Friday, July 27, 2012

Bought 100 of the Stock ETF LIT at $13.72/Sold 50 GSPRD at $20.03/ADX/Earnings: Husky Energy, BHLB, BYD, UBCP, CLGX/Harland Clarke

The market reacted positively to a comment by the ECB chief that the bank "will do whatever it takes to preserve the Euro".

The well known banking analyst, Dick Bove, listed a number of his customer service grievances against Wells Fargo in a recent research note. Reuters

If anyone becomes aware of a lawsuit being filed against Wells Fargo/Wachovia (assuming WFC was the swap counterparty), the trustee, and/or J P Morgan in connection with the GJN redemption, please let me know by leaving a comment or sending me an email.

Harland Clarke sold $235 million in aggregate principal amount of 9.75% senior secured notes due 2018 at 96. SEC Filed Press Release The company intends to use the net proceeds to repay a portion of its secured credit facility. I do not see this event as having any impact on the senior unsecured bond owners. I own 3 of the 2015 senior unsecured bonds. I am keeping my overall exposure to junk bonds modest, hovering in the 60 to 70 thousand dollar range. I will not go above the top end of that range due to the risks. Item # 8  Junk Bond Ladder Table (37 different issuers currently in the basket)

This is a link to the Adams Express (ADX) recently released second quarter report. ADAMS EXPRESS COMPANY - FORM N-CSRS - JUNE 30, 2012 As of the date of that report, this CEF had a 4.3% weighting in Apple. The trading activity was far more active than normal (page 13). Net realized gain for the first six months was reported at $.21 per share.

Forest City announced the partial redemption of its 2015 senior note at par value plus accrued interest. The principal redemption amount will be $125 million leaving $53.3 million outstanding.  I only own one of those bonds and plan to do nothing in response to this redemption. FCE raised the redemption proceeds by selling an additional $125 in aggregate principal amount of FCY, a 7.375% exchange traded senior note maturing in 2034. I would just as soon be left alone on my 2015 bond. Bought 1 Forest City Enterprises 7.65% Senior Bond Maturing 6/1/2015 at 100 I bought that bond just to receive the coupon until June 2015.

The VIX fell 9.72% to close at 17.46, as the S & P 500 average rose 1.65% to close at 1360.

Unilever reported yesterday that underlying sales rose 5.8% in the second quarter, compared to a forecast of 4.8%. SEC Filed Press Release Net profit was reported at €2.435 billion. Earnings Call Transcript The "UL" shares rose over $2.08 in trading yesterday:

UL 70 Shares Unrealized Gain of $1,206.5 as of 7/26/12 
Unilever PLC ADS (UL)

United Technologies reported an E.P.S. that beat the consensus estimate by 16 cents but the company lowered guidance for the remainder of 2012. Reuters

According to the WSJ, Ford is planning a F-150 truck with an aluminum body.

1. Husky Energy (own 200 shares HSE:CA: Canadian Dollar (CAD) Strategy): Husky reported second quarter net income of $431 million or 43 cents per share, down from 71 cents in the year ago quarter. SEC Filed Press Release 

This report is discussed in an article published by Reuters.

The Board also announced a regular quarterly dividend of 30 Canadian cents per share. Husky Energy Announces 2012 Second Quarter Dividend This results in close to a 5% dividend yield at the current price. I also believe that Husky has long term potential, though the short term outlook is not rosy. I am close to break-even on my current position of 200 shares and have had some realized gains from trading.

Stock Quote Toronto Listed Shares: Husky Energy (TOR: HSE)
Stock Quote U.S. Listed Ordinary Shares: HUSKF Husky Energy

I have a smaller position in Suncor.

Husky Energy (TOR: HSE) shares rose 32 cents in trading yesterday to close at $25.

2. Boyd (own 1 senior 2018 bond and common as part of the Lottery Ticket Basket Strategy): If my exposure to a company is limited to a lottery ticket, I will glance at an earnings release. When I also own a bond, I will read the entire release and an analyst report discussing the release. Most of the time that report will be from a Morningstar analyst, but could include reports issued by other firms. 

Boyd Gaming missed the consensus estimate by 6 cents. BYD reported adjusted earnings of 4 cents per share on a 7.1% rise in revenues to $615.2, which was below the consensus forecast of $628.7M. BYD's wholly owned businesses reported a 12.4% increase in revenues to $438.7M. Borgata, a 50/50 joint venture, reported a decline in revenues. That casino is located in NJ.

The LT in Boyd's common is probably a lost cause for at least a couple of years.  

3. BHLB (ownRegional Bank Basket Strategy)Berkshire Hills reported second quarter net income core E.P.S. of 47 cents (GAAP at .37 including charges).  The consensus estimate was for 47 cents.

As of 6/30/12, the net interest margin was 3.7%; the efficiency ratio was 59.29%; tangible equity to tangible assists was 8.04% NPAs were .6% of total assets; the coverage ratio was 126%; and the core return on assets was .94%.

Berkshire Hills was a recent addition to this basket: Bought 50 BHLB AT $21.66

Berkshire Hills Bancorp fell 9 cents in trading yesterday to close at $21.61 after hitting an intra-day high at $22.04.

4. CoreLogic (own 2 senior bonds: 2028): CoreLogic reported net income from continuing operation of $41.1 million or 39 cents per share. Revenues increased 18.6% to  $389.4 million.

