Friday, April 14, 2017

Observations and Sample of Recent Trades- 4/14/17 (SGYP, TANNZ, TANNL, AGNC, VEA): Tax Cuts and Trumpcare

Tax Cuts and Trumpcare:

Trump says he has to do health bill before tackling tax reform - MarketWatch

That change calls into question the GOP's tax cuts.  

The republicans apparently can not agree on a tax package and need to drastically cut spending on healthcare in order to deliver corporate tax cuts. There would be no other reason to put tax reform after the passage of TrumpCare. GOP Healthcare Plan: Trumpcare Will Make the Rich Richer | Fortune.com The border tax, call it a tariff, was the linchpin for the corporate tax cut, and that tariff looks increasingly like a no go.

Trump aims to squeeze Democrats into health-care negotiations-MarketWatchTrump Threatens Coverage Of Millions If Democrats Won't Negotiate On ACA Repeal

The squeeze involves the government withholding premium support payments. The Democrats responded by linking funding to their votes on a debt limit increase. Dems link ObamaCare payments to shutdown fight | TheHillTrump Threatens Health Subsidies to Force Democrats to Bargain - The New York Times

The GOP believes that the continued funding is unconstitutional since Congress has not specifically approved funding for the premium support even though it is required under Obamacare. 

That issue is currently before the U.S. Court of Appeals for the District of Columbia after a republican District Court Judge ruled that premium support payments for low-and-moderate income families were being made illegally since the republicans in Congress had not authorized those payments. US House of Representatives v. Burwell, 130 F. Supplement 3d 53 - D.C. District Court

The District Court's order has been stayed pending appeal.

Trump has to decide whether to continue the appeal. If the government's appeal is withdrawn, the District Court's order enjoining payment would become effective, and Obamacare would probably collapse soon thereafter. Court Stays Cost-Sharing Reduction Payment Case, Giving Control To New Administration And Congress (Updated)United States House of Representatives v. Burwell (D.C. Cir.) | Constitutional Accountability Center Those losing coverage would know who to blame so that would be a high risk move by the GOP. 

Trump Blowing With The Wind

Trump Drops Campaign Promise by Saying He Won't Label China a Currency Manipulator - Bloomberg

Donald Trump flips on NATO, China, Russia and Syria - CNN

Remember Trump saying that he did not know that healthcare was so hard. He had another similar revelation about North Korea:


“After listening for 10 minutes (to China's President), I realized it’s not so easy. ... I felt pretty strongly that they had a tremendous power” over North Korea,  “But it’s not what you would think.” Highlights from President Trump's interview with the Wall Street Journal - ABC News
86% of republicans supported Trump's missile attack against Syria but only 22% supported the same strike proposed by Obama in response to another chemical attack. Ryan and McConnell flip-flop on use of force in Syria to deter chemical weapons - The Washington Post That is what I would expect.

Democratic support for Obama launching a missile attack against Syria was at 38% and 37% for Trump's missile attack. The question was the same in both polls.  Republican voters have flip-flopped on airstrikes in Syria - Axios; On Syria, 'reflexive partisanship' doesn't apply to both parties | MSNBC

DeVos Undoes Obama Student Loan Protections - Bloomberg

Trump on pace to surpass 8 years of Obama's travel spending in 1 year - CNN

Trump's Family Trips Cost Taxpayers Nearly As Much In A Month As Obama's Cost In A Whole Year

++++++++++++

Short Term Bond/CD Maturities:

As a result of the ongoing bond rally, I could not find any intermediate term bonds that I would buy yesterday. 

The ten year treasury note closed Thursday at a 2.24% yield. The yield was at 2.62% on 3/13/17. During that same period, the five year treasury has declined from 2.14% to 1.77%. Daily Treasury Yield Curve Rates

I started to build the intermediate term ladder last December and currently own $221K in bonds and CDs maturing between 4/1/20 through 12/31/26. A significant number of those purchases have not yet been discussed, and it will be a month or so before I discuss all of the purchases included in that sum. The short term bond/CD basket is considerably larger, and the instruments are maturing now.

