Observations and Sample of Recent Trades: ABDC, CPTA, IAU, K, TPVG

Economy: 

Housing starts dip in June and permits fall more steeply in another sign of malaise - MarketWatch; 

Census Bureau: June New Residential Construction.pdf

Foreign purchases of American homes plunge 36% as Chinese buyers flee

CEO of railroad giant CSX says the economy is the 'most puzzling' he's seen as stock plummets; Closing CSX Price Day of Earnings Report: CSX $71.38 -8.17 -10.27%); CSX Announces Second Quarter 2019 Financial Result 

Fed's Rosengren not on board for rate cut: 'I think we should wait'

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Markets and Market Commentary: 

The Fed is acting insane — that’s the economy’s biggest problem - MarketWatch I would agree with the author that fiscal conservatives exist only when they are out of power. The worldwide interest rate suppression, which has kept rates at an extremely abnormal levels for over a decade, has fueled a debt binge with global debt near 325% of world GDP. 

The Fed's expected rate cut not supported by economic data The current FF range is already abnormally low for an expansion cycle. With unemployment at a 50+ year low; record stock market levels; continued job gains; real GDP growing annually at over 2% annually; and extremely low by any historical standard intermediate and longer term interest rates, a cut in the FF can not be reasonably justified at this time. 

Buying stocks when they are this expensive has led to low returns in the future

Market Remains Overvalued - dshort - Advisor Perspectives

This pattern popping up in the market may signal a breakout for stocks

Why Bond Legend Dan Fuss Is Buying AT&T Stock - Barron's (subscription publication)

Netflix stock slammed by subscriber miss, but analysts are unfazed - MarketWatch; Why Netflix says it had a rare subscriber loss in Q2 2019 Netflix raised the cost of its basic monthly subscription to $9 from $8 and lost U.S. subscribers as a result. This indicates consumer resistance to price increases. Netflix lost 126,000 domestic paid subscribers. The company missed its own forecast of global subscriber growth by 2.3 million. Closing Price 7/18/19: NFLX $325.21 -$37.23 -10.27%. I do not own any shares. 

Closing Price 7/18/19: IBM $149.63 +6.56 +4.59%: International Business Machines Better than expected earnings were reported after the close on 7/17/19. International Business Machines Corporation (NYSE:IBM) - IBM Beats Earnings Estimate Despite Falling Revenue | Benzinga 

In after hours trading that day, the IBM initially popped by over $4 per share, but drifted down and closed the after hours session with over a $1.5 price decline. I own a few shares that are being bought under the small ball purchase restriction. 

The probability of a .5% FF cut later this month retreated to close the week at 22.5%. Countdown to FOMC: CME FedWatch Tool There was a brief spike to almost 70% in response to comments made by the NY Fed President John Williams who later clarified his remarks. Fed clarifies Williams speech that market took as signal of a rate cut 


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Growing Tensions with Iran: 

Iran's seizure of  a British flagged oil tankers was sufficient for me to buy 50 share of IAU, a gold bullion ETF. Iran seizes British-flagged oil tanker — here’s what you need to know about the Strait of Hormuz - MarketWatch Pompeo and Bolton believe that Iran's hostile acts against shipping prove that their maximum pressure policy is working. 

That ETF can be bought commission free by Fidelity and Vanguard brokerage customers. I bought this lot in my Vanguard taxable account: 

IAU 50 Shares at $13.63

IAU | iShares Gold Trust Overview | MarketWatch 

Sponsor's Website: iShares Gold Trust | IAU  

This purchase was a snap decision after reading the headline late in the trading day. 

Last Discussed: Item # 3.B. Bought 30 IAU at $11.47-Commission Free For Vanguard Customers (9/26/18 Post) 

Expense Ratio: .25% 

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Trump: 

Trump’s New Top Labor Official Is Expected to Advance an Anti-Labor Agenda - The New York Times   

Trump says ally and tech investor Thiel ‘believes Google should be investigated for treason’ and he will ’take a look’ - MarketWatch  

President Trump accuses Rep. Omar of supporting al-Qaeda - The Washington Post (no evidence to support that claim)  

President Trump says he’s no fan of Epstein, but they seem to be having a great time in this Mar-a-Lago party clip - MarketWatch (Just a couple of boys engaging in "locker room" talk)

GOP lawmaker Mike Kelly (PA): 'I'm a person of color. I'm white.'; GOP Congressman Mike Kelly Declares 'I'm White, I'm A Person of Color,' Defends Trump From Racism Accusations 

Kelly represents Pennsylvania's 16th congressional district. Kelly compared the EPA to a terrorist organization in 2014.  

