The preceding table reflects the current closed end fund portfolio, viewed as a portfolio within an overall portfolio of close to 400 positions and tailored to supplement and complement individual positions. The last table of CEF positions was posted on May 11th in Impact of Rising Rates on Bond Prices. I have sold some of the positions included in that earlier table including all of the shares of GCS, BDV, BDT, BDJ and IGI. I added 100 MSF as noted below in Item # 1, 50 shares to IGR, 300 shares of HSF and some shares purchased with reinvested dividends. Those transactions resulted in a net pare of the CEF portfolio value. ERC and PSY were ex dividend yesterday, both with their monthly distributions. Wells Fargo Advantage Multi Sector Income Fund, ERC BlackRock Preferred Income Strategies Fund Inc, PSY I am not reinvesting dividends in either one at present. ERC changed the first part of its name to Wells Fargo from Evergreen. After paring the total value of the positions some, I changed the distribution option on a couple of the CEFs back to reinvestment in shares from payment in cash. One of those was Evergreen International Balanced Income Fund (EBI) which also pays monthly dividends and was selling at more than a 10% discount to its NAV. WSJ
1. Added 100 of the CEF MSF at $13.57 (see Disclaimer): This purchase was an average down from my last purchase of 100 shares at 14.4. This CEF invests in emerging market stocks. I was fortunate to sell my hedge, EEV, for my emerging market stock position on 5/20 at a profit. SOLD Double Short EEV NEAR THE CLOSE There was a big pop that day in EEV, a double short on the emerging market index, with shares closing at $63.85: EEV: Historical Prices for ProShares UltraShort MSCI Emerg With the recent rally EEV has fallen to near $48, which proves why these double shorts are so dangerous. My timing has to be very, very good. I noted in a couple of recent posts the liquidation of all of the double short hedges with sales on 6/30 ( ITEM #7), and last Friday as noted in Sold Last Double Short. It remains to be seen whether those sales were prescient. It does appear to be so, at least so far.
MSF closed at a NAV of $15.43 on Monday. The discount based on Monday's closing price of $14.15 was 8.3%. This information can be found at the WSJ.com , the Morgan Stanley web page for its closed end funds, and the CEFA - Closed-End Fund Association. The discount narrowed to 7.98% on Tuesday.
2. Bought 50 Southside Bancshares (SBSI) at $19.49 on Monday (Regional Bank Stocks basket strategy) (see Disclaimer): This basket strategy now has 39 names in it. Southside is headquartered in Tyler, Texas, and has 46 branch locations. Eighteen of those branches are in retail stores. "The branches are located in and around Tyler, Longview, Lindale, Gresham, Jacksonville, Bullard, Chandler, Hawkins, Seven Points, Palestine, Forney, Gun Barrel City, Athens, Whitehouse, Fort Worth, Arlington and Austin."
Southside did not participate in TARP. SEC Filed Press Release 11/2008 Southside stated that it was well capitalized and did not need the government's money. Its capital ratios are among the highest that I have seen.
As of 3/31/2010 and on a consolidated basis, the total capital ratio was 20.22% and its Tier 1 capital to risk weighted assets ratio was 18.97%. The bank itself had a Tier 1 capital to risk weighted assets ratio of 18.22%, and 6% is considered well capitalized (see ratios at page 35 of form_10q.htm) The net interest margin was 3.74% as of Q/E 3/2010.
The bank earned 74 cents in the 1st quarter of 2010, down from 90 cents in the linked quarter from 2009. Nonaccruing loans to total loans was 1.8% and the allowance for loan losses to non-accruing loans was 106.19%. (see page 39 10-Q). I like to see the allowance over 100% of non-accruing loans since it will mitigate any future negative surprises on reserve levels. Some banks have less than a 30% allowance which may be justified but it may also be a harbinger of inadequate allowances for bad loans.
Unlike the other banks in the regional bank strategy, Southside is trading about where it was in 2007 before the onset of the Near Depression: Chart | SBSI The share price did fall a lot in the first quarter of 2009 and then quickly recovered back to its trading range between $18 to $24, where the stock has been moving since it broke out of a lower channel in June 2006.
I have a $2000 limit on exposure to one bank in the regional bank basket. I will take SBSI close to that maximum level by buying another 50 shares at a later time. I want to review its 2nd quarter report before making a decision to add 50 shares however. The bank has been declaring 5% stock dividends (this is a link to a five year chart at YF for SBSI which will hopefully show the 5% stock dividends). Its cash dividend is currently 17 cents per quarter. MarketWatch The yield is about 3.48% at a total cost of $19.49 per share.
