Friday, August 29, 2014

Sold Taxable Accounts: 100 IAE at $13.49, 100 SSRAP at $13.4/Bought 50 AFSIPRB at $24.79/Roth IRA: Bought 250 FAX at $6.11/Bought Regular IRA 100 APTS at $8.75 and Bought Back 100 ARCP at $12.88/Added to VEA at $41.35/Added 100 CSG at $7.85-Average Down

Since I finished writing this post a day early, I decided to go ahead and publish it.

Big Picture Synopsis:

Short Term: Market Needs to Correct
Intermediate Term: Slightly Bullish
Long Term: Bullish

The market sank some yesterday after Russian troops reportedly entered southeastern Ukraine. The pathological liar Vlad and his lap dog Sergey Lavrov deny any Russian involvement in Eastern Ukraine.

That farcical assertion was contradicted by the "Prime Minister" of the "Donetsk People's Republic" who acknowledged that regular Russian troops "on leave" are supporting the separatists. Apparently those regular Russian troops are taking their armored vehicles and trucks with them on vacation. NYTWSJ

As I understand Putin's claim, putting just a little spin on it, those Russian troops, who are on vacation, were in route with their Russian military vehicles to Crimea for some fun in the sun. Unfortunately, there is no other land route to their vacation destination other than through Eastern Ukraine. Once fired upon they had no choice but to defend themselves.

Another criticism of the Shiller P/E can be found in this article: CNBC

Short to Long Term: Slight Bearish Based on Interest Rate Normalization
The Difficult Path to Interest Rate Normalization

That forecast is known as the break-even spread, the average annual rate of inflation for the owner of the 10 year TIP to break even with the owner of the non-inflation protected treasury.

The break-even spread is calculated by subtracting the yield of the TIP
Daily Treasury Real Yield Curve Rates

From the Yield of the Non-inflation protected treasury
Daily Treasury Yield Curve Rates


Recent Developments:

The government's estimate for second quarter GDP was revised up to 4.2% from the previous estimate of 4%. News Release: Gross Domestic Product The consensus estimate for the second revision was 3.8%. Real personal consumption expenditures rose 2.5%.

The S&P/Experian Consumer Credit Default Composite Index is trending near its historic lows, as is the St. Louis Fed's Financial Stress Index.

As of the 2012 4th quarter, slightly more than 35% of American households (109,631: in thousands) are receiving one or more means tested government benefits. The Census Bureau just released the data for the 2012 4th quarter: Economic Characteristics of Households in the United States

82.679M in Medicaid or 26.7% of total households
51.471M receiving Food Stamps  or 16.6%
20.355M receiving SSI
22.526M " WIC
5.442M   " TANF

49.5% of the total households receive one or more program benefits which would include SS, Veteran's Care, Unemployment Compensation  and Medicare.

July sales of new single family homes were at a seasonally adjusted rate of 412,000, which was 2.4% below the revised rate in June and 12.3% above the June 2013 estimate of 367,000.

New single family home sales continue to trend near prior recession lows even though the last recession ended several years ago.

New One Family Houses Sold: United States-St. Louis Fed

Zillow reported that the negative equity rate "fell to 17 percent of all homeowners with a mortgage" which represents approximately 8.7M homeowners.

One long term secular force supporting a U.S. stock bull market is the move toward energy independence and an abundant supply of relatively low cost natural gas.

The U.S. Energy Information Administration provides information on both the consumption and production of fuels. U.S. Energy Information Administration (EIA) I clicked the line for natural gas and enlarged the production chart in order to take a snapshot:

The Case Shiller home price indexes for 10 and 20 metropolitan areas are still showing increases in home prices year-over-year, but the increase has slowed to the high single digits from the double digit pace last year. The 20 city composite index showed a 8.1% increase Y-O-Y in June. homeprice-release-08-26-14.pdf

Eurozone annual inflation fell to .3% in July. Euro area unemployment was steady at 11.5%. Eurostat Home Perhaps, the German austerity plan is not working out too well. There are certainly rumblings in several European countries to abandon that plan and to implement monetary fiscal stimulus. NYT There was a shake up in France's cabinet last week after the finance minister and other cabinet members criticized the austerity course. Those cabinet members are no longer in Hollande's administration. Bloomberg Hollande's approval rating was last reported at 17%. The European Central Bank is probably moving closer to some type of QE program.

Consumers cut spending by a seasonally adjusted .1% in July. The savings rate rose to 5.7% from 5.4%. News Release: Personal Income and Outlays Real disposable income increased .1% in July, down from .3% in June. Personal savings in July (disposable personal income minus personal outlays) was $739.1 billion in July, up from $709.4B in June (i.e. a higher month-over-month savings rate).


1. Sold 100 IAE at $13.49 (see Disclaimer): I am going to gradually substitute the low cost ETF VEA, discussed in Item # 4 below, for IAE. I can trade VEA without incurring a commission in my Vanguard brokerage account which allows me to buy small lots cost effectively. 

Snapshot of Trade:

2014 Sold 100 IAE at $13.49
Snapshot of History: 

Snapshot of Profit:

2014 IAE Sold 100 Shares +$32.98
Dividends: $96
Total Return: $128.98 or 9.85% (holding period 9+ months)

Security Description: The Voya Asia Pacific High Dividend Equity Income Fund (IAE) is a buy-write stock CEF.

Data as of 8/13/14:
Closing Market Price: $13.49
Closing Net Asset Value Per Share: $14.47
Discount:  -6.77%
1 Year Discount: -7.9%

CEFConnect Page for IAE

According to CEFConnect, the last four quarterly dividends have not been supported by a return of capital but have been financed in part from short term capital gains.

Last SEC Filed N-Q: Holdings as of 5/31/14

Last Filed SEC Shareholder Report: Period Ending 2/28/14

Morningstar Page for IAE

Rationale: The performance was poor. Over the past one year through 8/13/14, the total return based on net asset value was 12.46%. Over three years, the annualized total return was only 7.24%.

Future Buys: Highly Unlikely

2. Bought 250 FAX at $6.11 Roth IRA (see Disclaimer):

Snapshot of Trade:
2014 Roth IRA Bought 250 FAX at $6.11
Subsequent to my purchase, FAX went ex dividend for its monthly distribution on 8/20/14.

Security Description: Aberdeen Asia-Pacific Income Fund

As of 4/30/14, the fund is weighted in investment grade securities (35% in AAA):

Page 6 Aberdeen Asia-Pacific Income Fund, Inc.

The current monthly distribution is $.035 per share. FAX Announces Record Date And Payment Date For Monthly Dividend Recently, that dividend has been supported in part by a ROC.

