Wednesday, January 6, 2010

Added 50 PFK in Roth at 20.88-Averaged UP/Bought 100 NHTB at $9.51/Sold 100 RJZ at $10.18/Bought 50 OKSB at 6.84/WPCS PVSW/David Rosenberg-More Doom and Gloom

1. Pervasive Software (PVSW)(owned LT category) PVSW updated its guidance for the quarter ending on 12/31/2009. It expects GAAP earnings of 5 to 6 cents on revenues of 11.5 to 11.7 million. Non-GAAP earnings are estimated at 6 to 7 cents. The approximate cash flow for the quarter was 2.3 million and the cash balance was about 41.7 million. Pervasive bought back 204,000 shares during the quarter at a weighted cost of $4.97. Pervasive Software Updates Guidance The current market cap at a $4.9 price is just 87 million and change.

2. David Rosenberg Predicts Doom and Gloom for 2010: Anyone who accepts predictions made my pundits like Rosenberg may want to read the March 9th edition of Barron's from last year. In that edition, Barron's featured both Rosenberg and David Levy predicting more trouble ahead for stocks. Of course, the market began its epic run on March 9, 2009, which was the bottom (Levy interview: Barrons.com; Abelson's column: Barrons.com) Alan Abelson does not focus to much on his disastrous call to buy long treasuries and to avoid stocks, a perspective shared by the David Bobsie twins. Rosenberg continues his bearish outlook in this missive from January 4, 2010 that can be found at Breakfast With Dave, January 4, 2010. At least David's prediction in April for the S & P 500 to fall in the 475 to 600 range for an extended period of time turned out to be on the pessimistic side. Rosenberg

3. Added 50 PFK at $20.88 in Roth (see Disclaimer): PFK is a senior bond from Prudential that matures in 2018 at $25 and pays interest monthly based on a 2.4% spread to calculation based on CPI, which covers a 12 month period with a 3 month lag. I have explained in several posts how to do this calculation, including several recent ones. The most recent post is the first one linked below:

This is what I would call an Old Geezer purchase and represents an average up: Item # 7 Bought 100 PFK at 18.47/ /Added 50 PFK at $17.83 Item # 7 Bought 90 PFK in IRA at 18.94

This is a link to the prospectus: Pricing Supplement No. 122 dated March 31, 2006

I also sold my last mutual fund in a retirement account yesterday. It no longer fit my approach to managing these accounts, paying me at yearend less than a $1. I did okay with it, primarily because I included it in a ROTH conversion on 10/20/2008, and then allowed it to recover in the Roth before selling it.

4. WPCS (owned LT Category): This mini micro cap rose over 18% yesterday, closing at $3.5, after announcing the award of 30 million in new contracts. WPCS WPCS is a very small company, and 30 million exceeds its market capitalization. I mentioned in my last post from 12/26 on WPCS that the CEO was upbeat about the backlog of bids. Item # 6 WPCS An Executive VP made the following statement in the press release from yesterday:

"We are now beginning to see strong momentum in converting our bid activity into revenue producing backlog. These newly awarded projects will keep us very busy in the months ahead. We remain very encouraged with the communications infrastructure opportunities that continue to be present in public services, healthcare and energy."

Although these mini micro cap are viewed as speculative here at HQ, it is also recognized that companies like WPCS, or ANIKA which was bought last Monday, have potential or possible catalysts that can precipitate large percentage moves.2010 Speculative Strategy-Gateway Post For WPCS, it may receive more contract rewards in the coming weeks. For a drug firm like ANIKA, approval by the FDA of the MONOVISC product later this year, which has already been approved in Europe and Canada, may provide a kick. Then, another catalyst would be better than expected sales after its launch. One thing about these small companies is that they are small. Anika has a market cap of around 90 million, a rounding error for Pfizer or JNJ. It would not take much good news on the revenue side to move a 90 million dollar market cap stock. Still the OG views these kind of companies as sufficiently speculative that only limited amounts of capital are placed at risk in them.

Besides, the Old Geezer bought two real LTs over the weekend, scratch offs, and won $500 on one and $50 on the other. So I am on a roll. The LB just said that the Old Goat can now quit picking up pennies in the Kroger parking lot. Sooner or later, when the OG stoops over, gravity will pull that aging, balding structure down to the pavement, and all of the residents of the SUV Capital of the World will mistake the resulting sound for the return of the New Madrid earthquake of 1812, which caused the Mississippi River to run backwards and rang church bells in Boston. I know something about this earthquake because I was hired back in 1986 to stop a drawdown on environmental grounds of the Reelfoot lake, which was formed by this earthquake. 793 F.2d 129 (& district court decision: FindACase™ | BUNCH v. HODEL) This was an interesting case since the federal district court trial ended shortly after the complaint was filed, and demonstrated that the legal system can work effectively at relatively low cost.

Frequently with these small companies, the first question that I ask myself is whether the firm will survive to realize its potential or to improve upon its results during better economic times. Another question is what are the catalysts that could drive the price higher, and how realistic is it that one or more of them will occur and when? This is why my first focus is on the balance sheet, the amount of debt, maturity schedules and the cash per share.

5. Bought 100 New Hampshire Thrift Bancshares at $9.51 Yesterday (NHTB)(see Disclaimer): NHTB is a small micro cap bank (54M) that serves areas in New Hampshire and Vermont with 28 branches. The bank operates under the name of Lake Sunapee Bank. This is a list of the branches and their location: Lake Sunapee Bank NHTB is the parent of Lake Sunapee Bank: New Hampshire Thrift Bancshares, Inc. The bank traces its roots back to 1868.

