Economy:
U.S. productivity falls for the first time since 2015-MarketWatch; US industrial productivity labor costs Q3 2019 Productivity declined at an annual rate of .3% during the third quarter.
The ISM October 2019 PMI increased to 54.7% from 52.6% in September. The new orders component increased by 1.9 to 55.6.
China eclipsing U.S. as Europe’s go-to partner - MarketWatch
China says it has agreed with the US to cancel existing tariffs in different phases This report was responsible for both a stock surge and a rise in longer term interest rates last Thursday. The report is vague in its particulars and requires considerable speculation to fill in the blanks.
The Stock Jocks ignored Donald's comment yesterday that he had not agreed to a tariff rollback. Trump says he hasn't agreed to roll back tariffs on China; Trump says he hasn't agreed to rolling back China tariffs - POLITICO
My general reaction is that China's "concessions" are more mirages than real.
I doubt that any agreement reached on currency, for example, will impact what China's central bank would do without an agreement.
Promises to purchase U.S. agricultural products may simply restore the status quo prior to the tariff war.
Any intellectual property protections will be more smoke and mirrors that will not materially impede the theft of U.S. intellectual property.
It is certainly possible that Donald will fold and claim that the so called Phase 1 agreement is the best deal ever struck in world history.
The motivation for caving now would entirely relate to his concerns about winning reelection and the importance of the farm vote in states that he has to win.
China tariff rollback faces fierce opposition in the White House; Trump trade adviser pushes back on reports of US-China tariff deal | TheHill
More Americans say now is a bad time to buy a home (only 21% say it is a good time to buy a house)
For those who believe that the recent FED interest rate cuts are a magic elixir for the economy, notwithstanding the negative impact on household free risk savings income, you may want to consider the negative implications that will flow from the rise in longer term rates.
The ten year treasury yield closed yesterday at 1.94%, up from 1.47% on 9/4/19. Daily Treasury Yield Curve Rates
+++++
Markets and Market Commentary:
J.P. Morgan reduces gold recommendation while still pushing stocks - MarketWatch, quoting head of JPM's market strategy team as follows: “We maintain a significant and incrementally larger tilt in our model portfolio towards risky assets, based on signs of a cyclical recovery, easing geopolitical tensions, synchronized monetary easing, and defensive investor positioning across asset classes,”
The World Has Gone Mad and the System Is Broken by Ray Dalio
Stocks may be rallying to records, but the earnings outlook is darkening
J.P. Morgan reduces gold recommendation while still pushing stocks - MarketWatch, quoting head of JPM's market strategy team as follows: “We maintain a significant and incrementally larger tilt in our model portfolio towards risky assets, based on signs of a cyclical recovery, easing geopolitical tensions, synchronized monetary easing, and defensive investor positioning across asset classes,”
The World Has Gone Mad and the System Is Broken by Ray Dalio
Stocks may be rallying to records, but the earnings outlook is darkening
+++++
Trump:
Majority expect Trump to win re-election, poll finds - MarketWatch (85% of republicans, 51% of independents and 35% of Democrats: National Tracking Poll 191104)
Majority expect Trump to win re-election, poll finds - MarketWatch (85% of republicans, 51% of independents and 35% of Democrats: National Tracking Poll 191104)
New York writer E. Jean Carroll, who accused Trump of sexual assault sues him for defamation Donald invites this kind of suit by publicly calling his accusers liars rather than just denying the claim which could not form the basis of a libel suit.
Stephanie Grisham called Ms. Carroll a "fraud". Ms. Carroll could add Ms. Carroll as a defendant for that comment and possibly argue that Donald is derivatively liable for that statement as well.
These are jury questions and are not generally susceptible to dismissal prior to a trial, though one republican judge S. James Otero, will allow Donald to defame private citizens by creating a broad exemption for "rhetorical hyperbole".
Stephanie Grisham called Ms. Carroll a "fraud". Ms. Carroll could add Ms. Carroll as a defendant for that comment and possibly argue that Donald is derivatively liable for that statement as well.
These are jury questions and are not generally susceptible to dismissal prior to a trial, though one republican judge S. James Otero, will allow Donald to defame private citizens by creating a broad exemption for "rhetorical hyperbole".
I hope Ms. Carroll adds Grisham as a defendant since her mouth needs to act with more restraint and maybe that would teach her a much needed lesson.
Poll: 62% of Trump fans say they support him no matter what I suspect that the number is significantly higher than 62%. Some people would support him no matter what but would not admit to it when asked that type of question.
++++++
Fraud and the Trump Foundation:
Trump had to admit that he used Trump Foundation money for his political purposes, to pay off business debts and to purchase a portrait of himself. Trump ordered to pay $2 million to settle Trump Foundation suit; Trump Ordered to Pay $2 Million to Charities for Misuse of Foundation - The New York Times; Donald Trump to pay $2 million to settle New York Attorney General civil lawsuit against Trump Foundation and his children
Just another Trump fraud. The Trump Foundation in New York was a sham. We have no idea how many other foundations are too. - Vox
The Clinton Foundation on the other hand is a real charity. Charity Navigator - Rating for The Clinton Foundation
There is no proof that the misused charitable donations for their personal use.
And, the Clintons received no compensation from the Clinton Foundation. Frequently Asked Questions | Clinton Foundation
The republicans have alleged from time to time that Hillary promised favors while she was Secretary of State in exchange for donations to the Clinton Foundation, but reliable proof is lacking and the allegation is more in the nature of conspiracy theory hatched by republicans.
See generally, Clinton Foundation Archives - FactCheck.org
Will the Trumpsters who have blasted the Clinton Foundation, criticize Donald for using charitable funds for his own benefit?
I have not found one republican politician who voiced a whimper of disapproval.
Based on what is known factually, as opposed to republican reality creations perpetuated in bad faith and with actual malice, the mistake made by the Clintons was allowing the Clinton Foundation to accept foreign donations while she was Secretary of State. She needed to remove the conflict argument that the republicans would inevitably make.
++
Impeachment Inquiry Transcripts Released:
Top White House official told Congress ‘there was no doubt’ Trump sought quid pro quo with Ukrainians
4 big takeaways from Fiona Hill’s and Alexander Vindman’s transcripts
Top diplomat in Ukraine directly ties Trump to quid pro quo
U.S. diplomat accuses Giuliani of 'lies' campaign against envoy to Ukraine
Impeachment inquiry: George Kent's testimony takeaways: USA Today
Impeachment transcripts released for Alexander Vindman and Fiona Hill
It is abundantly clear, except in the Alternate Reality of Trumpworld of course, that Donald put a hold on military aid to the Ukraine. This was done solely to pressure that country into launching investigations of Donald's political opponents. The scheme failed only because there was bipartisan pressure on Donald to release the aid.
Without a doubt, reasonable or otherwise, every GOP House and Senate member would vote to impeach a Democrat president for the same conduct. The howls for impeachment would be deafening and would be led by none other than Senator Lindsey Graham (R-SC).
Will there be a single republican vote to impeach Trump?
Maybe there will be a handful, capable of being counted with the fingers of one hand, when you combine the votes in both chambers.