Assuming a continuation of that penny rate, the dividend yield at a total cost of $6.11 is about 6.87%.

The stock suffered from what I call a known CEF risk recently and last year, when the market price declined at a faster rate than the percentage decline in net asset value per share.

E.G. 7/29/114 Values
Net Asset Value per share=$6.89
Market Price: $6.29
Discount: -8.71%

The market price declined by 3% between 7/29 and 8/14, while the net asset value per share declined only by .58%. Although I do not know, I suspect that the slight decline in net asset value per share between those dates was due primarily or entirely to currency conversions. FAX is priced in USDs while it owns bonds priced in the currencies of several Asa-Pacific region countries.

Prior Trades: I currently own a position in a taxable account. Item # 4 Added: 150 FAX at $5.8 (February 2014 Post)Item # 2 ought: 200 FAX at $6.08 (10/24/13 Post)Item # 6 Bought 100 FAX at $6.35 (6/15/13). I have quit reinvesting the dividend.

As noted in the last linked post, I was able to buy this bond fund at a greater than 30% discount to its net asset valuer per share during the Dark Period. I purchased 200 shares at $3.39 in October 2008 and quickly sold those shares for a $241.81 profit (see snapshot in Item # 6 Bought 100 FAX at $6.35 (Prior Trades Section)Some Nibbles Got Filled: JZE, PJS, INZ and FAX (October 10, 2008 Post).

Rationale and Risks: The previous discussions, linked above, outlines the rationale and risks, so I will just highlight a couple of issues here.

Currency risk is at the top of my worry list for this fund. The fund has exposure to bonds in several different currencies.

AUD/USD Currency Conversion Chart (Australian Dollar)
USD/INR Currency Conversion Chart (India's Rupee)
USD/IDR Currency Conversion Chart (Indonesia Rupiah)
USD/MYR Currency Conversion Chart (Malaysia Ringgit)
USD/SGD Currency Conversion Chart (Singapore Dollar)

I intend to sell within the next year my position in a taxable account. I am transitioning this security to ownership solely in the Roth IRA. In anticipation of that future transition, I started a position in the Roth with this 250 share purchase. FAX will own bonds, and consequently its dividends will not be classified of course as qualified dividends. I prefer to own bond CEFs in a Roth IRA, but will own several of them in taxable accounts periodically for their income generation.

The goal for this security is to harvest dividends for a year or two and exit the position with a 5%+ gain in the shares after commissions. The objective is a 8% to 10% annualized total return, mostly provided by the dividend.

3. Bought 100 APTS at $8.75-Regular IRA (see Disclaimer): I thought that this REIT was a bit too risky for the IRA so I limited my purchase to only 100 shares and bought it in the Regular IRA. If the price declines by 10%+, I will consider transferring this stock to the Roth IRA or selling it for a loss.

Snapshot of Trade: 

Security Description: Preferred Apartment Communities (APTS) is a relatively new REIT primarily focused on apartments with the intention of growing its retail assets to 20% of the total.

The company recently announced to acquire nine grocery anchored retail shopping centers in Miami, Orlando, Atlanta and Columbus GA., Nashville and Houston "areas". Two of those centers, representing an aggregate 127,157 square feet, are in Nashville, and both of those are anchored by Publix.

Key Developments Page at Reuters

APTS is currently paying a quarterly dividend of $.16 per share. Preferred Apartment Communities, Inc. Announces Third Quarter 2014 Common Stock Dividend Assuming a continuation of that rate, the dividend yield at a total cost of $8.75 is about 7.31%.

Since its IPO in 2011, APTs has raised its quarterly dividend several times, starting with a $.125 dividend rate in 2011. (APTS) Dividend Date & History

I left one mostly meaningless comment to a recent Seeking Alpha article on this REIT. I just wanted to point out that the apartment complex that APTs was acquiring in "Nashville" was in Gallatin, TN.

Last Earnings Report: Due to the recently announced proposed acquisitions, the company as configured, prior to the closings of those acquisitions, is not that important or predictive of future results.

Preferred Apartment Communities reported second quarter FFO of $4.091+M or $.25 per share. Normalized funds from operations was given at $.26 per share. AFFO was reported at $.21 per share. Same store rental revenues rose 4.3% during the quarter compared to the second quarter of 2013, while NOI increased by 6.99% on the same basis.

The company discussed recent proposed acquisitions in this earnings press release.

For apartments, the company is in the process of acquiring 1,397 apartment units in four geographic areas that it describes as Nashville, Kansas City, Dallas, and Houston. The total purchase price is $181.7M which is a huge bite for such a small REIT. That acquisition cost is higher than the current market cap.  I noted in a comment to a recent SA article that it is a bit of a stretch to call the "Nashville" acquisition as being in Nashville. As I mentioned in my comment to the SA article reference above, this apartment complex is near Nashville and may be inside what some would call the greater Nashville metropolitan market, but the address is 2325 Nashville Pike, Gallatin, TN. 37066. (see article about this acquisition in Multi-Housing News Online) That complex has 364 apartments and is located on 30.5 acres. It looks nice.

Google Map Showing Location of "Nashville" Apartment Complex: Stoneridge Farms At Hunt Club - Google Maps

Another apartment complex is near "Houston", but is actually located in Katy, Tx.: Vineyards Apartments - Google Maps;  Katy,TX | Vineyards Apartments

The two other apartment complexes appear to be:

Estancia Townhomes in Dallas- Google Maps

Sandstone Creek Living Overland Park, Kansas- Google Maps (just outside of Kansas City); Overland Park,KS | Sandstone Creek Apartments

The other recently announced proposed acquisition involves nine retail shopping cents mentioned above. Retail Shopping

Rationale: Assuming this REIT can obtain favorable financing for these proposed purchases, and can earn an accretive cap rate after raising the necessary funds (partly through a stock offering), then some capital appreciation and dividend increases can be reasonably anticipated in the future.

At the current quarterly rate, the dividend yield is about 7.31% at a total cost of $8.65.

Risks: One substantial risk involves all of the recently announced acquisitions. Those acquisitions will more than double the REIT's size and will have to be financed successfully. Whenever a company grows this fast, there is always some danger that it will grow too fast or grow too much at the wrong time.

Future Buys/Sells: I may average down in 50 shares lots, but I doubt that more than 50 more shares will be purchased in the IRA due to risk considerations. There could be a downdraft when APTS announces a share offering to help for the previously discussed acquisitions.

4. Added 10 VEA at $41.35 (see Disclaimer):

Snapshot of Trade: I am able to buy this low cost ETF commission free in my Vanguard brokerage account.

