%; the Texas Ratio was 8.55%; the tangible equity to assets ratio was 8.57%; and the total risk based capital ratio was 16.47%.

I have been critical of FNFG's management and Board based on their ill-advised decision to buy 195 HSBC branches. First Niagara: Just Another Incompetent Bank Board of Directors First Niagara Dividend Slash

6. United Bankshares (own: REGIONAL BANK BASKET STRATEGY): UBSI reported 4th quarter net income of $20.3 million or 40 cents per share, which included a before-tax non-temporary impairment charge related to some securities of $6.3 million.   Press Release  As of 12/31/2011, the net interest margin was 3.88%; the efficiency ratio was 51.81% (down from 53.87% on 12/21/10); NPAs to total assets stood at 1.58%; and the coverage ratio was 92.7%.

I am keeping UBSI around due to the dividend yield at my cost (over 7%), and the bank's history of raising that dividend. Bought 50 of UBSI (November 2009)

7. Bought 40 SuperValu (SVU) at $6.98 Last Thursday (Lottery Ticket Basket Strategy)(see Disclaimer): Until this LT purchase of the common, I have limited myself to SVU's senior bonds. I have sold 3 bonds for a profit, and currently own two as part of my Junk Bond Ladder Strategy. I have discussed this company in prior posts due solely to my ownership of its bonds.

The stock declined 12.5% on 1/11/11, closing at $7.34, after SVU released a disappointing earnings report for its third fiscal quarter ending 12/4/11. The company reported adjusted net income of 24 cents, one cent shy of estimates, on a 4% decline in revenues.  SEC Filed Press Release The GAAP per share was a loss of $3.54. The company recorded goodwill and intangible asset impairment charges of $907 million pre-tax ($800 million after tax or $3.78 per share).

In retrospect, it would be fair to characterize SVU's acquisition of Albertsons in 2006 to be ill-advised. Some of the debt that I have bought originates from Albertsons.

SVU's debt is its primary problem in my opinion. The recently filed SEC Form 10-Q shows the long term debt and capital lease obligations to be $6.203 billion as of 12/3/2011. (see note 5 at page 11).  The maturity dates of those obligations are listed in a table.

Of the bonds listed in that table, I own the 7.5% senior note maturing in November 2014 and the 8.7% note maturing in 2030. Bought 1 SuperValu 7.5% Senior Bond Maturing 11/15/2014 at 97.8 Bought 1 Senior Albertsons' Bond Maturing 2030 at 85.75 I have bought and sold the notes maturing in 2016, 2026 and 2029. Sold 1 Albertsons' Bond Maturing 2029 at 84.125-  Bought 1 Albertsons Bond (now part of SVU) at 77SOLD: 1 Albertsons 7.75% 2026 Bond @ 88.3-BOUGHT 1 Albertsons Bond Maturing 2026 at 80Bought: 1 SuperValu Bond Maturing in 2016 at 98.73Sold 1 Supervalu 8% Bond Maturing 2016 at 104.125

SVU is paying a too generous quarterly common stock dividend of $.0875 per share. Dividend History: SUPERVALU Assuming a continuation of that rate, the dividend yield would be approximately 5% at a total cost of $6.98 per share.

The stock does have several statistical characteristics common to most lottery ticket purchases. The stock price has been smashed for one. SVU Interactive Chart The forward P/E is 5.63. The five year forward P.E.G. is estimated at .96. SVU Key Statistics

SUPERVALU profile page at Reuters
SUPERVALU key developments page at Reuters.

Supervalu closed at $6.96 yesterday. The 52 week high is $11.77.

8.  Snapshot of Coin Sales in January 2012:



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