Friday, September 18, 2009

Added to Medtronic/Sold LT Opnext/Bought 50 AMAT at $13/Bought 50 STIPRA at $17.2/GE, AT & T and VZ

1. AT & T and Verizon Views on the U.S. Economy: I own AT & T common stock and some senior long bonds from both Verizon and AT & T in trust certificate form (AT & T: JZE, JZJ AND GJF; VERIZON: PJL AND XFL). I recently sold my Verizon stock positions but have been contemplating buying some shares after the UBS downgrade from buy to neutral last Wednesday knocked VZ down below 30 again. Reuters ran a story summarizing a speech by Verizon's CEO, Seidenberg, where he reportedly said the economy is still contracting. AT & T's CEO Stephenson said that he expected "to run at a flattish level for some time". Reuters There is not any growth from corporate customers, who have been disconnecting lines during this recession.

I am just noting for myself that the UBS analyst John Hodulik lowered his 2010 forecast to $2.45 from $2.7. MarketWatch This blog is like a bunch of post-it notes to myself.

I sold my VZ common shares on 7/29/09 at $31.64. Sold All Verizon Stock/Eliminated GRTPRG & Reduced GRTPRF

2. General Electric (owned): I noted that Nicholas Heymann, who has been around for more than a few years covering GE, said that GE stock was "excessively valued" under the most optimistic of circumstances. He has a sell rating with a $11 price target. The NYT columnist Joe Nocera summarized a bearish note from Heymann that may have knocked GE's stock down to $6 back in March: Personally, I would like the opportunity to buy more shares at $11, but I think Heymann may be dreaming with that target right now.

3. Bought 50 Applied Materials at $13 (see Disclaimer): I avoided the Nasdaq meltdown in 2000-2002 for a number of reasons. I thought the valuations were nutty and bizarre, and I am inclined to limit my exposure to tech stocks. I do currently own Intel with an average cost of around $15 and Microsoft bought around $17.8. So I will nibble only when I can understand the valuation. Applied Materials was sold recently at a slightly higher level after the pop from March levels gave me a profit. I reconsidered that earlier decision to sell and bought the shares back on Friday at $13.

Most investors are already familiar with this company and I certainly have nothing to add to Reuter's profile of it: Company Profile I noted another story early Friday morning that chip equipment orders turned up in August, up 5% from the prior month and the book to bill ratio stood at 1.03 to 1 in August: Reuters While AMAT's price has recovered from the March lows of around $8, they are currently trading near the late 1998 and early 1999 price, before the spike from 11 in December 1998 to around 51 in early 2000. When AMAT returned to orbit, it settled into a channel trade mostly in the 10 to 20 range between August 2001 to now, except for a few spurts over 20 and the recent fall to $8 last March. The current price seems like a reasonable entry point for a wait until the next up cycle in chip equipment sales, whereupon I will sell my measly 50 shares somewhere in the 18 to 22 range, or that is my plan now. When will that happen? The upturn may be starting now, and will gain some steam in 2010, so hopefully I will not have to wait more than a year or two before institutions pile back into this stock. AMAT does pay a small dividend, around 1.8% at my cost, and has a lot of cash on the balance sheet. AMAT: Balance Sheet AMAT Stock Quote

A wild card potentially for AMAT is its emerging business in solar equipment: Applied Materials Introduces Multiple Printing Capability for Producing Higher Efficiency Solar Cells I did read the analyst reports issued by Morningstar, Value Line and S & P before buying AMAT again. Morningstar has an upbeat report and a 5 star rating on this stock.

I am cutting back on my small technology Lottery Tickets, having made some large percentage gains in VIMC and SIMG. On Friday I sold my 50 shares of Opnext, another one that I do not understand.

4. Sold 50 Opnext (Opxt) at $3.1 (see disclaimer): I still could not explain to anyone Opnext's business. I did buy 50 shares at $1.91 in July: Bought 50 OPXT as Lottery Ticket/ Digirad/EMC earnings/ So while the amount of the profit will not impress Uncle Warren or Bill Gates, the percentage gain was close to 50%. I did note that J P Morgan thought OPXT would be burning cash for several more quarters. AllThingsD

5. Bought 50 STIPRA at $17.2 (see Disclaimer): This is a floating rate, non-cumulative equity preferred stock issued by SunTrust Bank, the large southeastern regional bank that ran into some trouble with its Florida real estate lending. I have less confidence in Suntrust than U.S. Bank, but more than I have for Zions Bank. This security pays the greater of 4% or .53% above 3 months Libor. According to the Quantum site, this one is rated junk, which does not surprise me, and pays qualified dividends. Preferreds eligible for the 15% Tax Rate Table - I did put it in a taxable account. I am just buying bits and pieces of these higher risk securities to spread my risk to them as a group around some.

This is a link to the prospectus: Final Prospectus Supplement

The guarantee is the applicable rate now. At the 4% guarantee, my yield is around 5.8%. If Libor moved to say 5%, then my applicable rate would be around 8%. I passed on this one at a lower price, but I am coming back to several of these issues after seeing my money market funds earn .1%. Also, these type securities do provide some inflation and deflation protection in the same security. Another point is that the government's preferred stock is at the same level of priority. The only protection that I have as an equity preferred shareholder is the payment on a Junior Security, and SunTrust does pay a common dividend still at 1 cent per quarter. There is also the factor that these banks will be very hesitant to defer paying the government's dividend which gives me some protection at least in theory. I discussed this issue at length recently in connection with Zions. (item # 7 Sold 100 FBFPRN at $17.38/Bought 50 ZBPRB in Roth at $19.9) Sure, Suntrust could eliminate its common dividend, that is always a possibility, and then it could eliminate the dividend on its equity preferred, but it would have to defer the government's dividend at the same time. That would be a big deal.

6. Added to Medtronic (MDT) at $37.58 (See Disclaimer): This was an average up. My last buy of MDT was on 3/4/2009 when it was trading south of $26. I am a little surprised by my buying back then, given that I am a cautious sort, and the stock buying did get into the six digits before the period. To the extent I have a strategy on MDT, it is probably to wait, collect a few dividends, and sell whenever the price crosses a 15 P/E on estimated forward earnings which seems rational to me. The estimate for the fiscal year ending in April 2010 is $3.16 and $3.45 in April 2011. So, let's split the difference, which gives me $3.29 doing the math in my head, multiply that number by 15, and that gives me a $49.35 target. The forward P/E is just around 11 on fiscal year 2011 estimated earnings. MDT: Key Statistics for MEDTRONIC Morningstar has it rated 5 stars.

No comments:

Post a Comment