2014 Bought 10 VEA at $41.35
Security Description: The Vanguard FTSE Developed Markets ETF (VEA) is a broad ETF that owns foreign stocks in developed markets, excluding the U.S. and Canada (e.g. Europe, Japan, Australia)

The expense ratios is just .09%. Vanguard

Some of the Top Holdings as of 7/31/14:

I will not be discussing most of these small ETF adds. I now own 20 VEA and future buys will be in the 5 to 20 share range and will probably not be mentioned here.

Rationale and Risks:

European equities have become unpopular again. I would note that most of the top European holdings are multinationals. The exposure to Europe explains the poor performance from 2006 to present. Since I have no idea when Europe will start to meaningfully contribute to worldwide growth, I will be adding only small lots, spaced out in time. Eventually, European equities will play catch up with the U.S. My exposure to this stock asset class (foreign stocks ex-Canada) is really light now. I am substantially underweighted in Japanese and European equities.

Through 8/15/14, the fund had a YTD return of just 1.5% and 11.78% over one year. The three year annualized total return was 10.63%. Vanguard FTSE Developed Markets ETF (VEA) Total Returns The relative underperformance to U.S. stocks is one reason for nibbling. Over the same periods, SPY was up 6.95% YTD, 19.95% over 1 year, and a 19.99% and 16.53% annualized total return over three years and five years respectively. SPDR S&P 500 (SPY) Total Returns The five year annualized return for SPY was 7.86% better than VEA. That is huge as an annual difference and really mounts up over a five year period.

Future Buys: I will periodically add to this position in small lots. Generally, I will add a small lot to one of my commission free and low cost ETF positions whenever there is a 1% or greater daily decline, preferably when the purchase would lower my existing average cost per share.

5. Added 100 CSG at $7.855 (see Disclaimer):

Snapshot of Trade:

Security Description: Chambers Street Properties (CSG) is a self-administered and internally managed REIT that focuses on acquiring, owning and operating net-leased industrial and office properties. A net lease requires the tenant to pay rent and expenses normally paid by the property owner including real estate taxes, insurance, maintenance, repairs and/or utilities. A single net lease will require the tenant to pay property taxes. A double net lease adds insurance costs to the tenant's obligations. In the triple net lease, the tenant is responsible for all costs normally paid by the owner. The rent would of course be lower than in a standard lease agreement for the same property.

Chambers owned or had a majority interest in 129 properties, including those owned in joint ventures, containing 35.9M rentable square feet (as of the day of my last purchase). Overview | Our Portfolio | Chambers Street Properties Those industrial and office properties are located in 20 states, Germany, the U.K. and France.

2nd Quarter Fact Sheet: CSG-pdf (more than 54% of the tenants are investment grade, with Amazon at 9.8% )

I just look at the pictures, mostly office and industrial properties. Properties | Our Portfolio | Chambers Street Properties

Chambers Street Announces Investment Grade Issuer Rating

Prior Trades: Item # 3 Bought  100 CSG at $7.73 (April 2014)Roth IRA: Bought 50 CSG at $7.65 (December 2012)Item # 2 Bought: 150 CSG at $8.4 (November 2012);

Brad Thomas wrote an article about CSG that was published at Seeking Alpha (4/1/14).

Recent Earnings Report:

The occupancy rate (same store) was at 95.6% as of 6/30/14, down slightly from 95.8% as of 6/30/13.

2014 Second Quarter Supplemental Information.pdf

2014.06.30 8-K PR Earnings Press Release

Earnings Call Transcript | Seeking Alpha

Rationale and Risks: The payout ratio is improving, as shown in the preceding snapshot.

Dividends are paid monthly. I am reinvesting the dividends to buy more shares currently.

The current valuation is reasonable at P/FFO of 11.55 based on the 2014 estimate of $.68 and assuming a price of $7.86.

At the current monthly rate of $.042 per share, the dividend yield is about 6.41% at a total cost per share of $7.86. CSG Analyst Estimates

REITs generally have unimpressive dividend growth and will frequently cut their dividends during recessions. I would not expect much dividend growth from Chambers. The current rate has been constant since the October 2013 distribution.

FFO is estimated to be minuscule between 2014 at $.68 to $.7 in 2015 or just 2.94%.

A slightly better growth rate over the next 18 months, coupled with at least one small dividend boost, may be prerequisites for the share price to hit my first purchase price of $8.4 within 12-18 months. Based on the subsequent market action, I paid too much for that first 150 share lot, even though that price was down significantly from a $10 top back in June 2013. CSG Interactive Chart

Perhaps the market is wrong given the current yield and valuation in today's abnormally low interest rate environment.

Since 90%+ of the net income has to be paid out in dividends, cash is not being retained to grow the business. Share issuances are used to raise new capital.

Chambers has a number of short term mortgages on their properties. While the current rates are low, commercial mortgages are relatively short in duration and will need to be refinanced continually. Income generation can be hurt by higher refinancing costs.

As of 6/30/14, Chambers had the following liabilities listed at page 1 of its last filed 10-Q:

The maturity schedule of the $652.166M in secured debt can be found starting at page 17. Some of the higher cost mortgages maturing before 12/1/2015 are likely to refinanced at lower interest rates:

Partial List
What goes around, comes around. While near term debt is likely to be refinanced at lower rates, the already refinanced mortgages may easily have to be refinanced at higher rates when they mature.

The unsecured loan facilities are priced at a spread to Libor:

At some point, it might be wise to de-emphasize that kind of lending in exchange for longer term fixed coupon debt.

Investors have a tendency to view REITs as bond substitutes. Consequently, the price will frequently be driven down when interest rates rise.

The company details risks factors starting at page 5 of its 2013 Annual Report: 2013.12.31 10-K

6. Bought Back 100 ARCP at $12.88-Regular IRA (see Disclaimer):

Snapshot of Trade:

Security Description: American Realty Capital Properties (ARCP) is a REIT that owns single tenant, free standing commercial real estate that is net leased to corporate tenants that are "primarily" investment grade. The IPO for this company occurred in September 2011.

Company Website: American Realty Capital Properties

A map showing the properties can be found at American Realty Capital Trust. In Tennessee, the company owns 47 properties that are leased to such companies as Wendy's, IHOP, Walgreens, Dollar General, Hardees, and FEDEx.

Dividends are paid monthly: Dividends | American Realty Capital Properties

Link to recent Seeking Alpha discussing recent developments and the last earnings report.