This bank is lightly traded and I used a limit order, when the bid was 9.4 and the ask was 9.6. An order had just been filled at 9.51 so I entered that limit and it was promptly filled along with 200 other shares.

This bank will be added to Category 2 of my Regional Bank Stocks stratagem.

The dividend yield at my cost is close to 5.5%. NHTB The bank is profitable and is expected to earn $1.08 in 2009 and 1.09 in 2010 by the one analyst that follows it: NHTB: Analyst Estimates Price to book is .62. NHTB: Key Statistics for New Hampshire Thrift Bancshares The knock on it would be a lack of earnings growth. But, then again, it is earning money and paying a good dividend.

In the 3rd quarter of 2009, New Hampshire Thrift Bancshares earned 29 cents compared to 19 cents in the year ago quarter. Non-performing loans as a percentage of total loans was just 1.21%. Tier 1 Core Capital to Assets was 8.83% as of 9/30/09, and book value was given at $13.6.

NHTB did accept 10 million in TARP funds. Form 8-K As far as I can tell, those shares are still outstanding.


6. Sold Remaining 100 shares of RJZ at $10.18 (see disclaimer): I do not want to be greedy with these commodity ETNs that I bought last year. I bought 200 shares of RJZ at $6.96 last October. Item # 5 Bought MSPRA RJZ & ADX/ COMMODITIES AS AN ASSET CLASS I subsequently sold 100 shares at $9: /Sold 100 RJZ at $9/ The last sell represented a 46.26% profit in less than 3 months before brokerage commissions.

2010 RJZ 300 Shares +$306.42
7. Bought 50 OKSB at $6.84 (see Disclaimer): Southwest Bancorp (OKSB) is another small bank, and it provides banking services in Oklahoma and Kansas.Southwest Bancorp, Inc. www.oksb.com Reuters.com At my price the market cap is around 104 million. The bank is still profitable, but I suspect larger institutional investors were disappointed with the 3rd quarter results. Southwest Bancorp Reports Third Quarter 2009 Results - That report was released on 10/20. On 10/19, the stock closed at $12.88, and has been moving down since that time to yesterday's close at $6.8. The bank reported earnings of 7 cents a share down from 16 cents in the year ago quarter. e10vq

Price to book is given at .43 at YF. OKSB: Key Statistics for Southwest Bancorp The one analyst that follows the bank estimates E.P.S. at 52 cents in 2009 and then falling to 39 cents in 2010: OKSB: Analyst Estimates for Southwest Bancorp, Inc The long term chart reveals some trading activity over $25 in 2004 and 2007, with a waterfall pattern starting in December 2006 at around $27.86: Southwest BancorpPrice Chart The recent price action took the stock below its 200 day moving average.

Nonperforming loans as a percentage of total loans is high at 4.09%, and the allowance for loan losses to nonperforming loans is just 54.87%.


The bank exceeds the regulatory minimum capital ratios:

"Bank holding companies are required to maintain capital ratios in accordance with regulations adopted by the Federal Reserve Board (“FRB”). The guidelines are commonly known as Risk-Based Capital Guidelines. At September 30, 2009, Southwest exceeded all applicable capital requirements, having a total risk-based capital ratio of 14.31%, a Tier I risk-based capital ratio of 13.04%, and a leverage ratio of 12.39%. As of September 30, 2009, Stillwater National and Bank of Kansas met the criteria for classification as “well-capitalized” institutions under the prompt corrective action rules of the Federal Deposit Insurance Act. Designation as a well-capitalized institution under these regulations does not constitute a recommendation or endorsement of Southwest, Stillwater National, or Bank of Kansas by bank regulators." (page 41:e10vq)



OKSB is paying a minimal dividend now of 10 cents per year, which is one reason why I only bought 50 shares. It barely qualifies for Category 2 in the Regional Bank Stocks stratagem. And my overall lack of confidence is further demonstrated by the small investment. Still, this bank has recovery potential, when viewed with a very long, forward looking gaze, maybe a telescope into the distant future.

I am done for now in adding banks. I will wait until the 4th quarter earnings are released before deciding whether to add new ones or to buy more of some already owned.

8. Advanced Battery (owned-LT Category): I would never buy anything based on a rumor. Yesterday, ABAT rose 8.87% to $4.42 based on a rumor, reported at Briefing.com, that it had been awarded a contract for Apple's rumored tablet device. Advanced Battery TheStreet.com Who knows?

9. Dividends and Interest: Progress Energy ( PGN) goes ex dividend tomorrow. Even after its recent rally (for an electric utility stock, not much of a % gain for the Young Turks no doubt!) from my last purchase at $38.05 Bought 50 Shares of FPCPRA & PGN , the stock still yields about 6.1% at yesterday's closing price of $40.43, which is an above average yield for an electric utility. PGN Stock Quote - Progress Energy

2 comments:

  1. Would you comment on this article?http://www.istockanalyst.com/article/viewarticle/articleid/3759275. It is about the cash level in mutual funds. Thanks

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  2. Individual investors have been pulling money out of stock funds and pouring money into bond funds. This is one reason for the lower cash levels at stock mutual funds. The author of that article pegs the cash level at 3.8% currently.

    I am not convinced that historical patterns are that relevant now, as many individual investors are buying stock ETFs rather than mutual funds. I am certainly one of them having bought several stock ETFs last year including VEU, ADRD, VV, VTI, AOA, and VV. Also, a lot of buying comes from overseas and from institutional investors. If the market turns lower, it will be due to other factors, such as the failure of the economy to mend as currently anticipated. I would anticipate now that individuals will be slow to return to stock mutual funds after their experience in 2008.

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