Economy:
U.S. creates just 130,000 new jobs in August, keeping Fed on track to cut rates - MarketWatch The gain would have been less than 100K without the temporary census hirings (25K). The median forecast was for +170K. Average hourly earnings increased by 11 cents with a Y-O-Y increase of 3.2%. The average hourly work week increased by .1. The job gains in June and July were revised down by a 20K. The average monthly job gains for 2019 now stands at 158K compared to the 223K average over the same period in 2018. Employment Situation Summary The U-6 number increased to 7.2% from 7% in July. Table A-15. Alternative measures of labor underutilization
Payroll growth 195,000 in August vs. 140,000 estimate: ADP/Moody's
Both payroll reports are estimates and can differ for the private payroll data. ADP reported, for example, a private payroll increase of 195K last month but the BLS number for private payrolls was +96K. I would put more weight on the Bureau of Labor Statistics. The ADP number is an estimate based on the payroll data for their private clients. If the BLS number is closer to the truth, then the euphoria created by the ADP report last Thursday was not justified.
The fade into the close last Friday may be due to the BLS report throwing cold water on the ebullience created by Thursday's ADP report.
Disappointing jobs report would have been worse without Census workers The increases in wage growth and the work weak were positives. Both of those numbers, IMO, reflect a tightening labor market and a shortage in desirable new hires. I am expecting job growth to tail off in the coming months even without an onset of a recession.
U.S. creates just 130,000 new jobs in August, keeping Fed on track to cut rates - MarketWatch The gain would have been less than 100K without the temporary census hirings (25K). The median forecast was for +170K. Average hourly earnings increased by 11 cents with a Y-O-Y increase of 3.2%. The average hourly work week increased by .1. The job gains in June and July were revised down by a 20K. The average monthly job gains for 2019 now stands at 158K compared to the 223K average over the same period in 2018. Employment Situation Summary The U-6 number increased to 7.2% from 7% in July. Table A-15. Alternative measures of labor underutilization
Payroll growth 195,000 in August vs. 140,000 estimate: ADP/Moody's
Both payroll reports are estimates and can differ for the private payroll data. ADP reported, for example, a private payroll increase of 195K last month but the BLS number for private payrolls was +96K. I would put more weight on the Bureau of Labor Statistics. The ADP number is an estimate based on the payroll data for their private clients. If the BLS number is closer to the truth, then the euphoria created by the ADP report last Thursday was not justified.
The fade into the close last Friday may be due to the BLS report throwing cold water on the ebullience created by Thursday's ADP report.
Disappointing jobs report would have been worse without Census workers The increases in wage growth and the work weak were positives. Both of those numbers, IMO, reflect a tightening labor market and a shortage in desirable new hires. I am expecting job growth to tail off in the coming months even without an onset of a recession.
Fed’s Beige Book finds steady or improving activity outside of manufacturing and farm sectors - MarketWatch; Federal Reserve Board - Beige Book
China and the U.S. agree to hold high level talks in early October. I discussed that development in a comment. I would note that the meeting was to be held in mid-September but there was difficulty on affirming that time period according to an article published in Bloomberg.
I suspect, reading the tea leaves, that China pushed the date into October since it wanted to see whether Donald would go ahead and increase the 25% tariffs on $250B to 30% effective 10/1/19. If Donald does not delay that increase, then we may have another meaningless meeting like the one in D.C. last May, which ended up being a brief discussion.
Trump pressures China to make deal soon, or it'll get tougher if he wins in 2020 From China's perspective, increasing U.S. demands are not going to make an agreement more palatable to them but less. Donald still believes that his past tactics to pay less than owed will work on a major economic power. All he has to do is apply more pressure rather than to find common ground where both sides compromise.
One potential area for increased pressure, assuming Trump wins reelection, would be to declare a national emergency and then order U.S. firms to cease their China operations and to forego selling products and services to China.
The Duck has already threatened to abuse his Presidential power by issuing such an order.
This will not likely happen IMO before the election, but may occur when he wins another term.
The likely result from such action would be a catastrophic drop in the U.S. stock market. For most U.S. multinationals, China and emerging markets are the growth markets.
One potential area for increased pressure, assuming Trump wins reelection, would be to declare a national emergency and then order U.S. firms to cease their China operations and to forego selling products and services to China.
The Duck has already threatened to abuse his Presidential power by issuing such an order.
This will not likely happen IMO before the election, but may occur when he wins another term.
The likely result from such action would be a catastrophic drop in the U.S. stock market. For most U.S. multinationals, China and emerging markets are the growth markets.
The ISM August 2019 Non-Manufacturing PMI was reported at 56.4%, up from 53.7% in July. The new orders component rose 6.2 to 60.3.
The gap between the August ISM numbers for manufacturing and services is large at 7.3 points, the 13th largest in history.
In 2000, a large gap preceded a recession while another large gap presaged a growth slowdown in 2015. I suspect that the trade war with China is impacting U.S. manufacturing more than services and that may explain the large gap.
There is a large discrepancy between this report and the one released by Markit on the same day. Markit U.S. Services
So, that raises a question on who do you think has the more accurate report or whether both are wrong. That is a problem with surveys based on samples.
Mortgage Rates Drop - Freddie Mac
+++++
The gap between the August ISM numbers for manufacturing and services is large at 7.3 points, the 13th largest in history.
In 2000, a large gap preceded a recession while another large gap presaged a growth slowdown in 2015. I suspect that the trade war with China is impacting U.S. manufacturing more than services and that may explain the large gap.
There is a large discrepancy between this report and the one released by Markit on the same day. Markit U.S. Services
So, that raises a question on who do you think has the more accurate report or whether both are wrong. That is a problem with surveys based on samples.
Mortgage Rates Drop - Freddie Mac
Markets and Market Commentary:
10-Year Treasury Constant Maturity Minus 3-Month Treasury Constant Maturity (T10Y3M) | FRED | St. Louis Fed
FED Model Probability of Recession .pdf
Plunging bond yields have lifted these two stock sectors to record levels (REITs and utilities) One reason given for my JRI purchases was that fund's ownership of bond like common stocks. I will trade that CEF if I catch a whiff of the worm turning.
'We can't really buy into' the bond yield bounce: Wells Fargo
US private debt funds brace for downturn - Reuters
10-Year Treasury Constant Maturity Minus 3-Month Treasury Constant Maturity (T10Y3M) | FRED | St. Louis Fed
FED Model Probability of Recession .pdf
Plunging bond yields have lifted these two stock sectors to record levels (REITs and utilities) One reason given for my JRI purchases was that fund's ownership of bond like common stocks. I will trade that CEF if I catch a whiff of the worm turning.
'We can't really buy into' the bond yield bounce: Wells Fargo
US private debt funds brace for downturn - Reuters
10 BDCs to Buy for Big-Time Income: Kiplinger (discussion includes ARCC and TPVG which are currently owned by me)
Morgan Stanley: Get defensive as 'recession fears emerge'
Energy Industry Stumbles As Recession Looms | OilPrice.com
Alan Greenspan says negative rates will spread to US
Enjoy 2019 while it lasts, because ‘the Big Top’ is coming, B. of A. strategist warns - MarketWatch The strategist argues that the most contrarian trade is to be long inflation assets.
UPDATE 1-Texas power prices jump to record high as heat bakes state - Reuters (9/5/19) Maybe there is some justice in that Texas has two senators who are climate change deniers. Ted Cruz thinks scientists invented climate change
Energy Industry Stumbles As Recession Looms | OilPrice.com
Alan Greenspan says negative rates will spread to US
Enjoy 2019 while it lasts, because ‘the Big Top’ is coming, B. of A. strategist warns - MarketWatch The strategist argues that the most contrarian trade is to be long inflation assets.