As my short term bonds/CDs mature, the primary option now would be to buy more short term bonds and CDs given the compression in the yield spread. Over the past few weeks, shorter term treasuries frequently have frequently had higher YTMs than CDs, and I can purchase treasuries commission free in three brokerage accounts (Vanguard, Fidelity and Schwab).

Most of the proceeds from maturing short bonds and CDs will likely be reinvested at higher coupons into similar term instruments. If the FED raises the Federal Funds rate in June or July, that increase would slightly raise short term rates.

+++++

1.  Intermediate Term Bond Ladder Basket Strategy:


A. Bought 1 ERP Operating Partnership 2.85% Senior Unsecured Bond Maturing on 11/1/2026-ROTH IRA Account:


Issuer: ERP Operating Partnership 


General Partner of Issuer: Equity Residential  (EQR:NYSE)
EQR Page at Morningstar
Finra Page: Bond Detail (prospectus linked)
Credit Ratings of Operating Partnership Senior Unsecured Bonds: 
Moody's at Baa1
S & P at A-
Fitch at A -

YTM at Total Cost (95.028) = 3.461% 

I purchased this 2026 bond in a taxable account and discussed that purchase here (item #1.D.)


B. Bought 2 EPR Operating Partnership 3% Senior Unsecured Bonds Maturing on 4/15/23:

Roth IRA Account Purchase:
Issuer: See Above Discussion
FINRA Page: Bond Detail (prospectus Linked)
Credit Ratings: See Above

YTM at Total Cost (99.551) = 3.082%

Taxable Account Purchase:


YTM at Total Cost  (99.478) = 3.095%


C. Bought 2 FEDEX 2.7% Senior Unsecured Bonds Maturing on 4/15/23:




Issuer:  FedEx Corp. (FDX)

Finra Page: Bond Detail (prospectus linked)
FDX FedEx Corp Page at Morningstar
Credit Ratings:
Moody's at Baa2
Moody's assigns Baa2 rating to FedEx' new unsecured notes
S & P at BBB

YTM at Total Cost (98.795) = 2.919%


FDX Analyst Estimates

Fedex SEC Filings
Earnings Report for the Q/E 2/28/17


D. Bought 2 Georgia Power 3.25% Senior Unsecured Notes Maturing on 4/1/26:




FINRA Page: Bond Detail (prospectus is not linked)

Prospectus   
Credit Ratings:
Moody's at A3
Moody's changes Georgia Power outlook to negative, affirms at A3
S & P at A-

YTM at Total Cost (99.206) = 3.353%


Georgia Power is a wholly owned subsidiary of The Southern Company (SO). Moody's negative outlook "reflects the increased credit and regulatory risk facing the company due to the uncertain future of Westinghouse, the construction contractor building the new Vogtle nuclear units, and its parent company Toshiba "


Westinghouse has filed for bankruptcy. 

Westinghouse woes could raise power bills in Georgia, South Carolina | Reuters

As shown in the FINRA price chart, this bond traded at over 109 in June 2016. Interest rates started to move up last July. On 7/8/16, the ten year treasury yield was 1.37%. By mid-December the yield had risen to 2.6%: 2016 Daily Treasury Yield Rates

2. Short Term Bond/CD Basket Ladder Strategy:


A. Bought 2 Kroger 1.5% Senior Unsecured Bonds Maturing on 9/30/19:




Issuer: Kroger  (KR)

KR Page at Morningstar
Finra Page: Bond Detail (prospectus not linked)
Prospectus 
Credit Ratings:
Moody's at Baa1
Moody's upgrades Kroger to Baa1
FITCH at BBB
Fitch Rates Kroger's $1.75B Notes 'BBB'
YTM at Total Cost (98.717) = 2.027%


Kroger SEC Filings


KR Analyst Estimates


2016 4th Quarter Earnings Report


Last January, Kroger sold $1B in 4.45% senior unsecured bonds maturing in 2047: Prospectus.


