Sunday, July 15, 2018

Observations and Sample of Recent Trades: BHB, FBIO, KR, MRK, NHLD, RPGAX, SGY:CA, SPHS, STWD

New Publication Schedule: I am changing my publication schedule to Sunday and Wednesday with a separate portfolio management post on Friday whenever I have something to say on that topic. This post has a portfolio management section, which tends to get lost in my inevitably long posts. 



Consumer inflation hits 6-year high, CPI shows - MarketWatch (+2.9% Y-O-Y with core CPI at +2.3%)

Consumer Price Index Summary

Second quarter real GDP growth will be stoked in part to stockpiling in advance of anticipated tariffs.  


Markets and Market Commentary

As Trade War Persists, Mnuchin Says China Talks Have ‘Broken Down’ - The New York Times

I noticed late last week that a few market pundits have come up with a new narrative to explain the market's recent rise, notwithstanding the U.S. threat to levy a 10% tariff on $200B in additional Chinese exports. 

The theory is that China blinked after that last announcement, which is allegedly evidenced by its failure to immediately provide a list, as the U.S. has done, of the products impacted by the new proposed tariffs. That may turn out to be an accurate assessment, but China did immediately say it would respond. China vows to hit back over U.S. proposal for fresh tariffs | Reuters

This argument overlooks some key facts. 

First, even if China wanted to impose a 10% tariff on $200B in additional U.S. exports, it could not do so since it would run out of products at around 1/2 of that amount. 

Second, of the remaining products that are not currently subject to levies, energy commodities are the largest category. If China imposed a 10% tariff on those products, it would simply raise consumer and business costs unless China had first lined up suppliers to replace the U.S. energy exports. So give it some time before China replies to the latest threat. 

Chinese Tariffs on U.S. Energy Would Signal a New Attitude - Bloomberg

Lastly, there are a number of ways that China can retaliate other than through tariffs. One counter measure, discussed in the state media, is to restrict or even ban leisure travel to the U.S. by China's citizens. China's state media claims that their citizens spend $115B a year on leisure travel to the U.S.    

There are a number of qualitative measures including increased border inspections, unexpected legal problems for U.S. companies operating in China, Yuan depreciation which is already happening (
USD/CNY Currency Chart), and selling or just refusing to buy more U.S. treasuries as the federal government's debt bomb grows parabolically. The ongoing Yuan depreciation against the USD partly offsets to a U.S. purchaser the U.S. tariff on China's imports. The depreciation in the Yuan also makes China's products cheaper elsewhere which could result in lower U.S. export sales for competitive products.  

Another potential weapon is to deny U.S. firms access to China's supply of rare minerals that are essential to many products manufactured by U.S. companies. China's secret trade war option: A rare earth embargo | TheHill

In other words, pinning so much hope on the China blinking narrative at this point in time is wishful thinking. Just give it some time. 

Bond market's recession indicator may not be working this time (maybe that will prove to be correct, given that interest rates are still being manipulated by central banks to varying decrees and it is consequently questionable whether a yield inversion reflects a consensus market opinion about a possible recession on the horizon)

Jeffrey Gundlach argues in this week's Barron's Roundtable that a yield curve's reversion is even a better indicator of a recession when rates are low as now.  

Ed Yardeni: That flawless predictor of recession and a bear market is wrong this time - MarketWatch

The bear case for stocks is ‘so obvious, it can’t be right’ - MarketWatch

As Tariffs Bite, China Cancels U.S. Soy Deals and Hunt Is on for New Export Markets | Successful Farming China can increase soybean imports from countries like Brazil. Once American farmers lose market share in China due to the tariff, it may prove difficult to regain that lost share, making the lost sales that are now occurring more than temporary blips. 

Trade war may steer tax cuts' windfall to even more buybacks | Reuters I do not view stock buybacks to be meaningfully beneficial to the real economy. The cash used for the buybacks is not available to create jobs, to add plant and equipment, to conduct research and development, or to create new businesses. The volume of cash buybacks has been a factor contributing to the stock market's robust gains in recent years and will consequently increase the value of stock options granted to senior management. The top 10% will benefit through stock ownership, but will generally save rather than spend the windfall unlike the bottom 50% who are not invested in the stock market, either in taxable or retirement accounts, and who have no choice but to spend income. But that does not matter now to the Stock Jocks since earnings increase at a faster rate than than revenues due to the tax cuts and stock buybacks. Increasing the wealth gap does matter, however, in the long term as shown by what happened in 2008 as a large segment of the population was unable to service the debt acquired to keep up with Jones. 