One republican congressman who said he would actually consider the evidence was hounded into retirement. GOP congressman who was open to impeachment calls it quits
Trump has been attacking the whistleblower almost daily as a traitor and a "never" Trumpster, all of whom are "human scum" according to Demagogue Don. Yesterday, he called the whistleblower a "disgrace" to the country. Donald Trump Calls Whistleblower A ‘Disgrace,’
Jordan: Republicans Will Subpoena Whistleblower for Public Hearing
Republicans and their media apparatchiks have been circulating one name as the possible whistleblower. Eric Ciaramella: 5 Fast Facts You Need to Know | Heavy.com Donald Jr. tweeted Ciaramella as the possible whistleblower. Reading Junior's twitter feed is remarkable for the easily identifiable echo chamber of TrumpWorld's Alternate Reality.
Donald and other republicans want to punish the whistleblower for coming forward with what has proved to be, without question, accurate factual information about Donald's abuse of power.
This is to be expected from them, and the whistleblower had to know that would happen before filing his complaint. My advice to the whistleblower would be to take all precautions for their personal safety now.
Donald has already incited Trumpsters to make death threats against the public servants who have come forward, including Fiona Hill. Former Trump aide Fiona Hill says she's received death threats-Business Insider
Transcripts show Republicans’ scattershot strategy in early days of impeachment inquiry Republicans complained that the depositions were not conducted in public, but their complaint during the depositions was that information was being made public through releases of written prepared remarks.
Apparently, for reasons that are impossible for me to fathom, this kind of crystal clear hypocrisy and inconsistent positions work on millions of Americans.
Republicans echo Trump conspiracy theories in impeachment inquiry interviews -The Washington Post The post story refers to the questions posed by representatives Jim Jordan (R-Ohio), Lee Zeldin (R-NY) and Mark Meadows (R-NC), three of the most clownish republican representatives.
The deposition of Marie Yovanovitch revealed that she was concerned about her safety from remarks made by Trump. Marie Yovanovitch’s testimony, explained: Impeachment transcript released - Vox
And the State Department told her to leave Ukraine on the next plane for her own "security". In her testimony, Ambassador Yovanovitch summarized a telephone conversation with Carol Z. Perez, Director General of the Foreign Service, as follows:
Inside the Impeachment Testimony: Dry Questions and Flares of Drama ("The transcripts indicate that, despite repeated claims that they have been prevented from taking part in the impeachment inquiry, Republican members have spent many hours questioning witnesses.") The republicans use part of their time to smear the witnesses with fact free allegations.
Most Republicans on impeachment committees aren’t showing up, transcripts reveal Some of the GOP representatives who stormed the deposition room, chanting "let us in" were actually permitted to attend the depositions including one of the ringleaders Jim Jordan.
Jordan, a former wrestling coach, is among the best and brightest that the House GOP has to offer. Referee says he told Rep. Jim Jordan that Ohio State doctor performed sex act in shower
Consequently, since the hearings starting next week will be held by the House Intelligence committee, and Jordan was not a member of that committee, the GOP leaders decided that their best and brightest needed to be added as a republican member of that committee. Trump ally Jim Jordan gets a seat on committee for impeachment hearings
The republican senior member of that committee was Devin Nunes who made headlines recently suing a cow for defamation. Devin Nunes sued a fake cow. And kept suing and suing and suing... - Los Angeles Times; Devin Nunes Has Filed a Very Weird Lawsuit Against Ryan Lizza | Washingtonian (DC); Devin Nunes sues Twitter, ‘Devin Nunes’ cow’ for defamation - The Washington Post
As a constitutional matter, the only question left is whether Donald's conduct warrants impeachment and that is debatable. The fact that he abused the office of the presidency for personal political gain is not debatable.
+++
Last Week's Elections-More Signs of Ongoing Realignment in the Suburbs:
Democrats Win Control in Virginia and Claim Narrow Victory in Kentucky Governor’s Race
Election 2019 takeaways: Matt Bevin, Andy Beshear, Virginia and more: USA Today
When the republicans controlled Virginia's government, they engaged in racially based gerrymandering that solidified their control through artificial and anti-democratic means. Supreme Court hands Democrats a win in Virginia racial gerrymander case
In Trump's shadow, Republican suburban slide shows little sign of slowing - Reuters
Major geographic political realignments do occur periodically.
1960 Presidential Election Interactive Map Southern states were mostly carried by JFK, while the west coast and most of New England were carried by Nixon.
2016 Presidential Election Actual Results The South is solidly republican except for Virginia, while the west coast and most of New England voted for Hillary.
There is no longer a republican House member from New England. Susan Collins Is the Last New England Republican in Congress Ms. Collins may easily lose her bid for reelection in 2020.
++++++++
1. Canadian Reset Equity Preferred Stocks:
A. Bought 50 BAMPRS at C$14.55:
Issuer: Brookfield Asset Management Inc. Cl A (U.S.: NYSE); Brookfield Asset Management Inc. Cl A (Canada: Toronto)
Coupon: Floats at a 2.35% spread to the 3 month Canadian Treasury Bill
Prospectus Excerpt:
Recent Dividend Payments:
At a 1.5% 3 month yield, the coupon would become 3.85%. The dividend yield at a total cost of C14.55 would be 6.62%.
At a 4% 3 month month yield, the coupon would because 5.5%, raising the dividend yield to 9.45% at a TC of C$14.55 per share.
2. Small Ball Trades-All Commission Free:
I am continuing to resist the urge to sell every stock and stock mutual fund or reduce the size by at least 90%.
I am continuing to resist the urge to sell every stock and stock mutual fund or reduce the size by at least 90%.
A. Eliminated R-Sold 15 at $50.49:
Quote: Ryder System Inc. (R)
Profit Snapshot: +$69.15
I had a negative reaction to the third quarter earnings report. That resulted in stopping the small ball purchase program. Ryder Reports Third Quarter 2019 Revenue of $2.2 Billion, Up 3%; Earnings Impacted by Change in Residual Value Estimates When I have that kind of reaction, I really do not care what anyone else thinks about it. The Stock Jocks got over it in a few days.
Earnings generated by selling used vehicles is an important part of the business so I will not ignore a major change in the profitability of that segment.
A downturn in prices for those vehicles caused Ryder to markdown their residual value.
The end result was a third quarter GAAP E.P.S. loss of $1.75.
The company also made this comment:
"While commercial rental pricing was up modestly for the quarter, demand was below our prior expectations which negatively impacted utilization in the quarter. We are executing on our plan to right-size our tractor rental fleet and expect to have it aligned with market conditions by early 2020."
"In the Supply Chain Solutions (SCS) business segment, total revenue and operating revenue (a non-GAAP measure excluding fuel and subcontracted transportation) were down 2% to $618 million and $454 million, respectively, compared with the year-earlier period. The decline in SCS total revenue and operating revenue primarily reflects previously announced lost business."
I will reconsider restarting when (1) the price is below $45 and (2) there is a substantial improvement in a subsequent earnings report. Investors reacted negatively but not as negatively as warranted IMO.