B. Bought 2 Citizens Bank .95% CDs Maturing on 9/29/17:




3. Small Cap Biotech Lottery Ticket Basket Strategy:


A. Bought 50 SGYP at $4.52-Used Commission Free Trade:





SGYP Stock Quote - Synergy Pharmaceuticals Inc.

SGYP SEC Filings
Company Website: Synergy Pharmaceuticals

I initiated my first round trip by buying 50 shares: Item # 3 Bought 50 SGYP at $3.95-Update For Healthcare Basket Strategy As Of 8/12/16 - South Gent | Seeking Alpha.


When I bought that lot,  SGYP had filed a new drug approval application for Plecanatide (SP-304) for the treatment of idiopathic constipation. (7/15/16 Press Release: Synergy Pharmaceuticals Provides Update on Ongoing FDA Review of Plecanatide CIC NDA and IBS-C Clinical Development Program ("We remain optimistic about the potential approval of plecanatide in CIC by the PDUFA date of January 29, 2017.")


FDA approval was granted in January 2017. (Press Release Dated 1/19/17-Synergy Pharmaceuticals’ TRULANCE™ (Plecanatide) Receives U.S. FDA Approval for the Treatment of Adults with Chronic Idiopathic Constipation


The share price initially declined after the announcement: Historical Prices


SGYP needed money to launch this drug since it has no partner for it.


Synergy Pharmaceuticals issued a press release on 1/31/17 announcing a stock offering.


2/1/17: Synergy Pharma stock sinks 12.5% after announcement of common stock offering - MarketWatch


Synergy sold 20,345,204 shares at a public offering price of $6.15: Prospectus Before SGYP's expenses, the company netted $6 per share. At least I bought at below the $6.15 February public offering price. 


The company claimed to have received net proceeds of $121.6 after the underwriting commissions and its expenses. Synergy Pharmaceuticals Reports Fourth Quarter and Full Year 2016 Financial Results and Business Update The company sold stock at $3 per share back in May 2016.


Pipeline:




SGYP Presentation at Investor Conference on 1/15/17

SGYP Presentation at Investor Conference 3/21/17

This company needs to be acquired by a large pharmaceutical company. It has one compound that has received marketing approval for one indication and may receive approval for another, Irritable Bowel Syndrome with Constipation, as shown in the previous snapshot.


Synergy Pharmaceuticals Announces Positive Results in Second Phase 3 Trial of Plecanatide in Patients with Irritable Bowel Syndrome with Constipation (IBS-C)


SGYP has now filed a New Drug Application for that indication.

Synergy Pharmaceuticals Submits Supplemental New Drug Application (sNDA) for TRULANCE™ (Plecanatide) for the Treatment of Adults with Irritable Bowel Syndrome with Constipation (IBS-C)


The other compound in the hopper is Dolcanatide. This compound appears to be on the back burner.


The recently SEC filed 2016 Annual Report contains the same "going concern" admonition at page 15 of the 2016 Annual Report. I do not know whether the accountants will remove that admonition due to subsequent events including the stock offering.  


There are competing drugs in this space and an abundance of launch execution risks. And, even at a  $4.6 share price, the market capitalization is already slightly over $1B which will require plecanatide to be somewhat successful to justify that capitalization, let alone a significantly higher one.  


After my purchase, Citigroup downgraded SGYP to sell. That downgrade was discussed in this Seeking Alpha article.


There is also a large short position in SGYP that spiked in March: 24/7 Wall St.

Synergy's Safety Profile Should Boost Trulance Uptake, Takeover Prospects Remain Favorable | Benzinga


4. Continued to Pare Longer Duration and Risky Exchange Traded Bonds:


A. Sold 50 TANNZ at $25.65 ($1 Commission at IB):




Profit Snapshot: +$95.47





Quote: TravelCenters of America LLC 8% Senior Unsecured Notes Maturing on 10/15/30 (TANNZ)(formerly traded under the "TANP" symbol)

Prospectus (risk factors are discussed starting at page S-5 which include no financial covenants)
Issuer: TravelCenters of America LLC (TA)
TA Analyst Estimates
TA SEC Filings
TA 2016 Annual Report (long term debt discussed starting at page F-15)

I classify TANNZ as Exchange Traded Baby Bond. Par value is $25.