I recognize that Trump may soften his current trade demands on China, Europe, Mexico and Canada shortly before the midterm election next November, accepting close to what those nations were willing to do before the tariff war even started. 

Donald could then crow and claim a major victory, the best and most magnificent victory ever achieved by any President in the past or at anytime in the future, just before the election.  

The fact that the claim would be untrue, and that he had done far more harm than good in getting to that point, will of course be irrelevant to tens of millions who will accept his spin as a fact. 

Politically, it would not be a good idea to have the trade war accelerating into the midterm elections which could cost the GOP the House, but not the Senate. 

With the House in control of the Democrats, the only potential unfavorable outcome for the GOP, political tensions and uncertainties will rise in the remaining two years of Donald's four year term.  


Portfolio Management

The preservation of capital emphasis is highlighted by the cash flow received on 7/16. These snapshots are from my Fidelity taxable account: 

I received dividends from only two common stocks, and both of those payments were small positions in equity REITs: Apple Hospitality (APLE) and Lexington Realty (LXP).

Bond and CD payments were generated by 1 or 2 lots. The CD interest payments shown above are paid monthly. 

Three of the $1K par value bonds pay monthly. Those are the one 3% National Rural 2027 bond, the 2 National Rural 2022 bonds  and the 1 GS bond.  The other $1K par value bonds make semi-annual interest payments. 

I had two treasury notes mature. My treasury note purchases are made in the secondary market and are bought below par value. The YTM will invariably be higher than the coupon. 

I received one quarterly dividend from a convertible equity preferred stock, EPRPRC, that I recently bought and discussed in this post.  Item # 1 Bought 50 EPRPRC at $24 and $ 50 at $23.78-two separate accounts using commission free trades(4/23/18) This one has a $25 par value. 

Closing Price Last Friday: EPR-PC $27.10 +$0.08 +0.30% 

The price rise in EPRPRC above par value is due to the rise in the common share price since I purchased the convertible preferred stock. EPR Properties Interactive Chart As I discussed in the preceding linked post, the conversion price is adjusted down by a calculation tied to the common share dividend. As of 3/31/18, the conversion price was at $64.35. The conversion price was reduced to $63.97 as of 6/30/18: EPR Website Calculation.PDF If that link does not work, then go to this page and click the Series C preferred link. 

As I mentioned in a comment to my last post, short term CD rates have trended down over the past week or so. Considering that inflation is moving up and the FED remains on course to increase the FF rate in September and probability in December, this rate decline makes these shorter securities even more unattractive. My Vanguard Prime MM fund, whose yield has been increasing as the FED jacks up the FF rate, now yields 2.05% as of last Friday. VMMXX - Vanguard Prime Money Market Fund | Vanguard 

That fund, which is more liquid than a bank CD of course, is now yielding more than the bank CDs maturing in January 2019 except for a Synovus Bank CD which has a 2.05% coupon:

Part of my portfolio management has always been to pinch pennies, nickels and dimes and that adds up over a long period of time. 

A lot of that pinching has involved saving money by lowering my brokerage commissions whenever possible. That started in 1982 when I opened a Schwab account which then had a $45 commission on orders submitted through a telephone ordering system as I recall. That was really cheap compared to the full service brokerage firms. Now, I pay either no commissions or a $1 IB commission on a 100 share lot. My commission free trades will soon expire in my Schwab account so trades will be switched to my Fidelity account where I have an abundance of free trades expiring in 2020 or IB.

Bond commissions have also come way down as well. I generally buy corporate bonds in 1 or 2 bond lots, paying a $1 per bond brokerage commission. I pay $2 per bond at Vanguard which, given my penny pinching ways, is my last resort for bond buying. I will only buying treasuries in the secondary market where I can do so commission free which is the case for Fidelity, Schwab and Vanguard brokerage customers.   

When buying broad based index or sector ETFs, I go with the low expense ratio ETFs that can be bought in a brokerage account. Sometimes, I have to go with a higher expense ratio fund, like ENY, since my choice is limited in a particular sector like Canadian energy companies. 

