Observations and Sample of Recent Trades: CPB, GLAD, GJT, OHI, PNNT, TXMD

Economy: 

The ISM services PMI rose to 58.6 in May from 56.8 in April. The new orders component rose .5 to 60.5.  

New orders for manufactured products fell .8% in April with new orders for durable goods declining 1.6%: 

U.S. productivity in first quarter cut almost in half to 0.4% growth - MarketWatch; Productivity and Costs, First Quarter 2018, Revised

Mexico imposes tariffs on $3 billion worth of US exports ("products including pork, apples, potatoes, bourbon as well as different types of cheese.")

Trump invokes War of 1812 in testy call with Trudeau over tariffs - CNN (Trump blamed Canada for burning down the White House in 1814. The British did it. British troops set fire to the White House - Aug 24, 1814 - HISTORY.com) 

A majority U.S. citizens are at least as ignorant as Trump about U.S. history and government. Americans’ History Education: Knowledge is Poor, and That’s a Problem | National Review; Poll: Americans’ Knowledge of Government, History in ‘Crisis; 'Many Americans know nothing about their government. Here’s a bold way schools can fix that. - The Washington Post (Survey by the Annenberg Public Policy Center at the University of Pennsylvania: "Just a quarter of Americans in the nationally representative survey could name all three branches of government — the worst showing on that question in six years. And this is even worse: Nearly a third could not name a single branch of government.") 

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Markets and Market Commentary: 

‘For investors, the danger is already here,’ warns world’s largest hedge fund - MarketWatch

China Offers to Buy Nearly $70 Billion of American Goods if U.S. Halts Tariffs

Fed's Williams says rates may start to brake growth by next year | Reuters

People haven’t been this optimistic about house prices since just before the crash - MarketWatch

Oil bulls shouldn’t fear OPEC output boost — the market really needs it, says Goldman’s Currie - MarketWatch

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Trump: 

Ryan says he agrees with Gowdy that FBI acted appropriately-CNN 

Trump lawyers say he 'dictated' statement on Trump Tower meeting, contradicting past denials - CNN 

The arguments made by Trump's lawyers in a 21 page memo are consistent with authoritarianism. The argument is basically that Trump has the absolute power to terminate any federal investigation including one that involves him. In short, Trump is arguing that he is above the law and is not answerable to it. Trump’s Lawyers, in Confidential Memo, Argue to Head Off a Historic Subpoena

Giuliani: Under constitution, Trump could shoot Comey and not be indicted - The Washington Post

Trump and His Lawyers Embrace a Vision of Vast Executive Power - The New York Times

Signs of sophisticated cellphone spying found near White House, U.S. officials say Donald insists on using an unprotected cellphone which will allow foreign governments to intercept his phone calls. Trump faces new round of security questions over his cell phone | MSNBC  

Since coal jobs are not coming back in any meaningful way, Trump now wants to order electric utility companies to buy more coal, an unprecedented federal government intervention in this market. Trump Prepares Lifeline for Money-Losing Coal Plants-Bloomberg; Grid Memo Coal stocks pop as Trump moves to stop coal, nuclear plant retirementsThat does not sound like a republican idea. 

Trump did make coal jobs a major issue in his campaign even though the number of people employed in that entire sector is about 54K currently. Coal Mining; Exclusive: Trump's coal job push stumbles in most states - data | Reuters 

Scott Pruitt, the anti-environmental protection director of the Environmental Protection Agency, claimed that 50K coal mining jobs were created in the first six months of 2017. I am not kidding. Full Pruitt Interview: American Carbon Reductions Predate Paris Deal - NBC News (Pruitt on 6/4/17: "Since the fourth quarter of last year until most recently, we've added almost 50,000 jobs in the coal sector. In the month of May alone, almost 7,000 jobs.")

Coal mining: Has Donald Trump delivered on his promise to save the ailing industry?: USA Today ("Preliminary figures for 2018 show a slight increase, with a net gain of 1,300 coal mining jobs during Trump’s presidency"); The entire coal industry employs fewer people than Arby’s - The Washington Post

John Brennan, Ex-CIA Director, pens op-ed vowing to criticize Trump 'until integrity returns to the White House' (Trump "has shown highly abnormal behavior by lying routinely to the American people without compunction, intentionally fueling divisions in our country and actively working to degrade the imperfect but critical institutions that serve us." )

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Sen. Jeff Merkley says images of migrant processing center are "seared" in his mind - CBS News

LeBron James, Stephen Curry say Cavs, Warriors won't accept White House invitation - CBS News; Eagles White House visit canceled: Philadelphia Mayor Jim Kenney calls Trump a "tyrant" today - CBS News (no member of the Eagles team knelt during the National Anthem during the regular season last year.)