This bond was sold to the public in October 2015. Coming out of the gate, the price cascaded down to about $21.5.  TANNZ Stock Chart The bond is not rated but would IMO be well into junk territory if it was rated by Moody's or S & P. I am not into bonds with significant credit and interest rate risk presently. 


B. Sold Remaining 50 Shares of TANNL at $25.46-Used Commission Free Trade:  




Quote:  TravelCenters of America LLC 8% Sr. Notes Maturing on  12/15/29 (TANNL)


TANNL is another TravelCenters exchange traded senior baby bond. This one went ex interest for its quarterly distribution on 2/10/17.


Profit Snapshot: +$11.57



Prospectus

This baby bond was initially listed under the symbol TANO.


Item # 5. Sold 50 TANO in Roth IRA: Update For Exchange Traded Bond And Preferred Stock Basket Strategy As Of 3/28/16 - South Gent | Seeking Alpha (profit snapshot=+$55.47)- Item # 2. Bought 50 TANO at $23.2-ROTH IRA: Update For Exchange Traded Bond And Preferred Stock Basket As Of 12/18/15 - South Gent | Seeking Alpha


I sold the other 50 share lot at $25.53 on 2/24/17 realizing a $67.78 profit plus $125 in interest payments. The total return was 192.78 or 15.95% with about a 13 month holding period.  








I used a commission free trade to sell but paid Schwab a commission to buy.

5. Continued to Pare Stock Allocation:


A. Eliminated Remaining VEA Position: Sold 55 Shares at $39.44:





Barely Profitable-Source of Funds: +$39.29




The Vanguard FTSE Developed Markets ETF (VEA) currently has a 4 star rating from Morningstar. The recent performance has been poor due in part to the strength of the USD against other currencies and the overall subpar performance of the foreign stocks owned by this fund in their respective foreign currencies. VEA Total Return 


B. Pared AGNC Roth IRA: Sold 50 Shares at $19.94:




AGNC Investment Corp (AGNC)-A Mortgage REIT

AGNC Investment Corp | Investors | Investor Relations Home
AGNC Investment Corp. Declares Monthly Common Stock Dividend of $0.18 per Common Share for March

Position Before Pare: Average Cost Per Share = $19.07+




The average cost for the remaining 53+ shares is $18.68. 


As shown in the preceding snapshot, I first bought 50 shares at a total cost of $19.5 per share last October. The transaction price was $19.36. I have been reinvesting the monthly dividend.


The next 50 share purchase was made at an $18.64 total cost per share ($7 commission here). When and if the stock slides below $18.5, then I will consider buying back the lot sold, hopefully catching the stock on a significant downdraft below my 12/9/16 purchase price of $18.5.


This company has cut its dividend several times. The quarterly rate was $1.5 per share in the 2009 second quarter and was sliced several times before hitting $.65 per share during 2014. AGNC then went to a $.22 monthly dividend payment, starting in October 2014 which was cut to $.20 and then to the current $.18. AGNC Investment Corp | Investors | Dividends I will trade the stock hoping to generate a total return in excess of the dividend yield which I have managed to do so far.


While I put this transaction in the stock allocation reduction section, it is part of my normal risk mitigation strategy that is particularly applicable to disfavored securities, where I sell my highest cost lot and then wait for an opportunity to buy back shares at a price lower than my lowest cost lot. Mortgage REITs are viewed with disfavor here at HQ.


Given the high yield, any profit on the shares is viewed as acceptable.  Assuming no further dividend cuts, which is obviously a foolish assumption to make, the dividend yield would be about 11.59% at a total cost of $18.64 per share. That would be tax free in the Roth IRA.


