Thursday, April 12, 2012


A report for the General Accounting Office casts doubt on the claims made by N.J. Governor Christie (R) for his cancellation of a new train tunnel to relieve congestion on routes across the Hudson River. NYT

France Telecom will pay a €.8 per share dividend. share dividend I own 100 shares of FTE, recently bought back at $14.82 (3/15/12 Post). The stock has slid to below $14 since that purchase, as European markets have declined due to sovereign debt and recession concerns. Both Fidelity and Marketwatch have the ex dividend date as 6/5/12. Fidelity has the payment date as 7/5/12 in the amount of $1.0492 per share. The France Telecom website has the payment date as 6/13, but that may be for the ordinary shares traded in Paris.

Germany sold 10 year bonds yesterday at a record low yield of 1.77%.

A senior bond Macy's bond, originally issued by May Department Stores, is the only bond purchased in my junk bond ladder strategy that is now rated investment grade. S & P raised it to BBB from BBB- earlier this week. TEXT-S&P When I bought this bond in January 2011, it was rated BB+ by S & P. Bought 1 Macy's Bond Maturing in 2030 @ 99.5 The bond is not actively traded and that last trade was at 117+.

The recently bought CEF WIW was ex dividend yesterday for its monthly distribution.

I missed it, but the Global X SuperDividend ETF (SDIV) declared a $.213375 per share monthly dividend, going ex dividend on 4/4/12. The dividend will be paid on 4/12/12. This ETF will be paying a variable monthly dividend. Distributions

Yesterday, natural gas futures fell below $2 per million British thermal units, the lowest price in over a decade. Under those circumstances, it is not surprising to see a stock like Quicksilver Resources declining in price, falling to about where it was in 1992. Quicksilver Resources While KWK does have too much debt for a company so dependent on natural gas, it does have some emerging oil plays that will take time to develop.  Bought 50 KWK at $5.3-LT Category Anyone buying KWK's stock will have to be focused on the long term potential, meaning somewhere in the neighborhood of 3 to 5 years. There is an abundance of natural gas, and it will simply take a long time for new uses of that supply to soak it up. A primary driver of demand will be as a fuel to produce electricity, particularly as more coal fired generating stations are closed due to the EPA's new emissions standards. That movement may accelerate in the event Obama wins the upcoming election, whereas the new EPA standards of coal plants would likely be reversed entirely or severely curtailed in the event Romney wins. The GOP has made it clear that it wants to emasculate the EPA.

Synergy Resources reported earnings yesterday for the Q/E 2/2012. At the end of that quarter the company had 38.852 million in cash and cash equivalents. Operating income was reported at $2,875,295 on revenues of $6,118,805. GAAP net income was $6.118+ million or 12 cents per share, but that included a tax benefit of $3.241 million.  For that quarter, oil revenues were $5.153+ million and gas was at $1.065 million (page 21Form 10-Q)

1. Alcoa (AA) (own common): For the 1st quarter, Alcoa reported adjusted earnings of 10 cents per share on revenues of $6 billion.

The consensus was for a loss of 4 cents on revenues of $5.77 billion.

China is increasing aluminum production even as prices decrease. Bloomberg Morgan Stanley's analyst estimates that China's aluminum production will grow to 44% of global production from 33% in 2008.

AA rose 58 cents  or 6.62% in trading yesterday to close at $9.9, still below my recent add at $10.18. I mentioned in that post that any stockholder of AA will likely need a lot of patience. I would add to that observation the need for a longer term time horizon than normal among the trading class of investors.

A positive article appeared about Alcoa appeared last night in Barrons. 

2. SuperValu (SVU)(own 2 bonds: Junk Bond Ladder Basket Strategy and common as Lottery Ticket): For its 2012 4th fiscal quarter, SUPERVALU reported adjusted earnings of 38 cents per share on revenue of $8.231 billion. Same store sales fell 1.9%.

The consensus estimates were for 35 cents on $8.31 billion in revenues.

The GAAP loss for the quarter was $2 per share which included non-cash goodwill and intangible asset impairment charges of $2.32 per share and 6 cents per share relating to a workforce reduction.

Fiscal 2012 net cash flow from operating activities was reported at $1.1 billion.

The company estimates fiscal 2013 earnings at between $1.27 and $1.42. The Street consensus was for $1.19 Reuters. That estimate is on a GAAP basis. Same store sales, excluding fuel, is estimated to decline 1% to 2%. The company estimates debt reduction of approximately $400 to $450 million.