Since my last discussion, ARCP closed its acquisition of "approximately" 500 Red Lobster restaurants in a sale-leaseback transaction. I thought the use of approximately in this context was somewhat humorous. Does it mean that ARCP does not know the precise number of restaurants that it purchased and leased-backed to Golden Gate Capital which acquired those stores from Darden Restaurants Inc. (DRI). ARCP asserts that the transaction was completed "at a cash cap rate of 7.9% and a GAAP cap rate of 9.9%". The weighted average lease of this portfolio is in excess of 24 years, with the master leases including "2% annual compounded contractual rent escalations".

As I have noted in several comments at Seeking Alpha, I did not care for the large share issuance at $12 which occurred shortly after I bought a 300 share lot at $12.74. The President had asserted unequivocally in February 2014 that such a large issuance at that price would not happen.

Prior Trades: I currently own 300 shares in a taxable account: Item # 7 Bought 300 ARCP at $12.69

I have bought and sold 100 ARCP in an IRA account: Item #10 Sold 100 ARCP at $13.35 (5/17/14 Post)(profit snapshot=$45.07)-Item # 4 Bought 100 ARCP at $12.74-Roth IRA (12/31/14 Post)

Related Trades: I have bought and sold out of my position in the American Realty Capital Properties Inc. 6.7% Cumulative Preferred Series F Stock (ARCPP)

Item # 9 Sold 50 ARCPP at $23.75 (6/7/14 Post)(profit snapshot=$107.22)-Item # 1 Bought ROTH IRA 50 ARCPP at $21.33 (2/13/14 Post)

Item # 7 Sold 100 ARCPP at $23.43 (5/10/14 Post)- Item # 2  Bought 100 ARCPP at $22.76 (4/15/14 Post)(profit=$51.04)

Recent Earnings Report: I thought that this report justified a repurchase of the 100 shares previously sold in an IRA account. For the 2014 second quarter, American Realty Capital Properties reported AFFO per share of $205.3M or $.24 per share and established a "pro forma" AFFO run rate at year-end of "$1.18-$1.2" per share. Portfolio occupancy was reported at 99.8% with a weighted average lease term of 12.2 years. The total number of properties was 4,429 occupying 99.1M square feet. Investment grade tenants, based on revenues, were at 46%.

ARCP 6.30.2014 10-Q

Rationale and Risks: Assuming ARCP hits its forecasted 2014 AFFO number, the valuation is reasonable.

Dividends are paid monthly which is always a plus.

The current dividend rate is $.08333333 per share. ARCP Dividend History

Assuming a continuation of that rate, the dividend yield is about 7.76% at a total cost of $12.88 per share.

I am still not going to get too enthusiastic about this stock.

The then CEO Nicholas Schorsch told investors in February 2014 that ARCP would not sell stock at $12 (page 7 Earnings Call Transcript | Seeking Alpha: "We said we weren't going to see equity no matter what anybody said at $12") In May, ARCP sold 120M shares at $12. SEC Filed Press Release  That creates a serious trust issue, at least for me.

JMP Securities gave several reasons for downgrading ARCP back in May 2014 including his dismissal from American Financial Realty Trust in 2006. I explored that history in detail before that Forbes article was published in my SA comments. I am naturally weary of real estate wheeler dealers.

Forbes ran a negative article about Schorsch last June, going into his past history.

The share price has not done much since the IPO at $12.5. Prospectus

A scathing letter was sent to ARCP by the hedge fund Marcato Capital Management back in June, and I agreed with many of their criticisms.

In the last election, a unusually large number of votes were withheld from several directors, indicating institutional dissatisfaction with the company. SEC Form 8-K

The company discusses risks incident to its operations starting at page 14 of its last SEC filed Annual Report. ARCP 12.31.2013 10-K

Link to ARCP SEC Filings: EDGAR 

Future Buys/Sells: I will not buy more ARCP. My next trade would likely be a 100 or 200 share pare of the 300 share position held in a taxable account.

7. Bought 50 AFSIPRB at $24.79 (see Disclaimer):

Snapshot of Trade:

2014 Bought AFSIPRB 50 Shares at $24.79

Quote Before Trade:

The yield information is incorrect. This security had its IPO during the quarter and the dividend rate of $.3726 is the rate for a partial quarter. The entire quarterly rate will be $.453125 per share ($25 x. .0725=$1.8125 annually per share dividend by 4 quarters=$.453125 per share).

Security Description: The AmTrust Financial Services 7.25% Non-Cumulative Preferred Series B Stock (AFSI.PB) is an equity preferred stock that pays qualified and non-cumulative quarterly dividends at the fixed coupon rate of 7.25% per annum on a $25 par value.


The prospectus contains a typical "stopper" clause that is the legal means for enforcing the preferred shares preference right to income compare to "junior" securities which means common stock in this case.

Page S-26 Prospectus
The issuer has the option to call at par plus accrued dividends on or after 7/1/19.

The issuer is the controversial AmTrust Financial Services (AFSI) who has been criticized and questioned about its accounting practices. Several of those articles were written by The GeoTeam who has a long position in AFSI puts. Barron's has also published a negative article.

AFSI Key Statistics (forward P/E 8.47)

Consensus E.P.S. Estimates: $4.89 (2014) and $5.27 (2015)

This security is not rated.

Prior or Related Trades: None

Recent Earnings Report: AFSI 2Q Earnings Press Release

AFSI 6.30.2014 10Q

Link to discussion of this earnings report.

Rationale: The only reason to invest in this security is to generate income. This preferred stock pays qualified and non-cumulative dividends.

At a total cost of $24.79 per share, the dividend yield is about 7.31%.

This security went ex dividend on 8/27/14 after my purchase.

Risks: The company discusses risks incident to its operations starting at page 38 of its 2013 Annual Report: AFSI 12.31.2013 10K I do not have the training or the background to render any opinion about the merit of the accounting issues raised by The GeoTeam.

As a general rule of thumb, I will buy an equity preferred stock issued by a leveraged financial institution knowing that the security would likely become worthless in a BK, just like the common stock.

Future Buys/Sells: I will need an 8% yield to average down. I will consider making that purchase in an IRA account for its income generation. Given the accounting issues raised by others, I will not be adding more than another 50 shares. A more likely outcome is that I will simply flip this 50 share lot after collecting one or more dividends, shooting for a total return of 8% to 10%.

8. Sold 100 SSRAP at $13.4 (see Disclaimer):

Snapshot of Trade:

Snapshot of Loss:

2014 SSRAP 100 Shares -$400.93

Bought 100 SSRAP at $17.25 (TC-Underlying Bond from Sears Acceptance)(December 2010 Post)

I had a positive total return given the annual interest payments of $181.26:

2013 Interest Payments:

The total interest paid was $634.41 resulting in a total return of just +$233.48.

