Monday, October 16, 2017

Observations and Sample of Recent Trades: CPB, LXP, MDRX, WBSPRE/ Healthcare Stocks Trading Profits 2016-2017

Economy 

The Bond Ghouls viewed the BLS inflation report for September as confirming their long term thesis that inflation will never be a problem until the end of days. 

After all, the headline number was up only .5% rather than the anticipated consensus number of .6%. This spurt caused the non-seasonally adjusted annual number to rise to 2.2%. 


And, core inflation rose just .1% compared to the .2% consensus. 


The ten year treasury yield declined to 2.28% last Friday from 2.33% on Thursday. 2017 Daily Treasury Yield Curve Rates


As I previously mentioned, the headline number was juiced by a rise in gasoline prices caused by the two hurricanes. I read in several articles that this was only temporary, which I have yet to notice in reality when filling up my vehicles.   




There are generally some inflation numbers in the detailed category list that causes me to scratch my head. Table 2. Consumer Price Index for All Urban Consumers (CPI-U): U. S. city average, by detailed expenditure category


The most questionable item in this last report, which I view as absurd, is a claim that health insurance costs rose only .1% over the past year through September 2017 using non-seasonally adjusted numbers. Holy cow, that is a laugh at loud number.  


Look under the category "Services Less Energy Services" and then under the category "Medical Care Services". Sure, with those kind of numbers, there is no wonder that core inflation was so low.   


Yellen Speech 10/15/17: The Fed - The U.S. Economy and Monetary Policy


Yellen Says `Best Guess' Is Soft Inflation Won't Persist - Bloomberg


Gradual rate hikes should help sustain economic growth, Yellen says - MarketWatch


Oil jumps to near 3-week high as Middle East tensions escalate - MarketWatch


Crude Oil - Electronic Nov 2017 Price 


Iraqi, Kurdish forces clash near oil-rich Kirkuk in wake of independence vote - MarketWatch


Empire State index jumps to three-year high in October - MarketWatch

Empire State Manufacturing Survey (overview) - FEDERAL RESERVE BANK of NEW YORK

+++++++++


Market Commentary


It would take an ‘immaculate conception’ to create bear market in stocks right now: analyst - MarketWatch


Stocks, Bonds & Politics: Vix Asset Allocation Model Explained Simply With as Few Words as Possible (5/17/09 Post)


Vix Asset Allocation Model - South Gent | Seeking Alpha


Closing Volatility Prices 10/13/17: 


VIX - CBOE Volatility Index for the S & P 500: 9.61


VXD - DJIA Volatility Index: 10.19 


VXO - CBOE S&P 100 Volatility Index: 7.57


RVX - CBOE Russell 2000 Volatility Index for the Russell 2000: 14.63


According to Birinyi Associates, the GAAP TTM P/E for the S & P 500 was 24.33 as of 10/13/17, while the forward 12 month estimated non-GAAP "operating earnings" P/E was 19.39. P/Es & Yields on Major Indexes - Markets Data Center 
++++++


Trump and Obamacare



Trump is doing whatever he can, irrespective of legalities to undermine the Obamacare exchanges and to raise premium costs for those who purchase insurance on those exchanges. 


The latest salvo was his decision that the federal government would no longer reimburse insurance companies who are required by Obamacare to reduce out-of-pocket expenses for eligible households. 


Trump refers to those payments as insurance company bailouts, which is just another lie. The payments are designed to help lower and middle income families to reduce the out-of-pocket maximum medical payments. The ACA’s cost-sharing subsidies

The end result of this latest attempt to undermine Obamacare is that the federal government will end up spending about $200B more over the next ten years and insurance premiums will go up 20% next year


CBO Report: The Effects of Terminating Payments for Cost-Sharing Reductions 


Many insurance companies have already priced the withdrawal of funds into their 2018 price increases. 