Fidelity, Schwab and Vanguard have a large variety of low cost ETFs that are offered commission free to their customers. The commission free is important for those who wish to invest small amounts periodically.


Cisco sinks on report Amazon wading into networking equipment | Reuters

Last Friday's Closing Price: CSCO $41.78 -$1.80 -4.13% 

I will need a much lower price to buy back my 50 shares previously sold: Item # 1 Sold 50 CSCO at $40.84 (1/18/18 Post)(profit snapshot = $885.28

As noted in that post, the share price went over $70 in 2000. Between 2010-2012, I bought shares at $18.7, $19.95 $20.39 and $22.45. 



When it comes to lying, Trump is nonstop - The Washington Post (column written by former GOP congressman Joe Scarborough)

McCain rips Trump: NATO actions 'disappointing' but not surprising

12 Russians indicted in Mueller investigation (The persons indicted are GRU members who engaged in a "sustained" effort to  hack into DNC computers. Yes, I know that Donald says it could have been a 400 pound guy living in his mom's basement) 

Interestingly, the Russians tried to hack into Hillary's emails on the same day that Donald publicly made a request for their assistance. (paragraph 22 of the indictment); Trump urges Russia to hack Clinton's email - POLITICO

Indictment.pdf The FBI has the evidence which is crystal clear for any non-Trumpster who reads the indictment. Facts are of course irrelevant to them and are classified as Fake News designed to put worms into their brains.  

Charges against Russian intelligence officers intensify spotlight on Trump adviser Roger Stone - The Washington Post

Roger Stone says he's "probably" the unnamed person in Russian hacking indictment - CBS News

Analysis: Trump Opens His Arms to Russia. His Administration Closes Its Fist.

Trump's Spiritual Adviser: Sure, Jesus Was A Refugee, But He Didn't Do Anything Illegal


The Growing Neo-Nazi Movement within the GOP

John Fitzgerald, the republican nominee for California's 11th congressional districthas appeared in neo-Nazi podcasts and has claimed that the Holocaust is a lie and part of an alleged international Jewish conspiracy.  A GOP congressional candidate in California has been appearing on neo-Nazi podcasts

A prominent neo-Nazi, Arthur J. Jones, won the GOP's primary in Illinois' 3rd congressional district. Jones has a video on his website where he gives the Nazi salute as a speaker at a white nationalist rally supporting Donald's election in 2016. 

Nazis and white supremacists are running as Republicans 

Look what crawled out from under Trump’s rock - The Washington Post

Republican Congressman Scott Taylor (R-VIR) Says He Can’t Be Racist Because His Son Is Named After a Black Man (The son's name is Sterling. I did not realize that Sterling was such an exclusive name reserved to African Americans and caucasians who wish to honor them) Scott Taylor represents Virginia's 2nd congressional district which is probably a safe republican seat except in a landslide election year for the democrats. A democrat won, for example, in 2008. The map for that district suggests that it has been gerrymandered by the republican legislature.  


The GOP's Disgusting Grand Standing and Ad Hominem Attacks During the Peter Strzok Testimony:

7 key moments from Peter Strzok’s wild hearing

I view several GOP politicians on the House Oversight and Judiciary committees to be repulsive human beings. I have arrived at that opinion based on their conduct and personalities rather than their reactionary and extreme political beliefs. 

Among the worst is Louie Gohmert (R-TX) who went out of his way to personally attack Strzok during this testimony. Louie Gohmert vs Peter Strzok EXPLOSIVE Exchange at House Oversight Hearing about anti-Trump Texts-YouTube A lot of Trumpsters left comments praising Gohmert's conduct, which is to be expected. Gohmert's contributions to western civilization consist of his claim that all of the evidence relating to climate change is fraudulent and the claim about his reality creation involving the terrorist baby plot. Rep. Gohmert Warns Of Terrorist Babies - YouTube

The republicans on those committee loved attacking Strzok for his extra marital affair, which in their viewed rendered him a leper unworthy of trust, but they have defended Donald after the Access Hollywood tape and multiple accusations of extra marital affairs and sexual harassment. 

