Thursday, February 23, 2012

PLXT PVR PERM/Sold 1 GMAC 6.25% Maturing 4/15/2019 at 92.312/Bought 50 PEP at $62.69-ROTH IRA

I noticed a number of  SEC Form 13G, and one 13D, filings for PLX Technology (PLXT), a LT, so I examined all of them. All of the information is for the period ending 12/31/2011. Artis Capital Management owns 10.3%, 13G; Blackrock owns 6.01%, 13G; Balch Hill Capital owns 9.7%, 13D., and Gagnon Securities at 4.8%. The 13D filing is unusual so I took a closer look. This is what I found to be interesting, keeping in mind Balch Hill's ownership share:

Bought 70 PLXT at $3.37-a LT (Feb. 2011). I do not profess to understand PLXT's products.

In an argument that provoked cheers among the True Believers, Romeny said that Obama has "fought against religion" and has endeavored to substitute a "secular" agenda for one based in faith. I am curious about that argument. Was the Iraq War grounded in "faith"? Preacher Santorum no doubt believes so. Were the Bush tax cuts that benefit primarily the rich part of a "secular" agenda or one based in faith? Is the agenda to dismantle the EPA and to permit more pollution a religious tenet? I could ask at least 100 similar questions.  

I do not recall Reagan pandering to religious zealots. Maureen Dowd is now calling Preacher Rick by a pet name, Mullah Rick. Religious Fanaticism

I have frequently discussed my stake in the Permanent Portfolio, a mutual fund that has an unusual asset allocation that remains relatively static over time.  The allocation includes gold and silver bullion (close to 25%), Swiss government bonds (close to 10%), natural resource and REIT stocks (close to 15%), treasury notes and strips (around 30%), short term investment grade corporate bonds (close to 6%), and growth stocks (close to 15%). SEC Filed Shareholder Report The fund fell only 8.36% in 2008. PRPFX returns  Of course, gold is no longer selling below $300 an ounce, on its way to $1700+, either.

I mention the Permanent Portfolio mutual fund now since there is a recently launched ETF originating from a different sponsor. Global X Permanent ETF (PERM) This idea apparently has its genesis in the theories of Harry Browne who argued that the best portfolio is a static one, evenly divided among four asset categories: Stocks, U.S. Treasury Bonds (Long Term), U.S. Treasury Bonds (Short Term) and Gold & Silver.  TheStreet So that is what this ETF will try to replicate. Fact_Sheet.pdf

{see: Fail-Safe Investing: Lifelong Financial Security in 30 Minutes: Harry Browne: Books}

The constituent elements can change but the stock allocation is in large cap U.S. equities (8.97%). small cap equities (2.98%), REITs (5.02%), natural resource equities (4.96%), and international equities (3.01%), as of 1/31/2012. I would emphasize that three of those asset categories have already undergone large up moves. Short term treasuries would be the sole exception. They would start to contribute something worthwhile in a rising interest rate environment.

It would be possible to replicate most of PERM's portfolio with low cost ETFs. For bullion, the gold and silver bullion ETFs, GLD and SLV, could be used for example. SHY and TLT would be low cost ETFs for short and long term treasury securities. iShares Barclays 1-3 Year Treasury Bond Fund (SHY): Overview - iShares iShares Barclays 20+ Year Treasury Bond Fund (TLT): Overview - iShares Both of those ETFs have .15% expense ratios. The iShares Silver Trust (SLV) has a .5% expense ratio. A low cost large cap ETF for U.S. stocks is the  Vanguard  Large-Cap ETF with a .12% expense ratio. The Vanguard Small-Cap ETF has a .17% expense ratio. For international stocks, I recently bought the Vanguard - FTSE All-World ex-US ETF which has a .22% expense ratio. The Global X Permanent ETF closed at $25.24 yesterday on light volume of just 6,135 shares. I did buy a 100 in a trust account at $25.11 yesterday, where I am the trustee.

{see also discussion of PERM at}

I am content to hold the Permanent Portfolio mutual fund, as a long term hold, but I may decide to trade the ETF PERM in one of my personal accounts.

