Friday, April 29, 2011

Junk Bond Ladder Table/Bought 1 7.55% CoreLogic Senior Bond Maturing 4/1/2028 @ 94.975/BDGE CBU UBSI KO VLY JNJ DXY/Added 100 of the Stock CEF JSN @ 12.51/Bought 1 Travelport 11.875% Senior Sub Maturing 9/1/2016

Based on a study conducted by USATODAY.com, wages now account for the lowest shares of Americans' income since the government started to keep statistics in 1929.  And, a record 18.3% of the nation's total personal income comes from payments made by the federal government. Those payments are made pursuant to Social Security, Medicare, food stamps, unemployment benefits, and other federal programs. 


The U.S. Dollar Index hit a new two year low yesterday, DXY Index Chart, as the USD continued its slide against a basket of 6 currencies. MarketWatch This most recent slide in the USD's value is pretty much across the board.  One AUD will now buy more than 1.09 USD. AUDUSD  One CAD will more more than 1.05 USD. CADUSD=XGold rose over $14 per ounce yesterday. Live Gold, Silver Spot  Gold Price Silver is near $50 an ounce. The ETN  for the DJ-UBS commodity index (DJP) is trading well above its 200 day moving average line:  iPath Dow Jones UBS Commodity  Chart  I own two "principal protected" notes with $10 par values whose coupon payments are linked to the performance of that index.

According to the IMF, China's economy will exceed that of the U.S. in 2016. IMF bombshell Will the 'Age of America' end in 2016? - CNN.com

The Federal Reserve's balance sheet has hit an all time record, possibly they can make a tender offer for the S & P 500 companies with the 2.695 trillion dollars currently on their expanding balance sheet.  No, I don't think that would be enough.  More money needs to be created. Maybe in a few years those USDs can replace monopoly money.

Johnson and Johnson (JNJ-own) raised its quarterly dividend from 54 to 57 cents. Johnson & Johnson Announces Dividend Increase of 5.6%  The raise last year was from 49 to 54 cents.  Johnson & Johnson Announces Dividend Increase of 10.2%

1. UBSI BDGE CBU VLY (own: Regional Bank Stocks' basket strategy)

United Bankshares (UBSI) reported 1st quarter net income of 17.9 million or 41 cents per share, up only slightly from the 40 cents earned in the year ago quarter.  As of 3/31/2011, NPLs to total loans were at 1.4%; the efficiency ratio was okay at 53.44%, the coverage ratio was comforting at 100% (peer group average was 77.6% as of 12/31/2010): the total risk based capital ratio was estimated at 13.9%, and the net interest margin was relatively good at 3.92%.  The capital ratios are clean in that there is no government money providing equity capital.  In previous posts, I indicated a desire to sell UBSI when the price hit 30.

I have expressed that desire twice and have yet to sell the shares even though I could have done so at that price.   There are a few reasons for holding UBSI.  The dividend yield at my constant cost is around 7.25%, based on the current annual rate of $1.2 per share.   Bought 50 of UBSI at $16.56 The bank also appears to be relatively well run, meaning that a swashbuckler Master of Disaster is not in charge.  It is important that the bank made it through the Near Depression period without cutting the dividend.  And, the bank has been moving into higher growth areas outside of its base in WV. I would also view the bank as a potential acquisition target. 

 Some countervailing considerations is that the dividend growth rate is anemic.  The annual dividend in 2003 was $1 per share and is now $1.2 in 2011.  The earnings growth rate and the payout ratio suggests that trend is likely to continue.  I also have a decent percentage long term capital gain in the shares.  

United Bankshares has 111 branches mainly serving West Virginia and the District of Columbia metropolitan area.  The bank has about 10% of the deposits in WV.  The bank has grown with almost 30 acquisitions since 1982. 

