Monday, October 22, 2012

ING/Sold 50 HUWHY at $19.91/Sold 50 TITN at $23/Sold 200 of the Stock CEF RMT at $9.3/Added 70 PCBK AT $9/Bought 50 UMPQ at $12.05/MCD XIN

My mother has caregivers 24/7. Most of them are naturalized American citizens from African countries that most Americans would have difficulty finding on a map. Where is Sierra Leone for example? It is interesting to me that these naturalized American citizens, who are registered to vote, are taking a great deal of interest in the upcoming election, watching CNN rather than the "fair and balanced" station, and actually paying attention to the debates from start to finish.

When I visited my mother yesterday, a naturalized U.S. citizen from Ghana was watching C-Span, so I listened for a few minutes which is unusual for me. A caller from Texas claimed that Obama had said that he would view an Iranian hostage like crisis as an "opportunity". I said out loud to the caller, "that does not sound like Obama".

Later in the day, I checked it out and found that it was Romney who made the comment during the same fundraiser where he call "47%" of American adults lazy good-for-nothings. (Romney: "by the way, if something of that nature presents itself, I will work to find a way to take advantage of that opportunity", Video: Mitt Romney Says He Would "Work to Take Advantage" of an Iranian Hostage Type Situation)

PolitiFact summarizes Romney's positions on abortion that fluctuate depending on whichever serves his political interest at a particular point in time.


As noted in Friday's post, the OG started to sell some stock positions, and to de-risk some in the retirement accounts after reviewing several unfavorable earnings reports, with the Google earnings report being the tipping point. I do not own Google or IBM, but their reports were not exactly consistent with a worldwide economic recovery gaining momentum.

The report from McDonald's released last Friday, which is not owned, added some to the OG's developing angst. While the report from GE was okay, contrary to the market's hand wringing, it was not sufficient to relieve the OG's anxiety and need for a steady infusion of chill pills. For a moment, there was even some consideration about learning Yoga and meditation, but that thought was quickly banished.

McDonald's earnings release referred to the "challenging conditions" faced by the company. Selling  happy meals is challenging due to an economic slowdown?  The company missed expectations. Part of the problem is the currency headwind. The company reported net income of $1.46B or $1.43 per share, down from $1.51 billion or $1.45 per share in the year ago quarter. The consensus estimate was for $1.46. Revenues declined .2% to $7.15B, but would have risen 4% in constant currency. Same store sales rose 1.9% globally, compared to consensus opinion predicting a 2.4% rise. And, MCD said that the weakness was continuing in October. Friday's Close: MCD: 88.72 -4.14 (-4.46%)

Overall, my selling has been light since I retain an overall positive intermediate and long term opinion. It would not be surprising to see at least a 10% correction in the S & P from its recent high of 1,465.77 (9/14/12), Historical Prices | S&P 500, which would be for the best longer term.

Bloomberg published an article last week noting that the Xinyuan Real Estate purchased a development site in Brooklyn. That notoriety may have pushed XIN stock up some last Friday bucking the significant downdraft in the major market averages. I noted this acquisition in a 10/1/12 Post, Item # 3, since I viewed it as strange.  I own 100 shares of XIN as a LT, with a total average cost of $2.64 per share. XIN is currently paying a quarterly dividend of 4 cents per share and goes ex dividend tomorrow. Friday's Close: XIN: 3.08 +0.28 (+10.00%)

ING (own as a LT) announced late Friday that it was selling its insurance units in Hong Kong, Macau and Thailand for $2.1 billion in cash. NYT The transaction is expected to close in the first quarter of 2013.

Last Friday:
S & P 500: 1,433.19 -24.15 (-1.66%)
VIX: 17.06 +2.03 (+13.51%)
Nasdaq: 3,005.62 -67.25 (-2.19%)
Russell 2000:  821.00 -16.12 (-1.93%)
LQD: 122.80 +0.22 (+0.18%)
TLT: 121.74 +1.63 (+1.36%)
BAB: 29.82 +0.20 (+0.68%)
My Main Taxable Account: -.7%

Regional banks were my best performing stock sector last Friday. The ETFs for regional banks fell less than the market. KRE: 27.95 -0.18 (-0.64%) My regional bank basket has the same percentage decline, with six positions in the green (BHLB, PCBK, NYB, PBCT, NBN, and WASH).