One of those republicans, Scott DesJarlais (R-Tenn.), had multiple extra marital affairs and encouraged an ex girlfriend to have an abortion even though he is without saying strongly pro-life. The Biggest Hypocrite in Congress? - POLITICO MagazineScott DesJarlais supported ex-wife's abortions, slept with patients, divorce transcript shows | Times Free PressRepublican Scott DesJarlais says God forgives him | Daily Mail Online

Another representative, Mark Meadows (R-NC), a founding member of the inappropriately named Freedom Caucus, is currently being investigated over payments made to an ex-staffer. Ex-Mark Meadows Aide Says Sexual Harassment in Congressman’s Office Was Known Earlier Than Reported;

Yet another member, Mark Sanford (R-SC), had a well publicized romp with an Argentine firecracker María Belén Chapur that led to his divorce. I do not recall Ms. Chapur being called a "firecracker" which is probably forever reserved to stripper Fanne Foxe who decided to go swimming in the Tidal Basin after the police pulled over congressman Wilber Mills for drunken driving. She apparently did not want to embarrass Wilber by staying in the car given her mode of dress. 

Then there is Jim Jordan (R-OH) who was recently accused by eight persons of ignoring sexual abuse conduct when he was a coach at Ohio State. 
Eighth Ex-OSU Wrestler Says Jordan Knew About Sexual AbuseA timeline of Ohio State’s Richard Strauss sexual abuse investigation -; New allegation that Rep. Jim Jordan knew of sexual abuse by Ohio State team doctor - NBC NewsEx-Ohio St. wrestler: Jim Jordan 'snickered' when told about sexual abuse And, as expected, other republicans dismissed those accusers and came to Jordan's defense as they did with Trump and Roy Moore.  John Boehner charitably called Jordan an asshole. John Boehner Unchained - POLITICO Magazine (“Jordan was a terrorist as a legislator going back to his days in the Ohio House and Senate,” and Mark Meadows mentioned above is an "idiot" in Boehner's opinion. He will not be receiving any disagreement from me on those two GOP congressman)  

Meadows and Jordan want to impeach the Deputy Attorney General for not allowing them to interfere more with the ongoing Russian investigation. Conservatives moving to impeach Rosenstein soon: report The second article of impeachment may involve Rosenstein daring to indict Russians who interfered in the election on behalf of Donald. When the mainstream media quits calling wing nuts and reactionaries "conservatives", then that will be a day to celebrate.  

Trey Gowdy (R-SC), another creature revealing his true nature during the Strzok testimony, led the two year investigation into the Benghazi attack. His approach is to attack a witness by asking pejorative "questions" (really his conclusions) in a loud voice, then interrupting a witnesses effort to answer with yet another "question" in an even louder voice and then moves into holier than now mode chastising the witness in a sanctimonious fashion as if Gowdy was channeling the Lord directly. All of that is reserved for any witness who does not adhere to Gowdy's reality creations and the Truth revealed to him by God. The Trumpsters love it. 

It is a wonder that the nation has survived this long with such "leaders". 

Peter Strzok just gave a hard-to-rebut defense of the objectivity of the Russia investigation’s origins - The Washington Post

Strzok testified that he did not divulge to the press any matter relating to the Russian investigation prior to the election. Peter Strzok says he didn’t leak information about Trump-Russia probe before election-MarketWatch The republicans have no proof to the contrary. The GOP should thank him for that discretion rather than spitting their venom on him. 

Yet, they want to claim that the FBI tried to influence the election by the Russian investigation which was not disclosed, when it was Comey who interfered on behalf of Trump by publicly restarting the Clinton email investigation shortly before the election. One has to have their brain ossified before being able to follow their reasoning. At a minimum a serious amount of brain scramble and chemical synapse pollution with radioactive waste is a necessary precondition to discovering a slither of merit in the GOP's argument here. 

As I mentioned in the past, Strzok served the country admirably in the military and in the FBI's Counter-Terrorism division--- until he expressed serious misgivings about Donald becoming President when he was investigating Russia's interference in the U.S. election. 

He may be discharged from, or otherwise disciplined by the FBI for the now well known emails that he exchanged with another FBI employee with whom he was having an extra marital affair. I would not quarrel with either of those disciplinary measures. 

The facts do support a bias against Trump, but what is glossed over is that Trump was not target of the investigation which was investigating Russian interference in the U.S. election, a well accepted fact among non-Trumpsters, and the factual connections between Russian intelligence operatives and certain members of the Trump campaign.  

