Observations and Sample of Recent Trades: AGNC, COTY, SCM, SLV, T

Economy: 

U.S. adds 204,000 private-sector jobs in April, ADP report shows - MarketWatch While that is still a good number, the increase has been declining since December 2017: 

Inflation hits Fed’s 2% target, PCE shows, in prelude to faster rise in U.S. interest rates - MarketWatch

PCE = Personal Consumption Expenditures

News Release: Personal Income and Outlays

The personal savings rate in March was reported at 3.1%:

Personal Saving Rate-St. Louis Fed

The PCE price index is moving closer to the annual nominal wage growth number which has been hovering around 2.5%:

China Is Set to Take a Hard Line on Trump’s Trade Demands - The New York Times (China will not even discuss Trump's two primary demands)

Trump Extends Relief, Confusion as Allies Given Tariff Reprieve - Bloomberg

Europe Is Annoyed, Not Grateful, After Trump Delays Tariffs

Canada GDP expands 0.4% in Feb - MarketWatch (3% annualized)

The ISM manufacturing PMI for April fell to 57.3% from 59.3% in March. Employment contracted to 54.2 from 57.3. 

Construction spending decreased by 1.7% in March from February. release.pdf

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Markets and Market Commentary: 

Investment Boom From Trump’s Tax Cut Has Yet to Appear - The New York Times

Billionaire Sam Zell warns on stocks and real estate: ‘Where’s the beef?’ - MarketWatch

McDonald's global same-restaurant sales tops estimates | Reuters

Kellogg reported better than expected earnings this morning and that may help the packaged food group. Kellogg Co. Stock Quote (U.S.: NYSE) - MarketWatch (up 4.17% in pre-market trading as of 8:17 A.M. this morning)

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Trump: 

President Trump has made 3,001 false or misleading claims so far - The Washington Post

A list of 49 questions that Mueller wants to ask Trump were leaked to the press. The list was prepared from the notes taken by Trump's attorneys. Donald was aghast that the list was leaked to the press and claimed that none of the questions dealt with collusion: 

There are several questions related to collusion. Mueller leaked questions for Trump: many relate to Russia collusion - Vox; Mueller Has Dozens of Inquiries for Trump in Broad Quest on Russia Ties and Obstruction - The New York Times; Robert Mueller's Trump Investigation Questions -- Russia Collusion Inquiry Ongoing | National Review 

Analysis: Why Talking to Mueller Could Be a Minefield for Trump (Mueller will probably have to issue a grand jury subpoena for Donald. It would be a mistake to volunteer his testimony since he is the proverbial loose cannon and would most likely commit multiple counts of perjury. Consequently, his best course is to require Mueller to issue a subpoena and then fight it for the next year or so until the matter is resolved by the Supreme Court.) 

Latest shake-up of Trump's legal team signals a more combative approach

I doubt that the new Trump legal team will offer Mueller anything that he will accept. Consequently, Mueller will request the criminal grand jury to issue a subpoena to compel Trump's testimony. 

Presidents have received subpoena's in the past. When presidents have been subpoenaed, here's what they've done

Ken Star served Bill Clinton with a grand jury subpoena and Clinton did testify in a non-courtroom setting. Trump will lose provided the questions do not require disclosure of information protected by legitimate privilege claims. Clinton v. Jones, 520 U.S. 681 (1997); United States v. Nixon, 418 U.S. 683 (1974). The need for evidence is greater in a criminal investigation compared to a civil one.   

Trump Team Leaked Mueller's Questions Despite President's Outrage, Legal Experts Say

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Trump: More Attacks on Institutions Necessary for a Properly Functioning Democracy: 

Donald also used this occasion as an excuse to attack the Free Press a/k/a/ the Enemy of the People:

As usual, republicans are threatening to impeach the Deputy Attorney General Rod Rosenstein unless he does precisely what they want him to do. Rosenstein Says He Won’t Be ‘Extorted’ Amid Impeachment Threat - Bloomberg The republicans who are making the threats are primarily the ones that are aiding and abetting Donald in his Russian investigation obstruction efforts.  