Related Trades: I have successfully trades a Sears Acceptance secured bond maturing in 2018, but will stay away from that one going forward. SOLD 3 Sears 6.625% Senior Secured Bonds Maturing in 2018 at 95.002-ADDED 2 Sears Holding Senior Secured 6.625% Bonds Maturing 10/15/2018 at $89.75Bought 1 Sears Holding 6.625% Senior Secured Bond Maturing 10/15/2018 at 83.25 That bond is currently rated B- by both Moody's and S & P.

I do currently only one of the Sears 2018 secured bond, and would sell it when and if I see a buyer willing to take just one.

I have never owned the common.  SHLD Interactive Chart

Security Description: The MS Structured Asset Corp. SATURNS Sears Roebuck Acceptance Corp. Deb Bkd Series 2003-2 Cl A-1 (SSRAP) is an Exchange Traded Bond in the Trust Certificate legal form of ownership. The underlying bond is an unsecured senior Sears bond maturing in 2032.

Underlying Bond Prospectus: SEC

SSRAP Prospectus

When I sold this security, the underlying bond was rated Caa2 by Moody's according to FINRA.

Sears reported a $573M loss for its F/Y Q/E 8/2/14. Adjusted EBITDA was a negative $313M. The consensus E.P.S. estimate for the current fiscal year is -$9.5.  SHLD Analyst Estimates. The company has been spinning off its better assets depriving bondholders of future claims on the profit producing assets. Seeking Alpha (see also article in TheStreet discussing this latest dismal report)

Rationale: I gave up on Sears surviving to pay off this note. In addition, I have already booked a lot of gains this year, and this loss will reduce my tax bit some.

Monday, August 25, 2014

Update for Regional Bank, REIT and Lottery Ticket Basket Strategies/UBSI, NBTB, BDGE, BHB/Added to BHB at $26.34 and to UBCP at $8.08/Sold 100 CZNE at $19.52/Bought as LTs: 400 NZEOF at $.7, 30 QLGC at $8.92, 40 RAS at $7.63, and 40 OGZPY at $7.07/Sold as an LT 150 RSHYY at $1.94

Last Friday's Relevant Closing Prices for this Particular Post:

KRE: 38.96 +0.08 (+0.21%) : SPDR S&P Regional Banking ETF
VNQ: $76.75 -0.62 (-0.80%) : Vanguard REIT ETF
IWM: $115.21 +0.01 (+0.01%) : iShares Russell 2000 ETF
IWC: $72.82 +0.11 (+0.15%) : iShares Microcap ETF
TLT: $117.29 +0.65 (+0.56%) : iShares 20 Year Treasury Bond ETF
PFF: $39.87 0.00 ( iShares US Preferred Stock ETF
ROOF: $26.67 -0.13 (-0.49%) : IQ US Real Estate Small Cap ETF
SPY: $199.19 -0.31 (-0.16%) : SPDR S&P 500

The regional bank, REIT and lottery ticket basket strategies are updated on the last Monday of each month. The price shown in the following tables will be from last Friday.

Last Update: Update for Lottery Ticket, REIT and Regional Bank Basket Strategies/Sold 101+ BRKL at $9.53/Bought 50 LARK at $19.76, 100 SUSQ at $10.15, 50 UVSP at $18.8/Bought 50 ODP at $5.09 as a LT/CBU, BHLB, FFBC, WASH, FNLC, FMER, FISI, TRST, CCNE, HBAN, BPFH, NYCB, NPBC, WTBA, FNB, MBVT, UBCP

I frequently use a basket approach, particularly with industry sectors, that will vary in size as to the number of components. The focus will be on the total return of the basket, rather than individual components. Some of the advantages to this approach include diversification and risk mitigation. I am not concerned about a few mishaps provided other components are doing better than I anticipated when I made the initial purchase. As noted previously, I have been surprised by some of best and worst performers in the regional bank basket.

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, though I may occasionally buy one who does not fit those common criteria. Any technical analyst would most likely have a sell rating on the stock.

See 2004 Study by the Brandes Institute: "Falling Knives Around the World" 

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 substantially below my net realized gain number, so I currently have a lot of available capacity to expand this basket under this particular risk control rule.

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 to 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

There was one deletion since the last update. There were several additions discussed below.

Net Realized Gains: $14,068.09 

Click to Enlarge: 

Lottery Ticket Basket as of 8/22/14
Unrealized Gains over 30%:

AMOT +147.2%
AMOT reasserted its mojo and took a commanding lead over RFMD. AMOT reported second quarter E.P.S. of $.29, up from $.09 in the 2013 second quarter. Allied Motion Reports Record Results for the Quarter Ended June 30, 2014 AMOT Closing Price 8/14/14: AMOT: $15.24 +$3.10 (+25.54%)

RFMD +121.2%
FCE/A +72.56%
Possibly, Forest City is setting up for a long term break out. Hard to say. FCE-A Interactive Chart

AWCMY +58.99%
ING +49.98%
FCF +44.33%
ZAGG +34.05%
ZAGG is a new addition and rose after a better than expected earnings report. ZAGG Inc Reports Second Quarter 2014 Revenue of $50.2 Million, GAAP EPS $0.03

Iridium Communications almost made the cut for a snapshot at +29.8%.

A. Bought 30 QLGC at $8.92 (see Disclaimer): 

Snapshot of Trade: 

2014 Bought 30 QLGC at $8.92
I previously bought this stock as part of the LT basket strategy: Sold LT Basket: 30 QLGC at $11.7 (8/26/13 Post)-Bought 30 QLGC at $8.83.

QLGC was one of many Nasdaq bubble stocks in the 1999-2000 period, as I noted when I first purchased 30 shares as an LT. Asinine does not describe the insanity when the stock price hit a 290 P/E. QLGC Interactive Chart The share price went from $2 in 1998 to $78 in February 2000, adjusted for four 2 for 1 stock splits, and then quickly turned on a dime and plunged to $11 by March 2001. Since the investors sobered up, the stock has been moving mostly in a $10 to $20 range since 2001.

On the day of my purchase, QLGC fell some after being downgraded by Barclays to equal weight from overweight, with the target price reduced to $13 from $10. TheStreet This downgrade occurred after the stock had already experienced a sharp decline from $12.97 in early April 2014: QLGC Interactive Chart At the time of my purchase, the shares were trading below the 50 and 200 day SMA lines, which is standard for LT selections. I am focusing on falling knives, as noted above, and the chart will almost never say buy me.