It is not generally known that Strzok was one of the lead agents when the FBI rounded up a number of Russian "illegals" several years ago, which became the inspiration for FX's hit show The Americans (TV Series 2013–2018)GOP stunt to smear counter-intel expert Strzok ripe for backfire. Strzok was also involved in the 9/11 investigations and several FBI investigations into China's espionage activities. It is interesting that the republicans will not release his testimony taken in private, as requested by the Democrats, where he discussed why he had a negative opinion about Donald. 


Health Secretary Tom Price Wasted $341,000 on Improper Travel, Inquiry Finds - The New York Times

This author is correct IMO that Kavanaugh, along with the existing other 4 reactionary Justices, will roll back both voting and civil rights. Does Brett Kavanaugh Spell the End of Voting Rights? - The New York Times  The Roberts Supreme Court will roll back constitutional protections back 50 to 150 years depending on the issue. When this proves to be a correct prediction, don't say that you were not warned.

I mentioned in a prior post that Kavanaugh will support an expansion of corporate First Amendment rights. Part of that opinion is based on his opinion written on the internet neutrality case, where he claimed that ISP providers had the First Amendment right to edit content passing over their pipes. Kavanaugh wrote ISPs have First Amendment rights, could weaken privacy
Dissenting Opinion in United States Telecom Association v. FCC (D.C. CIR 2017).pdf (see page 74 et seq. of the PDF)



A. Sold 100 BHB at $30.69-Used Commission Free Trade:

Profit Snapshot for Last 100 Shares = +$1,718.56

Quote: Bar Harbor Bankshares (BHB)

BHB Total Realized Gains: $4,046.44;  

Closing Price Last Friday: BHB $29.79 -$0.03 -0.10%

I am satisfied with that gain, and I do not want to lose some or all of it when banks take another tumble as they repeatedly have done throughout my life.

This stock has stagnated near the current price since November 2016. BHB Stock Chart

I do view BHB as a well managed nano cap bank.

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

Several of those first quarter numbers are unappealing, including the decrease in the NIM, the increase in the efficiency ratio, and the lower than average ROA and ROE numbers.

Bar Harbor Bankshares Reports First Quarter Earnings 

2. Small Ball:

A. Sold 10 MRK at $61.3 ($1 IB Commission):

Profit Snapshot: +$65.7

Item # 5.B. Bought 10 MRK at $54.53 (2/15/18 Post)

Quote: Merck & Co. Inc. (MRK)

Prior 2017-2018 Sell Discussions:

Item 1.C. Sold 10 MRK at $61.2 (1/28/18 Post)(profit snapshot $69.17)-Item # 2.A. Bought 10 MRK at $54.29 (12/7/17 POST)

ITEM # 2.B. Sold 113 MRK at $65.28 (2/19/17 Post)(profit snapshot = $741.19)

Recent Earnings Report: Q/E 3/31/18 

I still view the investment case for Merck to be confined largely to Keytruda's growth. Revenue gains and losses from other products are basically offsetting one another.  Merck will be participating with Astra Zeneca in Lynparza sales but had to pay up for that right.  AstraZeneca, Merck team up on Lynparza combos in collaboration worth up to $8.5B | FiercePharma

Merck Announces First-Quarter 2018 Financial Results 

I have generally been in a trading mode for MRK shares where I buy at below $55 and then sell in the $60 to $62 range. My last buy was 10 shares under my small ball buying program where I did not have a chance to buy more shares before the shares rocketed back up based on Keytruda developments. 

B. Sold 50 STWD at $22.31 ($1 IB Commission):

Quote: Starwood Property Trust Inc.  (STWD)

Closing Price Last Friday: STWD $22.25 -$0.05 -0.22% 

Profit Snapshot: +$17.23

Item # 3.A. Bought 50 STWD at $21.93 (8/13/17 Post)

Dividend: Quarterly at $.48 per share

Last Ex Dividend Date: 6/28/18

STARWOOD PROPERTY TRUST, INC. (STWD) Dividend Date & History -

1 Year STWD Chart on Sell Date:

I view this trade as a successful dividend harvest.

I received 4 quarterly dividends and exited the position at a profit which is all that I wanted out of this purchase.

I am also buying shares as part of my small ball buying program using commission free trades.  

