Monday, May 21, 2012

Trust Certificate PJR Called/Bought 50 GOV at $22.9-ROTH IRA/Appleton Papers/Added 30 AMAT at $10.99/Earnings: PSEC, Momentive Specialty Chemical

The VIX rose 2.49% last Friday to close at 25.1. The VIX crossed 20, an important demarcation line, on May 9th. The S & P 500 Index closed on May 8th at 1,363.72 and has declined 5% since that time to the May 19th close.

The VIX closed at 14.26 on March 26th with the S & P 500 Index closing at 1416.51 that day. With the VIX moving from 14.26 to 25.1 since 3/26/12, the S & P 500 Index has lost 8.56%. Last week, this index lost 58 points or 4.3%.

The 52 week high in the S & P 500 was 1422.38, hit intra-day on 4/2/12. Historical Prices - S&P 500. When the market started to decline in October 2007, a temporary bottom was put into place around 1295, which was followed by a brief rally to 1425 into mid-May 2008. S&P 500 Index Chart The collapse followed, as the S & P experienced a waterfall decline before bottoming in March 2009.

This suggests the possibility only that resistance to the upside is significant at 1425, possibly a long term double top, and the market's high has already been made this year.

The S&P 500 Index closed at 1295.22 last Friday which suggests that this is a fairly important support level, so I would like to see a strong bounce off that level today. The S & P 500 index has already fallen below its 50 and 100 day SMA. S&P 500 Index Chart The 200 day is currently around 1278.

PJR has been called by the owner of the call warrants. Notice Of Exercise Of Warrants To The Certificate Holders Of PREFERREDPLUS Trust The warrant owner will purchase all PJR trust certificates at $25 plus accrued interest up to, but excluding, the exercise date which is 6/15/12. According to Marketwatch, the next ex interest date is June 12th. If that is correct, I will receive one more semi-annual interest payment and then two days of accrued interest. I still own 50 shares bought at $16.72. (July 2009).

The author of an article, published at the Motley Fool, makes an investment case for Meritor (MTOR) based on valuation. I own 100 shares of MTOR. Although the shares were bought recently, I am already in the hole.

Appleton Papers, a private company, has agreed to a business combination with the Hicks Acquisition company II. If that transaction is consummated, the combined entity will become a publicly traded company. SEC Filed Press Release That announcement had a positive impact on a 2015 Appleton second lien bond. FINRA

1. Prospect Capital (own 417+ shares): Prospect Capital, a Business Development Corporation, reported net income of $50.2 million (44 cents per share) for its third fiscal quarter, up from 38 cents in the year earlier quarter. PSEC's net investment income was $58.1 million or 51 cents per share for the March 2012 quarter.

Form 10-Q for the Q/E 3/31/2012 At page 3 of that form, the net asset value per share is shown as $10.82. The investments are described starting at page 7.

Prospect Capital decline 14 cents in trading last Friday to close at $10.58.

2. Momentive Specialty Chemicals (own 1 2016 Senior Unsecured BondJunk Bond Ladder Strategy): MSC reported a net loss of $16 million on revenues of $1.24 billion for the 2012 first quarter. In the year earlier period, the company reported net income of $63 million. As of 3/31/2012, MSC had unrestricted cash of $397 billion and long term debt of $3.444 billion. In addition, there was $224 million in long term pension and post employment benefits.  SEC Filed Press Release

Bought 1 Borden Chemical 8.375% Bond Maturing 4/15/2016

I am not likely to buy more than 1 Borden Chemical/Momentive Specialty Chemicals due to the credit risk.

3. Bought 50 of Government Properties Trust (GOV) at $22.9-ROTH IRA (see Disclaimer): Government Properties Trust is a REIT that owns commercial real estate leased to governments. As of 3/31/12, this REIT owned 71 properties, located in 29 states and the District of Columbia. The U.S. government is GOV's largest tenant accounting for 68.4% of the annualized rental income as of 3/31/12.  Form 10-Q for Q/E 3/31/12 at page 5

The total debt stood at $444.826 million, of which $350 million was an unsecured term loan. The weighted average interest rate under that term loan was 2.02% for the 2012 first quarter (page 5)  The corporate credit ratings are Baa3 by Moody's and BBB- by S & P, GOV Credit Ratings

For the 2012 first quarter, normalized FFO was 54 cents per share, up from 48 cents in the year ago quarter. SEC Filed Press Release

Profile at Reuters

GOV Website: Government Properties Income Trust

Link to Map of Properties: Government Properties Income Trust

The current quarterly dividend is $.42 per share. At that rate, the dividend yield at a total cost of $22.9 is about 7.34%. In the ROTH IRA, this is in effect a tax free yield, both when the distribution is paid and when it is drawn out.

This is one of several REITs originating from Commonwealth REIT (CWH) who still owns 9.95 million GOV shares, or 21.1%, as of 3/31/12.  CWH 10-Q page 7 I also own CWH shares.

This purchase was made Friday, 5/11/12.  

Government Properties Income Trust declined 34 cents in trading last Friday to close at $21.66.

4. Added 30 AMAT at $10.99 (see Disclaimer): The dividend yield at a total cost of $10.99 for this large cap technology company is about 3.22%. After making this last purchase, I decided to change my dividend option to reinvestment.

This purchase was made Friday, 5/11/12. I am over a week behind discussing my trades due to discussing earnings reports.

Although I have never lost money investing in AMAT, I have never made much either. I have nibbled at shares only after the price was crushed in the wake of the Nasdaq bubble and subsequent crash. During the Crazy Period, this stock traded over $50 per share.  AMAT Interactive Chart

At the time of my 30 share purchase, the consensus estimate was for an E.P.S. of 98 in the F/Y ending 10/2012 and $1.12 for fiscal 2013. AMAT Analyst Estimates If the consensus proves accurate, then my purchase was at less than 10 times forward earnings.

This purchase was an average down from a 50 share buy at $12.45 (June 2011).

Most likely I will average down again with a 30-40 share buy when and if the price declines below $10 per share.

At the time of my purchase, Morningstar had a five star rating on AMAT shares, with a consider to buy price at $13.3 or lower.

Subsequent to this last purchase, Needham cut AMAT to hold from buy. The report is discussed in the Tech Trader Daily column at Barron's.

For its second fiscal quarter ending 4/29/12, Applied Materials reported adjusted earnings per share of 27 cents on $2.54 billion in revenues. SEC Filed Press Release The expectations was for 24 cents on $2.4 billion in revenues.

Applied Materials fell 12 cents in trading last Friday to close at $10.36.

I will likely add another small lot below $10. 

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