Friday, November 21, 2014

Bought 300 WFREF at $2.6932/INTC, IRT, FISI

Big Picture: No change

Stable Vix Pattern (Bullish):

Recent Developments:

CPI was unchanged on a seasonally adjusted basis in October. Core CPI rose .2%. Over the past year, CPI has increased 1.7% on a non-seasonally adjusted basis. Consumer Price Index Summary

The Philadelphia FED reported that manufacturing "general activity" index exploded upward from 20.7 in October to 40.8 this month. The new orders index increased by 18 points to 35.7. November Manufacturing Business Outlook Survey

China's central bank lowered interest rates that sent stocks up worldwide. MarketWatch

The European Central Bank promised to do what it takes to create inflation. MarketWatch

I thought that the later two developments might help oil stock to move up, so I added a junior E & P in my Flyer's Basket as discussed below. 

Independence Realty (IRT)(own)

Independence Realty Trust sold 6M common shares at $9.6, with an over allotment option granted to the underwriters for another 900,000 shares. Prospectus I currently own 150 shares as part of my REIT Basket Strategy. Bought 50 IRT at $8.17-Roth IRA/Bought: 100 IRT at $8.87 (1/28/14 Post). The price difference in those two purchases was caused by a public offering occurring after the 100 lot purchase.

I realized last Thursday that I owned 200 shares of IRT rather than 150. This is becoming a more frequent occurrence. The snapshots in the preceding link are from my Fidelity Roth IRA (1/24/14) and main taxable accounts (1/17/14). I has completely forgotten that I had bought 50 IRT in a Vanguard Roth IRA on 1/23/14.

Vanguard Roth IRA History for IRT

So, I have corrected the information contained in the REIT Basket table to reflect 200 IRT shares.

The market did not care for this stock offering.

Closing Price 11/20/14: IRT: 9.40 -0.49 (-4.95%)

Financial Institutions (FISI)(own):

Financial Institutions (FISI) increased its quarterly dividend to $.20 per share from $.19. I own 100 shares as part of my Regional Bank Basket Strategy. Item # 2 Bought 50 FISI at $15.55 (4/17/12 Post); Added 50 FISI at $18.8 9/30/13 Post

I flipped a 50 FISI share lot and then bought back the 50 shares at lower price ($18.8 noted above vs. $19.8 noted below-small ball): Item # 5 Sold 50 of 150+ FISI at $21.26 (11/11/13 Post)(profit snapshot=$59.15)-Added 50 FISI at $19.8 (8/26/13) 

The dividend yield at a total cost of $17.15 (the average of the two purchases) is about 4.66% after this increase.

Intel (INTC)(own):

I am not too happy now with my pares earlier this year which did net me a nice profit. Item # 7 Pared Intel Again: Sold 40 at $24.61 (March 2014); SOLD: 41 INTC at $26.73 (January 2014)Pared Intel: Sold 42 at $23.64 and 45 at $25-Highest Cost Shares The total profit was $889.82.

I left more than that profit on the table by losing my patience.

Last Thursday, Intel increased its dividend by 6.7% and gave upbeat guidance. Intel Announces Increase in Quarterly Cash Dividend, 2015 Business Outlook at Annual Investor MeetingReuters;

The shares responded with a new 52 week high and the highest close since 2001. Bloomberg

Closing Price 11/20/14: INTC: $35.95 +$1.60 (+4.66%) 

My total average cost per share is down to $15.52:

Intel Position as of 11/20/14 Close
The new quarterly rate is $.24. At that rate, my dividend yield becomes 6.19% at my total average and constant cost number.


1. Bought 300 WFREF at $2.6932 ("The $500 to $1,000 Flyers Basket Strategy)(see Disclaimer): After doing my due diligence, I classified this stock as part of my Flyer's Basket Strategy that limited my purchase to no more than $1,000.

I have not yet decided whether to build a basket containing energy E & P companies. To qualify as a sector basket strategy, I have to own more than 10 stocks, and I will generally cap my exposure at $5,000 for each component. I am over that amount with my current position in COP. Bought:  50 COP AT $63.68 /Sold 100 HUSKF at $29.39 (2/10/14 Post); Bought 50 COP at $68.87 (1/13/14 Post)

One of my sector baskets will generally have anywhere from 20 to 40 stocks:

Stocks, Bonds & Politics: Update for Regional Bank Basket Strategy/FNFG: A Case Study In Value Destruction/Added 50 ONB at $12.45/Sold 100 TRMK at $24.45

Stocks, Bonds & Politics: Update for Equity REIT Common and Preferred Stock Basket Strategy/OHI Earnings Report and Dividend Increase

Snapshot of Trade: 

2014 Bought 300 WFREF at USD$2.6932
Company Description: Long Run Exploration Ltd (WFREF) is a small Canadian energy E & P company.