Trump did hold a big show for the "Eagles fans", replete with the U.S. Marine Band and Army Chorus, that demonstrated that Donald did not know the words to the National Anthem or God Bless America.  Video: Trump Doesn’t Know The National Anthem; 'God Bless America' fail: Trump appears not to know the lyrics Maybe this is the time to remind everyone how Donald dodged the draft with his alleged bone spur but was proud of his service during the Vietnam War in dodging venereal disease.  "Trump's personal Vietnam" - YouTube

Mueller Accuses Paul Manafort of Attempted Witness Tampering

Kim's tunnel explosions a goodwill gesture? No so fast - CNN

A Courtside View of Scott Pruitt’s Cozy Ties With a Billionaire Coal Baron - The New York Times (the pollution industry is now in charge of the EPA)

Scott Pruitt enlisted an EPA aide to help his wife find a job — with Chick-fil-A - The Washington Post

Millan Hupp-Top Aid  to EPA Administrator Scott Pruitt Resigns - The Atlantic (Hupp testified before a the House Oversight Committee that she "regularly  spent her days doing personal tasks for Pruitt, from hunting for housing to calling the Trump Hotel in Washington, D.C., in order to inquire about purchasing a used mattress") Scott Pruitt had aide do various personal tasks, including hunt for a used Trump hotel mattress - The Washington Post

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1.  Small Ball-All Trades Made With Commission Free Trades:

A. Bought 50 GLAD at $9.09:

Quote: Gladstone Capital Corp. (GLAD)

GLAD is a micro cap BDC that is externally managed. This was an unusual purchase for me since I bought this stock at a premium to net asset value per share. This is my first purchase-sort of a test drive or a trial balloon.  

Dividend: Monthly at $.07 (.84 annually)

Maximum Position: 100 Shares

The remaining lots will have to be bought at greater than 5% discounts to net asset value per share. The company has been selling stock under its ATM program at a weighted average cost in excess of its net asset value per share, one of the few BDCs that are raising equity capital at non-dilutive prices.

Gladstone Capital Announces Monthly Cash Distributions for April, May and June 2018 Nasdaq:GLAD

Dividend Yield at $9.09 = 9.24%

Next Ex Dividend Date:  6/19/18

Dividend Reinvestment: No, will not reinvest a BDC dividends at a premium to net asset value and will require at a minimum a 5% discount 

Last Reported Net Asset Value Per Share = $8.62 as of 3/31/18, up from $8.48 (a meaningful percentage increase for externally managed BDCs)

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

Gladstone Capital Corporation Reports Financial Results for its Second Quarter Ended March 31, 2018 Nasdaq:GLAD

CEO David Gladstone on Q2 2018 Results - Earnings Call Transcript | Seeking Alpha ("For the quarter, we issued approximately 265,000 shares at a weighted average price of $8.89 per share. NAV per share increased by $0.14 to $8.62 as of March compared to $8.48 as of December 31, 2017. Looking forward, we continue to be well positioned to benefit from any upward movement in interest rates. As 90% of the portfolio is tied to floating rate investments, the weighted average floor on these investments is 1.3%. And with floating rate assets of $378 million of principal and only $128 million of floating rate debt, 100 basis point rise in LIBOR should generate an approximately 5% increase in net interest income.")

B. Sold 50 PNNT at $7.35-Highest Cost Lot: 

QUOTE: PennantPark Investment Corp. (PNNT) - MarketWatch

Position Before Pare: Average Cost Per Share at $6.96

Position After Pare: Average Cost Per Share at $6.77

Assuming a price decline is not caused by a materially adverse news, I will consider buying back this 50 share lot at less than my last purchase price adjusted down for any subsequent dividend payment. 

Profit Snapshot: +$10.44

Last Substantive Discussions: 

Item # 1.A. Bought 15 PNNT at $6.69 (5/14/18 Post) 
Item # 1.B. (3/5/18 Post)

Dividend: Quarterly at $.18 Currently ($.72 per share annually)

When mentioning a BDC's dividend, I would emphasize the word "currently". 

Dividend Yield at New Average Cost Number: 10.64%, up from 10.37%

Last Ex Dividend Date: 3/16/18

Reinvestment: Yes at greater than a 5% discount to net asset value per share

PennantPark Investment Corporation Announces Financial Results for the Quarter Ended March 31, 2018 


C. Sold 31 OHI at $30.13: 

Profit Snapshot: $41.01

Quote: Omega Healthcare Investors Inc. (OHI)

This pare reduced my average total cost per share to $27.05 from $27.99. I used the specific identification method and selected the highest cost lots. 