UPDATE 1-Texas power prices jump to record high as heat bakes state - Reuters (9/5/19) Maybe there is some justice in that Texas has two senators who are climate change deniers. Ted Cruz thinks scientists invented climate change
++++++
Trump:
Mitch McConnell told Donald that he needed to take the lead on gun legislation. So it is put up or shut up time for the Duck. McConnell: Congress Is Waiting for Trump to Lead on Guns | Time Donald will end up doing nothing meaningful, notwithstanding his occasional missives to the contrary.
Being the leader of the pro-pollution party, Donald hated the fact that California and the major auto makers agreed to lower greenhouse gas emissions and will consequently challenge the right of the California and others states to have more stringent emission standards than allowed by Donald's pro-pollution EPA and Energy Departments. Trump administration challenges California on fuel economy standards - CBS News
Trump is currently in the process of rolling back rules designed to reduce emissions of greenhouse gases from cars and light trucks, an effort opposed by the automakers. Automakers Tell Trump His Pollution Rules Could Mean ‘Untenable’ Instability and Lower Profits - The New York Times
One attack on the agreement to lower emissions is the DOJ's claim that the California and the automakers agreement violated the antitrust laws. That claim by Donald's DOJ is just frivolous, and is further proof, when none is needed, that the Department of Justice has just gone way off the rails with Barr as its leader. Justice Dept. Investigates California Emissions Pact That Embarrassed Trump - The New York Times; Trump administration threatens California over emissions deal with automakers - Los Angeles Times
Mitch McConnell told Donald that he needed to take the lead on gun legislation. So it is put up or shut up time for the Duck. McConnell: Congress Is Waiting for Trump to Lead on Guns | Time Donald will end up doing nothing meaningful, notwithstanding his occasional missives to the contrary.
Being the leader of the pro-pollution party, Donald hated the fact that California and the major auto makers agreed to lower greenhouse gas emissions and will consequently challenge the right of the California and others states to have more stringent emission standards than allowed by Donald's pro-pollution EPA and Energy Departments. Trump administration challenges California on fuel economy standards - CBS News
Trump is currently in the process of rolling back rules designed to reduce emissions of greenhouse gases from cars and light trucks, an effort opposed by the automakers. Automakers Tell Trump His Pollution Rules Could Mean ‘Untenable’ Instability and Lower Profits - The New York Times
One attack on the agreement to lower emissions is the DOJ's claim that the California and the automakers agreement violated the antitrust laws. That claim by Donald's DOJ is just frivolous, and is further proof, when none is needed, that the Department of Justice has just gone way off the rails with Barr as its leader. Justice Dept. Investigates California Emissions Pact That Embarrassed Trump - The New York Times; Trump administration threatens California over emissions deal with automakers - Los Angeles Times
Don the Destroyer: A “Need for Chaos” and the Sharing of Hostile Political Rumors in Advanced Democracies cited in Opinion | The Trump Voters Whose ‘Need for Chaos’ Obliterates Everything Else - The New York Times
+++++
l. Small Ball-Contrarian Value (all purchases made with commission free trades):
A. Bought 15 SLB at $33.95; 5 at $32; and 5 at $31.39:
Quote: Schlumberger Ltd. (SLB)
SLB | Schlumberger Ltd. Analyst Estimates | MarketWatch
Closing Price Last Friday: SLB $34.20 +$0.14 +0.41%
Investor Overview | Schlumberger
2018 Annual Report
Any purchase of an energy oil service stock now will need to have an ample supply of patience. The SLB chart, reproduced below, does not provide any comfort for a purchase now other than for those humans who somehow find hope in carnage.
This starts a small ball buying program in SLB.
10 Year Chart (as of 8/23/19): Really Ugly (possible double bottom-broke long term support at $60 last year)
When I look at this kind of chart, there is no hope for the future reflected in it.
Maybe I need a brain transplant, but I find that attractive. Things are bad now and will never get any better is frequently just the flip side of everything is good now and will only get better. The enduring question is how long will bad remain bad.
Average Cost Per Share = $33.05
Dividend: Quarterly at $.5
Schlumberger Declares Quarterly Dividend
Dividend Yield at $33.05 = 6.05%
Last Ex Dividend Date: 9/3/19 (after purchases)
Dividend Reinvestment: Yes, viewed as undervalued long term at current prices
Last Earnings Report (Q/E 6/30/19):
Free Cash Flow = $500M
Segment Results:
Schlumberger Announces Second-Quarter 2019 Results
10-Q for the Q/E 6/30/19
Broker Reports:
Credit Suisse (7/21/19): Neutral with a $42 PT, reduced from $43
Morningstar (7/22/19): 5 stars with a FV of $62
S & P (7/19/19): 3 stars with a $42 PT
Senior Unsecured Debt Credit Ratings: Baa1/A+ (acquired debt through acquisition of Cameron)
Schlumberger (SLB) Suffers Credit Hit as Oil Customers Save-Bloomberg (article dated May 24, 2019) (S & P cut one notch to A+ from AA-)
SEC Filings
A. Bought 15 SLB at $33.95; 5 at $32; and 5 at $31.39:
Quote: Schlumberger Ltd. (SLB)
SLB | Schlumberger Ltd. Analyst Estimates | MarketWatch
Closing Price Last Friday: SLB $34.20 +$0.14 +0.41%
Investor Overview | Schlumberger
2018 Annual Report
Any purchase of an energy oil service stock now will need to have an ample supply of patience. The SLB chart, reproduced below, does not provide any comfort for a purchase now other than for those humans who somehow find hope in carnage.
This starts a small ball buying program in SLB.
10 Year Chart (as of 8/23/19): Really Ugly (possible double bottom-broke long term support at $60 last year)
 |
| Ugly! |
Maybe I need a brain transplant, but I find that attractive. Things are bad now and will never get any better is frequently just the flip side of everything is good now and will only get better. The enduring question is how long will bad remain bad.
Average Cost Per Share = $33.05
Dividend: Quarterly at $.5
Schlumberger Declares Quarterly Dividend
Dividend Yield at $33.05 = 6.05%
Last Ex Dividend Date: 9/3/19 (after purchases)
Dividend Reinvestment: Yes, viewed as undervalued long term at current prices
Last Earnings Report (Q/E 6/30/19):
Segment Results:
10-Q for the Q/E 6/30/19
Broker Reports:
Credit Suisse (7/21/19): Neutral with a $42 PT, reduced from $43
Morningstar (7/22/19): 5 stars with a FV of $62
S & P (7/19/19): 3 stars with a $42 PT
Senior Unsecured Debt Credit Ratings: Baa1/A+ (acquired debt through acquisition of Cameron)
Schlumberger (SLB) Suffers Credit Hit as Oil Customers Save-Bloomberg (article dated May 24, 2019) (S & P cut one notch to A+ from AA-)
SEC Filings
B. Bought 100 CJREF at $3.74:
Quote: Corus Entertainment Inc. Cl B NV (U.S. Pink Sheets: CJREF)
CJR.B: Corus Entertainment Inc. Cl B NV (Canada: Toronto) or TMX
Closing Price Last Friday: CJREF $4.07 +$0.0014 +0.03%
Category: Lottery Ticket Basket Strategy
10 Year Chart: Ugly, Typical for a Lottery Ticket Selection
Website: Corus Entertainment
Last Sell: Item # 4.A. Sold 100 CJREF at $5.64-Used Commission Free Trade(5/8/19 Post)
Last Buy Discussion: Item # 1.D. (4/9/18 Post)(I noted there that the dividend was unsustainable, producing close to a 20% yield based on the then closing price, and that I expected a dividend cut soon which happened)
I exited this position at a total return in excess of the dividend yield but just barely.
