Observations and Sample of Recent Trades: CIO, DEA, GPT, SRET

Economy:

The Atlanta Fed' GDPNow model is predicting at the moment a 4.1% real GDP growth for the second quarter. 

Retail Sales: The March number was revised up to .8% from .6%.

Sourced: Retail Sales.pdf

The major gains were sales by gasoline stations, due to the price of gasoline  and to online sales. Gasoline sales were up 11.7% Y-O-Y in April. I view the increased cost of gasoline to be a negative factor. The increase in price has a similar economic impact to a tax increase. Filling up the gas tank cost Americans an extra $4.4 billion in April - MarketWatch

The 10 year treasury yield hit its highest level since 2011 last Tuesday. 

The Bond Ghouls believe that it is 100% certain that the FED will raise the federal funds rate range by .25% next month. The odds of another .25% increase in September is close to certain. 

Goldman: Deficit-unemployment rate disconnect could fuel higher interest rates: CNBC 

NAFTA 'hot topics' unresolved as deal deadline looms, says U.S. official Ross | Reuters

China really is to blame for millions of lost U.S. manufacturing jobs, new study finds - MarketWatch

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Markets and Market Commentary: 

U.S. small caps near record highs, outperform larger rivals | Reuters

Rhetoric over U.S. exit from Iran deal rises amid threat of sanctions | Reuters

These earnings beats aren’t real-it’s mostly accounting gimmicks - MarketWatch

Italian markets spooked as radical agenda from 5 Star, League fuels fears of ‘new crisis’ - MarketWatch

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Trump, ZTE and China Loaning Money for a Trump Resort:

Trump's Commerce Department recently imposed sanctions on China's ZTE for selling products to Iran and North Korea. ZTE had pled guilty in March 2017 to violating the sanctions and was fined $1.9 billion. ZTE Corporation Agrees to Plead Guilty and Pay Over $430.4 Million for Violating U.S. Sanctions by Sending U.S.-Origin Items to Iran | OPA | Department of Justice (the other fines were levied by the Commerce and Treasury Departments.

ZTE then violated its plea deal by continuing to sell products to Iran and North Korea. The Commerce Department then prohibited U.S. firms from selling parts to ZTE for seven years as a punishment for ZTE's violation of the sanctions and its plea agreement. Donald talked to China's President who complained; and Trump reversed gears, saying that too many jobs were being lost in China.

Donald did not consult anyone internally that was actually involved in the ZTE matter before reversing his Administration's position.Trump’s ZTE tweet sows confusion before trade talks with China - The Washington Post 

Two days before Trump changed course, a state owned Chinese company agreed to loan $500 million to Indonesian developers building a resort that includes Trump branded hotels, residences and golf course. Trump Indonesia project is latest stop on China’s Belt and Road | South China Morning Post; China Contributes $500 Million to Trump-Linked Indonesia Project | National Review; Trump helps sanctioned Chinese phone maker after China delivers a big loan to a Trump project - Vox 

I wonder what Sean Hannity would say if Obama did anything remotely similar. Donald Trump and Sean Hannity’s Late Night Calls

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Trump: Never Apologize-Just Attack: 

White House Refuses to Apologize for Kelly Sadler’s Joke About McCain - The New York Times

Donald's apparent response was to blame the media and whoever leaked Kelly Sadler's comment about McCain:

In TrumpWorld, calling the leaker of Kelly Sadler's comment a traitor and blasting the Free Press is better than simply apologizing to McCain.

‘That’s not what we do’: Republicans balk at confronting Trump over McCain smear 

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Realistic Estimates of Retirement Expenses:

Health care will cost $280,000 in retirement — and that doesn’t include this huge expense - MarketWatch This estimate is for a couple retiring at age 65 now.

As usual, this estimate does not cover long term care expenses like nursing homes or caregiver services. The number does not include any meaningful change in traditional Medicare coverage such as the GOP's 2011 plan to substitute a voucher system to buy private insurance for traditional Medicare that would have doubled the premium costs.