The last price paid was $19.96. Item 1.A. (2/19/18 Post) The total position is at 25+ shares, with an average cost per share of $20.83. At that cost number the dividend yield is about 9.22% at the current quarterly rate. I will continue reinvesting the dividend at less than $23. 

C. Added 100 SGY:CA at C$2.39 (C$1 commission at IB):

Quote: Surge Energy Inc (Canada: Toronto)

Website: Surge Energy Inc.

Closing Prices Last Friday: 

Toronto: SGY.TO C$2.55 +$0.02 0.79% 

U.S. Pink Sheet Exchange: ZPTAF  US$1.94 +$0.02 1.04% 

I now own 300 SGY:CA.

I also own 200 ordinary Surge shares traded on the U.S. pink sheet exchange that are priced in USDs:  OTC Markets | ZPTAF

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

I thought that several of these numbers were encouraging including the 26% increase in adjusted funds flow per share, the 16% increase in production output, the share repurchase program, and the increase in net asset value per share by over 10% to C$6.06.

Surge Energy Inc. Announces First Quarter 2018 Results; Large Increase to Primary Credit Facility

Surge also pays a decent monthly dividend which it recently increased and been increasing as of late:

Dividend Info - Surge Energy Inc.

D. Sold 100 SPHS at $2.95-Used Commission Free Trade:

Profit Snapshot: +$25.31

Quote: Sophiris Bio Inc. (SPHS) 

Closing Price Last Friday: SPHS $3.17 +$0.07 2.26% 

I decided to bail with a possible re-entry at a price below my lowest purchase price. 

I have previously discussed my concerns. SPHS has one drug. 

A patient died on the same day as the drug was administered for a second time. While SPHS may overcome the hurdle of convincing the FDA that the drug did not cause that death, I am more inclined to require a very burden of proof given the timing. Sophiris Bio Reports Top-Line Interim Safety and Biopsy Findings For its Phase 2b Clinical Trial of Topsalysin in Localized Prostate Cancer   

I previously sold a 50 share lot shortly before SPHS reported this event: Item # 1.C. Sold 50 SPHS at $3.71  (6/28/18 Post) 

I would not touch the stock again personally if SPHS is unable to prevent clear and convincing evidence that the drug did not cause the death. 

While prostrate cancer is the second leading cause of cancer deaths among men, it is also a treatable disease and one that is frequently over diagnosed and treated given that the cancer frequently grows so slowly that far more men die with the cancer than because of it. Key Statistics for Prostate Cancer | Prostate Cancer Facts My point here is that actually or probably causing a death with a drug is not going to be lightly dismissed by the FDA.  

E. Bought 50 FBIO at $3.02 (Used Commission Free Trade) and 50 NHLD at $3.16 ($1 IB Commission)

Quote: Fortress Biotech Inc. (FBIO)
Closing Price Last Friday: FBIO $3.02 +$0.02 +0.67% 

Quote: National Holdings Corp. (NHLD) 
Closing Price Last Friday: NHLD $3.09 +$0.01 +0.32% 

I generally buy these two stocks as lottery tickets together. FBIO owns a majority stake in NHLD (56.6%), a broker dealer that will take the FBIO subsidiaries public.  

Website: Fortress Biotech - Specializing in Acquiring, Developing and Commercializing Novel Pharmaceutical and Biotechnology Products

FBIO June 2018 Investor Presentation

B.Riley FBR Thinks Fortress Biotech's Stock is Going to Recover

FBIO Pipeline:

As previously discussed, FBIO acts as an incubator company for other biotech companies. The ownership structures are complicated and somewhat opaque as to percentages which can change over time. A discussion of those issues and items is beyond the scope of this discussion since it would take way too much of my time. I would simply refer anyone interested to FBIO's 2017 Annual Report and the annual reports of the publicly traded and controlled companies. Some of the portfolio companies are publicly traded while several others are still privately owned. 

I bought back in my Schwab account a 50 FBIO share lot sold at $4.96:  Item # 5.A. (3/19/18 Post)(realized gain $20.29). I did not like my entry price for that lot which was at $4.55. Item # 3.B. Bought 50 FBIO at $4.55 (7/25/17 Post)

In a different account, I own another 50 shares. Item # 5.A. Bought 50 FBIO at $3.33-Used Commission Free Trade (1/4/18 Post)

I view this company as a quintessential lottery ticket. The market capitalization is about $161+M at a $3.02 price. I do not see FBIO earning a profit in the reasonably foreseeable future. The most likely source of a profit would be a major pharmaceutical company paying a significant amount for one of the majority owned subsidiaries. 