The Effects of Ending the Affordable Care Act’s Cost-Sharing Reduction Payments | The Henry J. Kaiser Family Foundation


Administration’s Ending Of Cost-Sharing Reduction Payments Likely To Roil Individual Markets


4 ways consumers will feel the end of Obamacare subsidies - CBS News


Health Insurance Premiums To Rise After Subsidies Stop-NPR


Trump's New Obamacare Killer to Cost Uncle Sam $194 Billion - Bloomberg


CBO Analysis Finds That Ending Reimbursements To Insurers Will Raise The Deficit-NPR


How would the government's costs go up almost $200B over ten years and premiums soar as a result of Trump's decision to end what is called the cost sharing reduction ("CSR") payments to insurance companies. Cost Sharing Reduction (CSR) - HealthCare.gov Glossary | HealthCare.gov ("if you qualify for cost-sharing reductions, you also have a lower out-of-pocket maximum — the total amount you’d have to pay for covered medical services per year. When you reach your out-of-pocket maximum, your insurance plan covers 100% of all covered services.")


The reason is that the tax credit amounts will go up with the premium increases, at least until the subsidies exceed .504% of GDP and then the increases are tied to inflation rather than premium increases under section 1401 of the PPACA-Affordable Care Act -- Reconciliation - Tax Credits at section B (ii) III "Failsafe"- page 2 (about half way there now, but it is hard to say when the line will be crossed given the inherent inability to forecast both GDP growth and premium increases combined) 


The government provides assistance to lower and middle income families in two ways under Obamacare. 


The first is through tax credits which are available to people whose income is no more than 4 times the federal poverty level or about $97,200 in income for a family of four. Questions and Answers on the Premium Tax Credit | Internal Revenue Service  The increase in premiums caused by Trump's decision will cause the tax credit payments to go up which increases the cost to the federal government.      


The tax credits are refundable. 


The other government program, the one that Trump has decided to end, reduces the maximum out-of-pocket expenses for those who purchase the silver plan. Impact of Cost Sharing Reductions on Deductibles and Out-Of-Pocket Limits | The Henry J. Kaiser Family Foundation
 


Those payments from the government are used to help lower and middle income families afford their deductibles and co-pays. About 7 million individuals receive that benefit, many of whom no doubt voted for Trump. In fact, an estimated 4 million of those beneficiaries live in states carried by Trump. Pro-Trump states Negatively Impacted There is something satisfying about that outcome for Trump supporters. 


Scroll to the Interactive Map Titled "Number of People Enrolled in ACA Marketplaces (2017) and Medicaid Expansion (2016) by Senator's Party: Interactive Maps: Estimates of Enrollment in ACA Marketplaces and Medicaid Expansion | The Henry J. Kaiser Family Foundation


Trump's action will also injure middle income individuals and families who make too much to receive tax credits or a reduction in out-of-pocket expenses through the CSR payments. Those individuals who purchase the silver plan will suffer premium increases caused solely by the withdrawal of the CSR payments. 


Trump also timed the withdrawal to cause maximum damage to the state insurance exchanges. Timing of White House actions unrolling parts of ACA ‘couldn’t be worse,’ states say-The Washington Post


Republican politicians cheered the President's decision to raise premiums costs by about 20% for low and middle income families next year and to cause the federal government to spend more money and to go deeper into debt than it will save due to Trump's decision to withdraw the CSR payments. 


It is critical for the GOP's firm hold on about 40% of the electorate that they accept whatever Trump and company say as true which is a good bet for the republican politicians to make. Lying works for them, so why stop.  


If the insurance companies can not be reimbursed for lowering the out-of-pocket costs for eligible insureds, many will no longer offer policies and more localities will lose the remaining insurance carrier willing to provide coverage. 


Those with pre-existing conditions will consequently lose coverage. 


Ending Obamacare subsidies would increase premiums by 20 percent in 2018, CBO says - The Washington Post ("The cancellation of subsidies could lead some insurers to withdraw from the program, potentially leaving 5 percent of Americans living in areas with no insurance options for 2018")


The republicans in Congress refused to appropriate money for the CSR payments required by law. The insurance companies are required by law to reduce out-of-pocket maximum expenses (deductibles and co-pays)  for eligible insureds.  


After refusing to fund those payments, the House of Representatives, then controlled by the GOP, filed a lawsuit against the Obama administration to enjoin it from making the payments after the GOP refused to specifically appropriate the funds.  