Dividends: Quarterly at $.06 per share
Dividends - Corus Entertainment
Slashed 79% from a monthly dividend of $.095 effective after the August 2018 monthly dividend payment. Corus Entertainment announces revised Capital Allocation Policy to position the company for future growth
The dividend yield will depend in part on the CAD/USD conversion rate.
If I assumed a .75 CAD/USD conversion rate, and no change in the penny rate, the annual per share amount of C$24 would convert into US$.18 per share. The dividend yield would then be about 4.81%. The actual yield will fluctuate with the conversion rate and whether the U.S. owner can recover the Canadian withholding tax through a foreign tax credit when held in a taxable account.
Next Ex Dividend Date: 9/13/2019 (after purchase)
Material Recent Event Negatively Impacting Price: Five events over the past year have negatively impacted price.
First, Corus admitted that it substantially overpaid for assets including those purchased from Shaw Communication, by taking a C$1.0137B writedown in the fiscal Q/E 5/31/18. Corus Entertainment announces fiscal 2018 third quarter results; Corus Entertainment Completes Acquisition of Shaw Media 4/1/2016 (C$2.65B); Corus Entertainment to Acquire Shaw Media in Transformational Acquisition ("Shaw Media's assets include the specialty channels Food Network Canada, HGTV Canada, DIY Network Canada, Slice, Lifetime, History Canada, H2, Showcase, National Geographic Canada, Nat Geo Wild Canada, Action, MovieTime, IFC Canada, Global News: BC1, BBC Canada, DejaView, Crime + Investigation, DTOUR and FYI. It also includes Global Television's national conventional service with stations in Vancouver, Okanagan, Edmonton, Calgary, Lethbridge, Saskatoon, Regina, Winnipeg, Toronto, Montreal, Halifax and Saint John.")
"Upon closing of the transaction, SCI will receive ~$1.85 billion in cash and ~71 million Corus Class B Shares at $11.21 per share, which is based on current volume weighted average trading prices on the Toronto Stock Exchange."
Second, Shaw unloaded its entire stake in Corus, consisting of 80,630,383 Class B non-voting participating shares at a price of C$6.80 per Class B Share. Corus Entertainment Press Release (5/14/19)
While that depressed the Corus price, there is another practical, non-accounting way to look at it in relation to the writedown later taken by Corus. Shaw Communications received about 71M Corus shares then valued at C11.21 and later sold those shares at C$6.8 or roughly a C$313.11M loss to Shaw rather than to Corus. Part of the Corus writedown was in fact shouldered by Shaw.
Third, the aforementioned dividend slash, while necessary, probably drove a substantial number of individual investors out of the stock.
Fourth, the small decline in the CAD/USD over the past year has contributed to the decline in the USD price shares. CAD / USD Currency Chart. Canadian Dollar to US Dollar Rates
Fifth, Corus continues to lose TV subscribers.
The issue then is how much of the foregoing is already baked into the share price.
Last Earnings Report: The market initially had no reaction to this earnings report. I thought it was okay. The report was released after the close on 6/26/19. The price close that day at US$4.62. However, starting on 7/3/19 with a close at $4.81, the shares started to drift down significantly on a percentage basis. CJREF Historical Prices
Due to the price depreciation which increased the dividend yield and made a positive total return more likely, I decided to try again. From the $4.81 close on 7/3/19 to my purchase price of $3.74, the price decline was 22.2+%.
In the last snapshot, the large loss shown for the Q/E 5/31/18 was due to the writedown.
The report did highlight an ongoing problem. Television subscriber revenues declined 4% during the quarter and 2% over the 9 month period in the current F/Y. Segment revenues increased by 5% due to a 10% increase in advertising revenues. Eventually, fewer subscribers will translate into declines in advertising revenues. The math can not work any other way.
Corus Entertainment Announces Fiscal 2019 Third Quarter Results
Current Position: 100 shares
Maximum Position: 200 shares in this account
IMO, this company needs to sell itself.
C. Bought 30 NRDBY ADR at $6.11:
Category: Lottery Ticket Basket Strategy
Closing Price Last Friday: NRDBY $6.69 -$0.01 -0.21%
Quotes:
Euro Priced Ordinary Share: Nordea Bank Abp (Finland: Helsinki)
USD Price ADR (pink sheet exchange): Nordea Bank AB ADR
1 USD Priced ADR = 1 Ordinary Share Priced in Euros: ADR
Nordea is a large European bank whose primary operations are concentrated in Denmark, Finland, Norway and Sweden but has branches in 16 other countries (1 branch in each). Our markets | nordea.com
The pink sheet symbol changed to NRDBY from NRBAY when Nordea moved its corporate domicile from Norway to Finland. The purpose was to escape the increasingly onerous bank regulations imposed by Norway.
10 Year Chart: Ugly, typical for Lottery Ticket Selections
Dividend: Annually
Dividend | nordea.com
Last Ex Dividend Date: 3/22/19
Based on that dividend, and the market's closing price on 8/24, Marketwatch calculated the dividend yield at 8.57%.
The actual dividend yield will depend in part on the EUR/USD exchange rate at the time of conversion into USDs.
Last Earnings Report (Q/E 6/30/19): Interim Report Second Quarter 2019.pdf
Current Position: 50 Shares
Maximum Position: 100 Shares
Previous Discussions:
Item # 4 Sold Nordea Bank (NRBAY) at $12.39 (2/1/18 Post)(profit snapshot $74.97)(noting that the last earnings report was awful IMO)-Bought Back 100 NRBAY at $11.54 (12/11/17 Post); Item # 2.A. Sold 100 NRBAY on Ex Dividend Date (4/1/17 Post)(profit snapshot $72.17).
I was harvesting then the annual dividend payment and then selling the shares for a profit.
Since those trades mentioned above, the shares have been cut in half, perhaps overdone, based on continued poor results and a Russian money laundering scandal. I would anticipate a large fine and more compliance costs. The company set aside €95M in the first quarter to account for the "AML" (anti-money laundering). When reviewing Nordea's earnings reports, the AML abbreviation will appear several times. Several lawsuits and criminal investigations are ongoing. The ECB's Jihad against the Euro is not helping.
Nordea handled about $790 million in suspicious transactions: Finnish TV - Reuters The alleged suspicious transactions were handled by the Estonia branch.
Nordea Bank Realized Gains to Date: $146.34
Debt Ratings: Excellent
Capital ratios are excellent.
Return on Equity is subpar.
Nordea was favorably mentioned by an investment manager in this article published on 9/3: 3 dividend stock picks with yields as high as 12% from a manager who doesn’t focus on dividends - MarketWatch I view the stock as a lottery ticket.
D. Bought 20 KGFHY at $4.645:
The dividend payment shown in the snapshot was for 30 shares. The U.K. does not withhold a dividend tax. However, the ADR administrator does receive a fee for its services which is deducted from the dividend payment.
Closing Price Last Friday: KGFHY $4.8500 -$0.02 -0.41%
Category: Lottery Ticket Basket Strategy
10 Year Chart: Ugly, typical for a Lottery Ticket Selection
Quotes:
USD Priced ADR: Kingfisher (KGFHY)
British Pence Priced Ordinary Shares: Kingfisher PLC (U.K.: London)
100 Pence = 1 Pound (£) (just like a USD equalling 100 cents)
1 ADR = 2 Ordinary Shares
Traded on the Pink Sheet Exchange (now called the OTC Markets)
London Quote In PENCE: Kingfisher PLC (U.K.: London)
The recent weakness in the Pound vs. the USD due to Brexit concerns will cause the ADR to underperform the ordinary shares traded in the U.K.