1. Sold 1 GMAC 6.25% Senior Bond Maturing 4/15/2019 at 92.312 Last Friday (Junk Bond Ladder Strategy)(see Disclaimer): I have been selling my lower yielding junk bonds near or above par value. While this bond was not yet near its par value, I elected to eliminate it due to its lower than average coupon and 2019 maturity date. I am substituting bonds with higher current yields. This bond was sold at break-even. Bought 1 GMAC 6.25% Bond Maturing 5/15/2019 at 92.495 (April 2011).

I still own two GMAC bonds with higher coupons and shorter maturities. 

2. Bought 50 PEP at $62.69 Last Friday-ROTH IRA (Common Stock Dividend Growth Strategy)(see Disclaimer): Some of my earliest memories involve sampling Pepsi and Coca Cola.  I have always preferred Coke over Pepsi, and that choice was made after the first taste. It must be biological in origin. I will buy several cartons when the price drops to 3 for $11 which invariably happens at the local Krogers when Pepsi lowers its price.

Other people that I know favor Pepsi and have done so their entire life. There is no way that Pepsi could convert me through any advertising campaign. I doubt that I would switch from my two Coke's per day even if Pepsi gave me their product for free. There may be people who switch back and forth, but I do no know of any.  Some Coke drinkers will drink Pepsi only when Pepsi is the only offering at a fast food restaurant. So there is only so much that can be done with advertising for those who have a taste preference.

The OG does consume  more than a bag per week of Pepsi Frito-Lay products. The exact amount is a secret.  Pepsi controls about 64% of the U.S. salty snack market.

The Pepsi CEO has emphasized recently healthy drinks, and many investors claim that she has neglected Pepsi's main brand. If the OG wants to drink something healthy, he prefers water which is close to being free. The healthy drink push may turn out to be the right strategy long term.

Over the past year or so, Pepsi has lost market share in the U.S. to Coca Cola. I believe that Pepsi's flagship cola brand fell to the number 3 market share position after being displaced by Diet Coke. Fortune That had to hurt. I am curious though why Pepsi was so slow to respond.

Investors did not care for Pepsi's 2012 E.P.S. forecast, as the shares fell from the $66.74 close on 2/8/12,  PEP Historical Prices When releasing its 4th quarter results, the company indicated that it expected a 5% decrease in adjusted E.P.S. for 2012. SEC Filed Press Release issued by PepsiCo, Inc, dated February 9, 2012 The company is increasing its global advertising budget by $500-$600 million in 2012 "with particular focus on North America". Maybe that will help. But, why was it not done earlier?

In the 4th quarter of 2011, Pepsico reported that core E.P.S. increased 9 per cent to $1.15 and full year core E.P.S. grew 7% to $4.4. SEC Filed Press Release issued by PepsiCo, Inc, dated February 9, 2012 Worldwide snack volume increased by 8% in the quarter and for 2011 (2.5% on an organic basis). Full year cash flow from operating activities was $8.9 billion.

Pepsico plans to increase its quarterly dividend by 4% in June. The company has a long history of raising its dividend. PepsiCo Dividend Information | The stock does qualify for purchase under my dividend growth strategy. Item # 6 Common Stock Dividend Growth vs. Long Term Investment Grade Bonds The decline in price just made the stock more appealing as an entry point for a long term hold. I will average down when and if the price falls below $60 by purchasing another 50 shares in the same ROTH IRA account. I will reinvest the dividends.

PepsiCo closed at $63.1 yesterday.

3. Penn Virginia Resources (own 1 bond: FINRA):  The PVR bond is one of my higher quality junk bonds, and has at least gone up in value since my purchase. My main reservation about the bond is that the company is a publicly traded partnership that pays out most of its distributable income to the common unitholders. Bought 1 Penn Virginia Resources 8.25% Senior Bond Maturing 4/15/2018 at 98

PVR Partners (PVR) reported 2011 distributable cash flow, after a provision for replacement capital expenditures, of $143.8 million for 2011 and $36.7 million for the 4th quarter.

Penn Virginia Resource Partners L.P (PVR) rose 58 cents yesterday to close at $24.73.  

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