B. Eliminated BDN-Sold 101+ at $15.33:
Quote: Brandywine Realt (BDN)
Closing Price Yesterday: BDN $15.25 +$0.07 +0.46%
Company Website: Brandywine Realty Trust
B. Eliminated BDN-Sold 101+ at $15.33:
Closing Price Yesterday: BDN $15.25 +$0.07 +0.46%
Company Website: Brandywine Realty Trust
2018 Annual Report
Profit Snapshot: +$100.4
Item # 2.A. Bought 100 BDN at $14.34-Commission free trade (7/17/19 Post)
I received one quarterly dividend which was reinvested.
Category: Equity REIT Common and Preferred Stock Basket Strategy
Dividend: Quarterly at $.19 per share
Last Ex Dividend Date:
Recent Earnings Report (Q/E 9/30/19):
"FFO available to common shares and units in the third quarter of 2019 totaled $64.0 million or $0.36 per diluted share versus $63.2 million or $0.35 per diluted share in the third quarter of 2018. Our third quarter 2019 payout ratio ($0.19 common share distribution/$0.36 FFO per diluted share) was 52.8%."
While the payout ratio and stock price to FFO look favorable for a REIT, I view those numbers as misleading. The relevant number for a non-triple net lease REIT is cash available for distribution.
As an office REIT, BDN will spend every quarter a considerable amount of cash on routine maintenance and "tenant improvements".
Cash used to fund those expenditures are not available to support the dividend.
BDN's FFO Calculation:
Brandywine Realty Trust Announces Third Quarter 2019 Results, Narrows 2019 Guidance and Provides Initial 2020 Guidance
The investor has to go to BDN's 10-Q to acquire information on those expenditures. For the 9 month period ending on 9/30/19, BDN spent $53.383M on "tenant improvements". Page 17 10-Q
Another $33.905M was spent on "redevelopments" which I interpret to mean capital investments that improve the value of existing properties.
I have a number of small trades in BDN that are initiated primarily pursuant to a dividend harvest strategy.
E.G. Item # 2 Sold 100 BDN at $12.38-ROTH IRA (8/9/12 Post)-Item # 1 Bought Roth IRA: 100 BDN at $11.24 (6/27/12 Post)(one dividend payment harvested)
I will consider repurchasing BDN at or below prior $14.3 prior to the next ex dividend date.
C. Eliminated SNR-Sold 398+ Shares at $8.05:
Quote: New Senior Investment Group Inc. (SNR)
Website: New Senior Investment Group
Last Earnings Report: New Senior Announces Third Quarter 2019 Results
SEC Filings
Closing Price Yesterday: SNR $7.52 -$0.09 -1.18%
Profit Snapshot: +$256.55
I explained the rational for this elimination in an earlier comment. The shares popped after this announcement: New Senior Announces Strategic Transaction to Sell Assisted Living/Memory Care Portfolio
Category: Gateway Post: Equity REIT Common and Preferred Stock Basket Strategy
Sell Discussions: Item # 2 Pared SNR-Sold 139 Shares at $8.28 (4/16/18 Post)(profit snapshot = $154.44)
Item # 4.A. Sold 100 SNR at $10.44 (8/7/17 Post)
Item # 6 Sold 100 SNR at $11.76 and Item # 7 Sold 50 SNR at $11.85: Update For Equity REIT Basket Strategy As Of 7/28/16 - South Gent | Seeking Alpha
South Gent's Comment Blog # 2 (noting a 50 share sell transaction at $12.3 on 9/16/16 in a Vanguard Roth IRA)
Realized Gains to Date: $879.17 ($622.62 in prior trades)
I would characterize SNR as a high risk REIT.
SNR 5 Year Chart
5 Year Annual Average Total Return = -7.59%
Sourced from DRIP Returns Calculator (through Friday's close)
I also mention SNR in Item # 3 below.
3. Dumpster Diving-Lottery Ticket Basket Strategy:
A. Bought 50 NEWM at $7.6:
Quote: New Media Investment Group Inc. (NEWM)
SEC Filings
Website: New Media Investment Group
Corporate Profile – New Media Investment Group
Closing Price Yesterday: NEWM $7.54 -$0.08 -1.05%
This particular dumpster dive may end up capturing a mouthful of garbage.
NEWM Info (Day of purchase-11/7/19)
New Media is in the process of acquiring Gannett. The deal terms provide that each Gannett share will be exchange for $6.25 in cash and .5427 of a NEWM share. SEC Filed Press Release Announcing the Merger
GCI - Gannett Co Inc Profile | Reuters
NEWM- New Media Investment Group Inc Profile | Reuters
SEC Filed Transcript of 8/5/19 Call to Discuss Merger
As part of the deal NEWM is getting rid of its external manager for a price:
SEC Filed Press Release
The external manager is Fortress Investment Group who I hold in low regard.
{New Senior Investment (SNR) was another company managed by Fortress. While the benefits to Fortress are clear, including the outrageous amount paid to buy out its contract, the benefit of its management to SNR shareholders was IMO impossible to find. New Senior Announces Definitive Documentation for Internalization}
I view that termination to be a positive.
When that acquisition is completed, the NEWM anticipates that dividend will be cut from the current quarterly rate of $.38 per share to $.19 or $.76 per share annually.
The dividend yield shown in the preceding snapshot likely reflects the last dividend paid by New Media at the $.38 per share quarterly rate.
Dividend Yield: Assuming the new penny rate works out to $.76 per share annually, the yield at at a total cost of $7.6 would be 10%.
The one year 45+% decline is certainly flashing a red warning light visible throughout the known universe. The Stock Jocks are not confident in the predictions made my NEWM about will happen after the merger is completed.
NEWM shareholders have been punished greatly for the decision to acquire Gannett. Empire building in the newspaper business is not the path to riches.
Chart: Widow Maker
The question is whether the current price reflects too much pessimism about the future. I am betting a small amount that the selling is overdone but I have low confidence in that opinion. There is certainly nothing in the chart that provides comfort that the worst is over.
It would be a plus for NEWM IMO if its shareholders vote down the merger proposal at the 11/14/19 meeting, even though there are some future benefits from the acquisition involving Gannett's non-newspaper businesses and the move to digital newspapers and advertising as cost saving measures. Key New Media holder (MNG Enterprises) to support Gannett deal-Seeking Alpha MNG owned 8.5% of NEWM as of 10/31/19.
Last Earnings Reports for Gannett and New Media:
New Media Announces Third Quarter 2019 Results, summarized at New Media ad drop dings Q3 revenue- Seeking Alpha; CEO Mike Reed on Q3 2019 Results - Earnings Call Transcript | Seeking Alpha
Gannett Reports Third Quarter 2019 Results summarized at Gannett EPS beats by $0.06, misses on revenue-Seeking Alpha
Both companies are growing digital subscribers.
In the third quarter, Gannett's digital revenue hit 38% of the total, with digital only subscriptions rising 27% Y-O-Y to 607,000. The total digital advertising and marketing services revenues were $183.6M or 53% of the total digital advertising and market revenue.