Average Cost Per Share Remaining Shares: $27.05

Dividend: Quarterly at $.66 per share (currently stuck at that level)  

Dividend Yield at Total Average Cost Per Share: 9.76%   

Last Buy Discussions: 

Item # 3.C. Bought 5 OHI at $25.62 (2/19/18 Post) 

Item 1.B. Bought 5 OHI at $26.6 (11/26/17 Post) 

Recent Round Trip Trade Discussions: 

Item # 6. Sold 100 OHI at $37.28: Update For Equity REIT Basket Strategy As Of 8/27/16 - South Gent | Seeking Alpha

Item # 6 Sold 39 Shares at $32.56  (10/5/17 POST) 

Item #5.A. Sold 107 OHI at $34.55 (7/15/17 Post)-see above 

Item 2.A. Sold 52+ OHI at $33.6-Eliminated Position in Roth IRA account  (5/8/17 Post)-Vanguard account 

OHI Trading Profits To Date: $1,387.8 ($1,346.79 in prior trades)

My overall impression is that OHI is a high risk equity REIT. The business risk is inherent in owning nursing homes leased to operators that require only some adverse conditions before defaulting on their lease agreements. Those adverse conditions include increases in input costs, including wages and the lease, that outpace growth in revenues and changes in government reimbursements. The risks can be magnified by leasing too many properties to operators on the edge which, IMO, OHI has done in the past.    

While the bulls in this sector frequently refer to demographics being a favorable factor, what is lost is that the rapidly rising cost to residents will dent that demographic factor by limiting the affordability of nursing homes. A single room in my county costs over $9K a month now. The government will have no choice but to limit its outlays in a few years.   

Last year, two of OHI's top ten tenants defaulted and one of those filed for bankruptcy. Omega Announces Restructuring Plan for Orianna Facilities – Omega Healthcare Investors, Inc. The other major tenant, Signature Healthcare, agreed to a restructuring to avoid a BK filing. Signature Portfolio Restructuring Completed

Genesis Healthcare has also been a problematic major tenant. 

Omega Announces First Quarter 2018 Financial Results; Continues Strategic Asset Repositioning A cynic would argue that "strategic asset repositioning" means taking losses on agreements that proved to be losers. Many of those agreements were probably obvious mistakes in the making before the decision to proceed was even made.   

While progress has been made in working through those current problems, which has provided a recent lift to the stock price, the underlying problems with this business remain in full force and may easily become worse over the next decade and beyond.

D. Bought 15 CPB at $33.26:

Quote: Campbell Soup Co. (CPB)

This purchase completes my small ball buying program for CPB in my Schwab account. As I discussed in my last post, I just started another 50 share buying program in my Fidelity account with a five share purchase at $33.28. Item # 1.E. (6/4/18 Post)

Current Position Schwab Account: 50+ shares
Average Total Cost Per share = $38.67
Dividend Yield at Average Total Cost = 3.62%

I will be reinvesting the dividend in this account. 

The market capitalization at $33.26 is about $10B. While CPB unquestionably has an array of issues, my gut tells me that the company is just too cheap. I would put the buyout price at close to $55 assuming the Dorrance family decided to sell. Their frustration may be at a high level now. I have no information on that later point.  

In a 5/22/18 report, the Morningstar analyst assigned a five star rating to the stock with a $48.5 fair value estimate. 

I will buy up to another 45 shares in my Fidelity account using small ball rules.  

E. Bought 30 TXMD at $5.88: 

Last Discussed: Item # 7.A. Bought 30 TXMD at $5.19 (10/15/17 Post) 

TXMD is a good news, bad news stock. The good news is that the FDA approved its IMVEXXY drug for the treatment of moderate to severe dyspareunia. The bad news is that the approval came with a Black Box warning. TherapeuticsMD Announces FDA Approval of TX-004HR: IMVEXXY (estradiol vaginal inserts), the Lowest Dose Vaginal Estrogen Product Approved for the Treatment of Moderate to Severe Dyspareunia, a Symptom of VVA, Due to Menopause 

A number of investors probably thought this compound would not be approved by the FDA. 

Others probably believe now that the approval with a black box warning label will seriously erode the drug's potential sales. Time will tell about revenues, but the market's reaction to the FDA's approval was a negative one. 

