Thursday, October 30, 2014

Added 50 SAN at $8.6

Big Picture Synopsis: No Change

Recent Developments: 

The Federal Reserve has finally decided to end QE3 effective this month. Federal Reserve issues FOMC statement--October 29, 2014 The Fed believes that "economic activity is expanding at a moderate pace" and labor "market conditions improved somewhat further". Labor market slack is "gradually diminishing". The FED anticipates that ZIRP will "likely be appropriate" for a "considerable time following the end of its asset purchase program this month". 

As of 10/22/14, the Fed's balance sheet was almost $4.2 trillion. System Open Market Account Holdings - Federal Reserve Bank of New York

The government estimated the 3rd quarter real GDP increased at an annualized rate of 3.5%, higher than the consensus estimate of 3.1%. Current dollar GDP increased by 4.9%. The price index for gross domestic purchases increased by 1.3% or 1.5% excluding energy and food. Real PCE increased by 1.8%. Disposable personal income increased $126.4 billion or 4%. Personal saving was $720.7 billion in the third quarter, with a 5.5% personal savings rate.  Real final sales increased by 4.2%, higher than the 3.2% pace in the second quarter. News Release: Gross Domestic Product

1. Added 50 SAN at $8.6 (see Disclaimer): 

My position in the SAN common shares are viewed as a long term contrarian investment for the reasons stated in prior posts.

I have one reader who will focus all of their comments, either here or at SA, on an investment that does not immediately pan out, making what I would generally characterize as gratuitous drive by hits. Nothing is ever said about those that work soon after purchase or over the long term. Any comment that thanks me for the effort put into these posts would be totally inconsistent with that person's character.

As I have noted in the past, I am fine with jerks ceasing to read my posts altogether and to vent their life's frustrations elsewhere. 

Snapshot of Trade: 

Closing Price on Date of Trade: SAN: $8.64 -0.22 (-2.48%)

The ordinary shares are priced in Euros and trade in Madrid. The price had closed a €6.86 on 10/29. 

Company Description: I recently discussed this company when I bought a 50 share lot. Item # 2 Bought 50 SAN at $9.73 (9/6/14 POST). I would just refer anyone interested to that post. 

I am reinvesting the dividend to buy more shares which avoids Spain's withholding tax. 

Banco Santander S.A. ADS (SAN) went ex dividend for its quarterly distribution on 10/15/14.  That dividend will be paid on 11/13/14. 

NASDAQ shows the total dividend paid in 2014 at $.80577 per SAN share. At that rate, the dividend yield is about 9.37% at a total cost of $8.6 per share.  

This last purchase was made when the stock had pierced its 50 SMA line to the downside. The stock also trading well below its 200 day SMA line which was then near $11.17. SAN Interactive Chart

The ordinary shares are priced in Euros. The Euro has been declining in price against the USD for several months. EURUSD 

Part of the SAN price decline can be attributable to that currency issue, as shown in this 6 month chart comparing ES:SAN (ordinary shares traded in Madrid and priced in Euros) and the ADS SAN priced in USDs. I am using the Marketwatch symbol for the ordinary shares here.  

The decline in the Euro will flow through into the price of the NYSE listed SAN shares causing them to underperform the Euro priced ordinary shares. 

There really has not been any negative news, specific to Santander, that would have caused the ordinary share price decline. SAN.MC Interactive Chart The chart does appear to have formed a double top formation near €7.9. 

My take on Santander is that there is long term recovery potential. The non-performing loans were still hovering over 5% as of 6/30/14, 2Q2014 Results: Santander made a profit of EUR 2.756 billion, 22% more than the first half of 2013. The next earnings report is scheduled for 11/4/14. The consensus SAN E.P.S. for the 2014 third quarter is €.12 per share, up from €.10 in the prior year. I retrieved that estimate from a Dow Jones news release out of Frankfurt, Germany dated 10/29/14. Most of the estimates originate from foreign brokerage firms and banks.     

Bloomberg Data (2014 E.P.S. estimate at  €.48 as of 10/29 or about $.60651) 

When I last bought shares, the 2014 consensus E.P.S. estimate was $.62 and is now 1 cent lower after rounding the USD number. SAN Analyst Estimates The current 2015 consensus estimate is for $.78, down from $.8 when I last discussed a SAN share purchase. 

SAN Filings With the SEC

Related Trades: I have done well with SANPRB, a floating rate preferred stock.

I have realized $900.26 trading that equity preferred floater in small lots. (snapshots in Sold Roth IRA: 50 SANPRB at $20.41; Item # 4 Added 50 SANPRB at $18.24 (sold); and in the Gateway Post Advantages and Disadvantages of Equity Preferred Floating Rate Securities)

I currently own 80 SANPRB shares: Bought: STDPRB at $13 (August 2011)(symbol later changed to SANPRB); Added 50 STDPRB at $15.44 (November 2011)

Santander Finance Preferred S.A. Unipersonal Floating Rate Gtd. Pfd. Series 6 Stock (SAN.PB:NYSE) 

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