The congressional republicans found a republican federal district court judge, Rosemary M. Collyer who graduated from the Denver law school, willing to adopt their legal argument as presented to her. She enjoined the Obama Administration from continuing those payments, but stayed the decision pending a final appellate court decision. 38 Page Decision Dated May 12, 2016 


{No one would confuse the University of Denver law school as one of the better ones (ranked a #76willing to admit over 50% of its applicants and only 37% find jobs after graduation according to the U.S. News and World Report} 


Then Trump was elected and there was no longer a real party in interest in that litigation. Trump was taking the same position on behalf of the U.S. government, the defendant in the case, as the congressional republicans who were the plaintiffs, so it was like suing yourself. 


The appellate court delayed making a decision at Trump's request which then allowed Trump to immediately cut off those funds last week, relying on that republican district court judge's opinion that has not been subjected yet to appellate review due to the delays requested by Trump and the House republicans. Joint motion for continued abeyance filed by Trump and the Congressional Republicans.pdf The Appellate Court should never granted the stay since the signatories of that motion were on the same side.  


The republicans in Congress could resolve the issue simply by appropriating the money of course, which they have refused to do for years now as part of their campaign to gut Obamacare and to raise insurance premiums for the people that they feign an interest in helping. 


They are not going to relent unless the Democrats agree to their demands on Medicaid and whatever may be their latest repeal and replace plan for Obamacare. That will not happen, so their fall back is to blame the Democrats for  harm that the republicans created by refusing to appropriate funds for the premium support payments. That legerdemain will work just fine for most republican voters including those who are seriously harmed by Trump's actions. 


There is not enough time in the day to point out all of Donald's lies. For informed voters, a perpetually shrinking minority to be sure, it is easy to identify Donald's lies. He has on several occasions reached 4 separate lies in just one tweet. I am waiting for five in one tweet which I do anticipate happening.    


I will address two recent tweets that are related to this section about Obamacare. 




The first lie in this tweet is the claim that insurance companies are being subsidized when in fact it is lower and middle income families who receive better insurance coverage by lowering their maximum out-of-pocket costs before coverage becomes 100%. The second lie is that insurance company are the "pets" of the Democrats. Overall, republicans receive more political donations from insurance companies as one would expect. Insurance-OpenSecrets 


Blue Cross donated $450+K to republicans and $229+K to democrats over a one year period. When limited to HMO and Health service donations, the contributions are close to equally divided, but the sums are not large. Health Services/HMOs-OpenSecrets


The other tweet involves Trump EO that contemplates allowing certain organizations to offer skinny plans that exclude essential benefits like maternity care, emergency room care, pre-existing conditions, laboratory services, lifetime caps, mental health and drug addition care and so on. That is what Trump is referencing in this lie: 




The beneficiaries are the employers who want to offer their employees junk health insurance coverage rather than comprehensive health plans required by Obamacare. The lie is that "millions of people benefit". Sure, the premium costs would be lower for junk plans since the plans do not cover much. The premium costs for those who need or want a comprehensive health insurance policy will go up a lot since the skinny plans will siphon off the healthiest individuals (who will regret their decision when they actually need good coverage).  And those intended victims of Trump's action do number in the millions. 


In the signing ceremony of this EO, Trump referred to these skinny plans as "great" healthcare, just another lie. Remarks by President Trump at Signing of Executive Order Promoting Healthcare Choice and Competition | whitehouse.gov ("This will be great healthcare", next to last sentence)


Health Care Changes Could Leave Millions of Cancer Patients and Survivors Unable to Access Meaningful Coverage | American Cancer Society Cancer Action Network


Donald Trump’s Terrible Executive Order on Health Care | The New Yorker;


Trump eases ObamaCare rules with executive order | TheHill


How Trump’s executive order affects health care plans and prices | PBS NewsHour;


Trump begins Obamacare dismantling with executive order - CNN


Eventually, all of this push and pull on healthcare insurance which creates chaos and increases costs will result in Medicare/Medicaid for all. 


Obamacare will not end up being the answer and will be relegated to the dustbin of history, nor will the GOP's approach which is in essence a return to the pre-Obamacare status quo. 


