Wednesday, February 8, 2012

Bought 50 EXC at $39.66/HCA CCNE

Fitch revised the Mertior's (MTOR) credit outlook to positive. TEXT I own two ArvinMeritor bonds. FINRA Links to Bonds in Junk Bond Ladder Strategy Meritor reported 4th quarter earnings last week. SEC Filed Press Release

For investors interested in Exide, a recent LT purchase, the author of this article at Seeking Alpha appears to be knowledgeable about battery companies and emerging technologies in this business sector. Bought 70 XIDE as LT at $2.75 A more important position for me is Exide's senior secured bond. Bought 2 Exide 8.625% Senior Secured Bonds Maturing 2/1/2018 at 81.375 Exide is scheduled to report earnings after the market close on Thursday. It will be important for the earnings and forecast to validate the stock's recent spurt. Exide Technologies rose 8.22% yesterday to close at $4.08.

Prospect Capital declared its monthly dividends for March, April and May. Since this BDC started paying monthly dividends, there has been a minuscule increase in the amount each month. Prospect Capital Declares Its 43rd, 44th, and 45th Consecutive Cash Distributions to Shareholders

A positive article on Forest City, a recent LT purchase, can be found at

A prominent deep thinking member of the Tennessee GOP, State Senator Stacy Campfield, has discovered the origins of AIDS, not as a result of his diligent review of the scientific literature, but through the more common method practiced by members of his tribe known here at HQ simply as reality creation. Knoxville Republican says AIDS came from man having sex with a monkey then with other men

1. Bought 50 Exelon (EXC) at $39.66 Last Friday (see Disclaimer): I sold my position in this large electric utility company last year.  SOLD: 100 EXC @ 44.67 (7/27/11 Post);  Sold Remaining Shares of EXC at $44.44 (9/22/2011 Post) 

2011 Exelon (EXC) Realized Gain $259.13
I  have also included the FirstEnergy trade in the preceding snapshot.

One reason for buying this stock is the dividend yield. The current quarterly rate is $.525, which results in an approximate yield of 5.29% at a total cost of $39.66 per share. That yield only sounds mildly appealing to me given the expected duration of the Fed's Jihad Against the Saving Class, now anticipated to last another three years. Under those circumstances, a 5%+ qualified dividend certainly looks more appealing than zero per cent paid by a money market account. The next ex dividend date is 2/13/12. EXC Quote

Another reason for buying the stock back is its recent decline. On 11/8/11, the stock closed at $45.24. A waterfall decline started in earnest on 12/29/11, when the stock closed at $43.71, and lasted for about three weeks.

The remaining reason for buying some shares back is that these shares have turnaround potential in my opinion. The share price closed at $89.96 on 6/30/2008. I did not own the shares until that price was more than cut in half. The market's enthusiasm in 2008 was based on the same factor generating the angst in 2012-Excelon's merchant power business. Earnings were increasing at a rapid clip in 2007-2008 due to the contributions from that business. In 2006, the company reported an E.P.S. of $2.35, and then $4.05 in 2008. Last year, the GAAP E.P.S. number was $3.75, down from $3.87 in 2010. So, the stock was selling at over 20 times earnings in 2008 in what turned out to be peak earnings for Exelon's merchant power business. The adjusted non-GAAP number for 2011 was $4.16.

The stock reacted negatively to the last earnings report. SEC Filed Press release Consolidated earnings reported by Exelon Generation declined 33% to $.54. The regulated utilities, ComEd and Peco, are doing okay, reporting earnings for the 4th quarter of 29 cents per share on a combined basis. Those companies serve about 5.4 million customers. The share price of Exelon will be more dependent on the results reported by Exelon Generation.

Exelon Generation owns 11 nuclear plants that produce about 4% of the electricity consumed in the U.S. Those units operated at a capacity factor of 93.3% for 2011. Merchant power prices have suffered due to the recession, which impacts demand. Low natural gas prices, an alternative fuel, would also have a negative impact. Judging from the current market price of EXC shares, investors apparently do not see anything resembling earnings growth from Exelon Generation for at least a couple of years.

Exelon is in the process of acquiring Constellation Energy Group (CEG). If that acquisition closes after receiving all regulatory approvals, it will add Baltimore Gas & Electric to EXC's regulated utilities, plus the generation fleet.

Exelon profile page at Reuters
Exelon key developments page at Reuters
Link to Last Earnings Call Transcript at Seeking Alpha

I may average down in the event the share price falls below $39.

Exelon closed at $40.03 yesterday. 

2. HCA (own senior bonds only): HCA reported net income of $1.935 billion or $4.25 per share, which included extraordinary items of $3.41 per share. Revenues increased 8.5% to $7.769 billion. Cash flow from operations was reported at $1.387 billion. Total debt stood at $27.052 billion. HCA Reports Fourth Quarter 2011 The company declared a special cash dividend of $2 per share, which seems inappropriate to me given the debt load.  

3. CNB Financial (CCNE)(own: REGIONAL BANK BASKET STRATEGY): CCNE reported 4th quarter net income of $3.9 million or 31 cents per share, up from 23 cents in the 2010 4th quarter.  SEC Filed Press Release As of 12/31/2011, the total risk based capital ratio was 15.14%; the tangible equity to tangible assets ratio was 7.61%; non-performing assets to total loans + OREO stood at 2.06%; and the net interest margin was at 3.52%. Bought 50 CCNE at $11.06

CNB Financial closed at $16.37 yesterday.  According to Marketwatch, the dividend yield at that price is 4.03%.  The current quarterly dividend rate is 16.5 cents per share. At a total cost of $11.06, my purchase price, the dividend yield is around 5.97%.  While this bank did not cut its dividend during the Near Depression period, which I view as important, it has kept the same quarterly dividend rate since November 2008. CNB Bank - Stock Splits/Dividends

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