Website: Homepage
Company Overview (1331 stores in 10 countries)
Think of Kingfisher as the Lowes or Home Depot of the U.K., Ireland, and parts of Europe without the success.
KGFHY Chart: Major BEAR Trend since April 28, 2014 with a close then at $14.37. The long term context is a dominant major long term secular bear market starting in April 1999 when the price went over $38. The most recent assertion of that dominant bear trend started in February 2018 after the stock traded over $10. In short, KGFHY has been a widow maker. The question with widow makers is whether negative news has been so heavily discounted in the price that anything positive can cause a major price surge.
Previous Discussion: Item #3.A. Bought 40 KGFHY at $7-Used Commission Free Trade (8/26/18 Post)
Last Ex Dividend: Semi-annual on 6/9/16
Dividend History for ADR (Sponsored)/Kingfisher PLC
Current Position: 50 Shares
Maximum Position: 100 Shares
Recent Event: The CEO "retired" and was replaced with a veteran Carrefour officer whose last position at Carrefour was CEO of its Asia operations. Kingfisher CEO to leave after profits go into reverse- Reuters; UPDATE 3-Britain's Kingfisher turns to Carrefour veteran to revive fortunes - Reuters
Last Earnings Report: Discussed at UPDATE 2-Lower sales in France weigh on Kingfisher's growth - Reuters
Purchase Restriction: Small Ball rule (next purchase will be considered in the $3.75 to $4.25 range)
Average Cost Per Share = $6.06 (50 shares)
Previous Round-Trips: Item # 2.A. Sold 100 Kingfisher at $8.41-Used Commission Free Trade (11/9/17 Post)(profit snapshot= $40.38 + semi-annual dividend payment)- Item # 5 Bought 100 KFGHY at $8 (7/8/17 Post)
Item #1 Sold 100 KFGHY at $10.44 (10/6/14 Post)(profit snapshot= $65.57)
The USD priced shares have been negatively influenced by a decline in the British Pound vs. the USD.
Debt Ratings: Liquidity & ratings
Fitch Revises Outlook to Negative and Affirms at BBB (6/18/19)
Moody's affirms Kingfisher plc (P)Baa2 rating; stable outlook (have to register to view)
E. Added 20 COTY at $8.73:
Quote: Coty Inc. Cl A (COTY)
Brands
Coty Key Developments-Reuters.com
SEC Filings
F/Y Ending 6/30/19 Annual Report: 10-K
I would classify COTY as a deservedly hated stock as reflected in this chart:
The price pop earlier this year was due to a Dutch offer auction by the controlling shareholder. The price paid was $11.65 per share for 150M shares. Coty Inc. Issues Statement Regarding the Final Proration Results and Closing of the Tender Offer by an Affiliate of JAB Holding Company S.à r.l.
Prior Round-Trips: I was successful in prior small ball trades but have been struggling after going back and trying again. Item 2.C. Sold 10 COTY at $21.46 (2/19/18 Post)(profit snapshot = $45.85); Item 1.D. Sold 20 COTY at $20.89 (1/28/18 POST)(profit snapshot = $80.61)
Closing Price Last Friday: COTY $10.02 +$0.24 2.40%
COTY Stock Surges on Success of Gucci Lipstick Launch | InvestorPlace
COTY | Coty Inc. Cl A Analyst E,P.S. Estimates (as of 9/6/19)
2019: $.68
2020: $.75
Those are non-GAAP estimates.
Dividend: Quarterly at $.125 per share (annually at $.5)
Last Ex Dividend: 9/6/19 (after purchase)
Dividend Yield at $8.73 = 5.73%
Dividend Reinvestment: Yes, for as long as the dividend reinvestment lowers my average cost per share.
Total Average Cost Per Share = $12.41
Dividend Yield at Total Average Cost = 4.03%
Last Substantive Discussion: Item # 1.B. Bought 10 COTY at $9.8-Used Commission Free Trade (11/21/18 Post)
Last Earnings Report (Fiscal Q/E 6/30/19):
Coty Inc. Reports Fiscal 2019 Fourth Quarter and Full Year Results, In-line with Guidance
Free cash flow reported at $213M for the F/Y ending on 6/30/19.
COTY overpaid for Procter & Gamble's professional beauty division and took a write-down connected in part to that acquisition: "The 4Q19 reported operating loss reflected $2.9 billion non-cash impairment charge primarily connected to the Consumer Beauty division and specific brand trademarks, bringing the FY19 total impairment charge to $3.9 billion. This impairment total includes $3.4 billion of Consumer Beauty goodwill, and $0.4 billion of indefinite-lived trademarks with the majority of the trademark impairment related to several Consumer Beauty brands."
Procter & Gamble Completes Transfer of Specialty Beauty Business to Coty (10/3/16) PG knew what it was doing.
See also :
Coty and Younique to Part and Focus on the Development of Their Respective Strengths ("Coty will sell its controlling stake to Younique’s original founders upon regulatory clearance, as soon as practicable"); Coty Completes Acquisition of 60% Stake to Enter into a Partnership with Younique (2/1/2017); Coty to Enter into Partnership with Younique, a Leading Online Peer-to-Peer Social Selling Platform in Beauty ("Coty will acquire a 60% stake of Younique for approximately $600 million in cash ") Easy come, easy go.
Coty Announces Turnaround Plan to Better Leverage Its Platform and Step up Performance (7/1/19)
Coty Announces New CEO and Board Changes (11/12/18)
Maybe the new turnaround plan will work better than the last one.
Coty Inc. Prices $550 Million of USD Senior Unsecured Notes and €800 Million of EUR Senior Unsecured Notes (3/28/18)
Current Position: 100 shares + shares purchased with dividends
Purchase Restriction: Small Ball Rule
Highest Cost Lot in Current Chain: Item # 2.B. 10 COTY at $16.47 (5/3/18 Post)
Quote: Corus Entertainment Inc. Cl B NV (U.S. Pink Sheets: CJREF)
CJR.B: Corus Entertainment Inc. Cl B NV (Canada: Toronto) or TMX
Closing Price Last Friday: CJREF $4.07 +$0.0014 +0.03%
Category: Lottery Ticket Basket Strategy
10 Year Chart: Ugly, Typical for a Lottery Ticket Selection
Website: Corus Entertainment
Last Sell: Item # 4.A. Sold 100 CJREF at $5.64-Used Commission Free Trade(5/8/19 Post)
Last Buy Discussion: Item # 1.D. (4/9/18 Post)(I noted there that the dividend was unsustainable, producing close to a 20% yield based on the then closing price, and that I expected a dividend cut soon which happened)
I exited this position at a total return in excess of the dividend yield but just barely.
Dividends: Quarterly at $.06 per share
Dividends - Corus Entertainment
Slashed 79% from a monthly dividend of $.095 effective after the August 2018 monthly dividend payment. Corus Entertainment announces revised Capital Allocation Policy to position the company for future growth
The dividend yield will depend in part on the CAD/USD conversion rate.
If I assumed a .75 CAD/USD conversion rate, and no change in the penny rate, the annual per share amount of C$24 would convert into US$.18 per share. The dividend yield would then be about 4.81%. The actual yield will fluctuate with the conversion rate and whether the U.S. owner can recover the Canadian withholding tax through a foreign tax credit when held in a taxable account.