The transition to single payer with universal coverage for citizens (except possibly for those eligible for Medicaid which could be continued as a separate program with the states) will not occur soon. I would give it a 25% to 50% chance within 10 to 15 years, with the odds gradually increasing thereafter. It would probably require that the GOP be relegated to a minority party that is so weakened that it has no power to influence events. The funding would probably be similar to Medicare and would include increases in the SS payroll and self-employment tax rates, employer taxes, and government funding. 2017 Payroll Taxes Will Hit Higher Incomes  


There will need to be a far greater focus on controlling medical cost increases as well. 


++++++++


Trump and Iran


Trump elected to decertify the Iran nuclear deal based on his view that Iran was not complying with the agreement. 


His generals, his Secretary of State and the U.N. Monitor told him that Iran was complying, but Trump knows better.  


Trump: “In the event we are not able to reach a solution working with Congress and our allies, then the agreement will be terminated.”


The other signatories to the agreement stated that they had no intention of negotiating any change to the agreement, and urged the U.S. to honor its obligations. The only countries supporting the U.S. would be Saudi Arabia and Israel who want the U.S. to spend lives and treasure to address their Iran problem militarily IMO. 


Congress may in response to Trump's decertification pass legislation calling for an automatic termination when certain conditions occur, as determined by Trump, but that is unlikely to receive 60 votes in the Senate.  


Tillerson urging Trump to certify Iran's compliance with nuclear deal: report | TheHill


Mattis Contradicts Trump on Iran Deal Ahead of Crucial Deadline - The New York Times


Trump: Iran is violating the nuclear deal. Top US general: no, it isn’t. - Vox


Iran Is Sticking to the Nuclear Deal, IAEA Says - Bloomberg


Fact-checking President Trump’s speech on the Iran deal - The Washington Post


Iran's hardliners say Trump has done them 'great favors' - CNN


Trump on Iran's 'Multiple Violations' - FactCheck.org


Why Trump Hates the Iran Nuclear Deal - Video - NYTimes.com (one reason is that it was negotiated by Obama which is sufficient in Trump's mind to unravel it)  


Trump's is likely to continue alienating our nation's traditional allies. Personally, I believe he is the most tangible threat to the continued use of the USD as the world's reserve currency. Trump is a gift to China that will keep on giving.  


Dollar drop? China will 'compel' Saudi Arabia to trade oil in yuan: USA Today


Oil Futures in China Would Be Transformational - Bloomberg


Venezuela publishes oil prices in Chinese currency to shun U.S. dollar


China sees new world order with oil benchmark backed by gold- Nikkei Asian Review


Chinese central-bank chief talks of reforms aimed at lifting yuan’s status - MarketWatch


++++++++++

My Healthcare Trading Profits Starting in 2016 (includes Small Cap Biotech Lottery Tickets)

The profit/loss snapshots are in prior posts. 

2016: 

AGN       +$  95.97 
AMGN   +$310.68
BBC       +$ 58.28
CARA    +$233.11
CYTK    +$  94.00
EARS     -$  91.57
EPZM    +$  33.72
HZNP     +$  65.64 
IBB         +$  44.17
IMDZ     +$  41.49
MACK   +$ 132.47
MRK      +$183.44
NVAX    -$277.01 
NVTA    +$ 51.99 
PFE:      +$257.01
PGNX   +$114.5
PRTX    +$ 92.47 
RIGL    +$109.24
SGYP   +$  45.99
SNY     +$177.46
SUPN   +$  69.38

2016 NET TRADING PROFIT = +$1,842.43

2017: 

ARRY  +$355.48
AZN     +$    6.85
CARA  +$260.35
CYTX  +$157.03 
FOLD  +$425.98
GILD   +$103.38
HRTX  +$ 53.99
IMGN  +$ 77.48 
KPTI    +$261.14
MACK +$  12.99 
MDRX  +$ 49.98 
MRK     +$741.19
NKTR   +$355.4
NVTA   +$ 46.59
OMER  +$721.41
PFE       +$469.95
PGNX   +$216.11
RHHBY+$307.8
SNY      +$130.36
VGHCX +$426.53