When held in a taxable account, the dividend payments are generally classified as ordinary, non-qualified dividends and return of capital. This is a snapshot of the 2016 characterizations:




Box 3 is the return of capital dividend source. This amount will not be taxable ($.43+ per share) in 2016 but will reduce the cost basis per share in an equivalent amount. The ROC adjustment is irrelevant in a Roth IRA. When ROC adjustments are significant and the dividends would otherwise be non-qualified which is the case for pass through entities, the investor may have the opportunity to convert the ROC into a long term capital gain when selling the stock or possibly holding the stock until DOD when the basis is stepped up.


Profit Snapshot-50 Share Lot Roth IRA: $15.03



AGNC 2016 Annual Report (risks are summarized starting at page 8 and continuing to page 23)


AGNC Investment Corp. Announces Fourth Quarter 2016 Financial Results


I also own 50 shares of an AGNC equity preferred stock that pays non-qualified and cumulative dividends.  AGNC Investment Corp. 8% Preferred Series A Stock  (AGNCP)


That stock went ex dividend on 3/29/17 for its $.50 per share quarterly dividend:




I discussed purchasing that equity preferred share lot at $24.88 here. The issuer has the option to redeem on or after 4/7/17.


Prospectus


My approach is similar to the common. I am interested only in capturing one or more dividends and to exit the position at a profit.


C. Sold 50 of 103+ AGNC Held in a Taxable Account Shortly After Monthly Ex Dividend Date


Ex-Dividend Date: 3/29/17 Payable on 4/7/17 

AGNC Investment Corp | Investors | Dividends

Position Before Pare: 


Sold 50 at $20.01:



Profit Snapshot: $41.67




This trade lowered my average cost per share from $18.93 to $18.7.

I will consider buying back this 50 share lot at less than $18.5. I will continue to reinvest the dividend for as long as the price remains below $20.5. This is a standard risk mitigation trading strategy for a high yielding stock with this kind of chart: 



   
The company estimated its "net book value of $21.17 per common share and estimated net tangible book value of $19.50 per common share as of February 28, 2017." AGNC Investment Corp. Declares Monthly Common Stock Dividend of $0.18 per Common Share for March

2016 Annual Report 


The Latest Update Gives More Encouragement To Own AGNC -Seeking Alpha


I do not recall discussing the AGNC common share purchases. I do not have either the time or the inclination to discuss most of my stock trading.

Disclaimer: I am not a financial advisor but simply an individual investor who has been managing my own money since I was a teenager. In this post, I am acting solely as a financial journalist focusing on my own investments. The information contained in this post is not intended to be a complete description or summary of all available data relevant to making an investment decision. Instead, I am merely expressing some of the reasons underlying the purchase or sell of securities. Nothing in this post is intended to constitute investment or legal advice or a recommendation to buy or to sell. All investors need to perform their own due diligence before making any financial decision which requires at a minimum reading original source material available at the SEC and elsewhere. A failure to perform due diligence only increases what I call "error creep". Stocks, Bonds & Politics: ERROR CREEP and the INVESTING PROCESS Each investor needs to assess a potential investment taking into account their personal risk tolerances, goals and situational risks. I can only make that kind of assessment for myself and family members

4 comments:

  1. Reading the article you link to on syria and partisanship, it reinforces a conclusion I'd been playing with... that the republican party is broken, fractured, has no real political policies and has mainly only social policies (many of which violate the spirit of the constitution as non-religious)... which left room for Trump to highjack it... and until they wake up, realize it, and fix it, the US is in trouble. (Not because they are in charge but because you need both parties in order to negotiate and come up with better planning for everyone.)

    I wish the dems hadn't linked response to trump aca games to debit ceiling. Instead they could have simply pointed out that trump/gop is what's letting it collapse, and the population has had no trouble understanding this kind of thing. The population was against this bill, before the accounting dept pointed out the 24 millions who'd lose coverage.


    ReplyDelete
    Replies
    1. LMH: The debt ceiling increase issue appears to me, sitting at a desk in Tennessee, to be far more problematic than the consensus opinion. Stock investors are certainly assuming that everything will work out just fine.

