Thursday, March 12, 2009

Buys of DKF, AA and a Lottery Ticket in 50 shares of RF/Heinz & its Boston Market Line/

I invested another grand of my recent contribution to the Roth IRA by buying 50 shares of DKF, a TC  containing a senior bond issued by Goodrich (GR). (When I discuss Trust Certificates, I am assuming now any reader of this post has read all prior posts on this subject and knows precisely what I am talking about)   I made this purchase about an hour ago when the bid was 19.8 and the ask was at 20.  The TC has a 8% coupon whereas the underlying bond is 7%, which in my view would make the TC a better buy even at a slightly higher price than purchasing the bond.  The yield at my cost is around 10%.  Par value of the TC is $25.  Interest is payable semi-annually with the next payment due in April.  Maturity is at the outermost limit for me, which is 4/15/2038.  This is a lower tier investment grade issue.  Fitch Corporate I believe that the underlying bond symbol is GR.GC and the latest data has it trading well over par value.


The TC thus appears to be seriously mispriced compared to the underlying bond,  since the TC  has not only a higher coupon but also is trading at a 20% discount to par value. This is a link to the prospectus: www.sec.gov

This is not to say that the price of the institutional bond market of the underlying bond contained in the TC is either a good price or even an accurate one.  For as long as I hold this bond I will have to monitor the credit worthiness of Goodrich.  This investment would give me 10% annually for the next 29 years provided GR survives and I hold to maturity. I would not expect to do as well in a S & P 500 index fund over such an extended period, though it might end up being a close race.

There is also an extra kicker in capturing the spread between a $20 cost and a $25 par value at maturity or an early redemption by GR. 

I also continued my movement toward a 100 share position in Alcoa by buying just 30 at $5.6 early this morning. There are a lot of negative comments that I could make about Alcoa and I made some of them in prior posts.  I can not say that a $5.6 price is too high looking at the long term chart and making an assumption that aluminum demand will return at some point within the next five years.   This last purchase was made a price last prevalent in 1987.  This will have to be a long term hold. 

Lastly, I bought a lottery ticket today.

There is no other description possible for my purchase of 50 shares of Regions Financial (RF) at $3.47.To say that this large regional bank has been mauled, and deservedly so, would be an understatement. Nonetheless, I do remember similar maulings of bank stocks in the early 1990s which turned out to be a time to invest.  History may not repeat itself, and it is worse this time around for the banks. That statement is not subject to dispute. So I am gambling on this one and am willing to risk only $180 or so, not a dime more than I just spent on purchasing this lottery ticket masquerading as a stock.  It is hard to find anyone positive on this stock. I am certainly not positive on its near term future and its long term potential is impossible to assess, though it could be large.  Morningstar might have the most favorable report on the company. The bank ran into a host of problems in its Florida market.   

I will frequently try a product made by a company that I own or am considering for purchase.  When researching Heniz, I saw that the company had launched a frozen food line called Boston Market in addition to its Weight Watchers frozen dinners. Boston Market® Frozen Foods - Real Food, Real Flavor... Real Good!™ While walking down the frozen dinner aisle at Kroger, I saw that the Boston Market meals were 1/2 price, which always appeals to me, and so I bought the meatloaf dinner.  The only good meatloaf  that I have ever eaten is made by my mother.  I ate the frozen Boston Market meatloaf last night and will declare it the best frozen meatloaf.  I may try another one soon.  Heinz also markets the Smart One frozen dinner line, part of Weight Watchers.  I do not have to watch my weight of course weighing a mere 190 pounds.  

Bernie says he is sorry in his plea document which makes for interesting reading. 


Cramer's target on the DJIA is 5320 as a worst case. CNBC.com

Obama is receiving poor grades from economists, giving him a grade of 59 out of 100. WSJ.com I am not going to say that these esteemed practitioners of the dismal science are wrong in their grading.  I would only add that I view them as falling into one of two categories as a class of experts: either worthless or worse than worthless. 
 DISCLAIMER:
  I am not a financial advisor but an individual investor trying to navigate my way through a difficult market. I have never worked for a financial institution and never will.  In these posts, I am acting as an unpaid financial journalist and an occasional political commentator.   I am also aggregating financial news stories that I view as important and providing any reader of these posts, assuming there are more than a couple, with links to those articles, sort of a filtered, somewhat intelligent, free search engine.  Any discussion made by me of particular securities  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 post explaining my reasons.  The sale may before or after the post.  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 post, and all others by me, 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 posts written by me may not be suitable for others based on their unique financial position and risk profile.  By way of example, it is unlikely that I will ever need the funds contained in my retirement accounts. Always read the prospectus before buying a Trust Certificate, bond, preferred stock or other bond or bond like investments.  Information contained in my posts has been obtained from sources believed to be reliable but cannot be guaranteed.  These posts by me do not constitute investment advice, nor shall they be construed as a guarantee of future results, or as an offer of any transaction in securities.   All content in these posts is provided for informational and entertainment purposes only, and it is a form of entertainment for me. 

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