2017 Net Profit = $5,179.99


++++++

Manafort Had $60 Million Relationship With a Russian Oligarch - NBC News

Women Shouldn't Have the Right to Vote, Says ‘Alt-Right’ Leader Richard Spencer


Why Donald Trump's Tax Plan May Blow Up in His Face—and Steve Mnuchin's


Tapper to Tillerson: Did you call Trump a moron? (Tillerson refuses to answer the question)


Trump Wants to Censor the Media - The Atlantic


Andrew Sullivan: Trump’s Mindless Nihilism (IMO, mindless nihilism is a good two word description)


Trump governs by disruption-and overloads all the circuits-The Washington Post


National (US) Poll - October 12, 2017 - U.S. Voter Support For Gun Con | Quinnipiac University Connecticut (For republicans, 77% of republicans approve of Donald's attacks on the media; 78% believe Donald tells the truth; 83% believe that the NRA is good for America; 83% believe that Trump actually cares about the plight of Puerto Rico; and 46% support a preemptive strike on NK) 


Misery in Puerto Rico: No power, no job, 'enormous' lines - Oct. 16, 2017


Nation Tracker: Americans feel tax reform plans would favor wealthy - CBS News


Sooner or later, Trump will cause a major negative event that the Stock Jocks will be unable to ignore. The negative impact on the real economy will be recognized, and the market will adjust quickly. My guess is that the first such action will be a U.S. trade war with Canada and Mexico. Trump's demands on those two countries, IMO, are intended to result in no agreement to amend the NAFTA trade agreement and will thereby provide Trump with an excuse to terminate the agreement which is what he really wants to do anyway.   

+++++++++++++++

1. Sold 100 LXP-Gateway Post: Equity REIT Common and Preferred Stock Basket Strategy:

A. Sold 50 LXP at  $10.39-IB Trading Account $1 Commission


Profit Snapshot: +38.52



I did receive two quarterly dividend of $.175 per share. Lexington Realty Trust (LXP) Dividend Date & History - NASDAQ.com

As noted previously, it has been difficult to realize trading profits in this out-0f-favor REIT, as shown by a five year chart: Lexington Realty Trust Interactive Chart Consequently, I have a hair trigger on any purchase and a declining consider to sell range. 

This leaves me with 179+ LXP shares.  


I own 50 share bought at $7.6 in a Vanguard Roth IRA account where I am not reinvesting the dividend.


Vanguard IRA History for LXP: 



  

In another Roth IRA account, I have pared the position down to 129+ shares. I bought 50 shares at $7.73 on 1/8/16. 
Item # 2 Update For Equity REIT Basket Strategy As Of 1/11/16 - South Gent | Seeking Alpha



History List of Purchases Does Not Yet Reflect 2.11 Shares Acquired Today but the total in yellow does
The remaining shares were purchased with dividends, mostly when I own a lot more shares. I have sold some shares in that account profitably that were purchased with dividends. 


B. Sold 50 LXP at $10.46-Used Commission Free Trade




Profit Snapshot: +$50.54




This 50 share lot was recently purchased in my Schwab taxable account at $9.45. Stocks, Bonds & Politics: Observations and Sample of Recent Trades (LXP)-6/11/17


LXP Trading Profits To Date: $800.94


2. Sold 50 MDRX at $14.32-IB Trading Account ($1 Commission)



Profit Snapshot: $49.58


Quote: Allscripts Healthcare Solutions Inc. (MDRX) 

For almost my entire ownership period, I was in the red on this lot which is sufficient for me to abandon the trade. 
MDRX Stock Chart The P/E is also high and there are no dividend payments. MDRX Analyst Estimates 


My only prior trade was more successful where I realized a $152.48 gain on a 50 share lot that was held for 2+ months. SOLD 50 MDRX at $11.82 (4/20/2009 Post)

3. Intermediate Term Bond/CD Ladder Basket Strategy

I am continuing to dump low coupon SU bonds maturing in 2026 for whatever profit exists, no matter how trivial. 


