Monday, April 2, 2012

AGY Holdings/Forest City/Sold 100 NSSC at $3.1-LT/Bought 300 SNMX at $2.73

The House of Representatives passed the Ryan budget plan last week, with no Democrat votes.  According to the NYT, the plan would cut $205 billion from Medicare, and spending for other health programs would be reduced by $770 billion. Welfare, food stamps, agricultural subsidies and other entitlement programs would be axed by $2 trillion. Medicare would be transformed into a private insurance plan with the option of buying into the existing fee for service program. There would be a reduction in the top tax rate to 25% for corporations and individuals.  CNN  An analysis by the Tax Policy estimates that those making a million or more per year will enjoy an average tax cut of $265,000 by 2016, whereas 50% of those making $20,000 to $30,000 will not have any tax cut under the GOP plan.

An analysis by the Center on Budget and Policy Priorities states that 62% of the GOP's budget cuts would come from programs for the poor. CNN Romney, the likely GOP nominee for President, said recently that he was not concerned about the poor. It will be interesting to see whether Americans will want to go down this path in November.

I would imagine that many well-off individuals are already paying over 50% of their income in taxes when everything is added up. The Democrats will usually omit references to the totality of the tax obligations, including state and local taxes on income, property, and sales, when discussing increases in the federal marginal tax rate. Those politicians have become more adept, however, in raising taxes on the wealthy without increasing their marginal rates, as witnessed by the tax increases included in Obamacare. Kiplinger

The Lottery Ticket selection Forest City Enterprises Inc. Cl A, (FCE.A) has done well since my recent purchase at $11.58 earlier this year, rising 4.75% last Friday to close at $15.66. The company reported earnings for the period ending 1/31/12. SEC Filed Press Release and SEC Filed Supplemental

An article in The Economist claims that Argentina's government is engaged in deception when reporting CPI numbers. As a result,  the Economist will no longer include those numbers in its indicators page. As I mentioned earlier, the problem with Argentina is its government. Item # 3 BOUGHT 40 GGAL at $6.72-LT Category An opinion column in the WSJ highlights other recent issues involving bad government politicies in that country.

1. Sold 100 NSSC at $3.10 Last Wednesday (Lottery Ticket Basket Strategy)(see Disclaimer): This security was sold by the LB to bring the Lottery Ticket Basket Strategy back into compliance with the rules governing this strategy. The RB who runs this strategy had temporarily exceeded the permissible total dollar exposure which is limited to the amount of realized gains. 

The shares sold last Wednesday were bought at $2.56.

2012 NSSC 100 Shares
This marks the third round trip for this stock under the LT strategy. The other transactions are summarized in these posts: Buy 100 NSSC at $1.02  Sold LT NSSC at $1.96 Bought 100 NSSC at $1.8 Added 70 NSSC as LT at 2.25 Sold 170 NSSC at 2.93

While this company may have some potential, I would question whether recent earnings reports support the current market price. For the 4th quarter of 2011, the company reported a 2 cent per share profit. SEC Filed Press Release

Headknocker wanted to advise all staff members about the importance of strict compliance with all of LB's 2,649,235 rules, particularly the one setting limits on Lottery Ticket purchases.

2. Bought 300 SNMX at $2.73 Last Thursday (Not a Lottery Ticket LT Category)(See Disclaimer): The current reigning cabal between the Old Geezer and Right Brain do not remember all of LB's stinking rules and could care less really.

Besides, the purchase of 300 shares was not a violation of the LT rules, even though more than $300 was used, because "more than $300 was used so the purchase could not be a LT selection", the RB reasoned. OG had trouble following the RB's "reasoning", thinking that it might be a tautology in logic theory, but was inclined to go along with the RB's "logic" since it sounded better than "screw those stinking LB rules".

LB wanted to know whether Headknocker was going to allow the Nit Wits to get away with such a flagrant violation of the LT Rules.

Senomyx is an unprofitable micro cap company involved in the discovery and development of novel flavor ingredients. Senomyx website.

The company released on 3/1/12 its 4th quarter results and announced that the first major branded product utilizing its S6973 Sucrose Enhancer was launched in the 4Q2011. SEC Filed Press Release This product reportedly allows manufacturers to "substantially reduce the sucrose in their products while maintaining the taste experience". And, its use in that fashion apparently reduces calories.

For 2012, the company is forecasting a diluted loss per share of $.18 to $.25 on revenues of $30 to $34 million and expects to end the year with $40 million in cash. The company has no debt. As of 1/1/2012, the cash per share was 1.34, SNMX Key Statistics.

2011 Annual Report

Three of the largest owners of this stock are the T.Rowe Price New Horizons Fund, the T.Rowe Price Small Cap Stock Fund and Adams Express which I find odd. SNMX Major Holders

The stock has not performed well and is trading below its moving averages. Between 2005-2006, it traded above $15 per share and hit $7.6 late in 2010. It has been on a  downhill slide since January 2011. SNMX Interactive Chart I would classify it in the extreme high risk/high reward potential category.

Senomyx closed last Friday at $2.74.

3. AGY Holdings (own 1 senior second lien note):  As previously noted when discussing prior earnings reports released by AGY Holdings, this company is losing money with no end in sight. I have no confidence in recovering my current unrealized loss in my one bond position.

After the close last Friday, AGY filed its 2011 Annual Report which does not contain any positive news of a material nature. Form 10-K Net sales for 2011 were $183.7 million, flat with 2010. The net loss attributable to AGY Holdings was $54.523 million. (page 16, 22)

The company gave several warnings in this report about its debt (e.g. page 13 et seq)

The only positive is that the amount of the first lien note was $25 million as of 12/31/2011 (page F-17), compared to the $172 million principal amount of the 2014 notes. This means that the second lien note is likely to be worth some amount north of zero in a liquidation and/or bankruptcy. The last trades were indicative of investor pessimism about recovery. FINRA

In addition to horrific operating results since I purchased this bond, the rating agencies have downgraded the debt. S & P currently has it rated CC which is a clear signal to stay away.

The company had to borrow some money on its credit facility to make the last interest payment.  See Snapshot Item # 4 AGY Holdings

AGY HOLDING 2014 BOND PLUNGE IN PRICE (September 2011 Post)
Item # 3 AGY (August 2011 Post)
Item # 4 Earnings: AGY Holdings (November 2011 Post)
Personal Risk Ratings For Junk Bonds: currently rated at 10+, the highest risk assignment

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