Gannett's operating revenue declined by 7.8% Y-O-Y, which is the problem in a nutshell.
There will be cost cutting including major staff reduction after the merger is completed shortly after the shareholder vote on 11/14.
The trend toward digital newspapers will be a difficult one since there is a trade off between advertising and subscription dollars. Currently, Gannett's main publication, USA Today, is not behind a paywall. USA TODAY If a subscription was required, advertising revenue would go down. The digital subscription is $9.99 per month for an exact digital replica delivered to the subscribers inbox and $4.99 per month for ad-free browsing. I read some articles and may go with the ad-free plan since the ads are annoying.
Gannett does provide advertising solutions for local businesses under its "ReachLocal" segment that could possibly provide a foundation for more profitable future endeavors. The services provided by ReachLocal are described in this excerpt from the 2018 Annual Report:
Page 7
So far, however, the results are uninspiring for this business segment.
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.
Profit Snapshot: +$100.4
Item # 2.A. Bought 100 BDN at $14.34-Commission free trade (7/17/19 Post)
I received one quarterly dividend which was reinvested.
Category: Equity REIT Common and Preferred Stock Basket Strategy
Dividend: Quarterly at $.19 per share
Last Ex Dividend Date:
Recent Earnings Report (Q/E 9/30/19):
"FFO available to common shares and units in the third quarter of 2019 totaled $64.0 million or $0.36 per diluted share versus $63.2 million or $0.35 per diluted share in the third quarter of 2018. Our third quarter 2019 payout ratio ($0.19 common share distribution/$0.36 FFO per diluted share) was 52.8%."
While the payout ratio and stock price to FFO look favorable for a REIT, I view those numbers as misleading. The relevant number for a non-triple net lease REIT is cash available for distribution.
As an office REIT, BDN will spend every quarter a considerable amount of cash on routine maintenance and "tenant improvements".
Cash used to fund those expenditures are not available to support the dividend.
BDN's FFO Calculation:
Brandywine Realty Trust Announces Third Quarter 2019 Results, Narrows 2019 Guidance and Provides Initial 2020 Guidance
The investor has to go to BDN's 10-Q to acquire information on those expenditures. For the 9 month period ending on 9/30/19, BDN spent $53.383M on "tenant improvements". Page 17 10-Q
Another $33.905M was spent on "redevelopments" which I interpret to mean capital investments that improve the value of existing properties.
E.G. Item # 2 Sold 100 BDN at $12.38-ROTH IRA (8/9/12 Post)-Item # 1 Bought Roth IRA: 100 BDN at $11.24 (6/27/12 Post)(one dividend payment harvested)
I will consider repurchasing BDN at or below prior $14.3 prior to the next ex dividend date.
C. Eliminated SNR-Sold 398+ Shares at $8.05:
Quote: New Senior Investment Group Inc. (SNR)
Website: New Senior Investment Group
Last Earnings Report: New Senior Announces Third Quarter 2019 Results
SEC Filings
Closing Price Yesterday: SNR $7.52 -$0.09 -1.18%
Profit Snapshot: +$256.55
I explained the rational for this elimination in an earlier comment. The shares popped after this announcement: New Senior Announces Strategic Transaction to Sell Assisted Living/Memory Care Portfolio
Category: Gateway Post: Equity REIT Common and Preferred Stock Basket Strategy
Sell Discussions: Item # 2 Pared SNR-Sold 139 Shares at $8.28 (4/16/18 Post)(profit snapshot = $154.44)
Item # 4.A. Sold 100 SNR at $10.44 (8/7/17 Post)
Item # 6 Sold 100 SNR at $11.76 and Item # 7 Sold 50 SNR at $11.85: Update For Equity REIT Basket Strategy As Of 7/28/16 - South Gent | Seeking Alpha
South Gent's Comment Blog # 2 (noting a 50 share sell transaction at $12.3 on 9/16/16 in a Vanguard Roth IRA)
I would characterize SNR as a high risk REIT.
SNR 5 Year Chart
5 Year Annual Average Total Return = -7.59%
Sourced from DRIP Returns Calculator (through Friday's close)
I also mention SNR in Item # 3 below.
3. Dumpster Diving-Lottery Ticket Basket Strategy:
A. Bought 50 NEWM at $7.6:
Quote: New Media Investment Group Inc. (NEWM)
SEC Filings
Website: New Media Investment Group
Corporate Profile – New Media Investment Group
Closing Price Yesterday: NEWM $7.54 -$0.08 -1.05%
This particular dumpster dive may end up capturing a mouthful of garbage.
NEWM Info (Day of purchase-11/7/19)
New Media is in the process of acquiring Gannett. The deal terms provide that each Gannett share will be exchange for $6.25 in cash and .5427 of a NEWM share. SEC Filed Press Release Announcing the Merger
GCI - Gannett Co Inc Profile | Reuters
NEWM- New Media Investment Group Inc Profile | Reuters
SEC Filed Transcript of 8/5/19 Call to Discuss Merger
As part of the deal NEWM is getting rid of its external manager for a price:
The external manager is Fortress Investment Group who I hold in low regard.
{New Senior Investment (SNR) was another company managed by Fortress. While the benefits to Fortress are clear, including the outrageous amount paid to buy out its contract, the benefit of its management to SNR shareholders was IMO impossible to find. New Senior Announces Definitive Documentation for Internalization}
I view that termination to be a positive.
When that acquisition is completed, the NEWM anticipates that dividend will be cut from the current quarterly rate of $.38 per share to $.19 or $.76 per share annually.
The dividend yield shown in the preceding snapshot likely reflects the last dividend paid by New Media at the $.38 per share quarterly rate.
Dividend Yield: Assuming the new penny rate works out to $.76 per share annually, the yield at at a total cost of $7.6 would be 10%.
The one year 45+% decline is certainly flashing a red warning light visible throughout the known universe. The Stock Jocks are not confident in the predictions made my NEWM about will happen after the merger is completed.
NEWM shareholders have been punished greatly for the decision to acquire Gannett. Empire building in the newspaper business is not the path to riches.
Chart: Widow Maker
The question is whether the current price reflects too much pessimism about the future. I am betting a small amount that the selling is overdone but I have low confidence in that opinion. There is certainly nothing in the chart that provides comfort that the worst is over.
It would be a plus for NEWM IMO if its shareholders vote down the merger proposal at the 11/14/19 meeting, even though there are some future benefits from the acquisition involving Gannett's non-newspaper businesses and the move to digital newspapers and advertising as cost saving measures. Key New Media holder (MNG Enterprises) to support Gannett deal-Seeking Alpha MNG owned 8.5% of NEWM as of 10/31/19.
Last Earnings Reports for Gannett and New Media:
New Media Announces Third Quarter 2019 Results, summarized at New Media ad drop dings Q3 revenue- Seeking Alpha; CEO Mike Reed on Q3 2019 Results - Earnings Call Transcript | Seeking Alpha
Gannett Reports Third Quarter 2019 Results summarized at Gannett EPS beats by $0.06, misses on revenue-Seeking Alpha
Both companies are growing digital subscribers.