Next Ex Dividend Date: 9/13/2019 (after purchase)
Material Recent Event Negatively Impacting Price: Five events over the past year have negatively impacted price.
First, Corus admitted that it substantially overpaid for assets including those purchased from Shaw Communication, by taking a C$1.0137B writedown in the fiscal Q/E 5/31/18. Corus Entertainment announces fiscal 2018 third quarter results; Corus Entertainment Completes Acquisition of Shaw Media 4/1/2016 (C$2.65B); Corus Entertainment to Acquire Shaw Media in Transformational Acquisition ("Shaw Media's assets include the specialty channels Food Network Canada, HGTV Canada, DIY Network Canada, Slice, Lifetime, History Canada, H2, Showcase, National Geographic Canada, Nat Geo Wild Canada, Action, MovieTime, IFC Canada, Global News: BC1, BBC Canada, DejaView, Crime + Investigation, DTOUR and FYI. It also includes Global Television's national conventional service with stations in Vancouver, Okanagan, Edmonton, Calgary, Lethbridge, Saskatoon, Regina, Winnipeg, Toronto, Montreal, Halifax and Saint John.")
"Upon closing of the transaction, SCI will receive ~$1.85 billion in cash and ~71 million Corus Class B Shares at $11.21 per share, which is based on current volume weighted average trading prices on the Toronto Stock Exchange."
Second, Shaw unloaded its entire stake in Corus, consisting of 80,630,383 Class B non-voting participating shares at a price of C$6.80 per Class B Share. Corus Entertainment Press Release (5/14/19)
While that depressed the Corus price, there is another practical, non-accounting way to look at it in relation to the writedown later taken by Corus. Shaw Communications received about 71M Corus shares then valued at C11.21 and later sold those shares at C$6.8 or roughly a C$313.11M loss to Shaw rather than to Corus. Part of the Corus writedown was in fact shouldered by Shaw.
Third, the aforementioned dividend slash, while necessary, probably drove a substantial number of individual investors out of the stock.
Fourth, the small decline in the CAD/USD over the past year has contributed to the decline in the USD price shares. CAD / USD Currency Chart. Canadian Dollar to US Dollar Rates
Fifth, Corus continues to lose TV subscribers.
The issue then is how much of the foregoing is already baked into the share price.
Last Earnings Report: The market initially had no reaction to this earnings report. I thought it was okay. The report was released after the close on 6/26/19. The price close that day at US$4.62. However, starting on 7/3/19 with a close at $4.81, the shares started to drift down significantly on a percentage basis. CJREF Historical Prices
Due to the price depreciation which increased the dividend yield and made a positive total return more likely, I decided to try again. From the $4.81 close on 7/3/19 to my purchase price of $3.74, the price decline was 22.2+%.
The report did highlight an ongoing problem. Television subscriber revenues declined 4% during the quarter and 2% over the 9 month period in the current F/Y. Segment revenues increased by 5% due to a 10% increase in advertising revenues. Eventually, fewer subscribers will translate into declines in advertising revenues. The math can not work any other way.
Corus Entertainment Announces Fiscal 2019 Third Quarter Results
Current Position: 100 shares
Maximum Position: 200 shares in this account
IMO, this company needs to sell itself.
C. Bought 30 NRDBY ADR at $6.11:
Category: Lottery Ticket Basket Strategy
Closing Price Last Friday: NRDBY $6.69 -$0.01 -0.21%
Quotes:
Euro Priced Ordinary Share: Nordea Bank Abp (Finland: Helsinki)
USD Price ADR (pink sheet exchange): Nordea Bank AB ADR
1 USD Priced ADR = 1 Ordinary Share Priced in Euros: ADR
Nordea is a large European bank whose primary operations are concentrated in Denmark, Finland, Norway and Sweden but has branches in 16 other countries (1 branch in each). Our markets | nordea.com
The pink sheet symbol changed to NRDBY from NRBAY when Nordea moved its corporate domicile from Norway to Finland. The purpose was to escape the increasingly onerous bank regulations imposed by Norway.
10 Year Chart: Ugly, typical for Lottery Ticket Selections
Dividend: Annually
Dividend | nordea.com
Last Ex Dividend Date: 3/22/19
Based on that dividend, and the market's closing price on 8/24, Marketwatch calculated the dividend yield at 8.57%.
Last Earnings Report (Q/E 6/30/19): Interim Report Second Quarter 2019.pdf
Maximum Position: 100 Shares
Previous Discussions:
Item # 4 Sold Nordea Bank (NRBAY) at $12.39 (2/1/18 Post)(profit snapshot $74.97)(noting that the last earnings report was awful IMO)-Bought Back 100 NRBAY at $11.54 (12/11/17 Post); Item # 2.A. Sold 100 NRBAY on Ex Dividend Date (4/1/17 Post)(profit snapshot $72.17).
I was harvesting then the annual dividend payment and then selling the shares for a profit.
Since those trades mentioned above, the shares have been cut in half, perhaps overdone, based on continued poor results and a Russian money laundering scandal. I would anticipate a large fine and more compliance costs. The company set aside €95M in the first quarter to account for the "AML" (anti-money laundering). When reviewing Nordea's earnings reports, the AML abbreviation will appear several times. Several lawsuits and criminal investigations are ongoing. The ECB's Jihad against the Euro is not helping.
Nordea handled about $790 million in suspicious transactions: Finnish TV - Reuters The alleged suspicious transactions were handled by the Estonia branch.
Nordea Bank Realized Gains to Date: $146.34
Debt Ratings: Excellent
Capital ratios are excellent.
Return on Equity is subpar.
Nordea was favorably mentioned by an investment manager in this article published on 9/3: 3 dividend stock picks with yields as high as 12% from a manager who doesn’t focus on dividends - MarketWatch I view the stock as a lottery ticket.
D. Bought 20 KGFHY at $4.645:
Closing Price Last Friday: KGFHY $4.8500 -$0.02 -0.41%
Category: Lottery Ticket Basket Strategy
10 Year Chart: Ugly, typical for a Lottery Ticket Selection
Quotes:
USD Priced ADR: Kingfisher (KGFHY)
British Pence Priced Ordinary Shares: Kingfisher PLC (U.K.: London)
100 Pence = 1 Pound (£) (just like a USD equalling 100 cents)
1 ADR = 2 Ordinary Shares
Traded on the Pink Sheet Exchange (now called the OTC Markets)
London Quote In PENCE: Kingfisher PLC (U.K.: London)
The recent weakness in the Pound vs. the USD due to Brexit concerns will cause the ADR to underperform the ordinary shares traded in the U.K.
Website: Homepage
Company Overview (1331 stores in 10 countries)
Think of Kingfisher as the Lowes or Home Depot of the U.K., Ireland, and parts of Europe without the success.
KGFHY Chart: Major BEAR Trend since April 28, 2014 with a close then at $14.37. The long term context is a dominant major long term secular bear market starting in April 1999 when the price went over $38. The most recent assertion of that dominant bear trend started in February 2018 after the stock traded over $10. In short, KGFHY has been a widow maker. The question with widow makers is whether negative news has been so heavily discounted in the price that anything positive can cause a major price surge.