In the Alternate Reality of TrumpWorld, any criticism of Donald and his policies is un-American and originates from "radical democrats" and the Fake News media.   

The hypocrite Senator Graham (R-SC) correctly summarized Donald's essence before he was elected President  by calling him “a race-baiting, xenophobic religious bigot.” Lindsey Graham on Donald Trump For good measure, Graham added that Trump "doesn't represent the values that the men and women who wear the uniform are fighting for."

Surprise, surprise. This GOP lawmaker gets the booby prize for moral imbecility. - The Washington Post (opinion column by republican Max Boot who adds there "is, in fact, no evidence that Trump’s targets are communists or that they hate America or even Israel. But there is ample evidence that the GOP has suffered a complete moral and intellectual collapse.") 

Representative Andy Harris (R-MD) declared that Trump's racist tweets were "clearly not racist" because “he could have meant go back to the district they came from — to the neighborhood they came from.” Mr. Harris represents Maryland's 1st congressional district. 

Donald claimed after his North Carolina pep rally, where his cult members chanted "send her back" in reference to Omar specifically, that he tried to stop the racist chant. The video shows him basking in the chant for almost 15 seconds before launching into another vicious tirade applauded by the Trumpsters. The Orange King was pleased with the "send her back" chant that he created with his tweets.  

16,000 Readers Shared Their Experiences of Being Told to ‘Go Back.’ Here Are Some of Their Stories. - The New York Times

Opinion | The Perfect Antidote to Trump - The New York Times (Bret Stephens is referring  to a novel written by Willa Cather called My Ántonia, originally published in 1918)  

Trump’s Electoral College Edge Could Grow in 2020, Rewarding Polarizing Campaign - The New York Times

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Recurring Problem of Issuer Optional Redemptions: 

I discussed this problem in my last post. Subsequent to publishing that post, I received notice that Alexandria Real Estate will redeem next month my 4 SU bonds that would have matured on 1/15/20: 

HCP had to make a small make whole payment to redeem its 2/1/20 note early. I owned 6 of those bonds with 4 of them held in my Fidelity taxable account: 

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1. Bought 50 Kellogg (K) at $55.44 and 10 at $54.68-Used Commission Free Trades:

Quote Kellogg Co. (K)

Closing Price Last Friday: K $56.58 -$0.40 -0.70% 

Analyst Reports: Available at Schwab

S & P: 3 stars with a 12 month price target of $61

Morningstar: 5 stars with a fair value estimate of $78 (wide moat rating)

Argus: Buy with a $65 price target

SEC Filings

10 Year Chart: Ugly for a 10 year SPX bull market

The churning action so far this year has been mostly between $55 to $60, with a brief decline below $55. On my purchase date, Kellogg's 52 week share price performance was -22+%. So it would be fair to say that I was not chasing a momentum stock.

A purchases of Kellogg shares is of course a contrarian play since the firm's main product line is in a long term secular decline.

There was a 6%+ rise in the stock price in response to this article: Kellogg is sitting on a ‘fake meat’ gold mine bigger than Beyond Meat - MarketWatch The author points out that Kellogg has the largest "fake meat" business in the U.S. which operates under the MorningStar Farms brand.

Products: In addition to Kellogg's cereal brands, the company also owns Cheez-It Crackers, Club Crackers, Eggo, K Protein Bars and Shakes, Kashi brands, Morningstar Farms ("fake" meat), Nutri-Grain, Pop Tarts, Pringles, Town House & Zesta crackers, and RxBar. Product Search Results | Kellogg's 

Kellogg also owns Keebler and Famous Amos cookie brands but is in the process of selling those products.

RxBar was acquired in 2017:  $600M RXBar Acquisition By Kellogg

Top 8 Companies Owned by Kellogg's (K)


5 Year GAAP Financial Data Through 2018:

Page 23: 2018 Annual Report

2 Year Non-GAAP Financial Data:

2018 vs. 2017

Adjustments are explained at page 27. Charges and costs relating to Project K, which was announced in 2014, are in their final year. Project K is a cost reduction and efficiency improvement program. 

Dividend: Quarterly at $.56 per share

Dividends – Kellogg Company

Kellogg announced last April that the 2019 third quarter dividend will be increased 2% to $.57 per share or $2.28 annually. Kellogg Company Declares Regular Dividend of $0.56 per Share and Announces Plans for 2% Dividend Increase

Without better earnings growth, dividend growth will likely be at best anemic IMO.  