A. Sold 2 Intel 2.6% SU Bond Maturing on 5/19/26


Profit Snapshot: +$2.32



Finra Page: Bond Detail

Issuer:  Intel Corp. (INTC)

INTC Analyst Estimates

Sold at 97.824
YTM Then at 2.887%
Current Yield at 2.66

Bought at a Total Cost of 97.396

Stocks, Bonds & Politics: ITEM 1.E. 
YTM Then at 2.929%
Current Yield at 2.67%

My consider to repurchase price would be lower than 90. 

B. Sold 2 JPM 2.95% SU Bonds Maturin gon 10/1/26




Profit Snapshot: +$12.22




Finra Page: Bond Detail


Issuer: JPMorgan Chase & Co. 

JPM Analyst Estimates 

Sold at 97.9

YTM Then at 3.221%
Current Yield at 3.01%

Bought at a Total Cost of 97.189

Stocks, Bonds & Politics: Item # 1.A.  YTM Then at 3.303%
Current Yield at 3.04%

My consider to repurchase price is less than 92. 


C. Sold 1 Citigroup 3.2% SU Bond Maturing on 10/21/26




Profit Snapshot: +$9.07




FINRA Page: Bond Detail


Issuer:  Citigroup Inc. 


Sold at 98.585

YTM Then at 3.383%
Current Yield at 3.246%

Bought at a total cost of 97.578

Stocks, Bonds & Politics: Item # 1.B. 
YTM Then at 3.506%
Current Yield at 3.28%

My consider to repurchase price is less than 93. 


D. Sold 1 XCEL 3.3% SU Bond Maturing on 6/1/25





Profit Snapshot: +$13




Finra Page: Bond Detail


Issuer: Xcel Energy Inc. 

XEL Analyst Estimates

Sold at 100.755

YTM Then at 3.181%
Current Yield at 3.275%

Bought at a total cost of 99.255

Stocks, Bonds & Politics: ITEM # 1.C. 
YTM Then at 3.404%
Current Yield at 3.325%

My consider to repurchase price would be less than 96. 


$6K Outflow from Intermediate Term Bond/CD Ladder Basket Strategy 


4. Sold 50 of 100 WBSPRE at $25.32-Used Commission Free Trade




Profit Snapshot: +$6.92




I discussed buying this 50 share lot here.


As discussed in a previous comment, I expect this security will be called by the issuer on 12/15/17, the earliest optional call date. Prospectus Supplement

Par Value $25

Optional Call: On or Before 12/15/17 at Par Value
Dividends: Non-Cumulative and Qualified
Coupon 6.4%
Issuer: The Bank Holding Company Webster Financial Corp.

I will hold the other 50 shares, held in my Vanguard account, until redemption. I have to pay a $7 commission in that account to sell the lot. A redemption at par value occurs without a brokerage commission being charged. I will take a small loss on that lot when there is a redemption at par value as shown below:





5. Short Term Bond/CD Ladder Basket Strategy:


A. Bought 2 MB Financial 1.5% CDs (monthly interest) Maturing on 1/16/19:




Holding Company: MB Financial Inc.  (MBFI)

MBFI Analyst Estimates

B.  Bought 2 Wells Fargo 1.45% CDs (monthly interest) Maturing on 11/13/18 (13 month CDs)




C. Bought 2 Franklin Synergy Bank 1.2% CDs (monthly interest) Maturing on 2/28/18 (4 month CDs)




$6K Inflow into Short Term Bond/CD Ladder Basket 


D.  Issuer Optional Redemptions-$1K Par Value Bonds With Make Whole Provisions and IB Account Bond Allocation


Anheuser-Busch InBev is going to redeem early its 1.25% SU note maturing on 1/17/18. I own 3 of those bonds. The redemption date is 11/10/17 or just two months prior to maturity. Anheuser Busch InBev to Redeem Five Series of senior Notes due 2018.pdf While this bond is subject to a make whole provision, there would not be any material difference to the bond owners given the low coupon and the two month difference between the redemption and maturity dates. 


This kind of early redemption is fairly common and is frequently part of a larger refinancing plan that includes other securities maturing within a specific time frame. In this case, BUD has four other senior bonds maturing next year, all with significantly higher coupons than the 1.25% coupon, that are also being called at the same time.  