Last Ex Dividend: Semi-annual on 6/9/16
Dividend History for ADR (Sponsored)/Kingfisher PLC
Current Position: 50 Shares
Maximum Position: 100 Shares
Recent Event: The CEO "retired" and was replaced with a veteran Carrefour officer whose last position at Carrefour was CEO of its Asia operations. Kingfisher CEO to leave after profits go into reverse- Reuters; UPDATE 3-Britain's Kingfisher turns to Carrefour veteran to revive fortunes - Reuters
Last Earnings Report: Discussed at UPDATE 2-Lower sales in France weigh on Kingfisher's growth - Reuters
Purchase Restriction: Small Ball rule (next purchase will be considered in the $3.75 to $4.25 range)
Average Cost Per Share = $6.06 (50 shares)
Previous Round-Trips: Item # 2.A. Sold 100 Kingfisher at $8.41-Used Commission Free Trade (11/9/17 Post)(profit snapshot= $40.38 + semi-annual dividend payment)- Item # 5 Bought 100 KFGHY at $8 (7/8/17 Post)
Item #1 Sold 100 KFGHY at $10.44 (10/6/14 Post)(profit snapshot= $65.57)
The USD priced shares have been negatively influenced by a decline in the British Pound vs. the USD.
Debt Ratings: Liquidity & ratings
Fitch Revises Outlook to Negative and Affirms at BBB (6/18/19)
Moody's affirms Kingfisher plc (P)Baa2 rating; stable outlook (have to register to view)
E. Added 20 COTY at $8.73:
Quote: Coty Inc. Cl A (COTY)
Brands
Coty Key Developments-Reuters.com
SEC Filings
F/Y Ending 6/30/19 Annual Report: 10-K
I would classify COTY as a deservedly hated stock as reflected in this chart:
Prior Round-Trips: I was successful in prior small ball trades but have been struggling after going back and trying again. Item 2.C. Sold 10 COTY at $21.46 (2/19/18 Post)(profit snapshot = $45.85); Item 1.D. Sold 20 COTY at $20.89 (1/28/18 POST)(profit snapshot = $80.61)
Closing Price Last Friday: COTY $10.02 +$0.24 2.40%
COTY Stock Surges on Success of Gucci Lipstick Launch | InvestorPlace
COTY | Coty Inc. Cl A Analyst E,P.S. Estimates (as of 9/6/19)
2019: $.68
2020: $.75
Those are non-GAAP estimates.
Dividend: Quarterly at $.125 per share (annually at $.5)
Last Ex Dividend: 9/6/19 (after purchase)
Dividend Yield at $8.73 = 5.73%
Dividend Reinvestment: Yes, for as long as the dividend reinvestment lowers my average cost per share.
Total Average Cost Per Share = $12.41
Dividend Yield at Total Average Cost = 4.03%
Last Substantive Discussion: Item # 1.B. Bought 10 COTY at $9.8-Used Commission Free Trade (11/21/18 Post)
Last Earnings Report (Fiscal Q/E 6/30/19):
Coty Inc. Reports Fiscal 2019 Fourth Quarter and Full Year Results, In-line with Guidance
Free cash flow reported at $213M for the F/Y ending on 6/30/19.
COTY overpaid for Procter & Gamble's professional beauty division and took a write-down connected in part to that acquisition: "The 4Q19 reported operating loss reflected $2.9 billion non-cash impairment charge primarily connected to the Consumer Beauty division and specific brand trademarks, bringing the FY19 total impairment charge to $3.9 billion. This impairment total includes $3.4 billion of Consumer Beauty goodwill, and $0.4 billion of indefinite-lived trademarks with the majority of the trademark impairment related to several Consumer Beauty brands."
Procter & Gamble Completes Transfer of Specialty Beauty Business to Coty (10/3/16) PG knew what it was doing.
See also :
Coty and Younique to Part and Focus on the Development of Their Respective Strengths ("Coty will sell its controlling stake to Younique’s original founders upon regulatory clearance, as soon as practicable"); Coty Completes Acquisition of 60% Stake to Enter into a Partnership with Younique (2/1/2017); Coty to Enter into Partnership with Younique, a Leading Online Peer-to-Peer Social Selling Platform in Beauty ("Coty will acquire a 60% stake of Younique for approximately $600 million in cash ") Easy come, easy go.
Coty Announces Turnaround Plan to Better Leverage Its Platform and Step up Performance (7/1/19)
Coty Announces New CEO and Board Changes (11/12/18)
Maybe the new turnaround plan will work better than the last one.
Coty Inc. Prices $550 Million of USD Senior Unsecured Notes and €800 Million of EUR Senior Unsecured Notes (3/28/18)
Current Position: 100 shares + shares purchased with dividends
Purchase Restriction: Small Ball Rule
Highest Cost Lot in Current Chain: Item # 2.B. 10 COTY at $16.47 (5/3/18 Post)
2. Intermediate Term Bond Basket Strategy:
A. Sold 2 Ventas 3.25% SU Maturing on 10/15/26:
Profit Snapshot: +$90.62
Finra Page: Bond Detail
Issuer: Operating Entity for Ventas Inc. (VTR) who guarantees the notes
A. Sold 2 Ventas 3.25% SU Maturing on 10/15/26:
Profit Snapshot: +$90.62
Issuer: Operating Entity for Ventas Inc. (VTR) who guarantees the notes
Sold at 102.636
YTM at 102.636 = 2.827%
Last Sell Transaction: Item # 3.B.Sold 1 of 4 VTR 2026 at 100.16 (7/31/19 Post)(profit snapshot = $38.67)-Item # 1.B. Bought 1 VTR 2026 at a TC of 95.074 (3/28/17 Post)
I now own only 1 bond that was bought earlier this year: Item # 4.A. Bought 1 VTR 3.25% 2026 at TC of 94.205 (2/6/19 Post)
3. Small Ball-Commission Free ETFs:
A. Added 10 ECON at $21.68-Commission Free for Vanguard Brokerage Customers:
Quote: Columbia Emerging Markets Consumer ETF Overview
Closing Price Last Friday: ECON $22.11 +$ 0.07 +0.32%
Last Discussed: Item # 4.A. (6/29/19 Post); Item # 4 (4/3/19 Post)
Sponsor's Website: ECON | Columbia Emerging Markets Consumer ETF
Top Ten Holdings as of 8/19/19 purchase date:
After the close on 8/19/19, one of the top ten holding, Baidu Inc. ADR, reported stronger than expected revenues and earnings. Baidu Announces Second Quarter 2019 Results
ADR quotes for some other top 10 holdings:
Alibaba Group Holding Ltd. ADR (BABA) Overview
TCEHY | Tencent Holdings Ltd. ADR Overview (pink sheets)
CHL | China Mobile Ltd. ADR Overview
JD | JD.com Inc. ADR Overview
Tencent profit rises above expectations - MarketWatch
Expense Ratio: .59%
Current Position: 65 Shares
Maximum Position: 100 Shares
Purchase Restriction: Small Ball Rule
YTM at 102.636 = 2.827%
Last Sell Transaction: Item # 3.B.Sold 1 of 4 VTR 2026 at 100.16 (7/31/19 Post)(profit snapshot = $38.67)-Item # 1.B. Bought 1 VTR 2026 at a TC of 95.074 (3/28/17 Post)
I now own only 1 bond that was bought earlier this year: Item # 4.A. Bought 1 VTR 3.25% 2026 at TC of 94.205 (2/6/19 Post)
3. Small Ball-Commission Free ETFs:
A. Added 10 ECON at $21.68-Commission Free for Vanguard Brokerage Customers:
Quote: Columbia Emerging Markets Consumer ETF Overview
Closing Price Last Friday: ECON $22.11 +$ 0.07 +0.32%
Last Discussed: Item # 4.A. (6/29/19 Post); Item # 4 (4/3/19 Post)
Sponsor's Website: ECON | Columbia Emerging Markets Consumer ETF
Top Ten Holdings as of 8/19/19 purchase date:
After the close on 8/19/19, one of the top ten holding, Baidu Inc. ADR, reported stronger than expected revenues and earnings. Baidu Announces Second Quarter 2019 Results
ADR quotes for some other top 10 holdings:
Alibaba Group Holding Ltd. ADR (BABA) Overview
TCEHY | Tencent Holdings Ltd. ADR Overview (pink sheets)
CHL | China Mobile Ltd. ADR Overview
JD | JD.com Inc. ADR Overview
Tencent profit rises above expectations - MarketWatch
Expense Ratio: .59%
Current Position: 65 Shares
Maximum Position: 100 Shares
Purchase Restriction: Small Ball Rule
4. Short Term Bond/CD Ladder Basket Strategy:
Hopefully inflation will rise more than expected next year causing CBs to abandon their Jihad Against the Savings Class. That is not a prediction but simply a wish. I may make a request in a prayer.
