Wednesday, February 29, 2012

Thompson Creek/Added 100 BCF at $12.46/SOLD 1 Nextel 7.375% Senior Bond at 98.75/Sold 300 of the BOND CEF MMT at $7.09

The Case-Shiller home price index for 20 metropolitan areas ended 2011 at 2003 price levels. The one year change in the national index was -4%. Only two cities showed a gain in home prices from November to December 2011. Among the leading decliners month-to-month were Chicago at -2%, Atlanta at -1.8%, and Detroit at -3.8%. For 2011, the leading percentage decliners included Atlanta at -12.8%, Chicago at -6.5%, Las Vegas at -8.8%, Seattle at -5.6%,  and San Diego at -5.4%.

It is almost impossible to believe, but New York allows local governments to borrow from the state pension plan to meet their pension obligations to that plan. The amount borrowed may hit $1 billion next year. NYT In a NYT editorial, it is mentioned that NYC's pension costs have risen to $8 billion in 2012, compared to $1.3 billion in 2002. Out of control and exceedingly irresponsible are the only adequate descriptions. Eventually, there will be major population shifts in response to tax hikes necessary to pay for overly generous benefits, making the problems more acute for states like NY, NJ, Illinois and even California.

Normally, I do not discuss earnings from a company whose stock is bought as part of my Lottery Ticket Basket Strategy, unless I also own the bond. The earnings report from Thompson Creek Metals will be an exception. The common fell yesterday by 15.3% to close at $7.36 based on the contents of TC's latest earnings release. Thompson Creek reports 2011 record molybdenum sales of 40.1 million pounds and revenue of $669.1 million It was not the lack of earnings for the 4th quarter that caused the air pocket in my opinion. It is generally known that molybdenum prices are low, as noted in my earlier commentary. The problem is the projected costs associated with Thompson's Mt. Milligan project which will expand the firm's production into copper and gold. The new cap ex estimate for this project is $1.4 to $1.5 billion, up from the prior estimate of $1.265 billion. The escalating costs of this project eats into its value, and caused two firms to downgrade the stock yesterday.

I mentioned in my earlier post that I was not comfortable with the bullish case for TC given the escalating cost numbers and other unknown inputs such as the price of copper when Thompson starts production and thereafter. Consequently, I limited my purchase to just a LT amount. Bought 30 shares of TC at 8.65-LT Category I indicated then that a significant recovery in Molybdenum prices, which is being mined now, would cause me to revisit this company and possibly add 70 more shares to my position. I do not see such a recovery on the horizon.

Thompson Creek also filed its 2011 Annual Report with the SEC. The Mt. Milligan project is discussed starting at page 21 and again at page 69.

1. Added 100 of the Stock CEF BCF at $12.46 Last Thursday-Taxable Account (see Disclaimer):  This stock CEF was selling at a modest discount to its net asset value when I purchase more shares last Thursday.  The discount was 3.61% based on Thursday's closing price of $12.49 and a net asset value per share of $13.03. According to Morningstar, which rates the fund at a lowly 2 stars, the average discount of the prior three years has been 3.72%.

The BlackRock Real Asset Equity Trust (BCF) invests in natural resource and material companies. The fund does use a buy-write option strategy.

Sponsor's website: BCF : Fund Profile : Products : Individual Investors : BlackRock

This brings me up to 534.275 BCF shares in the taxable account, where I am at break-even on the shares. I have not been reinvesting the quarterly dividend, currently at 27.18 cents per share. BCF Distributions My highest cost shares were bought first, back in 2008, and I plan to dispose of them when and if the price crosses back above $14. Provided I am able to do so, my average cost per share would be substantially reduced. On a total return basis, I am ahead by the amount of dividends received since 2008, which is okay considering the dividend yield and the unfavorable lot purchases in 2008, a few months before the Lehman failure.  I have bought shares as low as $6.6 (February 2009).  

I have done better in the ROTH IRA where I own 152 shares and have an unrealized profit of over $500 on the shares. The cash dividend adds another 12% or so annually to the total return given my average total cost per share of $8.86:


BlackRock Real Asset Equity Trust closed at $12.61 yesterday.  The net asset value per share as of 2/28/12 was $13.08.

2. MetroPCS (own 1 bond: FINRA):  The MetroPCS bond has done well since I bought it. Bought 1 MetroPCS 7.875% Senior Bond Maturing 9/1/2018 at 98

PCS reported a 4th quarter adjusted E.P.S. of 25 cents per share, six cents better than the consensus estimate. SEC Filed Press Release Revenues increased 16% year over year to $1.134 billion. Adjusted EBITDA increased 15% to $362 million.

The common shares, PCS, rose 13.81% last Thursday in response to this report.

3. Select Medical (own 1 bond: FINRA):  SEM reported 4th quarter net income of $36.859 million or 25 cents per share, six cents better than the consensus estimate, on $718.441 million in revenues. SEC Filed Press Release The company reaffirmed its guidance for 2012 of fully diluted earnings per share between $.86 to $.94.

The common shares, SEM, are under consideration for a possible LT purchase.

4. Sold 1 Nextel 7.375% Senior Bond Maturing 8/1/2015 at 98.75 Last Friday (Junk Bond Ladder Strategy)(see Disclaimer): This was one of my lower yielding bonds. I sold the position near break-even on the bond. Bought 1 Nextel 7.375% Senior Bond Maturing on 8/1/2015 at 98.25 (August 2011 Post)

I was not pleased with Sprint's last earnings report. Sprint 4Q Earnings Release Nextel was of course acquired by Sprint.

Sprint did manage to sell recently $2 billion in notes: Pricing Press Release (2-27-12)

5. Sold 300 of the BOND CEF MMT at $7.092 Last Friday (see Disclaimer): This is my second pare of this bond CEF. I still own 400 shares in the ROTH IRA. This bond CEF has recently narrowed its discount to net asset value to 3.65% as of 2/24/12. I purchased those shares at $6.95 (10/4/2010 Post). I was content to make a few bucks on the shares plus 17 monthly dividend payments.

2012 MMT 300 Shares +$26.66

No comments:

Post a Comment