In the third quarter, Gannett's digital revenue hit 38% of the total, with digital only subscriptions rising 27% Y-O-Y to 607,000. The total digital advertising and marketing services revenues were $183.6M or 53% of the total digital advertising and market revenue.
Gannett's operating revenue declined by 7.8% Y-O-Y, which is the problem in a nutshell.
There will be cost cutting including major staff reduction after the merger is completed shortly after the shareholder vote on 11/14.
The trend toward digital newspapers will be a difficult one since there is a trade off between advertising and subscription dollars. Currently, Gannett's main publication, USA Today, is not behind a paywall. USA TODAY If a subscription was required, advertising revenue would go down. The digital subscription is $9.99 per month for an exact digital replica delivered to the subscribers inbox and $4.99 per month for ad-free browsing. I read some articles and may go with the ad-free plan since the ads are annoying.
Gannett does provide advertising solutions for local businesses under its "ReachLocal" segment that could possibly provide a foundation for more profitable future endeavors. The services provided by ReachLocal are described in this excerpt from the 2018 Annual Report:
So far, however, the results are uninspiring for this business segment.
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.
Last Friday, FSK popped at the open, rising to $6.02 from the prior close last Thursday at $5.75. The rally quickly faded to a trading range mostly between $5.85 to $5.91 before closing at $5.88, up $.13 for the day.
ReplyDeletehttps://www.marketwatch.com/investing/stock/fsk
The movement was in response to the earnings report which I discussed in a previous comment:
https://tennesseeindependent.blogspot.com/2019/11/observations-and-sample-of-recent_6.html?showComment=1573165978669#c7117205500489340661
I mentioned there that net investment income was reported at $.22, which beat the consensus estimate by 3 cents.
I reviewed the earnings call transcript today and found what I thought was the likely rationale for the waning enthusiasm.
The NII beat was almost entirely due to a look back recovery of a previous incentive fees paid to the external manager rather than an increase in recurring interest income.
Page 4
https://seekingalpha.com/article/4304775-fs-kkr-capital-corp-fsk-ceo-michael-forman-q3-2019-results-earnings-call-transcript?page=4
"The increase in net investment income quarter-over-quarter was largely driven by the look-back provisions impact on incentive fees. . . the look-back provision is a shareholder-friendly component of our investment advisory agreement, which resulted in approximately $16 million of incentive fee reductions in the third quarter. Absent material portfolio appreciation, we would anticipate that the look-back provision will continue to reduce incentive fees over the next several quarters, providing additional net investment income. Assuming stable underlying performance, we currently project incentive fee reductions in aggregate of approximately $60 million over the next 4 quarters or approximately $0.12 per share."
Management claimed that the quarterly dividend would have been covered by NII without that $12M reduction in incentive fees.
While it is favorable to shareholders that FSK is using a look-back to reduce current incentive fees, the additional income generated to shareholders is not recurring income which is important.
Externally managed BDCs pay a base fee that it applied to total assets and an incentive fee. Compensation is extremely generous and hedge fund like.
The problems with the incentive fee are (1) the barrier to earning the fees are relatively low taken into account the generous compensation already paid through the base fee and/or (2) subsequent events after payment result in a net loss and consequently reward the external manager for poor overall performance without a look back.
For many externally managed BDCs, the incentive fee has been paid even when assets are being incinerated, as reflected in persistent annual declines in net asset value, and the dividend to shareholders was cut at least once and multiple times in some cases.
Was having a discussion with someone and my opinion is starting to form. So I'm thinking...
ReplyDeleteSeems to me that wealth inequality is a result, not a cause of economic problems. It's pointed to, blamed as the cause.
Then the blame is that big companies cause wealth inequality, and rich people need to be taxed differently because it's causing WI.
Seems to me that big companies aren't a cause.
Seems to me the cause of WI is poor economy. Which is largely because of contraction from technology, a little from post-near-recession fear and shift to less enthusiastic spending. Probably to other factors.
Big companies need regulation because they are growing in part because they aren't taking responsiblities that brick companies take. Such as Facebook not having to shell out the money to make sure their ads meet TV truth requirements, and decency requirements in ads and comments.
Amazon not having to pay have customers pay tax in many states.
So regs are needed. But that's not the problem that people are facing. Instead it's a sluggish economy that's the problem.
Fixing is not taking money from business rich and giving it to safetynet programs. Instead it's visioning a world with technology... figuring out what jobs will look like, then how to train for them. Much of it tech. They include happy planet jobs (rather than coal). It doesn't require college for everyone.
I'm just finding that the WI arguments are saying WI is to blame for WI. Or that greed is what rich people are, and they are why poor people are poor. Instead, greed by rich people is sometimes why economies blossom off their hard work and drive. It's all pointing to the result and blaming it as though it's cause.
It's similar to Trump's blaming globalism and therefore immigration and darker people for making poor people. This far left version blames business and resulting rich people. Either realistically looks at the economy and figures out what's needed. And I suspect a lot of the problems stem from contraction from technology.
Land: I believe that wealth inequality is both structural and self made with some overlap between the two causes.
DeleteBy structural, I am referring to conditions that create or foster wealth inequalities that are beyond the individual’s control or provide significant barriers that must individuals are not able to overcome (e.g. race discrimination, the long standing trend where workers receive less of the income generated by their labor which is increasingly captured by the owners of capital)
See, e.g. The Productivity–Pay Gap
https://www.epi.org/productivity-pay-gap/
A new look at the declining labor share of income in the United States
https://www.mckinsey.com/featured-insights/employment-and-growth/a-new-look-at-the-declining-labor-share-of-income-in-the-united-states
By self made, I am referring to individual’s creating the conditions that cause their wealth disparity. (e.g. a lack of effort)
An example of overlap involves the difficulties to break out of a cycle of poverty and cultural conditions that persist over generations, but the cycle can be broken with individual effort starting early in the public school system. An example is explored in J.D. Vance’s book Hillbilly Elegy involving his caucasian family.
Another example is my maternal family’s history that I discussed in a previous post. For over 100 years, they scratched out a subsistence living in rural Hickman County TN. and that would have continued to this day unless someone broke the chain of poverty. The person who broke out was my grandfather who decided to leave and move to Nashville during the Great Depression. It was extremely difficult for anyone to break out of that long poverty cycle until my grandfather decided to just leave and move to an area where there was better opportunities.
For grades 1 through 10, I attended public schools in Nashville and Huntsville Alabama. I can not recall anyone making much of an effort, just trying to get by with as little effort as possible, and that includes both the students and the teachers who were uniformly mediocre or worse. Starting in the 11th grade, I enrolled in a private school and was struck immediately by my knowledge gap.
The wealth tax is a bad idea, particularly when used as a funding source for a new social program rather than to reduce existing budget deficits including the funding of currently unfunded federal government liabilities (e.g. Medicare and Medicaid)
The Warren/Sanders wealth tax will not change the conditions that create wealth equality and may end up aggravating it as millions received benefits that are unconnected with their own efforts to advance creating a disincentive for advancement.