      Back in 2010, the GOP endorsed the Conrad-Gregg Budget Commission. Mitch McConnell spoke favorably of this idea on several occasions. The plan had a number of GOP co-sponsors. Obama then said that he supported this approach. McConnell and the republican sponsors then voted against the plan.

      http://www.politifact.com/truth-o-meter/statements/2010/feb/01/mitch-mcconnell/mcconnell-reverses-position-conrad-gregg-budget-co/

      https://www.washingtonpost.com/opinions/mitch-mcconnell-the-man-who-broke-america/2017/04/07/8e12f1d8-1bbd-11e7-9887-1a5314b56a08_story.html?utm_term=.366100fbab39

      This extreme partisanship makes compromise difficult and impossible on important issues.

      "It's Even Worse Than It Looks: How the American Constitutional System Collided with the New Politics of Extremism"

      https://www.amazon.com/gp/product/B01AFE3ABQ/ref=oh_aui_d_detailpage_o03_?ie=UTF8&psc=1

      Delete
  2. OHI (own): Omega Healthcare raised its quarterly dividend by 1 cent per share. The new quarterly rate is $.63 per share. This was the 19th consecutive quarterly increase.

    http://www.businesswire.com/news/home/20170413006104/en/

    OHI: $34.46 +$0.40 (+1.17%)
    At close 4/17/17

    With the recent rise in the stock price, I have turned my dividend reinvestment option off.

    I currently own 180+ shares in a taxable account. My average total cost per share is $31.48. At a quarterly dividend rate of $.63 per share, the dividend yield is about 8%.

    I trade OHI within specific trading ranges. Last year, I sold my taxable account position, except for a 50 share lot, when the price went over $37.

    2016 OHI Trading Profit = $1,078.56 (plus dividends)

    https://tennesseeindependent.blogspot.com/2017/01/omega-healthcare-ohi.html

    I did recently toss my remaining 50 shares held in a Roth IRA, but have made no decision on the larger 180+ share position held in a taxable account. If I decide to sell, it will be at higher prices and in an incremental fashion (e.g. sell 50 shares at >$35, sell 50 shares at >36, eliminate at >$37, using commission free trades)

    I am not as enthralled by OHI as SeekingAlpha contributors.

    https://seekingalpha.com/symbol/OHI?s=ohi

    ++++

    CYTK (own 80 shares as Lotto Ticket):

    Cytokinetics will be added the S & P 600 Small Cap Index effective prior to the open on Monday, April 24.

    $12.15 $0.40 (3.45%)
    After hours: 6:28PM EDT 4/17/16

    I previously discussed selling 50 shares at $11.46 here:

    https://seekingalpha.com/instablog/434935-south-gent/4932974-south-gents-comment-blog-5-reits-preferred-stocks-bonds-regional-banks-healthcare-and#comment-73688821

    My last purchase was a 30 share lot at $8.75 (9/15/16).

    My last blog discussion was in a August 2016 post when I bought 50 shares at $9.81:

    1. Bought 50 CYTK at $9.81:
    https://seekingalpha.com/instablog/434935-south-gent/4902787-update-healthcare-basket-strategy-8-12-16

    That 50 share lot will be the next one sold.

    Pipeline:
    https://cytokinetics.com/pipeline/

    Since my last discussion, OMECAMTIV MECARBIL has entered a phase 3 trial. There were questions about whether that trial would ever get underway due to side effects noted in Phase 2.

    CYTOKINETICS ANNOUNCES START OF GALACTIC-HF, A PHASE 3 CLINICAL TRIAL OF OMECAMTIV MECARBIL
    http://ir.cytokinetics.com/phoenix.zhtml?c=142156&p=irol-newsArticle&ID=2226794

    The company announced a $100M transaction on its potential royalty payments from Amgen for Omecamtiv Mecarbil.

    http://ir.cytokinetics.com/phoenix.zhtml?c=142156&p=irol-newsArticle&ID=2241597

    4th quarter results:
    http://ir.cytokinetics.com/phoenix.zhtml?c=142156&p=irol-newsArticle&ID=2246868

    ReplyDelete
  3. I have published a new post:

    https://tennesseeindependent.blogspot.com/2017/04/observations-and-sample-of-recent_18.html

    ReplyDelete