I will make a slight profit on the 3 bonds when they are redeemed. Two of the bonds were purchased on 12/29/16 and the other one last January. (2 of the bonds are owned in my Fidelity account and 1 in my IB trading account)


Currently, in my IB trading account, I own the following bonds with a net unrealized gain of $329.41. The BUD 1/2018 bond that is being called is listed at the top: 




Several of these bonds are also owned in other accounts. 


The realized gain currently stands at $160.27. 


I have reduced my interest rate risk some with those dispositions. There are a number of short term corporate bonds remaining in this account. Two of the three XEL bonds shown above are actually issued by Public Service of Colorado, a wholly owned subsidiary of Xcel Energy Inc. (XEL), and are first mortgage bonds. ( Bond Detail for 9/15/22 Maturity; Bond Detail for 3/15/23 Maturity) The one is a first mortgage bond issued by another wholly owned XEL subsidiary, Northern States Power: Bond  Detail for 8/15/22 Maturity (rated Aa3 by Moody's)


As to the dollar size of the bond positions my IB account would be at #4, below the Vanguard accounts, and way under the Fidelity and Schwab bond allocations which include Tennessee municipal bonds and a wide array of investment grade corporate bonds. My largest taxable account is Fidelity which is about 90% in bonds, CDs and cash at the moment with the remainder in common stocks. That account has seen by far the largest reallocation out of stocks and is consequently the best positioned with maturities every week for a reallocation back into stocks. 


Most of my common stock weighting is in T.Rowe Price and Vanguard mutual funds. 

Even though I have exceeded my annual goal of between $15K to $25K in trading profits, I am continuing to be active in the short term stock trading. I am not talking about a day holding period, but more like several weeks or months where I harvest one or more dividend payments and a a profit on the shares, selecting stocks that I would be willing to hold during a correction at the price paid. 



6. Deeply Contrarian Basket Strategy


A. Added 20 CPB at $45.72-Used Commission Free Trade:


This purchase was made the day before the ex dividend date. 




The stock price had declined more than the value of the $.35 per share quarterly dividend: 


Closing Price: 10/11/17: $45.74 Down $.5 


My last foray into CPB is not working out so far. Nonetheless, I decided to add 20 more shares bringing my total position to 50 shares. 


Dump Campbell, Buy These 4 Consumer Staples Stocks Instead - October 11, 2017 - Zacks.com


I am either being aggressively contrarian with this add or intentionally masochistic. I am not sure either explanation is a positive one.  


I discussed buying the previous 30 share lot here: Item #2: Bought Back 30 CPB at $51 The heading for that section was "100% Contrarian Strategy-Though With No Conviction as to Near Term Positive Catalysts". That purchase was made on 7/10/17.


I had a profit in that lot as the shares rose to almost $54 by mid-August. I actually seriously considered selling this lot near $54, but apparently forgot to carry through. The CPB share price has been relentlessly downhill since then. CPB Stock Chart Perhaps, the pessimism has been laid on too thick. That is just a feel type item.


I will reinvest the dividend. Campbell Declares Quarterly Dividend 


Since my earlier discussion, Campbell did report its fiscal 4th quarter earnings for the period ending 7/30/17. The report was released on 8/31/17: Campbell Reports Fourth-Quarter and Full-Year Results 


That report provided no reason for CPB shareholders to pop the champaign cork. 


Campbell's Brands


In the simple meal and beverage category, which includes soups, sales "in the quarter decreased 3 percent to $815 million driven primarily by declines in soup and V8 beverages. Sales of U.S. soup decreased 4 percent driven by declines in condensed soups, broth and ready-to-serve soups, reflecting a reduction in retailer inventory levels while consumer takeaway in measured channels was comparable to the prior-year quarter. For the fiscal year, sales of U.S. soup decreased 1 percent."


In the "fresh" product category,  revenues "in the quarter increased 1 percent to $225 million driven primarily by higher sales of Garden Fresh Gourmet, carrots and carrot ingredients. Sales of Bolthouse Farms refrigerated beverages declined slightly, reflecting supply constraints. Segment operating earnings in the quarter decreased from $8 million to a loss of $8 million, reflecting higher administrative expenses, higher carrot costs and the continued cost impact of enhanced quality processes and related beverage capacity constraints." So the company was having operational problems in this category. 