A Couple Retiring in 2018 Would Need an Estimated $280,000 to Cover Health Care Costs in Retirement - Fidelity

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More on Amazon vs. WalMart.Com:

On 3/12/18, I paid Amazon $26.28 for this product:

Early yesterday morning, I checked the WMT price for the same product and size. The price was $21.91:

AMAZON was 20% higher.

Optimum Nutrition Superior Amino 2222 Capsules, 320 Ct - Walmart.com

A few minutes later, I went back to AMZN to confirm the product was the same. AMZN had changed the price to  $21.91, the exact same price as WMT. I could save a $1.1 per order if I set up a regular delivery schedule.

Apparently, Amazon was tracking my movements, noted that I visited WMT's site for this product, and only then lowered its price to match, not beat, the WMT price. 

I did not appreciate being ripped-off unless I first compared AMZN's price to another retailer. And, I was disturbed that my internet movements were apparently being tracked in this fashion.  

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1. Small Ball:

A. Sold 40+ GPT at $27.51-Used Commission Free Trade:

Profit Snapshot: +$149.16

Gramercy Property Trust Enters into Definitive Agreement to be Acquired by Blackstone for $27.50 per Share in a $7.6 billion Transaction 

So this will be my last trade in Gramercy. 

Stocks, Bonds & Politics: Gateway Post: Equity REIT Common and Preferred Stock Basket Strategy

Gramercy Trading Profits: +$1,133.84 (includes Chambers Property who acquired Gramercy and then changed its name to Gramercy)

B. BOUGHT 50 SRET at $14.8-Used Commission Free Trade:

SRET is a new entry into the small ball "buying program".

Quote: Global X SuperDividend REIT ETF

Sponsor's Website: SuperDividend® REIT ETF (expense ratio .58%)

Holdings as of 5/4/18:

Prior Trades: None

Dividends: Monthly

The next ex dividend date is 6/5/18.

Dividend Yield: The dividends are variable to some extent. If I used an average of $.094 per month, the dividend yield at a TC of $14.8 would be about 7.62%. Note the presence of several Mortgage REITs and foreign REITs among the holdings.

Canadian REITs:
Dream Global Real Estate Investment Trust (Canada: Toronto)(bought & sold)
H&R Real Estate Investment Trust (Canada: Toronto)

Australian:
Stockland Stock Quote (Australia: Sydney)(own 600 shares)
Vicinity Centres Stock Quote (Australia: Sydney)

Netherlands:
Wereldhave N.V. (Netherlands: Euronext Amsterdam)

Among the mortgage REITs, CYS is being acquired by Two Harbors. I recently sold out of my CYS and AGNC positions, both of which are owned by this ETF.

I also own the following stocks owned by this ETF:

Starwood Property Trust Inc. (STWD)
New Residential Investment Corp. (NRZ)
W. P. Carey Inc.  (WPC)
Medical Properties Trust Inc.  (MPW)
Independence Realty Trust Inc.  (IRT)

Government Properties Income Trust (GOV)

BRG, STWD, MPW, NRZ AND GOV were recent buys under the small ball "buying program". IRT is my largest position among those 5 REITs. I own 30 shares of WPC bought at $59.45 and discussed in this comment. I have frequently bought and sold MPW and currently own 63+ shares with the last buy of 10 shares discussed here: Item # 2.C. Added 10 MPW at $12 (2/12/18 Post)(trading profits using small lots at $1,395.20)

It is not surprising that there is overlap since I tend to take small positions in higher yielding equity REITs that are out-of-favor and in many cases deservedly so (e.g. GOV, SIR, SNR, BRG)

C. Sold 10 CIO at $11.58-Used Commission Free Trade:

Perhaps, I need to call this Tiny Weeny Small Ball. I am discussing this trade and the 10 share DEA disposition to point out an issue in dividend coverage.