Bridge Bancorp (BDGE) reported a 1st quarter E.P.S. of 34 cents or 36 cents without the acquisition costs associated with its purchase of Hampton's State Bank. The core net income number was 9% higher than the 1st quarter of 2010. As of 3/31/2011, the net interest margin was relatively good at 4.14%; loan growth was at 15% compared to the first quarter of 2010; deposits grew 20%; the total capital to risk weighted assets ratio was 13.6%; the tier 1 capital to risk weighted assets was 12.3%; NPLs to total loans were at 1.43%; the allowance for losses to NPLs was a comforting 120.67%; and the efficiency ratio was okay at 61.72%. Bridge did not participate in TARP: SEC Filed Press Release In my parlance, its equity ratios are clean.

Bridge is a new edition to the regional bank basket strategy.  I am reinvesting the dividend.  Bought 50 BDGE at 23.11 Bought: 50 BDGE @ 22.14  I am a few bucks in the red so far.

Community Bank System (CBU) reported net income of 16.2 million, a 15.4% increase over the 1st quarter of 2010. Earnings per share were up 14.3% to 48 cents per share, including a 1 cent acquisition related expense. This was the Wilber acquisition which was owned at the time of the merger announcement. The consensus estimate made by 5 analysts was for 46 cents per share in earnings.   CBU Analyst Estimates  CBU  is a new addition to the regional bank basket strategy, and I am near break-even so far. 

Valley National Bancorp, one of my larger holdings in the regional bank basket, announced after the close yesterday that it will acquire State Bancorp (STBC), based on a fixed exchange ratio of one VLY share for each share of STBC.  State Bancorp is a small bank with 17 branches and provides Valley an entry into the Long Island market. Upon completion of this acquisition, VLY is expected to become the 37th largest commercial bank in the U.S.  Last year, Valley acquired two banking institutions, Liberty Pointe and The Park Avenue Bank (Form 8-K), in an FDIC assisted transaction.  SEC Filed Press Release announcing the Park Avenue Bank Acquisition  SEC Filed Press Release announcing the LibertyPointe Bank Acquisition I discussed VLY's first quarter earnings' report in yesterday's post.

2. Coca Cola (own: Common Stock Dividend Growth Strategy):  Coca Cola missed the consensus estimate by one cent. The company reported a net income of 1.9 billion or 82 cents. On an adjusted basis the company reported 86 cents per share.   KO grew earnings in the first quarter by 18%, with 6% worldwide volume growth or 5% excluding new products. North American volumes were up 2%. This report is discussed at several financial sites including  MarketWatch,  Bloomberg,  and Reuters.  I recently quit reinvesting the dividend to buy additional shares.

I have booked some profits on KO shares but still owns shares bought in March 2009  at $38.72 and two 50 share purchases in April 2010. ADDED 50 KO AT 54.26 (4/7/2010 Post)  Bought 50 KO at 53.77 (4/24/2010). I go into some detail about KO's dividend growth in Item #1 Barrons (August 15, 2009 Post). The current quarterly dividend is 47 cents per share: Coca-Cola - Press Center  - Quarterly Dividend  The annual dividend rate per share was 88 cents in 2003 and $1.76 in 2010.   

3. Bought 1 CoreLogic 7.55% Senior Bond Maturing 4/1/2028 at 94.975 Last Tuesday (Junk Bond Ladder Strategy(see Disclaimer):  This bond was originally issued by First American and is now an obligation of  CoreLogic for the reasons discussed in several prior posts. See, e.g. Item # 3 Bought 50 of the TC PJS at 24.84

This bond is the underlying security in the Trust Certificate PJS which I also own. TCs are in effect Exchange Traded Bonds.   I have bought and sold that TC many times and have already booked some significant capital gains.  Since I have owned that TC in various quantities for over 2 years, I have also received several semi-annual interest payments. Bought PJS at 7.2-October 2008 Bought 50 PJS at 17.95 August 2009 Bought 50 PJS at $17.8 in Roth  Sold ALL PJS at 24.75 & 24.65 Bought 50 PJS at 23.73 Sold PJS at 25.45 Bought 50 of the TC PJS at 24.84 Bought 50 PJS @ 24.6 This TC has the same 7.55% coupon as the underlying bond:  www.sec.gov I currently own 150 shares and this security just went ex interest for its semi-annual interest payment.   Preferredplus Trust Series Far 1, PJS Stock Quote  Since I now own the underlying bond, I may sell 50 or 100 shares of my TC position when and if the price exceeds the $25 par value.

