Thursday, December 23, 2010

Pared FNB and AF-Regional Bank Basket Strategy/Bought 50 PIS at 24.88 in Roth IRA/Bought 50 HPQ at 41.57/Sold 300 WIW at 12.43

Three banks in my Regional Bank Stocks' basket strategy are included in TheStreet's list of 10 efficient, stable and profitable banks.  They are NYB,   ORIT, and HCBK.  I have bought and sold another on this list,  WIBC, and have some of the others on the large monitor list for this strategy. Sold 110 WIBC at 10.99

Sometimes, perception of reality is more important than the reality.  Over the past several days, I have read a number of commentaries predicting a tsunami of regional bank mergers.  An acceleration of mergers in 2011 may be in the offing, and consolidation is one of the rationales for the regional bank strategy, though it is certainly not the most important.  Rationale for the Regional Bank Stock Strategy 

There have been several recent announcements that lend some credence to these predictions.  The most high profile announcement came from Bank of Montreal (BMO), who announced its intent to acquire Marshall & Illsley (MI)  I had owned shares in MI, but sold them before the merger announcement  at 7.14, a price higher than where the shares are trading now.  Yesterday,  Hancock Holding announced its acquisition of Whitney Holding.   So far in 2010, two of my bank stocks, Wilber and Wainwright, jumped on acquisition news.  Bought 50 WAIN at 8.72  Sold 50 Wain at $18.7-Being Acquired Sold 151 GIW @ 9.26

I mentioned in yesterday's post that the regional bank stocks had shifted into another gear.  My regional bank basket had another good day yesterday, rising $730 or 1.48%.   

1.  Sold 50 AF at $14.09 and 100 FNB in two 50 share lots at $10 and $10.18 (Regional Bank Stocks' basket strategy) (see disclaimer):  I sold shares of Astoria that were part of my 100 share lot purchased at 13.08.  This kind of transaction books a small profit while lowering my average cost for the remaining 100 shares using FIFO accounting.  After buying 100 at $13.08, I averaged down by buying  50 AF @ 12.08.  

I also sold my highest cost shares of FNB, which were purchased at 9.36 and at 8.42.  I kept the shares bought  at $7.8 in a satellite account.  The shares, which were sold, were in two separate accounts which accounted for the differences in their respective sales prices.  

2. BOUGHT 50 of the Trust Certificate PIS at $24.88 in the Roth IRA (see disclaimer):  PIS is my replacement for the 50 KRH that was redeemed yesterday.  PIS is a Trust Certificate (TC) that represents an undivided beneficial interest in Liberty Media senior bonds owned by the trust.   PIS is classified by me as an Exchange Traded Bond.  Par value of the trust certificate is $25.   Both the TC and the underlying bond mature on 2/1/2030.  The TC has a higher coupon than the underlying bond.  The bond has a 8.25% coupon whereas the TC has a 8.75% coupon.  Since I bought those shares at close to their par value, my current yield and yield to maturity would be very close to the 8.75% coupon.  This is a link to the FINRA information on the Liberty Media 2030 bond.  The same bond is also the underlying security in  PYL and PYA.  PIS had the best current yield yesterday in this grouping.  All three of these TCs make semi-annual interest payments with the last ex date on 7/28.  

PIS Prospectus: 

The underlying bond is rated junk by all three rating agencies.  Moody's rates it B1. 

I have bought and sold PIS, and another TC with a different Liberty Media senior bond (PKK), at lower levels.  

This is a link to the last filed Form 10-Q for the Q/E 9/2010.  The debt is listed at page 23. 

3. Bought Back 50 HPQ at $41.57 (see Disclaimer):   When HP released its earnings report for its fiscal 4th quarter ending on 10/31/2010, it raised the mid-point for fiscal 2011 GAAP E.P.S. to $4.47 from 4.4 and raised the midpoint of its 2011 revenue guidance to 133 billion. HP's non-GAAP E.P.S. estimate for F/Y 2011 (ending 10/2011) was in the range of $5.16 to $5.22.   SEC Filed Press Release It is not often that I can buy such a quality company for less than 10 times earnings.  Price to sales is currently around .75 with a forward five year P.E.G. at .84, according to HPQ Key Statistics at YF.   

Since I am not comfortable investing in technology, I limited myself to a 50 share purchase, buying back the fifty shares previously sold at a slightly higher price.   /Bough 50 HPQ at 38.2 (Sept. 2010) Sold: 50 HPQ @ 43.11 (Oct. 2010).   I am also not going to invest much money in any common stock that pays such a miniscule dividend.  

Hewlett-Packard Company closed yesterday at $41.48, down 43 cents.  

4. Sold 300 of the Bond CEF WIW at $12.43 (see disclaimer):  This one was a trade with the 300 shares just purchased  at $12.14.  I have been in a trading mode on this security, clipping small gains, and a few dividends here and there. Bought 300 of the CEF WIW at $11.94  SOLD 200 of 300 WIW at $12.5 Bought 200 WIW at 12.29 Sold 300 WIW at $12.53 For this last trip, I will receive just one monthly dividend.   

I am in the hole on many of the recently purchased bond CEFs that have reacted poorly to the recent correction in treasuries.   I will use the proceeds from WIW to average down in small increments on those higher yielding CEFs such as HPF.  {Sold HPF at 20.35 in Roth Bought 100 HPF at 19.09 in Roth IRA} {Bought:  100 HPF at 19.89  Added: 100 HPF @ 19.14  Bought 50 HPF @ 17.55 and at 17.76}  I am at my limit on ERC and GDO, though I intend to add 50 shares to GDO,  and I do not care to add to BTZ, PSY or BHK.     I am trading GDO some to lower my average cost, which will require buying slightly more than I want on occasion and then paring some later at over $19. 

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