A. Bought 2 Treasury Bills Maturing on 2/20/20 (6 month bills):
1.888%IR
Auction Result:
B. Sold 1 TransCanada 2.5% SU Maturing on 8/1/22-In A Roth IRA Account:
Profit Snapshot: +$5.02
Item # 1.A. Bought 1 TCP 2021 SU at a TC of 99.053 (3/16/17 Post)
FINRA Page: Bond Detail (prospectus linked)
Issuer: TC Energy Corp. (U.S.: NYSE)
Pipeline company TransCanada changes name to TC Energy
Sold at 100.45
YTM at 100.45 = 2.337%
C. Bought 3 Treasury 56 Day Bills Maturing on 10/29/19:
2.029% IR
Auction Results:
D. Early Issuer Redemption:
I have mentioning some of these to highlight that issuers just can not wait a few more months, until a bond matures, to redeem and refinance, even if the redemption requires a small make whole premium. I am generally receiving early redemption notices anywhere from 1 to 3 times weekly.
5. Equity REIT Common and Preferred Stock Basket Strategy:
A. Sold 50 IRM at $31.97 ($1 IB Commission):
Quote: Iron Mountain Inc. (IRM)
Profit Snapshot: +$17.46
Item # 1 Bought 50 IRM at $31.58 (5/18/19 Post)
Dividend: Quarterly at $.611 per share
I received one quarterly dividend that went ex on 6/14/19. I bought the 50 share lot on 5/7/19.
Last Ex Dividend Date: 9/3/19
I did not like the price action after I made this purchase. IRM Historical Prices
I will stick with my small ball "buying program" for IRM using Fidelity commission free trades. Buying is subject to the small ball restriction as a risk mitigation tool.
The last lot under that program was bought at $29.51. Item # 2.B. (7/17/19 Post) I have nothing to add to that recent discussion. When and if the price falls into a $28-$29 range, I will consider buying more shares. I am reinvesting the dividend
This REIT makes me squeamish, similar to my overall gut reaction to OHI which I have bought and sold several times.
Last Sell Discussions: Item # 1.C. Sold 10 IRM at $33.91-Used Commission Free Trade (12/26/18 Post); Item # 3 Sold 50 IRM at $33.82-Update For Equity REIT Basket Strategy As Of 4/6/16 - South Gent | Seeking Alpha (profit snapshot= +$398.06)-Item # 3. Bought 50 IRM at $25.7: Update For Equity REIT Basket Strategy As Of 1/11/16 - South Gent | Seeking Alpha
IRM Trading Profits To Date: $429.86 ($412.40 in prior trades)
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.
AT&T Inc.
ReplyDeletePREMARKET $38.91 +2.66 +7.34%
Before Hours Volume: 9.3M
Last Updated: Sep 9, 2019 at 8:44 a.m. EDT
https://www.marketwatch.com/investing/stock/t
https://www.marketwatch.com/story/atts-stock-soars-after-activist-investors-outlines-plan-to-boost-shares-by-over-65-2019-09-09?mod=mw_theo_homepage
It will be interesting to see whether this pop carries over into regular hours trading.
The surge is related to a letter sent to AT & T by the activist investors Elliot Management that articulates several potential changes, which when implemented, could cause the stock to rise 65%. Elliot disclosed that he has taken a $3.2B stake and is seeking asset sales.
https://www.businesswire.com/news/home/20190909005482/en/
I recently used a commission free trade and sold my highest cost 20 shares following my small ball trading rules. I will discussed that trade in a subsequent post. I currently own 54+ shares with an average cost per share of $30.19.
Based on the price rise, I have changed my dividend option from reinvestment to cash payments.
Last Purchase Discussion-Small Ball Buying Restriction in Place:
Wednesday, January 16, 2019
Item # 4.A. Bought 5 AT & T at $27.7 and 10 at $26.95-Used Commission Free Trades
https://tennesseeindependent.blogspot.com/2019/01/observations-and-sample-of-recent_16.html
Schlumberger Ltd. $35.24 +1.05 +3.07%
ReplyDeleteUpdated: Sep 9, 2019 at 10:38 a.m. EDT
https://www.marketwatch.com/investing/stock/slb
I discussed buying a few shares in this post. JPM reduced its price target today to $34 from $41 and maintained its neutral rating. I do not have a copy of that report.
So far today, that PT reduction is not have an impact on the stock. Crude oil is up slightly today in response to the Saudi Oil Minister repeated commitments to energy cuts.
https://www.marketwatch.com/story/crude-gains-as-new-saudi-oil-minister-repeats-commitment-to-production-cuts-2019-09-09?mod=mw_quote_news
SLB did go ex dividend on 9/3/19, shortly after my three small ball buys.
Barron's published an article written by someone identified as an advisor to hedge funds. The author's argument reflect my opinion, frequently expressed here, that the extremely abnormal CB monetary policies are deflationary rather than inflationary.
ReplyDeleteSubscription Publication:
https://www.barrons.com/articles/the-solution-to-deflationary-trends-is-massive-fiscal-spending-51567794850?mod=hp_LATEST
The author points out that negative interest rates and other abnormal monetary policies are increasing supply, not demand. Those policies also sap disposable income from most households who are not able to earn a real return from risk free savings before taxes.
The foregoing is admittedly a minority view expressed by a handful of people. You would think that more investors would be willing to accept this opinion since it is the one that best fits the evidence, particularly for Europe and Japan over the past decade and to a lesser extent the U.S. (though the U.S. may now be trending in that direction). Lowering interest rates as demanded by the likes of Trump and Jim Cramer from already abnormally low levels will be counterproductive for the economy.
Those policies would not be deflationary IMO if the central banks had ended them several years ago, but that did not happen.
Maintaining those policies for 11+ years, and threatening to continue them into the indefinite future, is more likely to be a contributor to deflation.
+++
Over the past several days, there has been a surge in prices for what I would call contrarian value stocks that have been out-of-favor for a long time.
Several of my recent buys fit that style box and have increased over 10% since my purchases.
One example is Ryder (R) which closed at $53.61, up 5.64% today.
https://www.marketwatch.com/investing/stock/r
My two small ball buys were at at $46.25 and $45.18 in mid-to-late August 2019.
Item # 1.B.
https://tennesseeindependent.blogspot.com/2019/09/observations-and-sample-of-recent_4.html
The Ishares Russell 1000 Value ETF was up .86% today while the Russell 1000 Growth ETF declined by .78%.
iShares Russell 1000 Value ETF
https://www.marketwatch.com/investing/fund/iwd
iShares Russell 1000 Growth ETF
https://www.marketwatch.com/investing/fund/iwf
The rally in AT & T stock faded throughout the day which is not surprising. Elliott Management does not have the power to change what the Board and management want to do.
Yesterday, shortly before the close, I initiated a small position in SDS as a hedge. This is the third time so far this year that I have done so. I closed out the prior two trades profitably.