The stock initially popped intra-day after the announcement on 5/30 and then finished down for the day. After the company held an analyst day on 6/4, the stock popped again last Tuesday and yesterday: 

Closing Price 6/6/18: TXMD $7.19 +$0.60 +9.10% 

One of the bullish analysts reiterated his buy recommendation and $26 price target after the FDA approved this drug. Cantor Fitzgerald Reiterates a Buy Rating on TherapeuticsMD (I am not sure whether that price target is $26 or $16 for sure)

Oppenheimer increased its price target to $12 from $10 after the FDA's approval. That analyst views IMVEXXY to be the best in class profile based on safety, efficacy and convenience. 

TXMD has filed a new drug application for another compound to treat "moderate-to-severe vasomotor symptoms due to menopause". The PDUFA target date is 10/28/18. TherapeuticsMD Announces FDA Acceptance of New Drug Application (NDA) and Prescription Drug User Fee Act (PDUFA) Date for TX-001HR 

TXMD also has a prescription vitamin business. Prenatal Vitamins by Prescription from vitaMedMD

2. Sold 100 of the Synthetic Floater GJT at $20.74-Used Commission Free Trade: 

Stocks, Bonds & Politics: Synthetic Floaters

Profit Snapshot: +$192.58

Item # 3.A. Bought 50 GJT at $19.48 (7/8/17 Post) 

Quote: Synthetic Fixed-Income Securities Inc. STRATS Trust for Allstate Corp. Securities, Series 2006-3 (GJT)

GJT Prospectus

Par Value: $25

Coupon: .85% above the 3 month treasury bill rate with an 8% maximum  

Interest payments are made monthly. 

The coupon has been trending up with the 3 month treasury bill as shown in the following snapshot: 

Underlying Security: Allstate SU Bond Maturing on 4/1/36

Underlying Bond Prospectus: Make Whole Provision at page S-5

The Trust Certificate matures on the same date. 

Remaining Position: 100 Shares

Last Purchase Discussion: Item 1.A. Bought 50 GJT at $20.03 (3/1/2018 Post)

Last Sell Discussion: Item # 2.A. Sold 50 GJT at $20.55-In a Roth IRA Account (3/29/18 Post)

Trading Profits to Date= $841.08 ($648.5 in prior trades/snapshots in Gateway Post for Trust Certificates)

Sample of Prior Discussions: 

Bought 100 GJT at $8.3 (4/6/09 Post)

Sold 50 GJT at $13 (6/20/09 Post)

Item # 4 Sold 50 GJT at $17.5 (12/31/2009 Post)

Item # 3 Bought 50 GJT at $18.15-Roth IRA (7/22/11 Post)

ROTH IRA: SOLD 50 GJT at $18.9 (6/15/2013 Post)
Item # 3 Bought 50 GJT at $17.97-Roth IRA (3/28/15 Post)

3. Intermediate Term Bond/CD Ladder Basket Strategy: 

A. Bought 2 Lexington Realty 4.25% SU Bond Maturing on 6/15/23: 

Finra Page: Bond Detail (prospectus linked)

Issuer:  Lexington Realty Trust (LXP) 

10-Q for the Q/E 3/31/18 (debt discussed at pages 16-17)

As of 3/31/18, LXP had $690.074M in mortgage debt outstanding. 

LXP SEC Filings 

Credit Ratings: 

Bought at a Total Cost of 99.45

YTM at Total Cost Then at 4.371%

Current Yield at TC = 4.2735%

I also own the common shares. My last substantive discussion of a purchase was here: Item 1.D. Bought 10 LXP at $7.95-Used Commission Free Trade (3/12/18 Post)

B. Bought 1 Black Hills 3.95% SU Bond Maturing on 1/15/26:

FINRA Page: Bond Detail (prospectus not linked)

Prospectus

Issuer: Black Hills Corp. (BKH) 

BKH Analyst Estimates

Black Hills Corp. Reports Solid First Quarter 2018 Results NYSE:BKH

2017 Annual Report (long term debt listed and discussed starting at page 122)

Credit Ratings:

Bought at a Total Cost of 99.349
YTM at TC Then at 4.049%
Current Yield at TC = 3.9759%

C. Bought 2 Hanover Insurance 4.5% SU Bonds Maturing on 4/15/26:

FINRA PAGE: Bond Detail (prospectus not linked)

Prospectus ("We estimate that the net proceeds to us from this offering will be approximately $370,688,750 after deducting underwriting discounts and estimated offering expenses payable by us. We intend to use the net proceeds from this offering, together with cash on hand, to redeem our outstanding 7.50% notes due 2020 and 6.375% notes due 2021 and to pay related fees and expenses.") I certainly prefer using the proceeds to redeem higher cost debt as opposed to using the proceeds to buy back stock.  

