Monday, August 26, 2013

Updated Tables for Regional Bank Basket and Regional Bank Basket Strategies/ Added 50 FISI at $19.8/Sold LT Basket: 50 FIATY at $ 8.45, 30 QLGC at $11.7 & 100 TST at $2.27 & Added 100 CIDM at $1.38/AMOT, FCE/A, MRNK, CBU

1. Update of 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

Realized Gains to Date: $12,986.74

Click to Enlarge:
Lottery Ticket Basket as of 8/23/13
A. Added 100 CIDM at $1.38 (see Disclaimer): 

Updated: After publication of this post earlier today, Paulo Santos published another article about CIDM at Seeking Alpha involving the CIDM theatrical release of "Short Term 12". I left a comment to that article, pointing out the favorable review from the NYT.

This is my second buy of Cinedigm Digital Cinema Corp. Cl A. I recently bought a 100 shares discussed in this post: Bought LT Basket: 100 CIDM at $1.55

I decided to increase my stake based on a well researched article written by Paulo Santos and published by Seeking Alpha. He goes into far more depth about this company than anything that I would normally say about a LT purchase.

Snapshot of Trade:

2013 Added 100 CIDM at $1.38
The company is not yet profitable, nor is it expected to be profitable soon: CIDM Analyst Estimates

After this last purchase, CIDM released its fiscal year first quarter results for the Q/E 6/2013. The company reported a loss of 15 cents per share on revenues of $19.6M. Cinedigm Announces First Quarter Fiscal 2014 Financial Results During the quarter, CIDM incurred $2.6M of "direct theatrical acquisition, marketing and releasing costs" for 10 movies released theatrically. The "significant revenues generated by those releases" will be recorded during the second fiscal quarter. The company paid down $8.6M of nonrecourse debt during the quarter.

Q1 2014 Results - Earnings Call Transcript - Seeking Alpha

Last Friday's Close: CIDM: $1.41 +0.02 (+1.44%)

B. Sold 100 TST at $2.27 (see Disclaimer): TST is the symbol for TheStreet Inc. The dividend yield has been over 4% at my total cost per share number.

Snapshot of Trade: 

Snapshot of Profit:

2013 TST 100 Shares +$38.59
I just got tired of holding this one. The last earnings report did show an acceleration in subscriptions. SEC Filed Press Release

Bought 100 TST at $1.8

This last transaction completes my third round trip in this security as part of the Lottery Ticket Basket Strategy: Lottery Ticket Purchase: 100 at $1.88 -Sold 100 TSCM at $3.02Bought 100 TSCM at $2.86-Sold LT TST @ $3.42

C. Sold 50 Fiat at $8.45 (see Disclaimer):

Snapshot of Trade:

2013 Sold 50 FIATY at $8.454

Snapshot of Profit:

2013 FIATY 50 Shares +$148.49

Bought 50 FIATY at $5.17-LT (July 2012)

This sell was motivated primarily by profit taking. I am not pleased, as a shareholder, when I read a story like the one referenced below either.

No Work, No Pay? Not in Italy - (Fiat has left five factories idle for extended periods and pays workers part of their salary not to work)

Fiat SpA (FIATY) Profile Page at Reuters

Fiat SpA (FIATY.PK) Key Developments Page at Reuters.

Fiat Website: Investors Highlights

Q2 2013 Results - Earnings Call Transcript - Seeking Alpha

Last Friday's Close: FIATY: $8.33 -0.13 (-1.58%)

3. Sold 30 QLGC at $11.7 (see Disclaimer):

Snapshot of Trade:

Snapshot of Profit:

2013 Sold QLGC 30 Shares +$70.19
Bought 30 QLGC at $8.83 (December 2012)

I was not impressed with the last earnings report: SEC Filed Press Release

Last Friday's Close: QLGC: $11.21 -0.05 (-0.44%)

4. Allied Motion Technologies (AMOT): I noticed last Thursday unusual action in AMOT. Normally, volume is around 10,000 shares. Volume spiked to 116,069 on 8/22, and the shares rose almost 11% in value.

AMOT: $8.04 +0.78 (+10.74%)

The shares gained another $.71 per share or 8.83% last Friday. AMOT: $8.75 +0.71 (+8.83%)

I guess investors like this deal.

The only news was the announcement that AMOT was going to acquire Globe Motors from Safran USA for $90M. Globe Motors is a "high quality provider of customized and innovative motion solutions to meet the needs of customers in selected target market segments", according to the press release announcing the acquisition. Allied Motion Technologies Inc. to Acquire Globe Motors

Globe reported revenues of approximately $106M in 2012. AMOT claims that the acquisition will be accretive. When completed this acquisition will more than double AMOT's revenues.

AMOT is currently paying a quarterly dividend of $.025 per share. Allied Motion Declares Quarterly Cash Dividend

For the 2013 second quarter, the company reported net income of $819,000 or $.09 per share on revenues of $25,352,000. Allied Motion Reports Results For the Second Quarter Ended June 30, 2013

AMOT 40 Shares +42.31% as of  8/23/13

Bought 40 AMOT at $5.95-LT (February 2012)

5. Forest City: I may upgrade this one to my Flyer's Strategy which will allow me to buy another 50 shares. I currently own 30 shares bought as part of the LT Basket:

FCE/A 30 Shares +52.13% as of 8/23/13

I was allowed to go over the $300 limit due to prior profits in this stock.