Closing Price for Monday 8/4/2014: QLGC: $8.94 -0.18 (-1.97%)-Bought 30 QLGC at $8.83 (12/2012 Post)

This purchase was made without any meaningful understanding of QLogic's products and was based on statistical criteria, including the following:

QLGC Key Statistics at a $8.94 Price
Forward P/E F/Y 3/30/16: 9.22
P.E.G. 5 Year Estimate: .47
P/S Ratio: 1.71
P/B Ratio: 1.14
Cash Per share: $2.85
Total Debt: Zero

SEC Filed Earnings Press Release for Q/E 6/29/14

Form 10-Q for Q/E 6/29/14 (page 1 balance sheet: cash at $60.882M and marketable securities at $189.532M)

Last SEC Filed Annual Report: 10-K

Company Website: QLogic

QLogic Profile Page at Reuters

QLogic Key Developments Page at Reuters

Closing Price Last Friday: QLGC: $8.90 -0.11 (-1.22%)

B. Bought 40 Gazprom at $7.065 (see Disclaimer): I bought the ADS shares traded on the pink sheet exchange. Gazprom OAO (OGZPY). As a reminder, I will not go to a Russian website to read an earnings report, so I have not actually read Gazprom's recently release second quarter report.

1 ADS=2 Ordinary Shares

Snapshot of Trade: 

Gazprom is a major oil and natural gas producer. It operates Russian's Unified Gas System. Gazprom has been in the news lately in its collection dispute with the Ukraine. A story in Bloomberg noted that the brokerage firm VTB predicts Gazprom may cut its dividend by up to 44% due to that collection problem. First half profits declined 38% to $4.3B or RUB155B.

Earnings Call Transcript | Seeking Alpha

Gazprom supplies natural gas to Western Europe with pipelines running through the Ukraine, which creates other significant risks other than the Ukrainian collection issue. Gazprom reported a loss shortly after my purchase based on $5B in uncollected debts. Reuters

Gazprom OAO (GAZP.MM) Key Developments Page at Reuters

Assuming some satisfactory outcome for the current crisis involving Russia and the Ukraine, which is questionable, the major long term problem with Gazprom is its home country, a lawless state run according to the whims of a former KGB colonel. If Russia had an independent judiciary and a free press, which is not the case now or for the foreseeable future, Gazprom's stock would probably be priced four or five times higher than its current quote.

There are multiple reasons for classifying this purchase as a Lotto.

Bloomberg calculates the P/E based on estimated 2014 earnings at 2.65, based on the 8/14/14 close of USD$7.27. That number might not be updated with Gazprom's second quarter results. The estimated P.E.G. ratio was then .7383. The indicated dividend yield at that price was 5.47% with the ex-dividend occurring on 7/15/14. The dividend is paid annually. As mentioned above, I would reasonably anticipate a significant dividend reduction next year.

When I started to write this section on 8/14/14, the ordinary shares closed at RUB131.41 or RUB262.82 per ADS share: GAZP.ME: 131.41 +0.41 (+0.31%) That translated into USD$7.2948 on 8/14/14. Currency Converter

Closing Price Last Friday: OGZPY: $7.45 -0.14 (-1.78%)

C. Bought 400 NZEOF at $.7 (see Disclaimer): I bought the ordinary shares for New Zealand Oil and Gas traded on the U.S. pink sheet exchange and priced in USDs. New Zealand Oil & Gas Ltd. (NZEOF)

Snapshot of Trade:

New Zealand Oil and Gas Ltd (NZO.NZ) Profile Page at Reuters

New Zealand Oil and Gas Ltd (NZO.NZ) Key Developments Page at Reuters.

Company Website: New Zealand Oil & Gas.

The company is paying a dividend, but the amount is erratic. Two semi-annual payments of NZ3cents per share were made in 2013. One NZ three cent per share payment was made earlier in 2014. New Zealand Oil & Gas dividends Assuming a continuation of an annual NZ 6 cents per share, and the same conversion rate prevailing on 8/14 (of course it fluctuates), then the dividend yield with those assumptions before the NZ withholding tax would be about 7.14% at a total cost of USD$.7.

This purchase was based primarily on the information contained in this Seeking Alpha article. I left a comment.

Last Quarterly Report: (cash balance as of 6/30/14 at NZ$135.1M)

Closing Price Last Friday: NZEOF: $0.6850 -0.0050 (-0.72%)

D. Bought 40 RAS at $7.63 (see Disclaimer): I discussed RAIT Financial in my last weekly, published last Saturday, in connection with the purchase of RAIT's senior exchange traded bond RFT. Item # 5 Bought Roth IRA: 50 RFT at $24.28

As noted in that discussion, RAS had a near death experience during the Near Depression period, as reflected in the stock price chart. Adjusted for a 1 for 3 split, the share price went from a 2007 high near $103 to $2.5 in February 2009. RAS Interactive Chart A picture can be worth a book of words.

When I see that kind of action, I will characterize any purchase as a Lotto only.

Snapshot of Trade:

RAIT Financial Trust (RAS) Profile Page at Reuters

RAIT Financial Trust (RAS) Key Developments Page at Reuters

Company Website: RAIT Financial Trust

The company is currently increasing its quarterly dividend after slashing it from a 2007 high of $2.52 to a low of $.06 by 2011. So, it would be fair to say that this is not a dividend growth story, even though RAIT has increased the quarterly rate from $.06 to $.18 for the last payment. Dividend History-RAIT Website

For the 2014 second quarter, RAIT reported a 41.2% increase in CAD to $.24 per share. SEC Filed Press Release

As of August 4, 2014, RAIT owned 7,269,719 million shares of IRT, an apartment REIT. Page 32 Form 10-Q

I currently own 150 shares of Independence Realty Trust (IRT)

Bought 50 IRT at $8.17-Roth IRA/ Bought:  100 IRT at $8.87 (1/28/14 Post)

Closing Price Last Friday: RAS: $8.06 -0.01 (-0.12%)

E. Sold 150 RSHYY at $1.936 (see Disclaimer)

Snapshot of Trade:

Snapshot of Profit:

2014 Sold 150 RSHYY +$44.09 
While admittedly $44.09 does not sound like much now, it does represent an 18.5% return on my investment in about 4 months. I also received a paltry dividend.

RB, who runs the LT strategy, does not need a reason to buy or to sell. To the extent that it might have had a reason, it may have had something to do with the latest developments in the Ukraine. NATO claimed that Russia moved its artillery units into Ukraine. NYT I was glad to see those trucks return to Russia. And, maybe Merkel can sweet Vlad into being nice for a change.

2. Update for REIT Common and Preferred Stock Basket:

This basket is starting to contract, primarily though preferred stock deletions under the current trading guidelines. The first publication of this basket was made on 3/5/14: Stocks, Bonds & Politics: Equity REIT Common and Preferred Stock Table as of 3/5/14

I am using a blended strategy of including both common and preferred stocks. I am not likely to add back preferred stocks until there is another meaningful correction in their prices.