By buying the bond directly, I received a slightly better current yield and YTM compared to buying more PJS.  This bond will be harder to trade than the exchange traded TC. I look at what can be bought in small amounts in the bond market at least twice a day and this bond has not been available in less than a 5 bond lot until Tuesday over the past several months. And,  no bids have ever been shown for this bond for as long as I have looked at it, so I suspect that it will be virtually impossible to sell a 1 bond position.   Twenty bonds were available when I placed my order, with the minimum lot being 1 bond, so I bought just 1.

This is a link to the  FINRA information about this bond.

This is a link to the prospectus: www.sec.gov

The current consensus estimate for CLGX is for an E.P.S. of $1.12 in 2011 and $1.29 in 2012: CLGX Analyst Estimates | CoreLogic, Inc.   A description of this company can be found at  Reuters.com, and I also reviewed the Key Developments page at Reuters.com even though I am already familiar with this company.

This is a link to the recently filed Annual Report: form10k  I will always try to review the most recent information that falls under the headings of "long term debt" and "liquidity and capital resources.". (see pages 43-46; and pages 68-70). Some of the history of the 7.55% bond can be found at page 45 and at page 70.  It is listed among the long term debt obligations at page 68.  

My confirmation states that the current yield at my cost is 7.883% and the YTM is 8%.

4. Added 100 of the Stock CEF JSN at 12.51 Last Tuesday (see Disclaimer): I own 259 shares of JSN in a Roth IRA and added 100 in a taxable account last Tuesday.  I recently discussed this stock CEF and have nothing to add to that discussion:  Item # 3 Added 50 JSN at 12.23 in Roth IRA  As of 4/27/2011, the net asset value was $13.79 per share and the discount to net asset was -9.21% based on a closing price that day of $12.52. CEFA 

5. Bought 1 Travelport 11.875% Senior Sub Bond Maturing on 9/1/2016 at 92 Last Tuesday (Junk Bond Ladder Strategy) (see Disclaimer):  This brings me up to 3 Travelport bonds, which is precisely three more than the OG's comfort level.  The yield enticed the RB to lobby the OG, who is obviously suffering from some sort of old age issue, to buy one more.  It will not be long, LB added for good measure, before the OG embarrasses all staff members by leaving HQ without his pants.   It was noted by several staff members here at HQ that the OG's hand was trembling before hitting the buy button, and he was heard to mutter "I don't want to start eating at Mission's soup kitchen, they do not even have cheeseburgers".

Travelport has recently been sued by American Airlines.  Travelport characterizes that suit as meritless and states in its press release that AMR is using litigation as a bargaining tool in connection with a new contract. Travelport 


This is a link to the FINRA Information  on this bond.  It is of course rated DEEP into junk terriotory and would be characterized by any sensible person as very risky.   Please note that it is a "senior subordinated" bond.  LB calls that kind of bond a junior bond.  It is junior to both senior unsecured debt and senior secured debt.  You would be hard pressed to find a "senior subordinated" bond that is senior to any bond in the capital structure.  

This is a link to the prospectus:  www.sec.gov

This is a link to the recently filed Travelport 2010 Annual Report: 10-k  It would be nice to see the company turn a profit for a change (see page 39).  The company did report revenues of 2.29 billion dollars in 2010 and a net loss of 43 million, which RB characterizes as a vast improvement over the 871 million lost in 2009.  LB disclaims any connection with anything the OG and its Nit Wit ally are doing now in either the LT strategy or the Junk Bond Ladder Strategy.

My confirmation states that the current yield at my cost is 12.796% and the YTM is 13.813%.  It also shows that Moody's rates this bond at Caa1 and S & P has it at CCC.  The OG regards ratings that begin with the letter "C" to be equivalent to flashing red lights and blaring warning sirens.

6. JUNK BOND TABLE: This is a snapshot of my junk bond ladder table prepared by my broker.  For the first time, I was able to exclude the Prudential investment grade bond position in this table. The green in 2021 and 2022 represents $922 in interest payments for bonds maturing after 2022:

No comments:

Post a Comment