Forest City is developing a huge project in NYC called Atlantic Yards. That project included as its first phase the construction of the Barclays Center in Brooklyn. Forest City purchased the NBA team, formerly known as the New Jersey Nets, and moved that team to Brooklyn, rechristening the team as the Brooklyn Nets. Beginning in 2015, the Barclays Center will be the home of the New York Islanders. Forest City then sold 80% of the Brooklyn Nets and 45% of the area to the Russian billionaire Mikhail D. Prokhorov. All of the foregoing was a lever for the development of high rise apartment buildings in this area.

The first residential building, recently started, is a 32 story modular tower with about 400 apartments, NYT This prefabricated construction method has never been attempted at that height and could cut construction costs in half, assuming it is successful. Forest City brought in the Arizona State Retirement System as a 75% partner for that building.  CEO Hosts Investor Day (Transcript) - Seeking Alpha

In the Atlantic Yard project, there are 14 more apartment buildings that are planned near Atlantic and Flatbush Avenues, with close to 6,000 apartments, and one office building which could include a hotel. The NYT reported last week that Forest City was seeking a partner for that development and is willing to sell anywhere from a 50% to 80% stake while retaining management authority. The NYT reported that this transaction could generate as much as $800M.

SEC Filed July Investor Presentation

2. Update for Regional Bank Basket Strategy

Last Thursday, when the Nasdaq had its latest mishap, a number of my regional bank stocks traded on the Nasdaq showed suspiciously large gains. The basket was up close to $600 that day due largely to those gains. The market took away some of those unusual gains last Friday. Even after the stocks started to trade again, I noticed strange quotes, like a bid price significantly over an ask price. 

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.
The unrealized gains per holding do not include reinvested dividends.

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.

Since my last update, I have made two small purchases, Added 50 BDGE at $20.76/Bought 100 NPBC at $10.68, and one disposition, Sold 151+ WBCO at $15 (profit $217.23). I was disappointed in WBCO's last earnings report. I will consider buying back no more than 50 shares at below $13.5 (Previous Buys: Bought 100 WBCO at $13.46Added 50 WBCO at $13.3).

Last week, Stifel Nicolaus upgraded TRST, UBSI, and PBCT to buy from hold.

Total Net Realized Gains 2010 to Date: $13,938.48
Dividends 2010-2012: $4,690.79 (computed annually)

Click to Enlarge:
Regional Bank Basket as of 8/23/2013

A. Monarch Financial (MNRK): I left a comment to an article about MNRK published by Seeking Alpha

MNRK hit a new 52 week and all time high last week. MNRK Interactive Chart

Bought 120 MNRK at $8.65 (bought 100/Split 6/5)-Sold 100 MNRK at $10.59 (forgot that I owned 120); Bought 80 MNRK at $9.97 (thought that owning 20 was silly so I bought 80)

Last Friday's Close: MNRK: $12.35 +0.45 (+3.78%)

B. Community Bank System (CBU): Community Bank System increase its dividend for the 21st consecutive year. The new quarterly rate will be $.28 per share, up 3.7% from the prior level.

The dividend history since 1986 can be found at the bank's website.

Compared to a KO, the dividend growth rate is slow. The quarterly dividend was raised from $.145 to $.16 in the third quarter of 2003. So that is not even a double in ten years. Still, the dividend was raised during the Near Depression period and that makes CBU noteworthy in addition to the 21 consecutive years of dividend increases.

Perhaps, I needed to buy more shares when making this purchase: Bought 50 CBU @ 23.18 (October 2010).

Last Friday's Close: CBU: $34.71 +0.05 (+0.14%)

C. ADDED 50 Financial Institutions (FISI) at $19.8 (see Disclaimer): This was an average up. I bought the shares in a satellite brokerage account where I have sold some banks earlier this year, with the largest being my position in RNST.

Snapshot of Trade:

EMail Confirmation
Financial Institutions increased its quarterly dividend to $.19 per share, up 6% from the prior dividend and 36% from the dividend declared in the 2012 third quarter.

The quarterly dividend had been cut from $.15 to $.1 per share in the 2008 4th quarter and remained at $.10 for 10 quarters before it was raised to $.12. Investor Relations - Dividends

This bank, based in NY, did participate in TARP. The bank redeemed the remainder of the government's preferred stock after selling common shares. SEC Filed News Release In March 2011, the bank sold 2,813,475 shares at $16.35 per share, page 16 10-Q.

Market Share by County: Page 6, 2012 Form 10-K

Earnings Report for the 2013 Second Quarter:
E.P.S. $.47 up from $.42
NIM: 3.63%
Efficiency Ratio: 59.62%
NPL Ratio: .65%
NPA Ratio: .43%
Coverage Ratio 227%
ROA: .94%
Return on Average Common Equity: 10.35%
Return on Average Tangible Equity: 13.11%
Total Risk Based Capital Ratio: 12.21%

Bought 50 FISI at $15.55 (April 2012)

FISI 50 Shares +25.85% as of 8/23/13

Closing Price Last Friday: $19.77 -$.03 

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