Monday, September 28, 2009

HERTZ/More on Fidelity Investments & Online Bond Trading/Third Party Pricing of Bonds/Buy of 50 RCMT at $2.15 as Lottery Ticket

1. Hertz (own 50 shares of DKR only): I noticed today that Hertz filed suit against Audit Integrity for publishing what Hertz considered a defamatory report. The report claimed Hertz was one of 20 companies identified by Audit Integrity that was "most likely to go bankrupt or suffer severe financial distress" Reuters When I bought DKR at $6.45 during the dark days of 2008, I noted that the Morningstar analyst had then rated Hertz 50/50 on its ability to survive. HERTZ BONDS That assessment was from October 2008. This kind of opinion is well within the scope of the First Amendment and I really dislike companies using lawsuits to bludgeon people who express opinions viewed as unfavorable. I have noted several developments since that time which indicates the Hertz's chances have improved irrespective of whether one viewed the odds as 50/50 or 90/10 or 75/25 back in October:

As a result of these recent events, I am more comfortable holding DKR to maturity in 2012, but I am still concerned about the debt load and maturity schedule.

2. Bought 50 shares of RCM Technologies at $2.14 Today-Lottery Ticket (see Disclaimer): This stock has been on my monitor list of micro cap companies for a long time, for so long that I had forgotten about the nature of the firm's business or why it was on the monitor list. So I did not do a good job of monitoring it. I decided to take a look this morning.

When thumbing through its recent quarterly report, I first noticed that it had recovered 9.8 million in March 2009 from some lawyers that it had sued: Page 21 That may not sound like much except to the lawyer of course, but this firm only has a market cap of around 27 million at its current price. RCMT: Summary for RCM Technologies, Inc. The company still had 9.625 million in cash and cash equivalents as of 6/27/09 (page 3 form10q ). I also noticed that it is acquisitive, buying several smaller private firms over the past few years. Looking at the Yahoo statistics page, I see why I put it on the monitor list. Prices to sales is listed at .14 and price to book is at .45. RCMT The last earnings report showed a profit of 2 cents per share down from 11 cents in the year earlier quarter ( page 4: So the recession hit the revenue and profits a good lick. Hopefully, we are moving out of the recession into better times again. While this stock has had a good recovery off the March lows, it is still selling way below its range of $4 to $6, with a spurt to $10, from 2004 to 2008: RCMT I also noted while looking at a longer term chart that it had a spike in 1998-1999, so maybe it had some involvement in technology.

Now after looking at the numbers, I turned to the nature of RCMT's business. Its website says RCMT is a single source provider of business and technology solutions: RCM Technologies I spent a few minutes reading its descriptions under the "services" category which provided me with more details. Ultimately, I just relied on the description at which looked interesting enough to risk just over $100 as a Lottery Ticket.

3. Third Party Pricing: I have noted recently that the third party pricing used by Fidelity is sometimes off by as much as 10 points from the actual trades. I referenced the new system that Fidelity has in place earlier today that prevented me from even entering a sell order in the range of actual trades occurring that day.Fidelity Investments Fidelity Brokerage & Online Bond Trading Those trades were $10 to $12 higher than the third party price shown even after the trades were made last Friday, and even now. Another one was off between 3 and 12 dollars with a large number of trades. And that range highlights another problem with Fidelity's new system. Bond prices can be volatile in any given day within a wide range. I would like to copy the message that I just got attempting to enter an order to sell a bond at below the last trade:
Trade Message
(010422) The limit yield/price you have entered is too far away from the current price for this security. Your limit buy order cannot be more than 10 basis points (0.10%) above the current offered yield, or more than 1% below the current offered price. Your limit sell order cannot be more than 20 basis points (0.20%) below the current bid yield, or 2% above the current bid price or last estimated market close when a bid price is not available. If no current bid yield is available the order will be evaluated on the price parameters stated above. Please contact a Fidelity Fixed Income representative at 800-544-5372.

This renders online trading virtually impossible for the small individual investors, and actually impossible for the bonds that I have not yet sold in this account. Those who have been following this blog may remember that I sold a large number of bonds starting in February and used those funds to purchase stocks starting in early March 2009. It was advantageous to do what I did and I would add it took some nerve. That would not be possible now in my opinion, unless I wanted to bother going through a broker, first entering all my account numbers on the phone, and then being allowed only to enter a day order which might not be filled and then having to do the same process again and again until I was able to sell the bond. And, as you might have already guessed, I am not inclined to be hassled in that way. The bond that I just tried to sell last closed at around 73.5 and this message popped up when I entered an order at 73 just to prove a point. I knew before I did it that I would get this message. So even when I entered an order within the very narrow parameters I got nowhere. The order was not allowed to even be entered within 2% of the last trade.

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