In addition, many billionaires will simply forfeit their U.S. citizenship and become a citizens of a more tax friendly country and the costs of the programs (e.g. Medicare for All) will far exceed the estimates at a time when it is questionable how the government will fund Medicare and Social Security for the baby boomers.
In a way you are pointing to something similar to what I was. Namely education. The need for quality education that teaching for the environment one will be graduating into so one can be successful.
DeleteThat's a good point that plans like Warren's count on how a tax will work, but usually such items don't turn out the same way.
What I had a problem with in her approach, is the vilifying of Billionares. It's not that I "side" with them. But sides are a problem. It's the same concept of tribalism that we're already swimming in with Trump. One could even advocate for taxing the rich for money without vilifying them. Once that's set up, it will become an ongoing thing. Tax rich people a little more, and more. Instead of focusing on the underlying economy that makes everything so stressful and so many safety nets needed.
My family did well in a new location too. But it wasn't an economically driven move. But once moved, it worked out. That was brave of your grandfather to take a chance.
Land: Generations may live in a geographic area where breaking out into financial security is difficult or impossible.
DeleteMoving to another geographic area where there are far more bountiful opportunities does not insure a good result but only makes it more likely.
The individual still has to do what is necessary to improve their own financial circumstances.
Part of that effort starts in grades 1 through 12. Based on my experiences in public schools between grades 1 to 10, the general approach among students was to do as little as possible to get by.
Just as an aside, most native born Americans could not pass the citizenship test and would flunk badly.
While the Nashville public schools do not provide the quality of education as that available at the private schools (e.g. University School of Nashville where I attended grades 11 and 12), the quality was superior to rural Hickman County schools when my grandfather migrated to Nashville and most likely today as well.
So the emphasis is still on an individual’s work ethic, willingness to learn and apply themselves, intelligence, common sense, risk taking comfort levels, etc.
One of the most stark and clear messages that I received when starting the University School of Nashville (then called Peabody) in the 11th grade, was that I was knowledgeable based on the standards of the Huntsville Alabama and Nashville TN. public schools, but I was without question ignorant compared to the students at the University School.
Recognizing ignorance in oneself is important when accompanied by a willingness to improve and making the effort to do so.
Most billionaires want even more money, even though there is no need for them to acquire more. They want their taxes reduced and regulations eliminated or reduced that reduce the profits from businesses where they have significant private or public ownership stakes. They do not want to pay for other people's health care or to provide other benefits to people who, in their view, failed to take advantage of the opportunities provided to them starting early in life.
Millions reach adulthood believing that the government has a duty to take care of them and consequently demand benefits while opting to avoid any responsibility for paying for them.
That kind of opinion has filtered down in working class voters who are having trouble getting by and see others doing little receiving what they would characterize as government handouts. This creates resentment and a strong dislike for Democrat politicians seen as facilitating that result and actually rewarding it.
There can be a lot of debate that the generalities are too general, both in classifying the number of people being "unjustly" rewarded for just existing and those who need help and never had the pay me for doing nothing mindset.
One issue is that truly rich can afford to pay more in taxes. Another is how the increased tax revenue is used when the federal government is already spending a trillion per year more than it receives and their are massive unfunded liabilities under existing social programs like Medicare. Then there is the issue of how to address the structural problems that are actually contributing to the growing wealth disparity and the increasing financial strain on most working middle class families.
These are complex factual issues that can not be fully addressed in a comment.
"The Productivity–Pay Gap" could be impacted by availablity of automation for so many or parts of so many jobs. Employees are more expendable. There is certainly something in supple and demand that's letting wages not increase.
DeleteIt's problematic that public schools were that far behind private schools. It's an argument for at least making room for alternative schooling to keep pressure on our public system.
The whole uniform testing movement has cost a lot of quality (according to all the teachers I know) and a number of parents who are very involved in their kids educational opportunities.
I think I may be bothered by one of the same things you focus on... safetynets are worthwhile when they are nets. But it's hard to design them to uplift people into a better spot. It can be done. However, the current movement to provide them for every last thing, is exhausting and doesn't manage the real problem, the economy and wages and job opportnities and APPROPRIATE education opportunities. It's plugging holes in the dyke, such as rescue on rent, on paying for the NYC subway fee, free education whether you are in need of a college education or not, and so on. Once you define need to rescue on everything, it can become a growing list until there's a sense of entitlement and dependency rather than a sense of opportunities and how to work to take advantage of them.
I come from a different family background. Education is/was very important. My maternal grandfather tried to pay my Aunt not to get married so that she'd continue in school. I never met this grandfather. He was 14 when he stowed away on a boat to the USA. He was at risk of being drafted into the Polish army, and his parents sent him to the USA, with info about a family here from the same village, they'd stayed in touch with. He married one of their daughters, who was a 1st generation American. I wish someone had saved the details. Was he illegal? Did he get amnesty? At some point he became a proud American citizen. He was not very educated himself (became a shop owner) but he certainly valued education.
DeleteMy father's education was very spotty. They started running when he was 4 or 5. They settled in southeast asia until he was 8 and he attended school (of some sort.) Then in displaced persons camps when they returned, there was education. But I think "of sorts" can be added. He came to USA at 15. He once explained that he worked on learning English in his French class, since he came knowing a little French.
Both of my parents got their college education for free from NYC college system. I got the huge advantage of all the hard work each generation did before me. It was easy street for me by comparison.
I certainly got the impression I was supposed to work hard at school. My dad would puff up with pride at my report card and ask, but you got a 98%, but where's the other 2%? (He didn't make the same comments on grades that weren't quite that high.)
In Jewish families education is almost always revered. I've met some dumb Jewish folks. But the value is almost always there, even if the effort or ability wasn't. It's said, it's the one thing they can't take away from you if they chase you out. It's deeper than that though.
It's a different vantage point. It's hard to picture need for pushing the idea of working hard in school. Still, it's obvious this country has a big education problem. People are duped into believing the most outlandish things.
Much of that also comes out of the shift from a set of news sources that verify their info... an internet world.
Land: It is certain that increases in income created by worker productivity since the mid-1970 has been mostly captured by the owners of capital.
DeleteThere are a variety of reasons and the contribution made by each can not be measured within a narrow or certain range.
The use of machines, including computers and robots, have increased worker productivity but the income created thereby does not filter into the worker's paycheck.
On an aggregate basis, as shown in the charts, there is almost no trickle down over the past 5 decades. That has been a profound trickle up which has created the growing wealth disparity.
Why? The main reason is a lack of bargaining power among workers. Labor union members have become a rapidly shrinking percentage of the total work force.
The second most important reason is that the minimum wage has not kept pace with inflation. Adjusted for inflation, the minimum wage peaked in 1968.
https://www.pewresearch.org/fact-tank/2017/01/04/5-facts-about-the-minimum-wage/
Another reason is that worker productivity has been vastly improved in traditional low or no skill jobs through employer investment in machines.
Over the past year or so, the bargaining power for unskilled labor has improved due to the tightening labor market. A number of larger companies, heavily dependent on unskilled labor, started to raise entry level positions above the minimum wage.
