Monday, June 24, 2013

Updated Tables for the Lottery Ticket and Regional Bank Basket Strategies/Bought 50 FNB at $11.25

The Lottery Ticket and Regional Bank Basket strategies are updated on the last Monday of each month. I did not realize that today was the last Monday in June until earlier this evening. The prices shown in the tables below will be the closing prices from today. 

1. Update for Lottery Ticket Basket Strategy:

The Lottery Ticket Basket Strategy uses a deep contrarian value strategy, appropriately characterized as catching a "falling knife". A common criteria for the stocks contained in this basket is a smashed stock price at the time of purchase and an ugly looking chart. Any technical analyst would most likely have a sell rating on the stock.

Selections are made primarily on statistical criteria including price to book, price to sales, forward P/E, cash per share and/or free cash flow. I spend anywhere from thirty minutes to an hour researching a potential purchase prior to purchase.

For many selections, I may be pessimistic about the firm's future, but not as pessimistic as the market. I will also occasionally see a ray of light at the end of a dark tunnel. Since I expect failures, which are inevitable and unavoidable in this kind of approach, I limit my exposure to $300 per stock plus any prior trading profits. 

After experiencing some success with this strategy, I now have a requirement that my total investment in all LT holdings can not exceed my total realized gains for this basket strategy. My total exposure is currently under $7,000.

I am not finding much of anything to buy in this basket, other than gold mining stocks, but they look to hot to touch.

The name of the strategy aptly describes the risk. It is somewhat analogous in many cases to playing a hand of blackjack for the purchase amount knowing that the card count favors the house. It is a form of entertainment and an alternative to a casino visit. Based on the results to date, this strategy is far more likely to produce positive results even with the LB's skill at the tables. The primary purpose of the LT strategy is to entertain Right Brain, let it swing for the fences with up to $300, and keep the Nit Wit from interfering with Left Brain's management of Headknocker's portfolio.

Snapshots of realized gains can be found at the end of the Gateway Post on this topic: Stocks, Bonds & Politics: Lottery Ticket Strategy: New Gateway Post


Lottery Ticket Basket as of 6/24/13
My total exposure is less than $6,500. Perhaps, if the market continues melting down, I will see more opportunities than I do now. There were no buys or sells since the last update.

A. Capstone Turbine (CPST):

Capstone Turbine surged in price after announcing that it had received a "major" order from a real estate company (Related Companies) for its turbines. Capstone Receives Major Order for Global Real Estate Development and Investment Firm. For some time, CPST has had success selling it  products to oil and gas drillers, particularly those operating in remote locations. The order from the global real estate company for installation at its projects may be (or may not be!) a turning point in the appeal of CPST's turbines to a broader customer list.

This point of view is explained nicely in a video embedded in this Motley Fool article:

"Has Capstone Turbine Finally Turned the Corner?"

CPST shares did respond to this news with a surge: 5/29/13 Close: CPST: 1.17 +0.14 (+13.59%)

Other recent orders are discussed in these press releases.

Until 5/29/13, I was near break-even or in the hold on this LT. CPST Interactive Chart

Bought 300 CPST at $.9852-LT Category (June 2012)

The company has yet to produce an annual profit. The current consensus estimate is for a $.07 loss for its F/Y ending in March 2013 and for zero cents in the 2014 F/Y. CPST is scheduled to report its fiscal 4th quarter results, estimated to be a 1 cent per share loss on $36.3M in revenues, on 6/13/13.

Capstone Turbine announced its 4th fiscal results after the market's close on 6/12/13. The net loss was $.01 per share on revenues of $35.4M, compared to a 3 cent per share loss in the year earlier quarter. Revenues increased 18% from the year earlier quarter.

The consensus estimate was for a 1 cent per share loss on $36.3M in revenues.

Today's Closing Price: CPST: 1.14 +0.01 (+0.88%)

2. Sunopta (STKL): A favorable story about STKL was recently published by Bloomberg

I left some less than enthusiastic comments to a recent article about STKL published by Seeking Alpha.

Bought 50 STKL at $5.85

Today's Closing Price: STKL: $7.83 -0.07 (-0.89%)

2. Update for Regional Bank Basket Strategy

This strategy is explained in my Gateway Post on this topic:

I am not tracking reinvested dividends in the following table. The dividend yield showed in this table is calculated by Yahoo Finance based on last Friday's close. My dividend yield for each position will be different based on my total cost numbers. In most cases, with FNFG and VLY being notable exceptions, my dividend yield will be higher.