The consensus estimate was for 37 cents per share.

The bonds are hard to purchase, as previously noted. If an investor is able to purchase them at or near their last traded price (80), and is comfortable with a lack of liquidity, the purchase of the bond will provide a significantly better current yield and YTM than the purchase of a TC containing the bond. (see discussion in introductory section at  CoreLogic) The TC in question is Merrill Lynch Depositor Inc. PreferredPLUS 7.55% Trust Cert. Series FAR-1 for First American Corp (PJS).

Stock Quote: CoreLogic (CLGX)

5. UBCP (own: Regional Bank Basket Strategy): United Bancorp, a very small bank operating in Ohio, reported diluted earnings per share of 15 cents per share, unchanged from a year ago. The net income was lower in the last $20,836 lower at $731,455. The cash dividend continues to hover close to a 100% payout ratio. As of 6/30/12, the net interest margin was 3.94%; the non-accruing loans to total loan ratio was 1.4%; the coverage ratio was 67.84%; and the average return on assets for the quarter was .7%.

I  pared my position by selling 50 shares last April. Sold 50 UBCP at $10.05 The remaining shares are a marginal hold due the nice dividend yield which is largely offset by the payout ratio and lack of earnings growth.

United Bancorp closed at $9.07 yesterday on 700 shares of volume.

6. Sold 50 GSPRD at $20.03 last Wednesday (see Disclaimer): This security was held in a satellite brokerage account where preservation of capital is the primary objective and generation of income higher than a savings account rate is the secondary objective.

I bought these shares earlier this months and will receive one quarterly dividend payment. Bought Back GSPRD at $18.9

2012 GSPRD 50 Shares $42.47/2012 100 Shares Two 50 Lots=$121.95
Advantages and Disadvantages of Equity Preferred Floating Rate Securities

Stock Quote: Goldman Sachs Group Inc. Dep. Shs Pfd. Series D (GS.PD)

7. Bought 100 LIT at $13.7199 Yesterday (see Disclaimer): I had a consider to buy (note to myself) at less than $14.

Global X Lithium ETF (LIT) includes the major lithium miners, as well as battery makers (e.g. ExideSAFT GroupeA123) and at least one rare earth company (AVL: 1.43 -0.01). It is consequently not a pure play on lithium but you will could not have an ETF with just four stocks in it.

The big four lithium companies are Rockwood Holdings (ROC)Sociedad Quimica y Minera De Chile S.A. ADS (SQM)FMC and the Canadian company Talison Lithium (TOR: TLH). Those four companies control about 95% of the lithium market.  I have profitably traded SQM in the past, but currently have no position in any of those four companies. These companies have about a 53% weighting in this ETF. FMC has the largest weighting at 21%. Both FMC and Rockwood are diversified chemical and materials companies. I would not mind owning FMC, SQM or ROC individually. Since they are heavily weighted in this ETF, I am willing to accept the more speculative companies that take up the rest of the space, and possibly one or more of them will surprise me to the upside. Some have share prices less than a $1.

The fund also also smaller lithium miners. I just looked briefly at the website of two of those firms: Galaxy Resources Limited (GXY.AX at .385 per share) and Orocobre (commercial production expected  in early 2014, ORE.AX: 1.64); and only the stock information and data about another one called Canada Lithium (CLQ.TO: 0.55 +0.01).

If Rio Tinto actually starts to develop its lithium mine in Serbia, advancing beyond the feasibility study stage, then I suspect that its stock will be added to the list. Rio Tinto Minerals - Our projects

The battery companies have been a drag on performance over the past several months. Exide stock was over $10 in early 2010 and is having trouble staying over $3 now.  XIDE Interactive Chart {I do own 2 Exide senior secured bonds and have recently sold its common bought as an LT} A123 Systems has done worse and has no realistic prospect of profits anytime soon. AONE Analyst Estimates Fortunately, the weighting is just 3.69%. That stock closed today at $.63, so most of the conceivable damage is already in the LIT price. Another battery company is GS Yuasa, based in Japan. GS Yuasa Corp (6674.T) Quote, which also has a dismal looking chart. GS Yuasa Chart A lot of the negativity has to be in these companies respective stock prices already, the one and possibly only positive way to look at the foregoing. 

Since I was not familiar with the Saft Groupe, a battery company headquartered in France with a 4.7% weighting in LIT, I visited their web page and examined their recently released quarterly report. (SAFT Stock Quote; website:; quarterly report: income for six months up 26.6% to €20m or €.79 per share; Saft Groupe SA (S1A.PA) Chart)

Hopefully, some of these battery companies may actually have some positive contributions over the next year or two. 

I set my LIT entry price after reading a positive Barrons' article about Lithium stocks a few weeks ago. The author mentioned this ETF and noted a $14.79 closing price before the publication date. While the battery use of lithium is soaring, the author notes that a majority of lithium production is used in industrial applications which will also influence price.

Sponsor's website: Global X Funds

The expense ratios is very high for an ETF at .75%.

This ETF was launched in the Spring of 2010 and traded above $22 during 2011.  Global X Lithium ETF Chart

Stock Quote: Global X Lithium ETF (LIT)(closing price 7/26/12=$13.69).

This is a snapshot of the ETF's holdings as of 7/25/12:

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