Current Position: 60 Shares

Average Cost Per Share: $55.31

Dividend Yield at Average Cost  (based on $.57 per quarter) = 4.122%

Recent Product Disposal: Kellogg Company Reaches Agreement to Sell Keebler Cookies and Related Businesses to Ferrero (Kellogg "today announced that it has reached a definitive agreement to sell selected cookies, fruit and fruit-flavored snacks, pie crusts, and ice cream cones businesses to the Ferrero Group and its related companies. . . . The cash transaction is valued at $1.3 billion (or €1.16 billion, at current exchange rates). . . .  In 2018, these businesses recorded net sales of nearly $900 million and operating profit of approximately $75 million, including estimated indirect corporate expenses.  Assuming the cash proceeds are used only to reduce outstanding debt, the transaction is expected to be less than 5% dilutive to Kellogg's projected 2019 currency-neutral adjusted earnings per share.") 

These brands generated about 7% of total sales.  

The Keebler brands were acquired in 2001 for $3.86+B. Kellogg Agrees to Buy Keebler Foods for $3.86 Billion - The New York Times Note that the Cheez-It, Town House and Zesta cracker brands were part of the original Keebler deal and are not being sold to Ferrero. The Keebler Food acquisition also included the Famous Amos and Murray's cookie brands as well as the girl scout cookie operations.   

The cookie brands being sold include Keebler, Famous Amos, Murray's, Mother's and the cookies manufactured for the girl scouts. 

My preference would be to keep those brands and do an IPO of the MorningStar Farm's fake meat businesses to raise cash for debt reduction. Veggie Cuisine | MorningStar Farms  

2019 Guidance Revised for Brand Disposals: 

Last Earnings Report (1st F/Q Ending 3/30/19): SEC Filed Earnings Release 

While the non-GAAP E.P.S. number was better than the consensus estimate, this was overall a poor report as reflected in the Y-O-Y comparisons. 

"Reported earnings per share decreased by about 35% from the prior-year quarter, owing to business realignment charges, mainly related to the pending divestiture, unfavorable mark-to-market impacts, and a higher effective tax rate. On an adjusted basis, earnings per share declined by about 18%, negatively impacted by a higher effective tax rate and negative currency translation, as well as by lower returns on pension assets, and higher interest expense related to debt from acquiring additional stakes in our Nigerian operations last May."

Earnings have periodically been positive which has led to temporary share gains. The share price went from $60.19 (5/14/18) to $75.84 (9/10/18). That price rise was probably triggered, as I recall, by the 2018 first quarter results released on 5/3/18: SEC Filed Press Release 

The most recent temporary share price spurt started at around $54.27 (3/11/19) and ended near $59.4 on 4/2/19. 

Debt: Moody's at Baa2, S & P at BBB, Fitch at BBB-

Fitch downgraded Kellogg's senior unsecured debt to BBB- last October. Fitch Downgrades Kellogg's IDR to 'BBB-'; Outlook Stable

Selling the cookie operations and using the proceeds to reduce debt and to fund growth initiatives may have been precipitated, at least in part, by the Fitch downgrade. 

I have bought and sold Kellogg senior unsecured bonds. 

2018 Kellogg Bond Transactions: 

I currently view the common stock more favorably than the Kellogg bonds.

Maximum Position: 100 Shares 

Purchase Restriction: Small Ball Rule

Likely Sell of Highest Cost 50 Share Lot: at greater than $60+

Dividend Reinvestment: Yes at less than $60 per share  

2. Eliminations and Pares:

Most BDCs have a preponderance of loans that pay a spread to a short term Libor rate. Those loan coupon rates are declining which will lead to lower net investment income. 

The 3 month Libor rate topped out last January and has been trending down since that time:  

3-Month London Interbank Offered Rate (LIBOR), based on U.S. Dollar | FRED | St. Louis Fed

The directional change to lower short term rates is a major headwind for BDCs with floating rate loans. 

A. Sold 74+ TPVG at $14.87: 

Profit Snapshot: $246.23

Quote: TPVG | TriplePoint Venture Growth BDC Corp. Overview
TPVG SEC Filings
Website: TriplePoint Venture Growth

Closing Price Last Friday: TPVG $14.90 +$0.05 +0.34% 

This eliminates my TPVG position in the Schwab account. 

I mentioned in a prior post that I would likely sell those shares into a price pop. Stocks, Bonds & Politics: Observations and Sample of Recent Trades: FIE:CA, HTA, PFF, TPVG (7/13/19 Post)

Last Reported Net Asset Value Per Share = $13.59 as of 3/31/19

This leaves me with just 34+ TPVG shares held in my Fidelity account. The average cost per share is at $11.78. Purchases are subject to the small ball restriction in that account where each subsequent purchase other than through dividend reinvestment has to be at the lowest price in the chain. The lowest price paid for a lot was $11.2 on 12/18/18. Dividends are being reinvested.  