The estimate of the one analyst following the bank is for an E.P.S. of $2.51 in 2010. The total market capitalization at the current price is around 307 million.
3. Added 31 BCB Bancorp at 7.50 (regional bank stock basket strategy)(see Disclaimer): My last limit order for 50 shares was filled with only 19 so I went ahead and rounded my lot to 100 shares of BCBP by buying 31 shares at $7.5. BCB just completed its share acquisition of another small savings bank in NJ, Pamrapo Bancorp. The current quarterly dividend is 12 cents, so the yield at a total cost of $7.5 is around 6.4%. My first 50 share lot was bought at $9 so this was an average down. I do not intend to buy anymore.
4. Added 40 AA at $10.95 (see Disclaimer): I discussed Alcoa's earnings in my last post. Item # 6 Alcoa. Yesterday morning, AA shares had a small pop at the open and then fell back to unchanged for the day. While nothing about AA is regarded as stellar, I did think the last earnings report justified an add of 40 shares to my existing position. As previously mentioned, I do not have high hopes for Alcoa over the short or intermediate term, but suspect that the current price may prove to be advantageous for someone willing to be extremely patient over a long period of time. My last purchase was at $5.6 in March 2009. For reasons that make no sense, the OG is reinvesting the dividends, currently at 3 cents per quarter after AA slashed it from 17 cents early in 2009: Alcoa: Invest: Financial Information: Dividend History This last purchase brings the total share exposure to around 125.
5. Re-Purchased 50 RRST at $8.65 (See Disclaimer): I previously sold this Israeli company at 10.43 for a small profit and after clipping a dividend payment. I discussed this firm in the post discussing its initial purchase at $9.92. I last discussed it after reviewing its Q/E 12/09 earnings report in Item # 4 RRST. The current consensus estimate is for an E.P.S. of 73 cents in 2010 and 96 cents in 2011. RRST: Analyst Estimates for RRSat Global Communications A five year Chart shows a stock in a funk, trading below its 200 day moving average and near its low price over the past five years. The last earnings report for the Q/E 3/2010 looked okay to me: exhibit_99-1. RRSAT ended the last quarter with 40.1 million in cash and no debt (see balance sheet pages 6-7 exhibit_99-1) The current market cap is around 150 million.
6. Unilever (own): Given the price paid for my Unilever shares ( at 18.05 on 3/23/09), and the dividend yield at that price, I will be a long term holder of my stock. Goldman raised its rating from neutral to buy and placed Unilever on its conviction buy list. I would add that such a change of heart would be more meaningful to GS clients if it had been made when shares were trading at $18 rather than near $30. I do not see much in the way of near term upside in the share price.
7. Exelon (EXC) (owned): Morningstar believes that Exelon stock has been unfairly punished by the market. Its merchant power business, consisting mostly of nuclear power plants, has some wind at its back now with more favorable weather and improvements in industrial production. Exelon would be a beneficiary of any cap and trade legislation. I am under water in my purchase of EXC shares at 44.25 last February. EXC beat expectations by 10 cents in the first quarter. Form 10-Q EXC also owns Commonwealth Edison, the large electric utility serving Chicago. I view the state agency in Illinois responsible for setting rates to be unfriendly to the companies operating in its jurisdiction. Hostile is probably a better word, and I view that fact to be a significant negative for EXC. I discussed the Illinois commission in a post involving its decision on a rate increase request from Ameren (AEE). I sold my shares in AEE at 26.03 on the day of that rate decision which demonstrated an unwillingness to apply traditional rate making principles and to apply instead the Hugo Chavez approach to capitalism.
The two Canadian Bond ETFs that I own are discussed in this article from the Financial Post.
Singapore raised its forecast for GDP growth in 2010 to a sizzling 13 to 15% gain. The 2nd quarter increased a record 19.3%. CNBC
A LT buy was made by the RB on Tuesday which will be discussed in the next post. I own Intel shares and will discuss its report in the next post. WSJ
I noticed that Sandler O'Neill upgraded AON to buy based on its long term view of the beneficial impacts of the pending Hewitt acquisition. Barrons I am following news on AON due solely to my position in the AON junior bonds contained as the underlying security in DKK, KTN and KVW.