Trump Assails Justice Dept., Siding With House Conservatives in Dispute - The New York Times ("Mr. Rosenstein and top F.B.I. officials have come to suspect that some lawmakers were using their oversight authority to gain intelligence about that investigation so that it could be shared with the White House") I would disagree with the NYT labelling the House republicans as "conservatives".  

Trump has repeatedly made it clear that it wants to use the Justice Department to punish his political enemies and to thwart lawful investigations of him. This tweet from yesterday is just the latest example of Trump's intent to abuse his Presidential powers: 

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Trump threatens government shutdown in September if no funding for wall | Reuters (Trump: “We come up again on September 28th and if we don’t get border security we will have no choice, we will close down the country because we need border security.”)

Exclusive: U.S. EPA grants biofuels waiver to billionaire Icahn's oil refinery - sources | Reuters (more swap creature stuff)

Kelly thinks he's saving U.S. from disaster, calls Trump 'idiot,' say White House staffers Kelly called this report B.S. 

Exclusive: Bornstein claims Trump dictated the glowing health letter - CNN (not surprising given the superlatives); Here's 4 reasons why Donald Trump faking a doctor's note actually matters

GOP candidate for Governor aims gun at teen in campaign ad

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Scott Pruitt A/K/A The Swap Creature: 

Two Top Aides to Scott Pruitt Quit the E.P.A. Unexpectedly - The New York Times One of the aides Albert Kelly, a longtime of Scott and a former banker who has received a lifetime ban from working in finance, resigned as the head of the EPA's SuperFund program.  The other aid was the Chief of Pruitt's security detail who the Swamp Creature put in charge after another security chief refused to go along with Scott's security expenditures. House panel expected to interview EPA chief Scott Pruitt's former head of security in conduct probe - ABC News

Multiple EPA officials demoted after questioning Pruitt spending: report | TheHill; E.P.A. Officials Sidelined After Questioning Scott Pruitt's Spending - The New York Times

Lobbyist helped arrange Scott Pruitt’s $100,000 trip to Morocco - The Washington Post-republished at MSN where it is available for review without a WP subscription (some may wonder why Scott the Swamp Creature and his entourage felt a need to visit Morocco. According to the WP, the trip cost more than $100K, including a $16,217 first class seat for Pruitt and a stay at a luxury hotel in Paris on his way back to the U.S. The lobbyist who arranged the trip received shortly thereafter a $50K contract to promote Morocco's cultural and economic interests and only recently registered as a lobbyist for a foreign government. The alleged reason for the trip was to promote liquefied gas sales to Morocco which has nothing to do with the EPA. The Department of Energy handles that business sector.) 

As noted in my last post, House republicans view Scott the Swamp Creature as a paragon of virtue who, like Donald, is a role model for their young children.    


72 percent of Republicans think Trump is 'a good role model for children'

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1. Small Ball-MREITs and BDCs:

A. Sold 50 SCM-Highest Cost Lot-at $$12.63 (Used Commission Free Trade):

Quote: Stellus Capital Investment Corp. (SCM) 

Profit Snapshot:  $34.23

Item # 1.A. Bought 50 SCM at $11.95 (2/12/18 Post) 

Position after Pare: Average Cost Per Share = $11.29

I reduced my average cost per share from $11.75 to $11.29. 

Using small ball trading rules, I can buy this 50 share lot back at below $11.1 which was my lowest purchase price in this chain.  Item 1.C. Bought 10 SCM at $11.1 (3/15/18 Post) I discussed the earnings report for the 2017 4th quarter in that post. 

The price has shown a lot of chop looking at a five year chart, with the last period of sustained movement below $11.1 occurring between July 2015 through October 2016. The lowest price this year was at $11.07 (3/2/18). The ten share buy reference above was made that day.

The last earnings report was released on 3/6/18: Stellus Capital Investment Corporation Reports Results for its Fourth Fiscal Quarter and Year Ended 12/31/17 

Dividends: Monthly at .1133 ($1.36 annually)

Dividend Yield at $11.29 = 12.04%

B. Sold 71+ AGNC at $19.03 (Used Commission Free Trade): 

Quote: AGNC Investment Corp. (AGNC)

Net asset value per share declined to $18.63 per share as of 3/31/18 from $19.69 as of 12/31/17. SEC Filed Press Release A cardinal rule in my trading strategy for MREITs is that I will not own shares when the net asset value per share sinks below the current market price. There are a variety of really complicated reasons for this quarterly decline. I am not going to strain my brain cells trying to assess those reasons and whether they are likely to be temporary.

