Wednesday, March 14, 2012

Junk Bond Ladder Table/LT Table/CEF Portfolio Table as of 3-12-12/Sold 100 HUWHY at $20.72/Sold 1 Wendys 7% Senior Bond Maturing 2025 at 89.25/Bought 40 RSH at $6.89-LT CATEGORY/TICC

The VIX moved below 15 yesterday, falling .91 or 5.82% to close at 14.73. Continuous movement below 15 would be the most bullish signal in the Vix Asset Allocation Model. I would want to see 3 months of continuous movement below 20, permitting only minor and temporary movement above 20, before declaring the onset of a Stable Vix Pattern. VIX Historical Prices

As previously discussed, the VIX has been in an Unstable VIX Pattern since the Trigger event in August 2007. The prior Unstable VIX Pattern period lasted from October 1997 to March 2004. Mark Hulbert and the Use of the VIX as a Timing Model

This is a link to the historical VIX prices leading up to the Stable VIX Pattern Formation in March 2004 which lasted until August 2007.

This is a link to the  historical VIX prices leading up the the Stable VIX Pattern Formation in 1991 which lasted until October 1997.

Four large financial institutions did not pass the Fed's stress test. One of them was Citigroup. While I do not own the common shares, I do own several unsecured senior notes issued by Citigroup Funding and guaranteed by Citigroup, all of which mature in 2014. I am not concerned about Citigroup surviving to pay off those notes at the present time. Citi maintains that it did not "fail" the stress test.  WSJ

NYT article in its Reckoning Series from 2008 provided some details on how the Masters of Disaster at Citi sank that bank. There is no doubt in my mind that Citigroup would have failed without massive government assistance in 2008-2009.

Ally Financial also failed the stress test, and I own two senior GMAC senior unsecured notes. I recently sold one GMAC note.

I currently have no positions in another bank that failed the tests, SunTrust (STI). This is a link to STI's 2011 Annual Report and to SunTrust's press release responding to the stress test results.

Lastly, MetLife did not pass using a different standard of total capital ratio. My only position in MET is in METPRA, and I am not concerned about it at the present time. I have been thinking of at least harvesting the profit of the 100 shares held in a taxable account where I have over a 100% unrealized  long term capital gain:

MetLife issued a press release after the close yesterday complaining about the stress test standards applied to it.   

More information about the institutions that failed the tests can be found at BloombergReutersMarketWatch, the WSJ and the NYT.

Several banks that passed the stress test raised their dividends and announced share buybacks. 

Wells Fargo & Company increased its first quarter dividend from 12 to 22 cents by declaring an additional 10 cent per share dividend.

JPMorgan Chase increased its quarterly dividend to 30 cents per share, up five cents, and authorized a 15 billion dollar share repurchase program.

U.S. Bancorp increased its quarterly dividend by 56% to $.195 per share and authorized a new 100 million share repurchase program.

KeyCorp, owned, announced that it would evaluate a dividend increase, and its Board authorized the purchase of up to $344 million in stock. An analyst report from Guggenheim Securities, summarized at Barrons, mentions that KEY could be a buyout target for FifthThird.

While the hapless Bank of America passed, it did not announce an increase in its 1 cent per share quarterly dividend.

This is a link to the FED's report.

1. Sold 100 HUWHY at $20.72 Last Monday (see Disclaimer): This stock was sold simply to harvest a good percentage gain. The shares were bought in last January 2012 at $17.84. I had not been planning to sell the shares until I saw a 4.5% pop in the share price last Monday.

2012 HUWHY 100 Shares + $272.06
2. TICC Capital (TICC)(own):  TICC, a BDC, reported net investment income for the 4th quarter of 25 cent  per share. SEC Filed Press Release There were no loans on non-accrual basis at the end of the 4th quarter. As of 12/31/2011, net asset value per share was $9.3. The Board approved a 27 cent per share first quarter dividend.