Since my last update, I have bought and sold the following securities:

Sold Taxable Account: 30 DLR at $64.06, 30 EPR at $55.22-Ongoing Stock Allocation Reduction (8/9/14 Post)

Added 200 NWH_UN:CA at C$10.16/ Bought Roth IRA:  100 LXP at $10.64

I have included in the table a 100 share purchase of ARCP which has not yet been discussed.

Click to Enlarge:

REIT Basket as of 8/22/14
While it is too early to tell, I thought that it was noteworthy that VNQ declined by .8% last Friday as TLT rose .56%.

3. Update for Regional Bank Basket Strategy:

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

Snapshots of realized gains and losses can be found at the end of that post.

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.

Dividend Yields 5% or higher: Based on Total Cost
NYCB: 8.44%
UBSI: 7.66%
WASH: 7.56%
CZNC: 5.39%
FNLC: 5.38%
CBU: 5.15%
TRST: 5.1%
CCNE: 5.%

I am not tracking reinvested dividends in the following table. 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.

After a number of adds, I am now over my minimum $40,000 allocation after a bout of profit taking last year.

SPDR S&P Regional Banking ETF (KRE) Total Returns: 47.5% in 2013

I have not been impressed with several of the recent earnings reports from regional banks. Some of the banks discussed below have decent 2014 second quarter reports. While net interest margin has not contracted much, it is yet to show any expansion either for most banks. Chart: Net Interest Margin for all U.S. Banks - St. Louis Fed

One ETF will own several of the small cap regional banks and REITs that I own now or have owned in the past: PSCF | S&P SmallCap Financials Portfolio

In 2013, my dividend total from this basket totaled $1,932,93, up from $1,896.25 in 2012 and $1,660.57 in 2011. I will have to increase my current exposure in order to exceed the 2013 amount this year, given my light exposure for the first four months which was several thousand below the "minimum" level.    

Regional bank stocks are in a funk this year as interest rates started to go back down. One of the regional bank ETFs, KRE, closed at $40.61 on 12/31/13 and at $38.97 last Friday, but has closed as low as $36.84 this year (2/3/14). SPDR S&P Regional Banking ETF ETF Chart That ETF had worked its way back over its 50 and 200 SMA lines when I published the last update but has since fallen below those lines again. The KRE price is very close to its 50, 100 and 200 day SMA lines which have converged.

KRE SMAs as of Friday 8/22/14:
50 Day: $39.22
100 Day: $39.15
200 Day: $39.41

Without some negative event next week, I would anticipate a crossover to the upside for all of those lines.

The abnormally low rates benefited banks some when deposit yields were repriced down, but even 5 year bank CDs taken out in 2008 at higher rates have now matured, and the positive impact of that repricing is no longer present to any meaningful degree. 

Instead, the decline in rates for loans simply compresses net interest margin. When rates were rising last year, regional bank stocks were in an uptrend based on the common belief that higher intermediate and long rates would be a net positive for them, particularly when short terms were likely to remain near zero through mid-2015 and then rise slowly and modestly in 2016-2017. The rate spike starting last May impacted intermediate and long term rates. Short term rates remained anchored by ZIRP. 

I have used the downdraft in prices this year to add positions to my basket after selling into last year's strength.  

Realized Gains 2010 to Date: $16,204.75  (snapshots in Gateway Post)
Dividends Received 2010 through 2013=$6,623.72

Click to Enlarge:

Regional Bank Basket as of 8/22/14

Comparison Data From the St. Louis Fed:
Net Interest Margin for all U.S. Banks
Net Interest Margin for U.S. Banks with average assets under $1B
Net Interest Margin for U.S. Banks with average assets between $1B and $15B
Return on Average Equity for all U.S. Banks   (abbreviated to "ROE")
Return on Average Assets for all U.S. Banks (abbreviated to "ROA")
Nonperforming Loans (past due 90+ days plus nonaccrual) to Total Loans for all U.S. Banks (abbreviated to "NPL ratio")
Charge-Off Rate On All Loans, All Commercial Banks
Assets at Banks whose ALLL exceeds their Nonperforming Loans (I prefer a coverage ratio of  over 100% at the time of my initial purchase)(ALLL=Allowance for loan losses)

A. Bridge Bancorp (BDGE):
Bridge Bancorp reported core net income, which excludes securities gains and acquisition related expenses, of $4.5M or $.39 per share.

Net Interest Margin: 3.36%
Core Efficiency Ratio: 60.45% (prefer under 60%, but this is fine)
ROA: .8% ( prefer over 1%)
ROE: 9.84%
Core Return on Equity: 10.32% (excludes merger expenses & branch restructuring/securities gains)

The NPL and NPA ratios are excellent:

The coverage ratio of 716.8% is comforting.

The capital ratios are okay as of 6/30/14:

After selling my higher cost shares profitably, I currently own 109+ shares at an average cost of $19.05 per share (see snapshot at Item # 4  Pared BDGE Selling Highest Cost 56 Shares at $24.71) I have quit reinvesting the dividend, even though I can acquire shares at a 5% discount through a dividend reinvestment program.

I took this snapshot intra-day on 7/28/14 to show that the shares were then responding positively to this report, even though the market was trending down:

2014 BDGE Postition Intra-Day Price 7/29/14
Item # 1 BOUGHT 50 BDGE AT $18 (October 2011)Item # 4 Bought Back 50 BDGE at $19.65 (August 2012).

Some of the small fractional dividends resulting from pairing the overall position.

If the $1.92 consensus E.P.S. estimate proves prescient, BDGE Analyst Estimates, then BDGE is worth a hold. I can not say that the current price is justified by the $1.36 estimate for 2014. BDGE Analyst Estimates

Closing Price Last Friday: BDGE: $24.71 0.00 (0.00%)

B. NBT Bancorp (NBTB): NBT Bancorp reported second quarter core net income of $19.1M or $.43 per share, better than the consensus estimate of $.41. Core net income excludes the $11.2M net gain resulting from NBTB's sale of its ownership interest in Springstone, LLC and $2.9M in prepayment penalties associated with long term debt refinancing which is a positive longer term.

The capital ratios are okay as of 6/30/14:

I currently own 50 shares: Item # 2 Bought: 50 NBTB at $22.76 (2/17/14 Post)

Closing Price In Response to Earnings Report (7/29/14):  NBTB: $23.67 +0.68 (+2.96%)

2014 Consensus E.P.S.: $1.71
2015= $1.81
NBTB Analyst Estimates

The stock price recently broke its 50, 100 and 200 day SMA lines to the upside. NBTB Interactive Chart

Closing Price Last Friday: NBTB: $24.20 +0.11 (+0.46%)

At that price, and assuming the consensus estimate for 2015 is spot on, the forward P/E is about 13.37.