Issuer: Hanover Insurance Group Inc. (THG)
THG Analyst Estimates
The Hanover Reports First Quarter Net Income and Operating Income of $1.57 and $1.95 per Diluted Share

2017 Annual Report (debt discussed starting at page 110)

Credit Ratings:

Bought at a Total Cost of 99.6
YTM at TC Then at 4.56%
Current Yield at TC = 4.5181%

Over the years, I have bought and sold THG exchange traded bonds.

The latest example was the $25 par valueBaby Bond THGA which is a junior bond with a 6.35% coupon: Hanover Insurance Group Inc. 6.35% Subordinated Debenture.  due 2053 (THGA)

THGA Discussions: 

Item # 5.A. Sold 50 THGA at $25.69-Roth IRA Account and Item 5.B. Sold 50 THGA at $25.72 (9/11/2017)-South Gent's Comment Blog # 6: Bought 50 THGA in Roth IRA at $24.7 and South Gent's Comment Blog # 6: Bought 50 THGA at $24..87 

Item # 4 Sold 50 THGA at $25.36- Item # 4 Update For Exchange Traded Bonds And Preferred Stock Basket Strategy As Of 1/22/16 - South Gent | Seeking Alpha

Sold THGA: 50 Shares at $23.46-Roth IRA and 50 Shares Taxable Account at $23.67 (5/17/14 Post)-Item # 3 Roth IRA: Bought 50 THGA at $21.58 (11/6/13 Post) 

THGA Trading Profits: $259.61

Prior to those trades, I traded THG bonds that were in the Trust Certificate form of legal ownership. All of those securities have been redeemed by the call warrant owners. 

Realized Gains PKM AND KRH:$1,151.6

Item # 3 Bought 150 TC PKM at 17.8 & 17.5 June 2009; Item # 3 Pared PKM-Sold 50 at $20.11 July 2009; Bought 50 PKM at $24.84 September 2010; PKM Called; Item # 4 Sold 100 of 150 PKM at $25.93 January 2011

KRH-Exercise of Call Warrant December 2010-Bought: KRH at $24.85 Bought 50 of the TC KRH at $19 November 2009 

Sold 50 KRH at 24.6 (October 2010)-Bought 50 KRH at $18.62 in IRA 

Snapshots are located in the Trust Certificate Gateway Post.

This is my first purchase of a THG $1K par value bond bought in the bond market. The 2026 senior unsecured bond has a YTM of 4.56% and is senior in the capital structure to THGA which will mature about 27 years after 2026 SU bond. At the time of my purchase, THGA was selling at $25.31, a small premium to its par value, while I bought the 2026 SU bond at a discount to par value. The advantages to THGA are that it provides about a 1.75% current yield advantage to the 2026 SU bond and is far easier to trade.  

4. Short Term Bond/CD Ladder Basket Strategy: 

A. Bought 1 Wells Fargo 2.5% SU Bond Maturing on 3/4/21: 

FINRA Page: Bond Detail

Issuer:  Wells Fargo & Co. (WFC)
WFC Analyst Estimates

Credit Ratings: 

Bought at a Total Cost of 97.899 
YTM at TC Then at 3.291%
Current Yield at TC = 2.5537% 

B. Bought 2 American Express 2.125% SU Bonds Maturing on 3/18/19: 

FINRA Page: Bond Detail (prospectus linked)

Issuer: American Express Co. (AXP)
AXP Analyst Estimates
American Express Reports First-Quarter EPS of $1.86

Credit Ratings:

Bought at a Total Cost of 99.752
YTM at TC Then at 2.424%
Current Yield at TC = 2.13%

I had 4 American Express 1.55% bonds mature on 5/22/18. So I am redirecting the proceeds into other AXP short term bonds.

C. Bought 2 RYDER 2.875% SU Bonds Maturing on 9/1/20:

FINRA Page: Bond  Detail

Issuer: Ryder System Inc. (R)
R Analyst Estimates

Ryder Reports First Quarter 2018 Results

2017 Annual Report

Credit Ratings:

Fidelity Account: 1 Bond

Bought at a Total Cost of 99.366
YTM at TC Then at 3.165%
Current Yield at TC = 2.8933%

IB Account: 1 Bond

Bought at a Total Cost of 99.357
YTM at TC Then at 3.169%
Current Yield at TC = 2.8936%

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.