TICC Capital shares rose 20 cents in trading yesterday to close at $10.55. The next ex dividend date is 3/19/12 according to Marketwatch. 

3. BOUGHT 40 RSH at $6.89 Last Monday-LT Category (Lottery Ticket Basket Strategy)(see Disclaimer): RSH common shares are now near prices prevailing in 1982 which is a good argument against being a long term investor in that company. After trading around $16 per share last May, the shares have been on a downtrend and spiked down in late January after the company warned about 4th quarter results. RSH Interactive Chart The stock plunged 30% on 1/31/12 after RSH announced that 4th quarter earnings would be between 11 to 13 cents per share versus the expectation of 36 cents. SEC Filed Press Release The poor quarter was due "in large part" to underperformance in the Sprint postpaid wireless business. 

Later in February, RSH announced  net income of $11.9 million or 12 cents per share for the 2011 4th quarter, down from 47 cents from continuing operations for the 2010 4th quarter. The company ended the quarter with $591.7 million in cash and cash equivalents. Long term debt stood at $670.6 million. Of that debt, $325 is a 6.75% senior note maturing in 2019 (FINRA), and another $375 is a 2.5% convertible note maturing on 8/1/2013. Annual Report Starting at page 50 The convertible is a busted convertible. RSH will most likely have to pay off the note when it matures just like any plain vanilla senior bond. The company currently has a $450 credit facility maturing in 2016. 

For 2011, the company had net income of $67.1 million from continuing operations or 65 cents per share on revenues of $4.378 billion. 

This article at the Motley Fool contains information about Radioshack's margins on the IPhone and Android devices. RSH's margin on IPhone sales are substantially lower than on the android devices which is a problem given the IPhone's popularity. 

Another problem in my opinion is the prevalence of stand alone phone company stores. There are at least five Verizon, AT & T and Sprint stores closer to HQ than a RSH store. 

The problems dictate a LT purchase rather than a serious position. With a LT purchase, I can wait forever, if need be, for RSH to improve its operations. If a modest turnaround  can be accomplished at anytime within the next five years, so that the price returns just to the May 2011 level, then this LT will be successful, but it does not matter given the small investment one way or the other. I discuss the debt situation since RSH appears to have enough cushion to give it time to improve earnings. 

RSH is paying a dividend. RadioShack Corporation-Dividends The company will pay a $.125 per share dividend later this month. In my opinion, the company paid out too much in dividends in starting in 2002 and way too much in 2011 when the payout was 50 cents per share.  

RadioShack shares rose 7 cents in trading yesterday to close at $6.93.

Lottery Ticket Basket Table as of 3/13/2012

Lottery Ticket Basket Strategy Table
4. Sold 1 Wendys International 7% Senior Bond Maturing in 2025 at 89.25 (Junk Bond Ladder Basket Strategy)(see Disclaimer): This bond was sold near break-even after collecting slightly more than one year of interest. Bought 1 Wendy's Int Senior Bond Maturing 2025 at 87.5 (2/22/11 Post)

5. Junk Bond Ladder Table: I have been selling some of the lower yielding bonds in this basket. I have reduced my exposure to this basket strategy by about $9,000 since mid-February 2012. 

5. CEF Table As of 3/12/2012: I sold two of the minor positions yesterday and bought a new one, and those changes are not yet reflected in the table. The purpose of this portfolio is achieve a stream of income with most of CEFs paying either monthly or quarterly dividends and to achieve a balanced world portfolio.

Several CEFs were ex dividend yesterday for their monthly dividends (BTZ, PSY, WIW) and their quarterly dividends (BCF, JSN, JQC, JLA)

GDV, GGN and GNP are ex dividend today for their monthly distributions. Several of the other CEFs, including ERC, FAM, CSQ, IGD, went ex dividend for their monthly distributions earlier this month, while GDO, EOI, IGR, SGL and ETO are about to go ex dividend for their monthly dividends.

The regional bank basket was up 2.53% in trading yesterday. 

No comments:

Post a Comment