SuperValu's common shares rose 15.23% last Tuesday, the day of the earnings release, notwithstanding the big down day for the stock averages. I mentioned in Monday's post that there could be a pop with positive news given the Street's extreme negativity. Stocks, Bonds & Politics 4/9/12 Post

As noted in a WSJ article, the shares have been weak due to concerns about the firm heading toward insolvency. It is difficult to rationally justify that concern with a near or intermediate term perspective. Over the long term, the company has to address both declining same store sales and its mountain of debt.

After this earnings report, Barrons published a favorable article on SVU, noting that its days as a "value trap" may be over. A lot will depend, however, on the company actually hitting its estimates for the current fiscal year.

I have bought and sold several SVU bonds, either those originally issued by SVU or by Albertsons. Currently, I own just two long term bonds originally issued by Albertsons that are now SVU obligations. Bought 1 Senior 8.7% Albertsons' Bond Maturing 2030 at 85.75 (March 2011);  Bought 1 Albertsons 7.11% Senior Bond Maturing 7/22/27 at 73 (February 2012)

FINRA information links on long term Albertsons previously or currently owned are:

Albertsons 7.75% 2026 SOLD: 1 Albertsons 2026 at 88.3
Albertsons 7.11% 2027
Albertsons 7.45% 2029 Sold 1 Albertsons' 2029 Bond at 84.125
Albertsons 8.7% 2030

SVU closed at $5.13 last Friday and at $6.42 yesterday, a two day gain of over 25%. SVU Historical Prices

3. First Niagara (FNFG)(own: REGIONAL BANK BASKET STRATEGY): First Niagara announced earlier this week that it received the last regulatory approval necessary for it to close the acquisition of HSBC branches. This transaction will cost $1 billion dollars in cash. While the CEO of FNFG called this acquisition a "home run", the appropriate baseball analogy would be that FNFG hit itself with a baseball in the groin. First Niagara This acquisition caused a 50% reduction in the dividend and other negative consequences likely to restrain the growth of the dividend for years to come. I do not anticipate a dividend increase in 2012. First Niagara: Just Another Incompetent Bank Board of Directors First Niagara Dividend Slash I am using the reduced dividend to buy additional shares.

There is no reason for shareholders, who owned the stock prior to FNFG's announcement of this acquisition, to rejoice in its consummation.  For those buying the stock now after the destruction in shareholder value, it is conceivable that the total return for a long term hold will be satisfactory. The Jefferies analyst has FNFG as one of his top five long term holds, TheStreet, and that is not a spurious recommendation. His target is $12.

Citigroup started FNFG with a hold and a $10 price target. The stock was trading over $14 in the 2011 first quarter before the acquisition announcement, FNFG Interactive Chart. The stock is now trying to keep its head above $9.   

4. Bought 100 RRD at $11.60 Last Tuesday (see Disclaimer): This limit order was placed before the market started to tank last Tuesday.

R.R. Donnelley & Sons is a large commercial printer. It prefers to call itself "a global provider of integrated communications". About Us As noted in the preceding link, the company has more than 60,000 customers and 58,000 employees. For 2011, revenues were reported at $10.611 billion. Form 10-K

I referenced in a February 2012 post a positive article appearing in Barrons about RRD, where the author argued that the company can continue its generous dividend and stock purchases, while reducing its outstanding debt. I hope so. More than a year earlier, I noted that Barrons ran a favorable article when the price was higher. Stocks, Bonds & Politics 1/13/2011 Post 

The RR Donnelley Board recently declared its regular quarterly dividend of 26 cents per share. I have argued that this company needs to eliminate its dividend. Since it apparently intends to keep it, at least for now, I might as well receive it. At a total cost of $11.6, the current dividend yield is about 8.96%.

I have a strong tendency toward value investing, which also means that I am susceptible to falling into value traps on occasion. RRD is currently selling at a November 1987 price. RRD Interactive Chart Price to sales is .19.

The current consensus earnings estimate for 2012 is $1.81 per share and $1.88 in 2013. RRD Analyst Estimates  Based on the current calendar year estimate, the P/E would be 6.41 at the $11.6 price.

Morningstar has a four star rating on RRD with a $15 fair value estimate.

R.R. Donnelley & Sons rose 58 cents in trading yesterday to close at $12.05.

I am not likely to be a long term holder. Since last December, the chart shows some resistance close to $15. RRD Stock Chart 

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