Profit Snapshot: +$13.94

Item # 1.B. Bought 10 CIO at $10.19 (3/12/18 Post)

Quote: City Office REIT Inc. (CIO)

Why sell 10 shares? I do not have a good bad answer. My best bad answer is that I can do it without incurring a commission and I did not care for some financial metrics in the last earnings report which I view as important longer term.   

Dividend: Quarterly at $.235 per share

CIO Trading Profits: $282.95 ($269.01 in prior trades)

Prior Round-Trips:

Item # 8 Sold 100 CIO at $13.5: Update For Equity REIT Basket Strategy As Of 7/28/16 - South Gent | Seeking Alpha (profit snapshot= $207.97)-Item # 5 Bought 100 CIO at $11.4 at Update For Equity REIT Basket Strategy As Of 4/6/16 - South Gent | Seeking Alpha

Item # 1. Sold 50 CIO at $12.38: Update For Equity REIT Basket Strategy As Of 3/7/16 - South Gent | Seeking Alpha (profit snapshot $61.04 plus one dividend)-Scroll to 2. BOUGHT CIO at $11.12) Update For REIT Basket Strategy As Of 11/24/15 - South Gent | Seeking Alpha

The lowest previous buy price before this 10 lot purchase was at $11.12 and that was in 2015.

I am lowering my exit and entry points based on my opinions about financial results. 

When I discussed the 10 share lot purchase, I mentioned then that the 2017 4th quarter was not worthy of generating any excitement. 

Last Earnings Report-What is wrong with this one?:

City Office REIT Reports First Quarter 2018 Results

Most REITs do not provide accurate free cash flow numbers IMO. Personally, I view most reports as providing inadequate free cash flow numbers, meaning basically cash that is available for distribution.

Only a few REITs breakout routine maintenance expenditures as a deduction from FFO to arrive at FAD for example. Money spent to maintain the property is not cash available for distribution.

CIO does deduct cash expenses and non-cash revenues to arrive at its FAD/AFFO number. Remember the quarterly dividend is $.235 per share.

Note the deductions from FFO for several recurring expenses like tenant improvement, leasing commission and maintenance expenditures and the non-case revenue item created by the straight line rent accounting convention.

D. Sold 10 DEA at $21.44-Used Commission Free Trade:

Profit Snapshot: $22.59

Item # 1.A. Bought 10 DEA at $19.18 (3/8/18 Post)

Quote: Easterly Government Properties Inc. (DEA)

Prior Round-Trip: Item 5. A. Sold 50 DEA at $21.59-Used Commission Free Trade (12/11/17 Post)-Item # 3.A.  Bought 50 DEA $19.64 (8/19/17 Post)

DEA is still a sell for me whenever the price exceeds $21, irrespective of the profit or the number of shares owned, assuming I can sell a small lot using a commission free trade and I currently have over 500 of those.

DEA is another REIT that makes a good faith effort to be honest about its free cash flow number as I discussed in the 8/19/17 post linked above. I find this kind of financial disclosure to be rare among REITs. I real effort is made to disclose funds available for distribution in the quarterly reports. 

Dividend: Quarterly at $.26 per share

Dividends | Easterly Government Properties, Inc.

DEA Trading Profits to Date: $120.44

Last Earnings Report: Q/E 3/31/18:

Easterly Government Properties Reports First Quarter 2018 Results

REIT investors will generally focus on FFO. That "cash flow" number will generally include non-cash revenues created by the accounting professions and exclude cash expenses that are recurring in variable amounts. 

DEA reported FFO per share at $.31 which appears to provide good coverage for the quarterly dividend. The company then adjusts that number down to a AFFO of $.26 per share. One of the adjustments is to remove non-cash revenue created by the straight line rent accounting convention. 

DEA then calculates cash available for distribution which comes to $.221 per share. Among the cash expenditures deducted from the AFFO number are "acquisition costs", "maintenance capital expenditures", "contractual tenant improvements" and "leasing related expenditures".

When looking at cash available for distribution, the quarterly dividend of $.26 is not even close to being covered. I will give DEA an "A" for transparency which is rare in REIT land. I will consider buying shares back at or below my last purchase price of $19.18. 