TPVG has been a successful BDC trade for me. For BDCs, success is defined as any realized total return number in excess of the dividend yield. 

The total realized gain from small lot trading now stands at $652.94. 

Regular Dividend: Quarterly at $.36 per share ($1.44 annually)

Last Ex Dividend Date: 5/30/19, paid 6/14/19 

Last Special Dividend: $.10 per share paid last December

B. Sold 59+ CPTA at $9.6:

Quote: Capitala Finance Corp. (CPTA)
Capitala SEC Filings

Closing Price Last Friday: CPTA $9.83 +$0.01 +0.10% 

For the reasons discussed in prior posts, CPTA is a deservedly hated BDC as reflected in a five year chart. CPTA Chart The recent trend, however, has been up which has allowed me to harvest profits.

CPTA's IPO was at $20 per share in 2013: Form 497

History this Account:

Profit Snapshot: +$110.46

Last Sell Discussion: Item # 2.B. Sold 100 CPTA at $8.76 and Item # 2.C. Sold 50 Shares at $8.81-Used Commission Free Trade (5/11/19 Post)

Last Buy Discussion: Item # 2.A. Bought 50 CPTA at $7.99-Used Last Schwab Commission Free Trade (11/18/18 Post)

Last Earnings Report (Q/E 3/31/19): Capitala Finance Corp. Reports First Quarter 2019 Results

Current Dividend: Monthly at $.0833

Capitala Finance Corp. (CPTA) Dividend Date & History - Nasdaq

The monthly rate was cut to $.0833 from $.13 in 2017

Last Ex Dividend Date: 6/19/19

Next Ex Dividend Date: 7/22/19

CPTA Realized Gains to Date: $234.43

Any return in excess of the dividend yield is viewed as a victory.

C. Sold  55+ ABDC at $8.39+:

Quote: Alcentra Capital Corp. (ABDC)
Home - Alcentra Capital Corporation

Closing Price Last Friday: ABDC $8.32 +$0.03 +0.36% 

Alcentra Capital Corporation Announces Strategic Alternatives Review - Apr 4, 2019

History This Account:

Profit Snapshot: +$135.52

Item 1.B. Bought 50 ABDC at $5.65(11/25/18 Post)

ABDC Realized Gains to Date: $164.38 (on 100 shares + shares purchased with dividends) 

Last Sell Discussion: Item # 1. A. Sold 50 ABDC at $6.92  (2/2/19 Post)

Current Quarterly Dividend: $.18 per share

Alcentra Capital Corp. (ABDC) Dividend Date & History - Nasdaq

The quarterly dividend was cut was from $.25 to $.18 effective for the 2018 first quarter.

Last Ex Dividend: 6/27/19 (received)

Special Dividend: Ex 6/27/19 at $.15 per share (received)

Last Earnings Report (Q/E 3/31/19): Alcentra Capital Corporation Announces First Quarter 2019 Financial Results - May 6, 2019

3. Intermediate Term Bond Ladder Basket Strategy: 

A. Sold 1 of 6 Entergy Mississippi 3.1% First Mortgage Bond Maturing on 7/1/23: 

Profit Snapshot: +$8.09

I sold the highest cost lot held in my Fidelity taxable account. 

I kept the 3 bonds bought earlier this year in that account (see following snapshot). Item # 3.A. Bought 3 Entergy Mississippi 3.15% First Mortgage Bonds Maturing on 7/1/23 at a TC of 99.111 (2/13/19 Post)

I had no difficulty selling this bond at a higher price than the value assigned by Fidelity's third party service which was 101.461. 

I hit the best bid price for a 1 bond lot which was 102.025. 

The third party service used by brokers invariably prices bonds below fair market value". 

I would be shocked to see one of my bonds valued at a price in excess of FMV. I never know the FMV of a particular bond until I pull up the order book for that bond, look at recent trades as well as bid/ask prices.  

I also own 2 bonds in a ROTH IRA account. I now own 5 bonds altogether.    

FINRA Page: Bond Detail (prospectus linked)

Sold at 102.035

YTM at 102.035 = 2.533%

Proceeds at 101.935 

Issuer: Wholly owned subsidiary of  Entergy Corp. (ETR)

4. Short Term Bond/CD Ladder Basket Strategy:

A. Bought 15 Treasury 28 Day Bills  at Auction Maturing on 8/13:
IR = 2.174% 

This purchase redirected proceeds from recent maturities in what I view as an alternative to the low yielding Schwab sweep account. 

Auction Results: 

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.