Friday, May 11, 2012

JPM Masters of Disaster/Cisco and Intel on Enterprise Spending/Sold 40 of the LT EXAR at $8.08/JZV/Earnings: AEG, SEM, ASH, CBB, First Data, Ally Financial, TICC/

The Chinese April import and export data was significantly below expectations. MarketWatch Possibly, more attention needs to be paid to this news.

The Masters of Disasters are up to their old tricks- incinerating money by the truckloads. After the closing bell yesterday, J.P. Morgan disclosed that a trading group made "egregious mistakes" that will result in the "corporate group" losing $800 million in the second quarter which could "easily get worse".  WSJ Those losses are in a "synthetic credit portfolio" that has proven to be more volatile, riskier, and less effective as an economic hedge than originally envisioned by the Masters of Disaster. While Dimon refers to the foregoing as a "hedge" gone wrong, it sounds more like a bad bet from JPM's proprietary trading. Either way, it shows how quickly things can go south for these large banking institutions. {As I understand, the bank has taken $2 billion in losses in its synthetic credit position which have been offset by $1 billion in trading gains, WSJ.}

The foregoing development was disclosed in a SEC filing yesterday:


CORP Q1 2012 at page 9. This announcement will likely send large financial stocks down today. Both JPM and BAC are components of the DJIA.

Unlike Cisco, Intel has not seen any change in Europe on the enterprise side. According to Intel's CEO, the quarter is playing out as expected. Enterprise spending is good, not fantastic. Reuters During the earnings conference call, Chambers said that "we sure don't like Enterprise IT spending". Transcript (last sentence in first comment by Chambers in Q & A segment)

The Trust Certificate JZV was ex interest for its semi-annual distribution yesterday. The underlying security is a senior CNA Financial bond maturing in 2023. The coupon is 7% on a $25 par value. I own 150 shares, including 50 shares bought during the Near Depression period for less than $10. Buy of 50 JZV at $9.93 March 2009 My unrealized gain on the shares is close to $1000. Trust Certificates: New Gateway Post

The Treasury sold 30 year bonds yesterday to yield 3.09%.

Aegon, a LT selection, reported a first quarter profit of €512 million, beating the forecast of €247 million. Form 6-KMarketWatch I have sold out of my Aegon Hybrids. If I still owned one or more of them, this kind of earnings report would make me more comfortable from a credit risk viewpoint.

SeekingAlpha has published a transcript of Senomyx's presentation at the Deutsche Bank 37th Annual Healthcare Conference.

1. Select Medical (own common as part of the Lottery Ticket Basket Strategy and 1 2015 senior subordinated bond as part of the Junk Bond Ladder Basket Strategy):

Select Medical Holdings reported net income of $91.6 million for the first quarter, or 29 cents per share, beating the consensus estimate by 4 cents. Revenues rose 7.3% year-over-year to $744 million. SEM expects 2012 E.P.S. to be in the range of $.86 to $.94.  

The common shares, SEM, rose 20 cents or 2.22%, to close at $9.22 yesterday. The stock is currently trading above its 50 and 200 day SMA. SEM Interactive Chart

2. Cincinnati Bell (own 3 2018 senior subordinated bonds: Junk Bond Ladder Strategy): CBB reported an E.P.S. of 5 cents per share, missing the consensus estimate by 1 cent.   Earnings Release Q1 2012 Revenues were reported at 362.8M. Wireless revenue decreased to $64M from $71 in the year ago quarter. Revenues of CBB's wireline business declined 1%. The data center revenues increased by 21% to $53 million.

CBB also announced that it intends to pursue an IPO for its data center business and to use part of the proceeds to repay indebtedness. That announcement may explain the 8.71% pop in the stock price and an increase in the bond prices last Friday, the day of the earnings announcement.

3. First Data (own 1 2016 Senior Subordinated BondJunk Bond Ladder Strategy): First Data reported a net loss of $65 million on a 1% increase in revenues to $2.6 billion. SEC Filed Press Release The company ended the quarter with $1.5 billion in unrestricted liquidity. However, long term debt continues to remain close to unchanged at a whopping $22.544 billion. The company paid $495 million in interest on that debt during the first quarter. The company did manage to extend $3.2 billion in senior secured loans from September 2014 to March 2017.

Bought 1 First Data Senior Sub at 98.75-Maturing 2016 (March 2011)

4. Ally Financial (own two senior unsecured bonds: Junk Bond Ladder Strategy): Ally reported net income of $310 million for the first quarter, up from $146 million in the first quarter of 2011.  SEC Filed Press Release

Both of the bonds that I own make monthly interest payments.  Bought 1 GMAC 7.125% Bond Maturing 10/15/2017 at 98.072Bought 1 GMAC 7.25% Bond Maturing 4/15/2018 at 98.396

5. TICC Capital (own-Roth IRA): TICC reported first quarter earnings of 27 cents per share, in line with the consensus estimate. TICC is a BDC. The Board declared a 27 cent per share dividend for the second quarter.

No loans were on non-accrual at the end of the 2012 first quarter. Net asset value per share was $9.50 as of 3/31/12, up from $9.3 as of 12/31/11.

TICC Capital declined 6 cents to close at $9.62 yesterday.

6. Sold 40 shares of the Lottery Ticket EXAR at $8.08 (Lottery Ticket Basket Strategy)(see Disclaimer): As previously noted, EXAR has some hedge fund support. EXAR I am not seeing much improvement in the firm's earnings to warrant a continued hold.

For the 4th fiscal quarter ending 4/1/12, EXAR reported a Non-GAAP net loss of $4.6 million or 10 cents per share. SEC File PRESS RELEASE The GAAP loss was $21.6 million or 48 cents per share. EXAR restructured operations, which included a workforce reduction, during that quarter which resulted in a $12.74 million expense item. The company claims that the "gross impact of these actions represents over $22 million in annual expense savings...".  Net sales for the quarter decline to $27.8 million from $33.8 million in the year ago quarter. The gross margin declined to 40% from 46.1%. The company did issue upside guidance for the fiscal first quarter, but that guidance was insufficient to keep me interested in holding this LT position.

2012 EXAR 40 Shares +$57.89
Item # 3 Bought 40 EXAR as LT at 6.23 (July 2011). This is my second round trip in EXAR common stock as a Lottery Ticket.

I am still interested in it due to its strong cash position and potential. As of 4/1/12, the company had $196+ million in cash and short term marketable securities.

Exar rose 11 cents yesterday to close at $8.26.

7. Ashland (own 1 2029 BondJunk Bond Ladder Basket Strategy): ASH reported first quarter net income of 88 million or $1.1 per share on a 34% increase in quarterly revenues to $2.079 billion. SEC Filed Press Release

Bought 1 Hercules 6.5% Junior Bond Maturing on 6/30/29 at 86 

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