NHLD: 56.6% owned by FBIO

The National Holding controlled subsidiary has quarters where it has reported a profit, including a tidy sum for the fiscal year ending 9/30/17: 

NHLD Annual Report at page 25 

The market capitalization is only $39+M at $3.02 per share. The company had $31.2M in cash as of 3/31/18 and no debt: SEC Filed Financial Report for the Q/E 3/31/18 Cash per share was then at about $2.51 or about 83% of the $3.02 market value. 

NHLD is used by FBIO to take public its operating subsidiaries and to raise post IPO capital for them. Usually, when I buy FBIO, I also take a lottery position in NHLD which I did by buying 50 shares at $3.16. I previously exited a LT position at $3.75. Item # 4 Sold 100 NHLD at $3.75 (2/8/18 Post)(profit snapshot= +$92.12

Last FBIO Earnings Report: As of 3/31/18, the company had "consolidated cash, cash equivalents, short-term investments (certificates of deposit), cash deposits with clearing organizations and restricted cash totaled $179.4 million, compared to $168.3 million as of December 31, 2017, an increase of $11.1 million for the quarter." The net loss for the quarter was -$.49 per share or 21 million. 

"Net revenue totaled $55.4 million for the first quarter of 2018, compared to $44.7 million for the first quarter of 2017. Total revenue as of March 31, 2018, includes $5.9 million of Fortress revenue and $49.5 million of revenue from National Holdings. Total revenue as of March 31, 2017, included $2.8 million of Fortress revenue and $41.9 million of revenue from National Holdings."  National Holdings is a broker dealer that is traded under the symbol NHLD. FBIO has a % ownership stake in that company. 

The potentially most important subsidiary may be Mustang Bio Inc. (MBIO), an early clinical stage company exploring CART-T cancer drugs. Mustang Bio Announces Preclinical Data on Potency of its CAR T Cells in Glioblastoma Published in JCI InsightMustang Bio Reports First Quarter 2018 Financial Results;  Mustang Bio

Avenue Therapeutics (ATXI) has a pain drug in a phase 3 trial. Avenue Therapeutics Announces Positive Topline Phase 3 Data for Intravenous Tramadol in the Management of Postoperative Pain (possible NDA filing in late 2019)

Another public company is Checkpoint Therapeutics Inc. which has tanked since its IPO. Pipeline | Checkpoint TherapeuticsH.C. Wainwright Thinks Checkpoint Therapeutics Inc's Stock is Going to Recover 

Some Recent Press Releases

Fortress Biotech Announces Cyprium Therapeutics’ CUTX-101 (Copper Histidinate) Granted FDA Fast Track Designation for Treatment of Classic Menkes Disease 

Caelum Biosciences Announces Complete Cardiac Data Analysis from Phase 1b Trial of CAEL-101 in AL Amyloidosis  

Mustang Bio Announces Opening of CAR T Cell Therapy Manufacturing Facility in Worcester, Mass. 

Fortress Biotech Announces Publication of Phase 1 Data on CNDO-109-Activated Allogeneic Natural Killer Cells in Acute Myeloid Leukemia in Biology of Blood and Marrow Transplantation 

Checkpoint Therapeutics Reports Preclinical Data on BET Inhibitor CK-103 at the American Association for Cancer Research Annual Meeting 

Based on the stock prices of FBIO and its public subsidiaries, the institutional investor community does not view a major drug success as likely. I would say that the odds, as expressed in stock prices, of one major drug coming out of the pipeline is less than 10%. That is a guess of course. That probability may change based on developments in ongoing trials.    

