Tuesday, November 2, 2010

Sold: 100 VZ @ 32.75, 50 AMAT @ 12.4, Sold EMR @ 55.42 /Added 30 EXC @ $41

Headknocker wants to complement the LB, compliment #3 over the past 59+ years, for recognizing early the problems at Wilmington Trust and selling HK's shares for a nice profit at $14.13. Modification of Regional Bank Strategy: Sold 100 Wilmington Trust (WL) at $14.13 Wilmington shares fell 40.79% yesterday to close at $4.21, after accepting a take under offer from M & T. TheStreet The volume was over 52 million shares.

The ISM index for manufacturing for October rose to 56.9 from 54.4 in September. The consensus expectation was for a reading of 54. New orders increased 7.8% from September to 58.9. The employment component rose to 57.7.

I received yesterday the redemption proceeds for DKI, a trust certificate containing a Sprint Capital bond, that was called by the call warrant owner.

My regional bank basket took a mild hit yesterday, falling .84% as the major averages managed to eke out a gain.

I also received yesterday the quarterly dividend from SCEDN on my 50 shares. BOUGHT 50 SCEDN AT $84 The amount was $69.13. This one turned into a floater with no guarantee earlier this year. The float is based on a spread of 1.45% over the highest of the 3 month LIBOR, 10 year CMT U.S. treasury, or the 30 year CMT U.S. Treasury. Prospectus Supplement The 30 year would produce the highest rate now. If I annualized that quarterly payment, then the yield would be around 6.58% at my cost of $84. I see no reason to take a profit on this security which is now trading near its $100 par value. The penny rate for SCEDN was $1.5125 per share for the quarterly dividend that went ex on 7/1. Due to the decline in the 30 year bond since that payment, the penny rate declined to $1.3825 for the payment received yesterday. The shares closed yesterday at $99.8.

HPF, a bond CEF, declared its regular monthly dividend of $.124, John Hancock Closed-End Funds Declare Monthly Distributions

The London PM fix for gold was $1354.50 on 11/1. At least MOL has some excitement attached to it, and the OG wakes up long enough from his afternoon nap just long enough to check on the P.M. London fix.

1. Low Relative Strength and High Risk Grade Ratings: An article, published at Seeking Alpha, appealed to the naturally contrarian views, and cautious instincts, of the LB. The author screened stocks using two criteria. The first was to find stocks that were oversold based on a relative strength rating below 40. The other criteria was to include only those "oversold" stocks that had "low levels of risk" using the RiskGrade ratings of the RiskMetrics Group. Twenty-five stocks were selected using those criteria. From that list, I own the common shares of Exelon, FirstEnergy and Hudson City Bancorp. I have recently sold another, Kimberly Clark: SOLD KMB at 66.49 I also own an equity preferred stock issued by Aspen Insurance. Bought 50 AHLPRA at $19.75 Added 100 AHLPRA at 22.54 Bought 50 AHLPRA at 22.35 I was thinking about adding 30 shares to my 100 share of Exelon anyway, as an average down, and this article just pushed me in the direction that I was already leaning.

2. Added 30 Exelon at $41 on Monday (see Disclaimer): I am reinvesting the dividends received from EXC and this last purchase of just 30 shares was an average down from the 100 shares purchased in February at 44.25. That 100 share purchase was classified as a new addition to my core electric utility portfolio. The stock has slid some since recently announcing its third quarter earnings due in my opinion to the continued sluggish outlook for EXC's merchant power business. The regulated retail operations, which are quite large, appear to be doing fine. Item # 4 EXC Since my original purchase, the stock has been mostly in a slight downtrend, Exelon Corporation Common Stock Stock Chart | EXC A high of over $90 was reached in 2008. The current dividend yield at is around 5.14% with the next ex dividend date on 11/10. Exelon Corporation, EXC

One problem with Exelon now is the negligible earnings growth predicted by the consensus earnings estimate from the $4 per share in 2010 to just $4.10 in 2011. EXC Analyst Estimates This may very well be a reasonable estimate, considering the slow pace of the U.S. economic recovery, which is probably viewed by most investors as continuing into 2011 while others look for a double dip. Such outlooks do at least suggest the possibility of a surprise, when and if the U.S. economy performs at better than expected levels in 2011, which may be more likely than the more pessimistic forecasts allow for at present.

