Tuesday, July 14, 2009

Bought 50 PJR/ Intel


This is a picture of Tyler and his girlfriend just before his high school graduation.  He just returned from a week in  Curacao, and arrived today in Paris for a couple of weeks touring Europe with a young lady who will be attending Columbia.  Tyler will be going to Northwestern. 


1. BOUGHT 50 OF THE TC PJR at $16.72:  I recently discussed this trust certificate (TC) (item # 3: /Trust Certificates Containing Unum Debt/)  This particular TC contains a senior bond issue from Unum (UNM), a disability insurer which matures in 2028.   There was a narrow bid/ask spread this morning, 16.71/16.72, which is unusual in the thinly traded TC market, so I was able to place a market order rather than the normal limit order.  

The FINRA information on the underlying bond can be found at  FINRA - Investor Information - Market Data - Bonds - Bond Detail.  One point to keep in mind is that the yield shown at the FINRA page includes both the current yield and a yield to maturity based on the difference between par value and the price of $64.35 shown as of the last trade on 7/14/09. That was a low volume trade however, and most of the recent higher volume ones were at higher prices. The yield shown at the FINRA page is 11.325%.  The coupon of the bond is 6.75%.  The current yield is 10.48%. 

The TC PJR has a higher coupon than the underlying bond at 7.4%:   www.sec.gov Par value is $25.  So the current yield for the TC at a $16.72 total cost including commission is 11.06%, or about 1/2% better than the underlying bond bought at $64.35.   The discount to par value  is about the same for the two securities.  So the main reason for preferring the TC is just the simplicity of the trade in this particular situation.  Needless to say, I could not have bought the same dollar amount in the bond market, and I bought all that I want to own.  

I already own 100 shares of a TC containing a junior bond from Provident Financing Trust (KCC) which is guaranteed to the extent provided in the prospectus by Unum.  This junior bond is a typical Trust Preferred, allowing for liberal rights to defer interest for up to 5 years and it matures almost 10 years after the senior bond contained in the TC PJR which I bought today. I successfully traded another TC containing this same junior bond, KSA, and no longer have a position in it.  KSA, at it closing price today of $19.74, has a current yield 0f 10.76% or slightly less than the TC PJR with a senior bond in it that matures about 10 years earlier.  The senior debt is rated in the lower tier investment grade level by S & P and Fitch according to FINRA and Ba1 by Moody's. The junior bond is rated junk by all three rating agencies.  

I am not a fan of Unum so I do not own the common and will keep my bond position small.   

2. Intel (owned):  Intel  reported a better than expected quarter and had an upbeat outlook for the third quarter.  Excluding a charge relating to a fine imposed by the European Union, which Intel is contesting, Intel's non-GAAP earnings came in at $.18 per share on a 12% sequential increase in revenue to 8.02 billion dollars. This sequential growth in revenues was the highest since 1988.  Margins increased 5.5% sequentially to 50.8%.   All of these figures were better than expected with the consensus estimate calling for revenues of 7.28 billion and a profit of just 8 cents.  

Guy Adami, one of the panelists on Fast Money recommended that investors take profits in Intel tomorrow.  I have no intention of selling my shares.  My last purchase was at $15.25 in May, and my average cost is around $15.  Potpourri This Sunday Afternoon: 
I am reinvesting the dividend until the price establishes a range bound channel over $20 per share.  
 
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 readers of these posts 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.  It is always important to follow the investment process. the investment process    NOT A RESEARCH SERVICE 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.   Opinions are subject to change and they certainly evolve over time as information is assessed and analyzed for compatibility with prior opinions, the only process for a serious investor, and a topic of frequent discussion in this post.  Everyone is responsible for their own investment decisions, and no one should ever make any decision unless they are willing to accept full personal responsibility for it. 

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