I bought the ordinary shares traded on the pink sheet exchange using USDs. I have built up my CAD stash by selling several Canadian securities on the Toronto exchange. I will generally refrain from buying small positions on the Toronto exchange since my commission rate is C$19 compared to USD$7.95 when buying on the U.S. pink sheet exchange.

Quote Ordinary Shares Price In USDs: WFREF (the last letter in that symbol indicates that the investor is buying the ordinary shares rather than an ADR)

Quote Ordinary Shares Priced in CADs: LRE.TO

Currency Conversion Table:

This company appears to me to have more exposure to oil and natural gas liquids than Birchcliff, which I discussed yesterday. Natural Gas Super Cycle: Bought 100 Birchcliff Energy Ltd. At $9.7547 -Birchcliff Energy Ltd. (OTCMKTS:BIREF) | Seeking Alpha

Home - Long Run Exploration

The company has been on an acquisition binge lately.

In August, Long Run Exploration completed the acquisition of Crocotta for C$346.9M in stock.

In May 2014. the "Deep Basin Acquisition" was completed for C$228.8M that provides "a key entry point into an additional core area in the Deep Basin and Pine Creek areas of Alberta". The "acquisition properties are currently producing approximately 6,600 BOE/d (25% oil and NGLs)". Press Release

Long Run has a "dominant land position of 600,000 net acres in the Peace River Area. This is the highest producing area with approximately 10,000 BOE/d consisting of 4,000 bbl/d oil, 200 bbl/d NGLs and 35 MMcf/d of natural gas.

The Edmonton Area properties in central Alberta "include high-netback, light-oil". The primary target area is now producing 6,243 BOE/D, consisting of 5,410 bbl/d oil + NGLs (natural gas liquids) and 5MMcf/D of natural gas. The company has plans for 150+ future development wells which it claims will yield a "98% rate of return, 1.1 year payout, 2,9x recycle ratio with a low on-stream capital cost of 1 million".  

The Northern Gas play is a 710,000 net acres asset that has "an immediate inventory of over 1,000 locations complemented by excellent infrastructure with spare capacity" Long Run notes, however, that this area's production "has an 8% decline", but "Long Run run has managed to maintain a flat production rate of approximately 20MMcf/d since acquiring the property in November 2011".

Bloomberg has the estimated P/E, based on projected 2014 earnings, at 6.68 based on a C$3.08 price. The estimated CAD E.P.S. is shown at $.461.

Dividend: The company is currently paying a monthly dividend of C$.035 per share, raised from C$.0335 effective for the June ex dividend date. Dividend Information - Long Run Exploration The next ex dividend date is 11/26/14. Press Release

Using a C$3.04 total cost per share, the dividend yield would be about 13.82%. As a general rule, I would never assume a continuation of a dividend producing that kind of yield.

Chart: The long term chart is one reason for classifying this stock as part of the Flyer's Basket and consequently limiting my exposure to less than $1,000.

On the one hand, there is nothing in that chart that provides solace.

On the other, the stock has not been cheaper after being smashed by the market during the recent energy rout, and the company has recently started paying a dividend.

Last Earnings Report: All amounts are expressed in Canadian Dollars. For the 2014 third quarter, Long Run reported diluted E.P.S. of $.23 up from $.15 in the second quarter. Fund flows from operations increased  29% Y-O-Y to $80.2M. The company averaged 34,795 Boe/d in production, a 38% increase from the 2013 third quarter.  2014 Q3 MDA Nov 5 Final.pdf

Rationale and Risks: The usual risks apply here. Long Run is a small E & P company that has increased its size dramatically this year. It remains to be seen whether the two acquisitions noted above will be justified by their cost. The chart suggests at a minimum a lack of enthusiasm for this stock and probably expresses other concerns as well. Those concerns, whatever they may be, may be mostly irrational or rational, only time will tell.

The company is rapidly accelerating its production and the valuation is reasonable based on estimated 2014 and 2015 earnings. The recently inaugurated dividend is welcomed by any investor who focuses on income generation, and I certainly fall into that category.

The price of the USD priced shares will be negatively impacted by a continued decline in the CAD/USD exchange rate. The CAD is rising some today:

CADUSD Interactive Stock Chart

The decline in the CAD since it topped out back in July 2011 (around USD1.06 for C$1) would cause the USD priced WFREF to significantly underperform on a price basis the ordinary shares priced in CADs. The reverse can also happen. A rise in the CAD vs. the USD after my purchase will cause the USD priced ordinary shares to outperform the ordinary shares priced in CADs.

I would just note that there are also some tax peculiarities when I buy and sell foreign securities using owned foreign currency. I just highlight one of those issues when I recently sold two Canadian REITs. SOLD: 300 HLP-UN:CA at C$14.17 and 300 AX-UN:CA at C$15.71 (9/26/14 Post)

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