3. Consolidated Edison (own)(core electric utility): ED is my largest electric utility holding, bumping closer to my exposure limit for one company. I am reinvesting the dividends. My last open market purchase was in February 2008. Con Edison reported earnings from continuing operations of $1.32 per share, beating the consensus estimate for $1.21. ED raised its outlook for 2010 to a range of $3.4 to $3.5 a share. The previous forecast made by the company was for earnings between $3.25 to $3.45 per share. Con ED recently completed the sale of 6.3 million shares of its common stock. Form 8-K

4. Sold 100 Verizon at 32.75 (see Disclaimer): This limit order was placed soon after the market opened yesterday and was filled as the stock went up to $32.77 in early morning trading. The LB, firmly in control of the trading desk, is not capable of thinking long term and is focused on generating trading profits in what it calls a long term bear market in an Unstable Vix Pattern. This VZ trade was a good one, with the shares bought at $26.74 in July.

5. Sterling Bank (STL)(own common and a TP) & HopFed (HFBC)(Regional Bank Stocks' basket strategy) :

Sterling Bancorp reported a net loss of 3.3 million or 12 cents per share after "accelerating" the "resolution" of non-accrual loans, "principally in lease financing" which resulted in net-charge offs of 15.9 million. This caused the level of non-accrual loans to fall by two-thirds to .47% of total loans. The allowance for non-accrual loans rose to total loans rose to 289.5%. Non-GAAP income for the 3rd quarter was 10 cents per share, in line with estimates. STL Analyst Estimates | Sterling Bancorp As of 9/30, the total risk based capital ratio was at 14.7% (10% well capitalized); the tier 1 risk based ratio was at 13.63% (6% well capitalized); the tangible common equity ratio was at 7.05%; tier 1 leverage ratio was 10.35% (5% requirement); and net interest margin was 4.11%. Bought 50 STL at 6.58 The TP has a 10 dollar par value and a 8.375% coupon. Bought 50 of the TP STLPRA at $8.99 Added 50 STLPRA at 8.69 Bought 100 STLPRA at 8.87 Sold 100 of the TP STLPRA at 10.25 Bought 100 STLPRA at 10.05 (prospectus: sec.gov). Sterling closed down 7 cents yesterday to close at $9.32.

HopFed Bancorp (HFBC), a small bank headquartered in Hopkinsville, Kentucky, reported earnings of 21 cents per share, compared to a loss of 80 cents in the 3rd quarter of 2009. The consensus estimate from two analysts was for 21 cents. I am near break-even on my shares in HFBC, which closed at $8.97 yesterday, down 3 cents.

As of 9/30, NPLs to total loans was at 1.28%; tangible book value per share was $13.9; the total risk based capital ratio was at 19.04% on a consolidated basis and at 15.87% for the bank; and the net interest margin was 3.15%. HopeFed reduced its cash dividend from 12 cents to 8 cents in the last quarter and then added a 2% stock dividend. Press Release I would not view the stock dividend as equivalent to the cash dividend, but apparently the management of this bank thought that something was necessary as a sop to individuals who would otherwise be unhappy about the cash dividend cut.

6. Sold Remaining Shares of Emerson Electric at 55.42 and Sold 50 AMAT @ 12.4, both on Monday (see Disclaimer): I pared my position in Emerson at $53.31 in late September. The sale on Monday encompassed my remaining shares, mostly bought during the Near Depression period at around $33.5. 

2010 Sold 52+ EMR +$600.68
The LB is in a profit taking mode. Headknocker just said that he takes back compliment # 3 previously made and wants the LB to pay the tax on all of these short term gains taken by it during 2010. The HK then observed that the OG, despite his many faults, is at least capable of thinking long term, and even act with long term goals in mind, until he suffers the shakes of course. No one really appreciates the management hurdles that HK has to overcome daily with the staff here at HQ.

The LB can become easily bored with a stock that does not move. So, it sold yesterday the 50 shares of AMAT for that reason, and no other, at $12.4. This stock has been traded for small profits on several occasions this year.

My much older brother, who lacks an abundance of hair, unlike our Stock Stud LB, as proven beyond any doubt by the current profile picture, inquired whether Headknocker was a harder case than the LB. I replied with a historical analogy to an event known in our family. Many years ago, my father was by himself in a construction trailer and a former employee who had been fired for cause entered the trailer with a gun, pointed it at my father and threatened to kill him if he did not hand over some money. My father said no. At about the same time, a carpenter entered the trailer, saw what was happening, and told the former employee that he would put a hammer into his head if he pulled the trigger. That seemed to simmer things down, and no report was made to the police, as the matter was peacefully resolved. HK would have said no again even if he had been shot and survived, whereas the LB might have said yes just before the trigger was pulled, after giving the matter further consideration and mulling over the alternate scenarios and likely outcomes. Left Brain & Right Brain Decision Making

The remaining trades from Monday will be discussed in the next post.

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