1. PROMOTED PCBK to Regional Bank Basket Strategy from Lottery Ticket Basket Strategy/Added 70 shares at $9 Last Friday (see Disclaimer): The promotion was based on the third quarter earnings report and a dividend raise.

Pacific Continental is a small bank with 14 banking offices in Oregon and Washington, primarily in Eugene, Portland and Seattle. The bank is headquartered in Eugene, Oregon. Locations

Pacific Continental reported third quarter net income of $3.2M, up 32.8% over the 2011 third quarter. Third quarter E.P.S. was 19 cents, up from 14 cents a year ago.

Pacific Continental also announced a 1 cent quarterly dividend increase to 7 cents per share and a special dividend of 4 cents per share.

As of 9/30/12, the net interest margin was 4.1%; the efficiency ratio was 62.7%; the tangible book value was $8.98 per share; the tangible common equity to tangible assets ratio was 12.1%; the total risk-based capital ratio was 18.62% (10% well capitalized); the Tier 1 capital ratio was 17.37%; NPLs to total loans stood at 1.16%, the coverage ratio was 167.87% (allowance for losses to NPLs); and the return on average assets was 1.03%.

The bank repurchased 166,612 shares during the quarter at a weighted average price of $9. In February 2012, the Board authorized the repurchase of up to 5% of the outstanding shares or approximately 922,000 shares. Since that time, PBCK has repurchased 576,537 shares at a weighted average cost of $8.82 per share. Please note that $8.82 is below the 9/30/12 tangible book value per share of $8.98.

Core deposits increased by $30.8M from 6/30/12.

PBCK did not participate in the TARP program (page 39: 2008 Annual Report Form 10-K)

This purchase lowered my average cost slightly to $9.29. The 30 share LT purchase was made in April 2011. Item # 4 Bought 30 PCBK as LT at 9.42 

A long term chart, starting in 2000, shows a good move from $4.45 in 1990 to a top near $18.9 shortly before the onset of the Near Depression. The shares then started to retrace that rise before bottoming near $6.5 in 2011.  PCBK Interactive Chart

Friday's Close: PCBK: 9.10 +0.18 (+2.02%)

2. Bought 50 UMPQ at $12.05 Last Thursday (Regional Bank Basket Strategy)(see Disclaimer): I previously bought and sold this bank as a Lottery Ticket (LT), realizing at $38.09 profit on a 30 share odd lot earlier this year. SOLD 30 UMPQ at $13.33 (July 2010)-Bought 30 UMPQ as LT at 11.53 The third quarter earnings report was sufficiently favorable that I upgraded this bank to my Regional Bank Basket strategy. This new classification allows me to invest more than the $300 limit (plus realized gains) applicable to LTs.

Like Pacific Continental, UMPQ is headquartered in Oregon but is a larger bank than Pacific. UMPQ has branches between San Francisco and Seattle, Washington.

Umpqua Holdings Profile at Reuters

Umpqua Holdings reported third quarter net income of $25M or 22 cents per share, up from 19 cents in the 2011 third quarter.

As of 9/30/12, net interest margin for the bank was 4.05% (3.98% consolidated); the efficiency ratio was 61.36% for the bank (63.54% consolidated); the NPL ratio was .93%; the tangible equity to tangible asset ratio was 9.59%, the tangible book value per share was $9.3; the total risk-based capital ratio was 16.94%; the Tier 1 common ratio was 12.86%; and the bank earned .86% on average assets.

This bank did participate in TARP. Early in 2010, the bank purchased all of the government's preferred stock and bought back the government's stock warrants. (page 154, Form 10-K). The bank raised the necessary funds by selling 8.625M shares at $11. The bank raised $258.7M through a public offering of shares priced at $9.75.

The stock has spent most of the past five years, which includes the Near Depression period, in a channel between $8 and $14. UMPQ Interactive Chart A longer term chart reveals a good run from around $7.5 (11/2000) to a top near 31 (12/2006). The prices of many regional bank stocks started to decline in 2007 after hitting peaks in 2006, which in retrospect signaled troubled ahead.

UMPQ is currently paying a 9 cent per share quarterly dividend. Umpqua Dividend History Like many banks during the go-go years for regional banks, UMPQ was raising its dividend from 1993 to 2008. The quarterly rate was $.013 in 1995 and had reached 19 cents during the 2007 third quarter, staying at 19 cents until the 2008 third quarter when it was slashed to 5 cents. The bank raised the five cent quarterly dividend to 7 cents in the 2011 third quarter and then to 9 cents last June.