The number of private sector employees represented by unions was at 7.2M last year.
https://www.bls.gov/news.release/union2.nr0.htm
In 1971, about 1/4th of the U.S. workforce were members of unions and over 34% in 1945.
Union membership has declined steadily throughout the same period where worker share of income created by their productivity has declined.
https://www.epi.org/publication/as-union-membership-has-fallen-the-top-10-percent-have-been-getting-a-larger-share-of-income/
It is natural for the owners of capital to do whatever they can to increase their share of income created by their employees. That has always been the case and will continue to be until the end of days.
So owners create a variety of arguments supporting that outcome, fund think tanks that develop arguments supporting that result, and liberally donate part of their increased wealth to politicians who will implement policies that contribute to the increasing concentration of wealth and growing wealth gap.
Those are interesting info. If workers were in more demand, the unions wouldn't be as needed. Low end workers are always easy to replace, so min wage accommodates that.
DeleteAutomation has contracted so many businesses. Checkout, toll booth, paper industry, calculations by humans of all sorts, and so much more. That shuffle makes workers less valuable.
Land: From the owners' perspective, increases in income created by improvements in worker productivity is due to vast capital investments made by the owners of capital.
DeleteThe workers have become more productive due to those capital investments and owners want most of the return on them. That is understandable.
When writing that last sentence, a picture arose in my mind of the days before bar codes.
Each item in a store had to have a price tag.
The checkout process was cumbersome in that the cashier had to find the price sticker and then manually punch in the numbers on the cash register.
Some cashiers were much better than others.
The entire process was made easier for the cashiers after the bar codes came into existence supported my massive investments in online capabilities and computers.
So the cashier and other store employees have an easier job and are more productive, with fewer employees needed to produce a better result and thereby creating more income for their employer who spent the money on the infrastructure that made it possible.
The long term problem for the economy is that most of the income created by increases in worker employee flow up rather than trickles down.
Wages adjusted for inflation have stagnated or gone down.
Millions of working family households on the edge of financial disaster.
Spending is increasingly funded through debt acquisition rather than disposable income, a fact that is shown by charts of household debt during this period of technological revolution.
Those facts create conditions for more financial instability and the possibilities of more profound downturns in the economy due in large part to debt defaults, both for consumers, companies and even governments.
A more even distribution of wealth would actually make the system more stable IMO and lead over time to even greater nominal wealth for the owners of capital. The U.S. economy is after all consumer led which means the financial health of those consumers should be of paramount concern for the capital owners and politicians, which is generally not the case.
The world's financial system has become increasingly unstable IMO since the Asian Contagion in the late 1990s. Since then there have been too Catastrophic Events in the stock market (greater than 45% declines) and a Near Depression that could have easily turned into another Great Depression. Are we out of the woods now. IMO, we have just dug ourselves a deeper hole with massive and unparalleled debt accumulation worldwide. Rather than addressing the underlying problems for all of the financial instabilities, the response has been and will continue to be digging the hole deeper and deeper.
FOMX had a good run after I purchased a Lottery Ticket at $2.7, closing last Friday at $4.36.
ReplyDeleteThere may be a retreat today based on this news:
https://www.marketwatch.com/story/menlo-foamix-stocks-set-for-selloffs-after-all-stock-merger-deal-2019-11-11?mod=mw_quote_news
Press Release:
https://www.globenewswire.com/news-release/2019/11/11/1944601/0/en/Foamix-and-Menlo-Therapeutics-to-Merge-Creating-a-Combined-Company-Focused-on-the-Development-and-Commercialization-of-Therapeutics-for-Dermatologic-Indications.html
FOMX is being acquired by Menlo Therapeutics Inc. (MNLO).
"Under the terms of the merger agreement, each share of Foamix stock will be exchanged for 0.5924 of a share of Menlo common stock and a contingent stock right (“CSR”)."
Menlo has no FDA approved drugs. It does have a drug, serlopitant, that is currently in Phase III trials for the treatment of pruritus (itch). The results are expected in March or April 2020.
"Serlopitant has received Breakthrough Therapy Designation by the FDA for the treatment of pruritus associated with PN and has the potential to be the first approved therapy for this indication. Serlopitant is also being evaluated for chronic pruritus of unknown origin (“CPUO”), currently in Phase II clinical trials, and for pruritus associated with psoriasis, which had positive Phase II data."
"Serlopitant is also being evaluated for chronic pruritus of unknown origin (“CPUO”), currently in Phase II clinical trials, and for pruritus associated with psoriasis, which had positive Phase II data.
This creates uncertainty for FOMX shareholders who have one drug approved by the FDA and another likely to be approved next year.
I have noted that FOMX needed to sell itself, but I did not mean to a tiny clinical stage drug company. Menlo's market cap is only $125+M before today's loss.
https://www.marketwatch.com/investing/stock/mnlo
FOMX shareholders will receive additional shares in Menlo if the clinical stage drugs fail to meet their primary end points at or before May 31, 2020. So the trigger is not approval of those drugs by a failure to meet the primary end point in the ongoing trials by a certain date.
If those trials fail, receiving more Menlo shares is not going to help FOMX shareholders.
The acquisition can work for FOMX longer term provided the FDA approves Serlopitant for all of its current indications. FOMX is creating a marketing sales force from scratch. The more drugs that could be sold to dermatologists can result in higher profits for the combined company than either company going it alone.
Menlo Pipeline:
http://www.menlotherapeutics.com/pipeline-2/
Quote:
Pre-market trading is only 470 shares so that does not provide an indication IMO of what will happen during the day to both stocks.
https://www.marketwatch.com/investing/stock/mnlo
Keeping in mind that I am ignorant on medical matters, my initial reaction to the FOMX-MNLO is that MNLO shareholders got the better deal, but it could work out fine for the FOMX shareholders provided MNLO's Serlopitant is approved for at least two indications.
DeleteI bought 50 MNLO earlier this morning at $4.72 in the hope that the Stock Jocks realize down the road that MNLO with FOMX is better than MNLO without FOMX.
It is not like MNLO is paying up for FOMX which closed at $4.34 last Friday. At the $4.72 MNLO price x. the exchange rate of .5924, the merger values FOMX at $2.79 or 35.7% below the closing price for FOMX last Friday.
MNLO had its IPO in January 2018 at $17 per share, selling 8,050,000. Prior to its IPO, the company had raised stock through a convertible preferred offering and those shares were exchanged for common shares in connection with the IPO.
MNLO's stock quickly crashed after its IPO after announcing that "serlopitant for the treatment of pruritus in adults and adolescents with a history of atopic dermatitis " did not meet its primary endpoint.
https://www.marketwatch.com/story/menlo-therapeutics-stock-plunges-over-50-after-disappointing-trial-results-2018-04-09?mod=mw_quote_news
The other trials are continuing:
" two Phase 3 clinical trials (one in the U.S. and one in Europe) to evaluate serlopitant as a treatment for pruritus associated with PN." (prurigo nodularis).
The company expects to report "top-line data from these PN Phase 3 trials in March or April of 2020 and, if successful, could submit a new drug application for serlopitant for pruritus associated with PN in the second half of 2020."