Two Year History This Account: 

Profit Snapshot: +$29.56  

Item 1.B. Bought 10 AGNC at $18.15 (3/15/18 Post) 

Item 1.D. Added 10 AGNC at $18.57 (2/26/18 Post)

Item # 6 Bought 50 AGNC at $18.72-Used Commission Free Trade (2/1/18 Post)

Prior Sell Trades: 

Item 3.A. Sold 54+ AGNC at $20.71- Vanguard Roth IRA Account and Item 3.B. Sold 53+ AGNC at $20.71-Schwab Taxable Account (5/23/17 Post)(Profit Snapshots= $209.61)

Item # 5.B. Sold 50 AGNC at $19.94 Vanguard IRA Account  and Item # 3.C. Sold 50 AGNC at $20.01 Schwab Taxable Account (4/14/17 Post)(profit snapshots = $56.7)

Item # 4 Sold AGNC at $30.14 (2/15/12 Post)(profit snapshot= $15.72) 

AGNC has proven to be an imperfect total return vehicle for a buy and hold strategy. 

My first purchase was a 35 share lot that was sold for a $15.72 profit on 2/10/2012. 

If I had bought shares at the closing price that day, my average annual total return with dividends reinvested would have been 6.23% through 4/26/18. DRIP Returns Calculator | Dividend Channel

That tells me that the share depreciation wiped out close to 1/2 of the dividends paid during that period. 

The annual average total return for SPY, the S & P 500 ETF, was 13.95% during that same period.  

AGNC Realized Gains: $311.59

Another important point to consider when developing a trading strategy for MREITs is to look at historical net asset values per share and dividends. The investor will see both a decline in net asset values and dividend cuts. 

AGNC Historical Net Asset Values Per Share: 

3/31/18:  $18.63
12/31/18  $19.69
12/31/11   $27.71 Sourced: Page 39 10-K

I am not adverse to buying back shares, but would now want a starting entry price at below $18. My highest and lowest purchases in my last chain were $18.72 and at $18.15 respectively. 

C. Sold 61+ CYS at $7.33: 

QUOTE: CYS Investments Inc. (CYS)

Profit Snapshot: +$29.21

Item 1.B. Bought 10 CYS at $6.51 (2/12/18 Post) 

Item # 5 Bought 50 CYS at $6.93 (2/1/2018 Post)

I received one quarterly dividend.  

As noted in a recent comment, CYS agreed to be acquired by Two Harbors Investment Corp. (TMO).

Two Harbors Investment Corp. Announces Definitive Agreement to Acquire CYS Investments, Inc. ("CYS stockholders will exchange their shares of CYS common stock for newly issued shares of Two Harbors common stock as well as aggregate cash consideration of $15,000,000. The number of Two Harbors shares issued will be based on an exchange ratio to be determined by dividing 96.75% of CYS’ adjusted book value per share by 94.20% of Two Harbors’ adjusted book value per share.")

I did not see any reason to stick around given the uncertainty of the final exchange ratio. 

Two Harbors will assume the CYS equity preferred stocks:

"Two Harbors would assume the existing notional $75 million in CYS 7.75% Series A cumulative redeemable preferred stock and $200 million in CYS 7.50% Series B cumulative redeemable preferred stock."

I currently own 100 shares of CYSPRA, a 7.75% coupon cumulative equity preferred stock, and will keep that lot for now.  