 NBT Bancorp Inc. (NBTB) Dividend Date & History -

C. United Bankshares (UBSI): United Bankshares reported second quarter net income of $33.2M or $.48 per share, up from $.44 in the 2013 second quarter.

Efficiency Ratio: 47.69%

The capital ratios are okay as of 6/30/14:

Closing Price In Response to Earnings Report (7/29/14): UBSI: $32.64 +1.32 (+4.21%)

United Bankshares, Inc. (UBSI) Dividend Date & History - (currently at a quarterly penny rate of $.32 per share)

I bought in 2009 and continue to own a 50 share lot: Bought 50 of UBSI at $16.56

At the current $.32 quarterly dividend rate, the yield is about 7.73% at a total cost of $16.56 per share and growing.

Closing Price Last Friday: UBSI: $32.70 -0.11 (-0.34%)

D. Bar Harbor Bankshares (BHB): Bar Harbor Bankshares reported net income of $3.9M for the second quarter or $.65 per share, up from $.54 in the year ago quarter. The estimate, generated by just one analyst, was for $.57.

The capital ratios are good.

BHB underwent a 3 for 2 stock split after I bought my 50 shares. Bought 50 BHB at $30 (2/10/12 Post).  Prior to rounding that lot up to 100 shares as discussed in the next item, I owned 75 shares as a result of that split with a total average cost per share of $20.11

BHB Key Statistics

Closing Price Last Friday: BHB: $26.95 -0.12 (-0.44%)

E.  Added 25 BHB at $26.34 (see Disclaimer): This was an average up. After receiving 25 shares in a stock split, I decided to round up to a 100 share lot. The numbers for the second quarter were good. The quarterly dividend rate is currently $.223 per share, up from $.1733 per share in 2009. NYSE Assuming a total cost per share of $26.34, and a continuation of that rate, the dividend yield would be about 3.39%.

Bar Harbor Bankshares Increases Quarterly Cash Dividend

Bar Harbor Bankshares Continues Its Stock Repurchase Plan

Bar Harbor Bankshares (BHB) is a bank holding company that owns the Bar Harbor Bank & Trust which has 15 branches on or near Maine's coast.

Branch Map:  Bar Harbor Bank & Trust

Snapshot of Trade:

2014 BHB Bought 25 at $26.34
BHB is a small bank and there is frequently a large bid/ask spread. On the day of my purchase (8/4/14), the shares traded in a $26.02 to $27 range and closed at $26.59, down $.1 for the day. My purchase at $26.34 or $.35 per share below the prior close or just enough of a downdraft to compensate me for the $7.95 commission on that 25 share odd lot.

Position Snapshot as of 8/4/14:

BHB 100 Shares Average Cost Per Share=$21.74
The last ex dividend date was on 8/13/14. I am not reinvesting the dividend.

BHB Interactive Chart

BHB navigated the recent Near Depression period well:

E.P.S. (unadjusted for 2014 stock split) / Non-Performing Loans to Total Loans (NPL ratio)
2007: $2.36 / .36%
2008: $2.63 / .7%
2009: $3.19 / 1.35%
2010: $2.65 / 1.95%

Any NPL ratio below 2% during that period would be excellent in my opinion. And, the dividend was raised every year during 2007-2010.

Source: Page 38, 2012 Annual Report: 10-K

Closing Price Last Friday: BHB: $26.95 -0.12 (-0.44%)

F. Sold 100 CZNC at $19.52- In A Satellite Taxable Account (see Disclaimer):

Snapshot of Trade:

CZNC Recent History:

Dividends: $77 (only 1 quarterly dividend on entire 100 shares; 4 quarterly dividends on first 50 share lot bought in 2013)

Snapshot of Profit:

2014 CZNC 100 Shares +$48.5 
Item # 7 Bought Taxable Account:  50 CZNC at $18.5 (5/17/14 Post); Item # 3 Bought 50 CZNC at $19.15 (June 2013 Post)

Total Return=$125.5

I had more success with an earlier 100 share purchase: Sold 100 CZNC at $16.53 (September 2011)(snapshot of realized gain $517.61)-Bought 50 CZNC at $11.77Added 50 CZNC at $10.46

While the dividend yield is good, I was not pleased with the last earnings report: SEC Filed Press Release E.P.S. for the 2014 second quarter was $.33, down from $.4 in the 2013 second quarter. NPAs grew to 1.44% from .8%.

Closing Price Last Friday: CZNC: $19.55 -0.03 (-0.15%)

G. Added 50 of UBCP at $8.08-In A Satellite Taxable Account (see Disclaimer)

Snapshot of Trade:

United Bancorp Inc.  (UBCP) is a bank holding company with a market capitalization of around $39M at the $8.08 per share price. Generally, the bid/ask spread is large and trading is sparse. On the day of my purchase, the spread shrank to $8.04B/$8.08A when I placed my order so I just entered a limit order to buy 50 at the ask price. My 50 share lot was part of the 1,841 share total.

UBCP operates through The Citizens Bank  and The Community Bank with 20 branches in Ohio.

As noted in my last update, UBCP had a good earnings report for the second quarter, relatively speaking for it and regional banks in general. E.P.S. rose to $.14 compared to $.1 a year ago. United Bancorp, Inc. Reports Quarterly Earnings up 40% ROA and ROE are well below average however:

The low ROA and ROE will keep my investment in this bank low and I will trade the position some.

I previously sold a 50 share lot for a small profit. Sold 50 UBCP at $10.05-Bought 50 UBCP at $8.49 With this last 50 share lot purchase, I have bought back those shares at almost 20% below my last sale's price.

I have been reinvesting the dividends paid by the remaining 100 share lot, which have purchased over 22 shares. With 172+ UBCP shares now, I will continue to reinvest the dividend and then look for an opportunity to sell my highest cost lot profitably. The highest cost 50 share lot was bought at $8.13 (October 2010). Bought: 50 UBCP @ $8.13

The current quarterly dividend is $.08 per share, which was recently raised from $.07.  United Bancorp, Inc. (UBCP) Dividend Date & HistoryUnited Bancorp, Inc. Declares its Third Quarter Regular Cash Dividend Payment Assuming a continuation of the $.32 annual penny rate, the dividend yield is about 3.96%.

Closing Price Last Friday: UBCP: $8.04 -0.01 (-0.13%)