At a quarterly rate of 9 cents per share, the dividend yield at a total cost of $12.05 is about 2.99%. Hopefully, the bank will continue raising the quarterly dividend every year by two cents, which of course remains to be seen. At a 19 cent per share quarterly rate, the dividend yield would become 6.3%.

Friday's Close: UMPQ: 11.98 -0.07 (-0.58%)

3. Sold 50 TITN at $23 Last Thursday ($500 to $1,000 Flyers Basket Strategy)(see Disclaimer): With the RB and the OG in charge, there will be numerous knee jerk reactions to news events. Neither the OG nor the RB are deep thinkers like our former Head Trader LB. Last Thursday, the OG read the earnings release from Google, started to hyperventilate, hooked himself up to an IV of chill pills again, and immediately sold Titan Machinery at $23, which had just been bought at $19.88. Item # 1 Bought 50 TITN at $19.88 (9/13/12 Post).

What does Google and Titan Machinery have in common? "Nothing", the LB helpfully added, "the unholy alliance between the OG and the RB will inevitably produce a multitude of irrational decisions". The OG replied that the Google news may portend a weaker than expected world economy, which could impact Titan Machinery, and besides, "Titan does not pay a dividend", while UMPQ and PCBK, discussed above, do.

2012 TITN 50 Shares +$140.07
Friday's Close: TITN: 22.42 -0.58 (-2.52%)

4. Sold 200 of the Stock CEF RMT at $9.3 Last Thursday-ROTH IRA (see Disclaimer): Another reaction to the Google news was to de-risk some in the ROTH IRA by selling RMT at $9.3. The OG also has a gut feeling that the market is overbought. I still own 659+ RMT shares in a taxable account, where I am  a long term holder. I received one quarterly distribution ($24) on those 200 shares bought in August 2012: Bought 200 RMT at $8.81 in Roth IRA (8/20/12 Post):

2012 RMT 200 Shares Roth IRA +$84.37
Royce Micro-Cap Trust announced that it will redeem its 6% cumulative preferred stock at its $25 par value, plus accumulated and unpaid dividends.

Friday's Close: RMT: 9.14 -0.18 (-1.93%)

5. Sold 50 HUWHY at $19.908 Last Thursday (The $500 to $1,000 Flyers Basket Strategy)(see Disclaimer): This was the last sell from Thursday prompted by several concerns, none of which are directly related to Hutchison Whampoa. I realized a quick $112.7 on this 50 share lot. Bought 50 HUWHY at $17.35 (9/4/12 Post)

2012 HUWHY Realized Gains 
My total realized gain this year for HUWHY is $384.23.

Apparently, the $500 to $1000 Flyers Strategy is going to be primarily a trading one, as well as a source of funds when the OG becomes nervous.

Friday's Close: HUWHY: 19.41 -0.47 (-2.38%)


I continued to perform some paring early last Friday. Over the past seven trading days, excluding the sale of another stock CEF in the ROTH IRA that will be discussed tomorrow, I have sold the following: 200 RMT at $9.3 -Roth IRA; 50 HUWHY at $19.91; 50 TITN at $23; 50 LIT at $15.1; 50 VFH at $33.56; 200 HSE:CA at $28.13 CADs; 50 GOV at $24.5 in ROTH IRA; 30 NYT at $10.45; 50 MS at $17.4 and I had one bond redemption last Friday (Edgen Murray).

Another stock CEF was sold in the ROTH IRA last Friday, a standard de-risking strategy that I follow in that account. With the disposition of two stock CEFs and the GOV position in the Roth IRA, with no adds to replace them, the net addition to cash in that account last week was $5,674.31.

In the main taxable account, I have had an inflow of $11,316.81 from common stock sales and cash flow since 10/10/12, and I used only $4,893.25 of that inflow for common stock purchases (Tiny purchases of VELT, SIMG HBAN, PCBK, UMBQ, TTI;  100 of the stock CEF CGI:CA at $15.78 after selling 200 HSE:CA at $28.13 CADs; and 50 TDIV at $19.2) The purchase of 150 ARR was in a satellite taxable account.