Last CYSPRA Discussion: Item 3.B. Bought 50 CYSPRA at $24.5-In a Roth IRA Account (3/1/2018 Post); CYS Investments Inc. Cumulative Preferred Series A Stock (par value $25; optional call on or after 8/31/17)

2. More Small Ball: 

A. Bought 8 AT & T at $33.44; 10 at $32.8;  2 at $32.29 and 3 at $31.97 (Used Commission Free Trades): 

This stock is another falling knife where I am approaching purchase with extreme trepidation as shown in these small lot buys:  

The market reacted negatively to the first quarter earnings report which I discuss below. I initially thought that the purchase at $33.44 was about right but the stock continued to decline thereafter. The next buy was at $32.8 and the stock continued to decline until hitting that day a new 52 week low at $32.47. The close on the prior day was at $35.2: Historical Prices

Chart: Bear Market Trend Since December 2017

A five year chart shows that this stock was trading above $37 per share back in April 2013.

2017 Annual Report

Current Position: 35 Shares

Maximum Position: 60 Shares (contemplating possible 10 share sell of highest cost lot when profitable)

Purchase Restriction: Small Ball Rule

Average Cost Per Share: $33.7

Highest Cost Lot in This Chain: 10 Shares at $35.42 

Dividend: Quarterly at $.50

AT&T Historical Dividends (last raise was $.01 effective for the 2018 1st quarter)

Dividend Yield at Average Cost: 5.93%

Last Ex Dividend Date = 4/9/18  (owned 12 shares then) 

Reinvestment: Yes, at below $38

Last Substantive Discussion: Item 1.B.  (4/2/18 Post)

As noted in that post, my last somewhat serious position in AT & T was sold in 2010 (202+ shares) with the last sell transaction that year being at $28.95 (11/2/2010). 

Last October, I started a "10 share buying program" at $33.51 and decided to stop it by selling at $37.77 last January. Item # 1.E. Sold 10 T at $37.77 (1/28/18 Post) In two other accounts, I sold a 50 share lot at $37.36 and a 30 share lot at $36.41 last year. I am engaged in a dividend harvesting strategy for AT &T shares and will no longer even take a 100+ share position using that strategy. 

For the five year period ending Friday 4/27/18, the average annual total return (with dividend reinvestment) for AT & T shares was +2.83%, compared to +13.09% for SPY. DRIP Returns Calculator-Dividend Channel. 

The 2.83% total return indicates that an investor had a significant negative return on the shares; and that negative return on the shares wiped out close to 1/2 of the dividend's value. 

I would describe AT & T problems as involving high capital and labor costs to provide services in the declining wireline sector and the highly competitive wireless sectors. Those costs require a lot of debt and potential problems arising with a meaningful rise in interest rates.  

This is an interesting article relating to wireless competition: I switched from AT&T to T-Mobile. Here's why, and how it went. - Houston Chronicle

Last Earnings Report:  

I would note first that the dividend exceeds free cash flow: 

AT&T Reports First-Quarter Results 

GAAP E.P.S. for the quarter was reported at $.75. Adjusted E.P.S. which excludes a number of items was reported at $.85:

Revenues declined to $38.038B from $39.365B last year and missed the consensus estimate of $39.3B. Revenues fell 3.4% but were down 1.2% adjusting for an accounting changes related to revenue recognition for equipment and the Universal Service Fee. Revenues for the 2018 first quarter would have been $38.9B without the account change. 

The DirectTV Now streaming service added 312,000 customers which at least offset a 188,000 decline in traditional video subscribers:

Mobility Net Additions and Subtractions:

Sourced: SEC Filed Supplemental Data 

Average Revenue Per Customer (ARPU) for postpaid phones dipped to $57.01 from $58.09 in the year ago quarter. 

While the Mexico operations did produce 16% revenue growth, AT & T is losing money there due to capital expenditures and competition from the much larger American Movil which has about a 70% market share. 

SEC Filed Financial Data 

Last year AT & T spent approximately $1.1B in additional interest costs and fees, plus another $279M in merger integration costs, related to the pending merger with Time Warner. The additional interest expense resulted from the 2017 issuance of bonds last summer to finance the purchase. (sourced WSJ article)    

Final Prospectus Supplement (July 2017)

Final Prospectus Supplement (1£ Billion 3.55% Notes due 2037) and

Final Prospectus Supplement

Unless a compromise settlement is reached, the litigation is likely to continue for at least one more year, assuming an appeal from the district court's decision.

