In these blogs, I am acting as an unpaid financial journalist and an occasional ornery political commentator. This is not a recommendation to buy or to sell. Trade at your own risk. Consult with your financial advisor prior to making any purchase or sale. I will try to identify my sales too but it may take a few minutes after I implement them to create a blog explaining my reasons. The sale may before or after the blog. Before buying or selling any stock, even one recommended by a trusted financial advisor, please research it and make up your own mind which is what I always try to do. Research would include reading reports, reviewing financial records, earnings estimates, sec filings and prior earnings releases and news. In this blog, I am merely describing my reasons for purchasing or selling securities, and the potential pitfalls that I identified prior to purchase or the reasons for a sale. The securities mentioned in this and all blogs written by me may not be suitable for others based on their unique financial position and risk profile. At the present time, I have no intention to add to any of the very small positions bought today with surplus cash received yesterday, with the exception of Gannett where I will probably keep buying at lower levels until I ease into a 100 share position.
Thursday, October 16, 2008
OLD GAMER HATCHES A PLAN AROUND 1 P.M TODAY
A couple of hours or so ago I hatched a plan suggested in an earlier post today. I knew that I would kick myself a couple of years down the road by sitting on my derriere now, so I decided to buy some securities that I sold this year at higher prices with the cash paid into my account yesterday from dividends and interest this month. So I am just investing my recent excess cash flow. I thought that was pretty conservative. I also added a new position for me. I decided to just ease into these positions slowly with small orders, and I have about 50 or so that I will want to buy provided I can get in at the current or lower prices before the big rally today.
My new position was Valero and I bought it at 16.89. This refiner has fallen hard as refining margins and the "crack spread" have narrowed due to a fall off in gasoline demand. I bought back another refiner sold on 9/16/08 at 12.79 for 6.8 and that would be Alon (ALJ), which owns several refineries and 7-Eleven convenience stores. I will explain my rational for these purchases later tonight or tomorrow.
I also bought back, partially, some of my shares of SYNTA PHARMACEUTICALS (SNTA), a very speculative biotech play, at 6.69, having exited my entire position at over 9 just recently with the last sale in September at 9.87. This company is in late stage clinical trials for a melanoma drug elesclomol and just received a collaboration payment from Glaxo after hitting a milestone in the development of this drug.Synta Pharmaceuticals to get $25M from Glaxo: Financial News - Yahoo! Finance
I am "playing with the house's money" on Synta and I have never owned more than 150 shares in this small and speculative biotech at any given time. I reviewed the last earnings transcript before reinvesting.Synta Pharmaceuticals Corp. Q2 2008 Earnings Call Transcript - Seeking Alpha
see Feuerstein's biotech mailbag at thestreetcom:TheStreet.com
This stock will not be worth much if anything if this drug fails in its late trials as many have been known to do, with the latest small biotech having such a failure being Vanda. There is no room for a failure when the company is this small.
Lastly, REITS have just been killed this year. I did a profitable trade on First Industrial (FR), buying in the low 20s and selling it at 28.97 on 9/18 and then it just plunged after an earnings warning. Reuters
The common is now around 12.85. This REIT is a large developer and owner of industrial properties, with over 600 of them. This last sale was just lucky. I just happened to be in a selling mood that day. I also traded successfully at about the same time one of its cumulative preferred issues, FRPRJ. Today, I saw that its other cumulative preferred yielded more than FRPRJ so I bought 50 shares of FRPRK at $11.10. It has a $25 par value, it is cumulative with no maturity date and the yield at my price is around 16.32%. The coupon is 7.25% which give you $1.8125 per share in annual interest payments. To find your yield at $11.10 you would divide $1.8125 by $11.1 cost which=16.32%. Dividends are paid quarterly in March, June September and December. The knock on First Industrial is that it depends on property sales to fund itself and those have understandably dried up. I bought the preferred because it is cumulative and has preference rights over the common. I choose FRPRK over FRPRJ at the time of purchase because it yielded slightly more, and both issues are cumulative. I also looked at the recent earnings release again before making even a small purchase of the preferred issue. First Industrial Realty Trust Reports Second Quarter 2008 Results: Financial News - Yahoo! Finance
I am already familiar with this REIT also, and I am fully aware it is in the doghouse big time which is find with me since I did not own it during its recent smash up.
Lastly, and I sure this will be controversial, I added a small odd lot position of Gannett (GCI) at $10.68. Yes, as we all know, the newspaper business is in decline, advertising is falling off the cliff, and so on. But the yield at that price is over 14% and the price now is somewhere around where it was prior to 1985. Maybe that is just too pessimistic? Gannett is still making money and it owns some properties like USA Today which still look good to me. It is impossible to find a report that is not pessimistic. But at 10, it is selling for about 1/3 of book value and less than 3 0r 4 times next year's estimated earnings of $3 Yahoo! Finance.
Nonetheless, you hate to see a stock go down 6% on a day when the market takes off 400 points on the DOW, but Gannett has done that twice in October, today and last Monday when the Dow soared over 900 points. 19 stocks that missed 900 point rally - Oct. 13, 2008 So, it would be fair to say it is under heavy institutional selling which will occur and continue to happen regardless of how the overall market is doing. I do believe the dividend is currently covered by cash flow of around $5 per share according to Value Line. Gannett also owns a large stake in CareerBuilder Yahoo! Financeand owns about 23 network affiliated TV stations. , It has been expanding its digital presence by acquiring 100% control over ShopLocal, as well as X.com, Inc. plus minority stakes in such ventures as Cozi Group, Fantasy Sports Ventures, and quadrantONE.Gannett Jobs > About GCI
S & P did say it may downgrade the debt. MarketWatch
Due to problems in the commercial paper market, GCI recently drew down its borrowing facility.FT.com -
On typical problem with the decline in advertising, see Yahoo! Finance
Some times I like to fish in the lake full of dead fish hoping that, being by myself and virtually alone, I may catch a whopper, or maybe not.