3. Short Term Bond/CD Ladder Basket Strategy

A. Bought 2 Franklin Synergy BK 2.2% CDs (monthly interest payments) Maturing on 3/7/19

B. Bought 1 Prudential 2.35% SU Bond Maturing on 8/15/19:

Finra Page: Bond Detail (prospectus)

Issuer: Prudential Financial Inc.  (PRU) 
PRU Analyst Estimates

Credit Ratings:

Fitch Rates Prudential Financial's Senior Debt Issuance 'A-' (3/23/18)

Bought at a Total Cost of 99.6

YTM at TC Then at 2.717%
Current Yield at TC = 2.3594%

C. Bought 2 Tyson Foods 2.65% SU Bonds Maturing on 8/15/19:

FINRA Page: Bond Detail (prospectus linked)

Issuer: Tyson Foods Inc. Cl A (TSN)

TSN Analyst Estimates

Tyson Foods Delivers Earnings Growth in First Six Months, Reaffirms Guidance for Another Record Year (Fiscal Second Quarter Ending 3/31/18)

TSN SEC Filings

The last bond offering was in August 2017: Final Prospectus Supplement ($500M in 2.25% SU notes maturing in 2021; $400M in floating rate notes maturing in 2020).

Credit Ratings:

Fitch Affirms Tyson's IDRs at 'BBB'/'F2'; Outlook Stable (4/20/18)

Bought at a Total Cost of 99.847 (includes $4 commission)

YTM at TC Then at 2.79%
Current Yield at TC = 2.6541%

D. Bought 2 Select Income REIT 3.6% SU Bonds Maturing on 2/1/20:

FINRA PAGE: Bond Detail

Issuer: Select Income REIT Stock (SIR)

10-Q FOR THE Q/E 3/31/18
2017 Annual Report

SIR SEC Filings

Last Bond Offering Prospectus (May 2017: $350M 4.25% SU bonds maturing in 2024)

Credit Ratings:

Bought at a Total Cost of 99.822

YTM at TC Then at 3.716%
Current Yield at TC = 3.6064%

E. Bought 2 Wells Fargo 2.45% CDs (monthly interest payments) Maturing on 8/13/19 (13 month CD):

U.S. 1 Year Treasury Bill-MarketWatch

F. Bought 2 National Rural Utilities Cooperative Finance Corporation 2.125% SU Bonds Maturing on 2/1/19:

Finra Page: BondDetail

Issuer Website

Credit Ratings

Bought at a Total Cost of 99.746

YTM at TC Then at 2.608%
Current Yield at TC = 2.1304%

4. Eliminated a Small Position in the T. Rowe Price Global Allocation Fund (RPGAX):

Profit Snapshot:  +$635.79 Long Term

I have to take an abbreviated snapshot in this account to exclude the account number. This was the smallest stock mutual fund position in this account.

I quit reinvesting the dividend in 2015.

This elimination was due to my ongoing de-risking process where harvesting a profit and preserving capital are far more important to me than trying to gain a few extra percentage points in capital appreciation. 

RPGAX is currently rated five stars by Morningstar. It is a balanced world allocation fund. It is also my worst performing T. Rowe Price fund over the past 1 year. For a fund that maintains a significant allocation to bonds, the +17.02% total return last year was better than its benchmark.  Several bond categories have provided negative total returns over the past year unadjusted for taxes and inflation. The Investment Grade Corporate Bond ETF (LQD) and the iShares 7-10 Year Treasury Bond ETF (IEF) total returns over the past 52 weeks were negative through 7/9/18 for example. The Invesco Taxable Municipal Bond ETF (BAB) is up slightly over the past year.

5. Intermediate Bond/CD Ladder Basket Strategy

A. Sold 2 Kroger 3.5% SU Bonds Maturing on 2/1/26

FINRA PAGE: Bond Detail

Profit Snapshot: +$22.46

This bond was purchased on 5/14/18: Item # 3.B. (6/11/18 Post)

Bought at a Total Cost of 94.571

YTM at TC Then at 4.335%

Sold at YTM at 95.794 (excludes $2 commission)

YTM at 95.794 = 4.171%
Current Yield at 95.794 = 3.6537%

Currently, I am just not interested in corporate bonds maturing in 2026 that have YTMs near 4%. 

Inflation is accelerating and will likely receive a material boost from U.S. tariffs on imported products. I redeployed the proceeds into an Ecolab 2% SU bond maturing on 1/14/19, bought at a total cost of 99.761 and at a 2.43% YTM. Bond Detail The Ecolab bond also has a higher credit rating in addition to maturing 7 years sooner than the Kroger bond. I will discuss that bond purchase in a post later this month.    

DisclaimerI 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.