ReplyDeleteSDS is a double short ETF for the S & P 500 that loses tracking quickly and consequently this security is at best an imperfect hedge even when the timing is good.
I use the double short ETFs to hedge since I do not have a margin account, which would allow me to short major stock index ETFs, nor do I trade options. I am a pay cash for anything that I buy person and have no debt.
There are a few reasons why I bought SDS now.
(1) The euphoria from last week created by scheduling the 13th meeting among high level officials from China and the U.S., with no publicly disclosed breakthrough mentioned, appears to have faded.
(2) Some of the positive economic news from last week that contributed to the euphoria was contradicted by other data (Markit vs. ISM on U.S. services PMI; BLS August private employment gains vs. ADP)
(2) The GOP will be imposing an additional 5% tariff tax, paid by U.S. consumers and businesses, on about $250 in China exports effective 10/1/19. The meeting in D.C. was rescheduled from mid-September to sometime in October.
(4) A hard Brexit appears more likely soon than at anytime in the past.
(5) SPX has moved closer to its all time high.
(6) The Stock Jocks are ignoring other negative economic data points.
I will not hold SDS for long. The maximum holding period would be through 10/31, the Brexit date, into early November.
Hello South Gent,
ReplyDeleteI wondered if you could clarify for me the reason that Europe is continuing to look for ways to lower rates and devalue their currency.
I know you said in the past that the cheaper a currency is, the easier it is to sell product.
I have seen articles from Seeking Alpha, especially those of Mark Grant whose thesis is that many countries in Europe cannot afford the social programs that are needed for its populations to maintain a certain standard of living. Measures like austerity, budget responsibility, etc. are not viable in terms of electability of officials.
So the thesis is to pay for all this cost of living for the populations with the devalued currency.
This is forcing the United States to defend the dollar by also cutting rates.
I wondered if you thought my explanation had any validity?
It seems unreasonable and beyond belief that you would have to pay for the right to lend someone money, but that is what is happening.
Thank you
G: There are a number of reasons IMO.
DeleteThe primary reasons are a suboptimal number of growth companies, an unwillingness to engage in fiscal stimulus particularly in Germany, and a mistaken belief held by economists that negative nominal rates will result in economic growth and inflation.
The Fed provided an umbrella for other central banks to end their abnormal monetary policies starting in late 2015. No major central bank followed the lead. The ECB, other European CBs, and the BOJ kept their negative nominal benchmark rates.
In effect, the European CBs are trying to engage in stimulus through these abnormal monetary policies since their governments are refusing to do so, led by Germany who has a budget surplus and a faltering economy that may be entering a recession.
https://www.reuters.com/article/us-germany-economy-gdp/weaker-exports-hit-german-economy-but-budget-surplus-still-high-idUSKCN1VH0GH
https://www.dw.com/en/germany-closed-2018-with-record-budget-surplus/a-47626726
With a budget surplus and long term bonds with negative yields, you would think that Germany would now be engaged in a massive fiscal stimulus but that is not the case.
While the ECB denies it, a central reason for its monetary policies are to devalue the Euro against the USD and thereby stimulate exports.
Schlumberger Ltd. $37.71 +$1.47 +4.06%
ReplyDeleteLast Updated: Sep 10, 2019 at 10:55 a.m. EDT
https://www.marketwatch.com/investing/stock/slb
Morgan Stanley upgraded SLB to overweight and maintained its PT of $51.
https://seekingalpha.com/news/3498264-schlumberger-upgraded-stanley-returns-free-cash-flow-focus?mod=mw_quote_news
I do not have access to that report. It is interesting that this change was announced one day after its competitor JP Morgan downgraded its PT to $34 from $41 (see my prior comment).
I place almost no weight on analyst recommendations when I do not have access to the reports. And, with a company like SLB, I doubt that anyone really has a clue about will happen in a year or two. If I someone would give me hard data now on energy prices and drilling activity for the next two years, I would have a better handle on a PT for SLB over that period of time.
About all that I can say now is that the price was depressed when I bought a few shares, the dividend yield was good and its international business was doing okay.
Over the past few days, contrarian value, which is my investing style box and has been for over 4 decades, has been doing better than momentum growth. My contrarian value style also mostly focuses on stocks with significantly higher dividends than the S & P 500 average. SLB, which I have avoided for a long time, is just one example.
In addition, I would note that I am in a strong and dominant capital preservation mode. I will consider selling anything that I own into strength; as I have been doing for months with corporate bonds.
AT&T Inc. $37.52 +$0.73 +1.98%
ReplyDeleteLast Updated: Sep 10, 2019 at 11:33 a.m. EDT
https://www.marketwatch.com/investing/stock/t
AT & T is regaining today some of the momentum that lost during the trading day yesterday. Citigroup reiterated it buy and raised its PT to $42 from $37. I do not have access to the report and would surmise that the PT increase was due to Elliott's letter published yesterday morning.
I'm going to post here from the last post, rather than start comments in a prior post.
ReplyDelete"customer buying reaching saturation..."
Hadnt thought about that. I don't think we're anywhere near a saturation. Buying still seems kind of muted. People don't tell me all about their new whatevers. More vacations so there's that. But even that seems muted compared to before 2008.
Chris Hayes suggested that Trump is looking for any deal that will make front page with him shaking hands. Doesn't care about the deal, only the optics for his run. It would make a big difference if he had one, and the papers will obligate even when it's not really a deal.
I know this because my TV is stuck on MSNBC. I can mute and turn it off. But can't change channels. I want to change channels. I'm not going to be delighted when comcast tells me I can pay to mail one, or stand in line in their "store."
I have been busy. Decision is made to start treatment as soon as insurance approves (so any century now?). Should be in a couple weeks. It won't be chemo. Instead an immunotherapy drug through IV so I will need to bring plenty of distracting material. But shouldn't be as big a deal after the first time.
Spleen is big enough that when I slouch it reminds me to sit up straight. While my posture has improved and back muscles strengthened, I do not think it's the right exercise for your couch routine. Requires specialized equipment fancier than a baseball bat. Otherwise, the whole thing is very indolent acting. So as long as it responses to this med, it's not something to be get totally stressed over.
If I want to get totally stressed, I can just turn my volume back on. Trump appears to be talking.
Land: You might feel better after turning off the cable news channels.
DeleteU.S. consumers are still spending, based on the latest data, but they are also going deeper into debt.
https://www.cnbc.com/2019/09/09/us-consumer-borrowing-posts-biggest-gain-since-late-2017.html
According to a census report released today, median U.S. household income last year was at $63,179, basically unchanged from 20 years ago adjusted for inflation. So that is the crux of the problem.
" The U.S. Census Bureau announced today the median household income was not statistically different from the 2017 median"
https://www.census.gov/newsroom/press-releases/2019/income-poverty.html
I am sure it will. It is also time for bed. That will be a nice event.
DeleteI haven't figured out why low unemployment and job needs hasn't resulted in wage growth. Though the .11 cents seems like a lot.
The Chaos book looks intriguing. It seems like more of an entry theory. There are layers to look at, why people want Chaos or to poke at elites without further thought. Curious to see what they conclude.
"" long inflation assets""
ReplyDeleteI will have to read the article to learn what inflation assets are. I wouldn't start that trade right now. There's more deflation room. And room for a whole recession before inflation. However, it seems very worth keeping in mind. Especially if the recession risks recede.
The various charts thoughout your article show it can still be a while, but look like a recession is coming...
I have published a new post:
ReplyDeletehttps://tennesseeindependent.blogspot.com/2019/09/observations-and-sample-of-recent_11.html