Analyst Reports:

In a report dated 4/29/18, the S & P analyst kept the 4 star rating but reduced the 12 month price target by $4 per share to $39.

The Morningstar analyst has a 4 star rating and a $40 fair value estimate as of 4/26/18.

As I recall, AT & T had a tough start in the 2017 first quarter but recovered as the year progressed. And, some of the issues with the 2018 first quarter report involve a change in an accounting rule. 

B. Restarted for the Third Time Small Ball Purchase Program of COTY: 

Bought 10 COTY at $16.47

Quote: Coty Inc. Cl A (COTY)
Coty Inc. Cl A (COTY)

Coty Key Developments-Reuters.com

Brands

The other two starts quickly ended after price spikes which provoked me to sell the shares notwithstanding the small gains.  

Previous Round-Trips:

Item 2.C. Sold 10 COTY at  $21.46 (2/19/18 Post)-Item #  5.A. Bought 10 COTY at $16.92 (2/15/18 Post)(bought shares on 2/6/18)

The quick pop was due to a better than expected earnings report for the Q/E 12/31/18 that was released on 2/8/18, shortly after the the 10 share purchase referenced in the preceding link.

Item 1.D. Sold 20 COTY at  $20.89 (1/28/18 POST)-Item # 1.B. Bought 10 COTY at $16.94 and 10 at $16.78  (11/30/17 Post)

Trading Profits (30 shares) = $126.02

Last Earnings Report: Coty Inc. Reports Second Quarter Fiscal 2018 Results

I will sell whatever I own in the $20 to $22 price range. This last ten share purchase was the lowest price paid in this chain so far. Additional purchases can only be made at lower prices.

Coty Inc. Prices $550 Million of USD Senior Unsecured Notes and €800 Million of EUR Senior Unsecured Notes (3/28/18)("Senior unsecured notes in an aggregate principal amount of $550 million and €800 million, respectively, in a private offering consisting of $550 million of 6.50% senior notes due 2026, €250 million of 4.75% senior notes due 2026 and €550 million of 4.00% senior notes due 2023.") 

C. Bought 30 SLV at $15.4-Used Commission Free Trade: 

I will probably average down in 10 share lots with a 100 share maximum position. Normally, I would start a position with a 50 share buy but silver has been sliding persistently since 4/19/18 which coincides with renewed USD strength.  

Comparison Chart: Blue Line SLV and Black Line DXY 

SLV is a silver bullion ETF. iShares Silver Trust Overview

I started to trade the silver, gold, and platinum bullion ETFs in 2016.

I will trade gold and silver bullion only in long cycles.  I last sold gold and silver bullion in September 2011 and January 2012. Item # 1 (9/15/11 Post)(sold on 9/12/11); Item # 8 Snapshots of Coin Sales In January 2012 (1/31/12)

I have not bought any bullion since 1990.

My thinking is that bullion prices are not taking into account several geopolitical risks that are identifiable at the moment, including a trade war; the likelihood that Trump will terminate the Iran nuclear deal; and what I view as a more probable than not blowup in the NK negotiations.

Since 1/1/2016, I have realized the following trading gains in SLV:

2017 30 Shares +$52.02

2016 50 Shares +$129.73

2016 SLV 30 Shares +$14.19

2016 SLV 50 Shares +$24.48

Total = $220.42

The highest sell price was $19.06+ on 7/6/16 bought at $16.45 on 6/22/16.  The lowest purchase price was $15.23.  

Silver has been in a long term bear market of uncertain duration since 2011. Rallies are of relatively short duration. 

This chart starts in April 2006:

Using daily closing prices, the highest close during the period shown in this chart was $42.55 on 9/2/2011. On the day of my trade, the 52 week high was at $17.14 and the 52 week low was at $14.4.   

