Friday, May 27, 2011

LIQUIDATED MDT AT 40.68/HNZ/Cicada Cookbook-Free of Charge/Added 1 Senior Sub 8.75% Cincinnati Bell Bond at 97.45 Maturing on 3/15/2018/Sold 2 Dean Foods 6.9% Senior Bonds at 98.25

In his, Randall Forsyth argues that the old adage, "sell in May and go away", may be appropriate advice now, as several technical factors point to a continued correction in stock prices.

The government did not revise its first estimate for 1st quarter GDP growth yesterday. News Release: Gross Domestic Product The estimate remains at a sluggish 1.8% increase. Corporate profit growth in the first quarter shrank at a .9% rate, much worse than the consensus estimate of a 2.3% increase. 

LB is becoming annoyed with the 17 year Cicadas that have recently emerged and have surrounded HQ in force. /Cicadapage. LB is always thinking about the angles, however, and it occurred to him that the Cicadas might be a food source.  Since they were in such abundance, and were free with a small degree of labor necessary to catch them, LB reasoned that this could cut down on the food bill here at HQ.  LB is always looking for ways to cut expenses here at HQ. 

LB discovered after much research that the female Cicada is a better source of "meat" than the male, and most cookbooks recommended that the wings and legs be removed prior to cooking. Apparently, it is optional whether the cook needs to remove those large eyes. And, some of them could be frozen for later use, throughout the winter months, and probably through 2012 as well according to some sources which may not be reliable. LB found a cookbook produced by the University of Maryland, with a large variety of tempting recipes, and has offered to provide  a copy to all of the people under HK's direction, recognizing that many such persons need the protein for their own good provided by this delicacy enjoyed worldwide:

One way to cut down on Medicare costs is to quit paying for expensive procedures that have no proven benefit. The primary beneficiary of such procedures are the physicians that perform them, the hospitals where they take place, the hospital support personnel, and the companies that provide the product which is not needed by the patient. These procedures are summarized in an opinion column published in yesterday's NYT. In short the government needs to learn how to say "no". An example is that 1/5th of all implantable cardiac defibrillators are placed in patients that will not benefit from them, at a cost of $50,000 to $100,000 per patient.    

1. Sold 209 shares of MDT at 40.68 on Wednesday (Large Cap Valuation Strategy)(see disclaimer):  I am going to re-deploy the cash proceeds gradually into large cap tech stocks.  The recent earnings report and guidance from MDT was sufficiently disappointing to me that I no longer wanted to own the shares.

This is a link to an article in Barrons, published after the MDT latest earnings report, acknowledging that the recent dip in the share price "could represent a buying opportunity", but it will take time for MDT's wounds to heal. Our LB says in response that there "could" be a lot of buying opportunities after a dip in share prices after the wounds heal, but LB's patience is not exactly an unlimited reservoir. And that reservoir has run dry for MDT.

I did net an okay profit on the shares, but will not start buying back any of the shares sold north of $36:

MDT 2011 Realized Gains Short Term +$521.06; LT +$362.47/Total= $883.53

Medtronic closed yesterday at $40.41.

2. Heinz (own Common Stock Dividend Growth): I bought shares in HNZ at $31.67 during the Dark Period. (March 11, 2009 Post). Based on the dividend in effect at that time, the yield at my cost was around 5.4%. Since then, Heinz has raised the dividend annually. The company announced yesterday another increase. The quarterly dividend rate was raised from 45 cents to 48 cents, or $1.92 annually. This increased rate would result in a yield of about 6% at my constant cost number. 

HNZ also announced results for its fiscal 4th quarter yesterday. Heinz Sales grew by 6% to $2.89 billion. E.P.S. grew by 15% to $.69 which included a 2 cent acquisition related charge. On a constant currency basis sales grew by 2.7% and E.P.S. by 11.7%. 

H.J. Heinz Co rose 43 cents in trading yesterday to close at $53.82. I noted when I bought shares at $31.97 that several brokerage firms had just downgraded the stock.

An article in yesterday argues that the shares have further to run. 

3. Sold 2 Dean Foods 6.9% Senior Bonds Maturing in 2017 at 98.25 (Junk Bond Ladder Strategy)(see Disclaimer): This transaction improved the yield of my junk bond basket some to 9.37% with an average maturity of 7.45 years. I bought the 2 bonds in two separate 1 bond lots, and made the most off the first lot. Bought 1 Dean Foods 6.9% Senior Bond at 89.48 Maturing 10/15/2017 (December 2010). I recently averaged up by buying 1 more which was also sold at a profit on Thursday. Bought  1 Senior 6.9% Dean Foods Bond at 93.5 Maturing 10/15/2017 (4/19/2011 Post)

I am keeping track of the realized gains from my junk bond ladder strategy in Item # 5 Realized Gains Junk Bond Ladder Strategy 

4. Added 1 Senior Sub Bond 8.75% Cincinnati Bell Maturing on 3/15/2018 at 97.45 (Junk Bond Ladder Strategy) (see Disclaimer):  This bond was bought in the regular IRA and is viewed by all staff members other than the NERD MACHINE as an inappropriate buy in that account. This brings me up to 4 Cincinnati Bell bonds, and 3 of them are this 2018 Senior Subordinated bond. The other two are owned in a taxable account, where a tax loss sell would have some value given the short term capital gains already racked up so far in 2011. Bought 1 Cincinnati Bell Bond Maturing 2018 at 94 (12/21/2010 Post) Bought 1 Cincinnati Bell Senior Bond Maturing in 2020 at 96.8 (12/9/2010 Post)

LB's only response was to say "stuff it" to other staff members. Headknocker wanted to remind the "Stock Stud" that there are now 3 separate junk bonds owned in the Regular IRA account, and possibly LB would want to consider "safer" investments for that account, otherwise we will need to hook the OG back up to an IV to dispense quarts of chill pills and Maalox into him. LB replied that due consideration will be given to our "Great Leaders" concerns.

This is a link to the Cincinnati Bell (CBB) profile page at Reuters.  

This is a link to the firm's last Quarterly Report for the Q/E 3/2011. CBB reported net income of $15.2 million or 8 cents per share on $311.4 billion in revenues. The long term term is too high in my opinion at $2.507 billion. The amounts and maturity schedules of that debt can be found at page 6. The 2018 is subordinate to other senior debt shown in the table. For my purposes, I would just refer to "senior subordinated" debt to be junior debt on CBB's balance sheet. It has a lower rating than the senior bonds. 

FINRA Information on 2018 Bond: FINRA
Prospectus: Final Prospectus Supplement

My confirmation states that my current yield is 8.905% at my total cost and the YTM is 9.096%. 


  1. picked up some NYB @ $16 is good yield.

  2. I bought 200 shares of NYB in 2009 and now own 100 shares of NYB with an average cost of $11.31 per share after taking some profits. (see snapshot in Item # 1 April 21, 2011 Post)

    This bank stock is part of the regional bank basket strategy.

    I am somewhat concerned about the slowdown in earnings growth as noted in that April post. But, I intend to hold the shares unless something adverse and material shakes me out. My dividend yield at my constant cost number is close to 9%.

  3. S&P report says interest margin should widen for NYB and improved rents in NYC but slowly, their 2 acquisitions via FDIC are on a gov't loss-sharing so they view as positive/ accretive deposits, paying $1.00 yr/ div since 2003 I didn't go back further, financials via etf basket could be dragging it down, paid dividend a couple weeks ago.