The biscuit and snack segment had the overall best performance. Revenues "in the quarter were comparable to the prior year at $624 million, as gains in Pepperidge Farm snacks, reflecting continued growth in Goldfish crackers, as well as gains in Arnott’s biscuits in Australia, were offset by declines in Indonesia. Segment operating earnings increased 35 percent to $109 million. The increase was primarily driven by a higher gross margin percentage, lower advertising and consumer promotion expenses and lower administrative expenses." 


Excluding items, E.P.S. was reported at $3.04 for the fiscal year, up from $2.94 in the prior year. 


Debt and Proposed Pacific Foods Acquisition


Moody's: Campbell Soup acquisition of Pacific Foods is credit positive


This proposed acquisition of Pacific Foods is for $700M in cash. Campbell to Acquire Pacific Foods to Expand in Faster-Growing Health and Well-Being Categories (7/6/17 Press Release) This deal is at risk due to a lawsuit filed by the estate of a former Pacific Foods shareholder and co-founder who died in May 2015. Campbell Soup says Pacific Foods lawsuit puts deal at risk - MarketWatchAfter co-founder of Pacific Foods dies, fight erupts over $250 million | OregonLive.com  


The company ended the quarter and fiscal year with $319M in cash and $2.499B in long term debt and $1.037B in short term borrowings. Of the short term borrowings, $874M was in commercial paper with a weighted average interest rate of 1.31% as of 7/31/17. (Page 58 Annual Report for the F/Y Ending 7/31/17)


Campbell's sold $300M of a senior unsecured note in 2015 which was its most recent bond offering. Moody's rated the bond A3. The coupon was 3.3% with a maturity date in 2025. Prior to that offering, the company sold in 2012 $450M in 2.5% SU notes maturing in 2022 and $400M in 3.8% SU notes maturing in 2042. Prospectus Supplement


Issue with WMT


CPB mentioned that it was unable to agree on a seasonal promotion with a major customer. CBP did not identify the customer but Credit Suisse says it is WMT who is putting the squeeze on Campbell. To play ball, WMT wants lower everyday prices for CPB condensed soups. CS expects CPB to give up 100bps of top line. I derived that information from a CS report dated 9/5/17 that is available to Charles Schwab customers as are the Morningstar reports. Credit Suisse had at that time an underperform rating and a $43 price target, below the then current price. 


In the Morningstar report dated 8/30/17, the fair value estimate was then at $53 and the stock had a three star rating. 


In the S & P report dated 9/30/17, the stock had a 3 star rating and a $50 twelve month price target. 


Argus has a hold rating but a long term buy in a report dated 9/13/17. That is close to my view. I expect CPB to maintain its U.S. moat in soups with close to a 60% share. I would consider selling my shares at over $53.   

All of those reports are currently available to Schwab customers. 

Campbell Takes Actions to Reshape Portfolio toward Faster-Growing Spaces; Outlines Fiscal 2018 Priorities (7/19/17 Press Release)


At the time of my last purchase, the EPS consensus for the current F/Y was $3.06 and $3.16 for the next F/Y: CPB Analyst Estimates 


I do have a history of successfully trading CPB shares, with my largest gain realized in 2010, but the past may not be prologue for the future. 




Disclaimer: I am not a financial advisor but simply an individual investor who has been managing my own money since I was a teenager. In this post, I am acting solely as a financial journalist focusing on my own investments. The information contained in this post is not intended to be a complete description or summary of all available data relevant to making an investment decision. Instead, I am merely expressing some of the reasons underlying the purchase or sell of securities. Nothing in this post is intended to constitute investment or legal advice or a recommendation to buy or to sell. All investors need to perform their own due diligence before making any financial decision which requires at a minimum reading original source material available at the SEC and elsewhere. A failure to perform due diligence only increases what I call "error creep". Stocks, Bonds & Politics: ERROR CREEP and the INVESTING PROCESS Each investor needs to assess a potential investment taking into account their personal risk tolerances, goals and situational risks. I can only make that kind of assessment for myself and family members.