3. Intermediate Term Bond/CD Ladder Basket Strategy: 

A. Bought 1 DTE Energy 3.3% SU Bond Maturing on 6/15/22: 

Finra Page: Bond Detail (prospectus linked)

Issuer: DTE Energy Co. (DET) 

DTE Analyst Estimates 

DTE Energy reports solid 2017 financial results; positive impact of tax reform provides significant benefit to customers and improves 2018 guidance

2017 DTE Annual Report (debt discussed starting at page 110)

Credit Ratings: 

Fitch Affirms DTE Energy at BBB+;  Outlook Remains Negative (4/6/18)

Bought at a Total Cost of 99.686

YTM at TC Then at 3.381%

Current Yield at TC = 3.31%

B. Bought 2 Thermo Fisher 3.15% SU Bonds Maturing on 1/15/23: 

Finra Page: Bond  Detail (prospectus linked)

Issuer: Thermo Fisher Scientific Inc. (TMO) 
TMO Analyst Estimates 

Thermo Fisher Scientific Reports First Quarter 2018 Results

Thermo Fisher Scientific Reports Fourth Quarter and Full Year 2017 Results 

2017 Annual Report (debt listed and discussed starting at page F-37)

TMO SEC Filings 

Credit Ratings: 

Fitch Affirms Thermo Fisher at 'BBB' Following Acquisition Announcement; Outlook Stable (5/16/17)

S & P just upgraded TMO SU bonds to BBB+ which is not yet reflected in the FINRA data: 

Bought at a Total Cost of 98.738
YTM at TC Then at 3.44%
Current Yield at TC = 3.19%

Thermo Fisher Scientific Prices Offering of Common Stock (8/8/17) ("public offering of 8,771,930 shares of common stock at a price of $171.00 per share for expected gross proceeds of approximately $1.5 billion, before the underwriting discount and expenses. Thermo Fisher has also granted the underwriters a 30-day option to purchase up to an additional 1,315,789 shares of its common stock. Thermo Fisher intends to use all of the net proceeds of the offering to fund a portion of the consideration payable for its acquisition of Patheon N.V. (NYSE: PTHN), including the repayment of indebtedness of Patheon N.V. to be assumed by Thermo Fisher.")

C. Bought 2 Kellogg 3.125% SU Bonds Maturing on 5/17/22: 

FINRA PAGE: Bond Detail (prospectus linked)

Issuer: Kellogg Co. (K) 
K Analyst Estimates 
Kellogg Company Reports 2017 Fourth Quarter Results

Kellogg reported better than expected 1st quarter earnings this morning. 2018 1st Quarter earnings release.pdf

2017 Annual Report (debt discussed starting at page 85)

Kellogg SEC Filings

Credit Ratings: 

Fitch Rates Kellogg Co's $600MM Sr. Unsecured Notes 'BBB'; Outlook Stable (11/7/2017)

Bought at a Total Cost of 99.257
YTM at TC Then at 3.32%
Current Yield at TC = 3.1484%

4. Short Term Bond/CD Ladder Basket Strategy: 

A. Bought 1 Treasury 1.5% Coupon Maturing on 12/31/18: 
YTM 2.051%

I now own 3 bonds. 

B. Bought 1 Treasury 1.75% Coupon Maturing on 10/31/18: 
YTM 1.942%

I now own 3 bonds.  

I own 6 treasuries maturing on 10/31/18. 

The other two bonds have a .75% coupon (1 bond) and a 1.25% coupon (2 bonds). 

Generally, the YTMs will be similar when there are multiple treasury maturities on the same day. In this example, the two lower coupon treasuries adjust their price down to gain an approximate equivalence in YTM with the 1.75% coupon bond. On the day of this last purchase, the 1.75% bond had a slightly higher YTM than the ones with .75% and 1.25% coupons for a 1 bond purchase.  

C. Bought 1 McDonalds 2.2% SU Bond Maturing on 5/26/2020: 

I now own 2 bonds.

Finra Page: Bond Detail (prospectus linked)

Issuer: McDonald's Corp. (MCD)
MCD Analyst Estimates
McDonald’s Reports Fourth Quarter And Full Year 2017 Results And First Quarter 2018 Cash Dividend

Credit Ratings:

Fitch Affirms McDonald's at 'BBB'/'F2'; Outlook Stable (12/13/17)
Bought at a Total Cost of 98.853
YTM at TC Then at 2.765%
Current Yield at TC = 2.2255%

D. Bought 2 Bank of India 1.6% CDs Maturing on 6/6/18 (1 Month CD):

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.