Needless to say, the dividend yield for each position is higher than the 2.54% yield on the 10 year treasury as of last Friday's close. Standard Chart - Most of the dividend yields are higher than the 3.56% yield on the 30 year treasury (Standard Chart -, and many of these banks are raising their dividends. A buyer of that 30 year treasury bond with a 3.56% is stuck with that yield until the bond is sold.

Over the life of this basket strategy, I anticipate that the dividends will provide 40% to 50% of the total return. I am generally keeping my total exposure between $40,000 to $50,000.

TOTAL DIVIDENDS  2010-2012=$4,690.79

Regional Bank Basket as of 6/24/13

There were no sells since the last update and only two minor adds, including the one discussed below and the 50 share add of FFBC discussed in last Saturday's post. Update for Regional Bank and Lottery Ticket Basket Strategies 

A. First Pactrust: I currently own 50 shares of the common (BANC) and 50 shares of a senior exchange bond (BANCL): Bought 50 BANC at $11.3 February 2013; Item # 6 Bought Roth IRA: 50 BANCL at $25.20

First PacTrust completed the sell of non-cumulative equity preferred shares with a 8% coupon on a $25 par value.

First PacTrust Bancorp Inc. Dep. Pfd. (Rep. 1/40th Perp. Pfd. Series C) Stock Price 

Free Writing Prospectus

I discussed that preferred and another new one in comments to this Seeking Alpha article.

First PacTrust also sold 3,553,846 shares at $13 per share with an over allotment option of up to 360,000 shares. That offering did cause a small decline in the market share price to that offering price.

Today's Close: BANC: $13.06 0.00 (0.00%) 

B. Added 50 FNB at $11.25 (see Disclaimer):  FNB operates 250 branches in six states and three major metropolitan areas including Pittsburgh, Cleveland and Baltimore. I am averaging up with this last buy. 

Snapshop of Trade: 

2013 Bought 50 FNB at $11.25

I took a snapshot of my other odd lot position before the market opened on 6/14/13, where my original cost basis has been increased through dividend reinvestments. I quit reinvesting the dividend after the third quarter of 2012:

Pre-Existing FNB Postion

Added 50 FNB at $7.8 (July 2010)

I sold higher cost shares using FIFO accounting which left me with that 50 share lot bought at $7.8:

Bought 50 FNB at $8.42Bought 50 FNB at $9.36Pared FNB: Sold 50 at $10 and 50 at $10.18 (December 2010). Since that sale of 100 shares in December 2010, I have continued to read FNB earnings reports and have decided to repurchase 50 of those previously sold shares. 

Recent Earnings Release:
2013 1st Quarter: SEC Earnings Release 
2013 1st Q vs. 2012 1st Q

Net Income: $28.538M/ $21.542M
E.P.S.= $.2 / $.16
Net Interest Margin: 3.66%/ 3.74%
Efficiency Ratio: 59.76%/ 60.42%
Return on Average Assets: .96%/.75%
Return on Average Tangible Equity: 17.32%/ 14.65%
Return on Average Equity: 8.2%/ 6.42%
NPL Ratio: 1%/ 1.41%
NPA Ratio: .99%/ 1.28%
Coverage Ratio 124.8%/92.95%
Net Loan Charge Offs (Annualized) to Average loans: .21%.27%
Tangible Equity to Tangible Assets: 6.22%
Total Risk Based Capital Ratio: 12.2%

FNB announced shortly after my purchase the acquisition of BCSB Bancorp (BCSB) in an all stock transaction valued at $23.77 per share based on FNB's closing stock price on 6/13. The approximate value based on that FNB stock price would be $79M. BCSB is the holding company for the Baltimore County Savings Bank that has 16 branches in the greater Baltimore area. SEC Filed News Release

Today's Closing Price: FNB: $11.49 +0.06 (+0.52%)

C. People's United (own): JPM reiterated its overweight in People’s United (PBCT) and raised its price target to $15.5 from $13.50. 

Price change on day of JPM Report: PBCT: $14.29 +0.38 (+2.73%)

Bought 100 PBCT at $11.47 (June 2012)

Closing Price Today: PBCT: 14.55 +0.11 (+0.76%)

FirstMerit (FMER) hit a 52 week high today. 

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