2. Short Term Bond/CD Ladder Basket Strategy:

A. Bought 2 Pinnacle Bank 1.95% CDs (monthly interest payments) Maturing on 11/13/18:

B. Bought 1 Bank of India 1.95% CD Maturing on 10/31/18:

C. Bought 1 Treasury 2.375% Coupon Maturing on 4/30/20:
YTM at 2.468%

3. Intermediate Term Bond/CD Ladder Basket Strategy: 

A. Bought 1 Laboratory Corp. 3.2% SU Bond Maturing on 2/1/22: 

I now own 2 bonds.  

FINRA PAGE: Bond Detail (prospectus linked)

Issuer: Laboratory Corp. of America Holdings (LH)

LH Analyst Estimates 

LabCorp Announces Strong 2018 First Quarter Results and Updates 2018 Guidance 

SEC Filed Supplemental Report for the Q/E 3/31/18 

2017 Annual Report (debt listed and discussed starting at page F-23)

Credit Ratings: 

Bought at a Total Cost of 98.962

YTM at TC Then at 3.496%

Current Yield at TC = 3.234%

B. Bought 1 AvalonBay 2.95% SU Bonds Maturing on 5/11/26:

FINRA PAGE: Bond Detail (prospectus linked)

Issuer: Avalonbay Communities Inc. (AVB)

AvalonBay Communities, Inc. Announces First Quarter 2018 Operating Results

AVB SEC Filings; 2017 Annual Report (debt listed starting at page 46)

AVP last bond offering was to sell $300M in a 4.35% SU bond maturing in 2048: Prospectus (March 2018)

Credit Ratings: 

Bought at a Total Cost of  93.328
YTM at TC Then at 3.927%
Current Yield at TC = 3.1609%

I previously sold this bond at 98.255 and at 98.264. Items # 2 B. and 2.C. (10/11/17 Post)

C. BOUGHT 1 Anheuser Busch InBev 2.5% SU Bonds Maturing on 7/15/22:

I now own 3 bonds.

FINRA PAGE: Bond Detail

ISSUER: Anheuser-Busch InBev S.A.

Fitch Affirms Anheuser-Busch InBev at 'BBB'; Outlook Stable (3/22/18)

Bought at a Total Cost of 96.95
YTM at TC Then at 3.281%
Current Yield at TC = 2.5786%

D. Bought 1 Whirlpool 3.7% SU Bond Maturing on 3/1/23:

FINRA Page: Bond Detail (prospectus linked)

Issuer: Whirlpool Corp (WHR)
WHR Analyst Estimates

Whirlpool Corporation Reports First-Quarter 2018 Results

Whirlpool Corporation To Commence Modified Dutch Auction Tender Offer To Purchase Up To $1 Billion of its Common Shares

Whirlpool Corporation Announces Sale Of Embraco Compressor Business And A Modified Dutch Auction Tender Offer (" announced today that it has entered into an agreement to sell the Company's Embraco compressor business to Nidec Corporation for a cash purchase price of $1.08 billion") A bond investor would have preferred that the proceeds be used to retire debt or to fund operations without issuing new debt. 

WHR SEC Filings

WHR 2017 Annual Report (debt discussed and listed starting at page 54; total long term debt increased to $4.392B as of 12/31/17 from $3.876B as of 12/31/16)

Credit Ratings:

Fitch Affirms Whirlpool's IDR at 'BBB'; Outlook Stable

Fitch: Whirlpool's Ratings Unaffected by Pending Sale of Its Embraco Compressor Business

Bought at a Total Cost of 99.874
YTM at TC Then at 3.728%
Current Yield at TC = 3.7047%

Bonds are declining in price due to the ongoing rise in interest rates. I am noticing a lowering in ask prices intra-day far more frequently than in the past. This Whirlpool bond closed yesterday at 99.17. When and if the current yield creeps over 4%, I will consider buying one more bond.  

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.