"Phase 2 clinical trial conducted in 204 patients with pruritus associated with psoriasis, met its primary endpoint and a key secondary endpoint, demonstrating greater pruritus reduction in serlopitant-treated patients versus placebo."
" a Phase 2 clinical trial in 233 patients with CPUO. This trial is fully enrolled, and we expect to report top-line data in January or February of 2020."
CPUO: Chronic Pruritus of unknown origin.
https://www.globenewswire.com/news-release/2019/09/24/1920293/0/en/Menlo-Therapeutics-Announces-Completion-of-Enrollment-of-233-Patients-in-Phase-2-Trial-of-Serlopitant-in-Patients-with-Chronic-Pruritus-of-Unknown-Origin.html
TriplePoint Venture Growth BDC Corp. (TPVG)
ReplyDelete$14.38 -$0.28 -1.91%
Last Updated: Nov 11, 2019 EST
I discussed the third quarter earnings report, which was unfavorable, in a prior comment.
https://tennesseeindependent.blogspot.com/2019/11/observations-and-sample-of-recent_6.html?showComment=1573138242074#c3777538652010154246
The Stock Jocks did not care for the report either. The last closing price before the report's release was $16.87.
I have no interest in the stock at its current price, a judgement call reconfirmed after I read the earnings call transcript.
As previously mentioned, there was a big miss in NII. TPVG reported NII at $.29, well below its dividend rate of its $.36 per share quarterly dividend, missing the consensus forecast by 14 cents.
In the conference call TPVG's management claim that one large prepayment had been made shortly after the quarter closed. If made during the 3rd quarter, TPVG would have been able to cover its dividend with NII.
https://seekingalpha.com/article/4303515-triplepoint-venture-growth-bdcs-tpvg-ceo-jim-labe-q3-2019-results-earnings-call-transcript
While income associated with prepayments is part of the business, they are not recurring in the same manner as regular interest payments on the loan.
There was also a $.72 reduction in net asset value. That contributed to the negative vibe. TPVG acquired equity interests in CrowdStrike and Farfetch before those companies went public and both declined in price during the quarter, which contributed significantly to NAV decline. That is unavoidable until TPVG liquidates the positions and redirects the proceeds into income generating securities. TPVG had about $16M unrealized gain in those publicly traded securities as of 9/30/19. I believe the restriction on selling Crowdstrike (CRWD) ends this month or next. TPVG owns 278,747 shares at a $1.072M cost.
More important from my perspective is the number of loans going sour during the quarter which are discussed at page 4. One of those is ROLI where the principal amounts totaled $22.15M and had been marked down to $17.1M from $19.8+M as of 6/30/19. A PIK loan to that company accounted for $12.4 of the original principal amount. The loan is on non-accrual.
A loan to Harvest Power in the original principal amount of $13.2 and an original cost of $14.756M was discussed during the conference call with the loan now valued at $7.497M. That loan was valued at $14.367M as of 6/30/19.
The loan to Cambridge Broadband in the original principal amount of $6.7+M was written down to zero from a $3.863M mark as of 6/30/19.
Two loans to Munchery in the original amount of $2.889M are on non-accrual and has been written down to $1.908M. Both are PIK loans
Page 9 of 10-Q
https://www.sec.gov/Archives/edgar/data/1580345/000156459019041116/tpvg-10q_20190930.htm
Just too many negative developments all at once particularly given the elevated price to NAV per share before the report.
Garrison Capital (GARS) laid another egg after the close, cutting it quarterly dividend to $.15 per share from $.23 and reporting a decrease in net asset value per share from $10.3 to $9.04. Just pathetic. It is impossible to justify the generous compensation paid to GARS' external managers.
ReplyDeleteShares are trading down in after hours trading.
https://www.marketwatch.com/investing/fund/gars
NII was reported at 21 cents per share, 2 cents less than the consensus estimate.
Non-accrual assets increased to 6.5% of the debt portfolio total from 4.9%.
There was a $18.9M negative credit adjustments from GARS' investments in GIG Co Holdings, Gold Coast Bakeries, HRI Holding and "four syndicated investments".
GARS is a deservedly hated BDC due to the incompetence of the external manager. I have a Lotto Ticket position.
The quarterly penny rate was $.35 in the 2017 third quarter.
The Board announced that it was pursuing strategic options.
I mentioned in an earlier post that Clear Harbors sent a letter to the Board arguing that the managers were so bad that the only viable option was to liquidate.
This is a link to that letter:
https://www.prnewswire.com/news-releases/clear-harbor-delivers-letter-to-the-board-of-garrison-capital-highlighting-concerns-and-a-need-for-change-300948794.html
I would agree that liquidation is the best option.
Otherwise the external managers, based on their historical performance, will more likely than not IMO continue their incineration of assets leading to even further dividend cuts. I do not see any evidence in the historical data that would support the managers becoming worth their pay or even capable of reversing the slide in NAV per share.
10-Q for the Q/E 9/30/19 (the number 5 after a loan description indicates that the loan is on non-accrual)
https://www.sec.gov/Archives/edgar/data/1509892/000156459019042970/gars-10q_20190930.htm
++++
Another deservedly hated BDC, Investcorp Credit Management BDC (ICMB), reported after the close and the results were okay on NII and not so good on net asset value.
https://www.prnewswire.com/news-releases/investcorp-credit-management-bdc-inc-reports-results-for-its-fiscal-first-quarter-ended-september-30-2019-300956880.html
NII was reported at 26 cents per share, beating the consensus by 2 cents. The quarterly dividend is currently at $.25 per share.
Net Asset Value per share decreased to $10.19 from $10.51 as of 6/30/19.
10-Q for the quarter:
https://www.sec.gov/Archives/edgar/data/1578348/000119312519289995/d823983d10q.htm
Two criticisms that I have are the large PIK loans to 1888 Industrial Services, LLC. and the concentration of the portfolio. I would prefer no PIK loans. I seen too many PIK loans go sour which can result in the bonds issued in lieu of cash interest payments becoming worthless with no cash interest every received (I discuss one of those in connection with another BDC recently) And PIK interest does not support a cash quarterly dividend, at least until the bonds are sold or redeemed by the issuer.
Prior to the release, the Board declared the regular quarterly dividend of $.25 per share.
ICMB is a mini cap BDC.
The price closed at $6.89 today.
https://www.marketwatch.com/investing/fund/icmb
I classify all deservedly hated BDCs as Lottery Tickets, which will keep my investments at inconsequential levels. The goal is to earn a total return in excess of the dividend which is difficult to do for the BDCs so designated.
At $6.89, the current yield is 14.51% and the discount to net asset value per share (using the $10.19) number is 32.38%.
Based on the two earnings report and the dividend cut by GARs, I am far more likely to achieve the goal mentioned above in ICMB than GARS unless GARS liquidates soon.
In my Fidelity account, the positions are as follows:
GARS 148+ shares average cost = $7.15
ICMB 211+ shares average cost = $7.29
I am reinvesting the dividend on both.
I have published a new post:
ReplyDeletehttps://tennesseeindependent.blogspot.com/2019/11/observations-and-sample-of-recent_13.html