CJREF, EAF, FHB, IRM, RDS/B

Economy: 

China's GDP growth this quarter will be 0%, according to top economist Ed Hyman

Coronavirus plunges China into massive work-at-home pilot program - MarketWatch

U.S. First-quarter US GDP may be as low as 1.2% because of coronavirus, but stocks don't seem to care The underlying assumption is that the epidemic will peter out soon which is not supported by what is known now. 

German industrial production plunges in December (declined 3.5% in December compared to November); 

German Recession Risk Returns With Crisis-Era Plunge in Output- Bloomberg

December Declines in Industrial Output: 

France -2.8% 
Spain -1.4%
Netherlands -1.7%

Those numbers do not yet reflect yet the slower growth in China's demand caused by the coronavirus outbreak.  

Seasonally retail trade volume fell 1.6% Y-O-Y in the Euro Area. Eurostat News Release.pdf 

In his State of the Union campaign speech, Donald promised that the recently USMCA agreement will create “nearly 100,000 new high-paying American auto jobs”. 

The BLS reported that 10,600 auto industry jobs were lost last month. Trump promises 100,000 new ‘high-paying’ auto jobs-MarketWatch The recently released Challenger, Grey report estimated that the auto industry cut 50,776 jobs last year. 2020 January Job Cut Report: Job Cuts Surge to Highest Level in 11 Months | Challenger, Gray & Christmas, Inc. 

The USMCA agreement may lead to more jobs in the auto parts industry in Mexico and the U.S.  Ultimately, the number of auto industry jobs will depend on demand which has been trending down since peaking in August 2015. 

Light Weight Vehicle Sales: Autos and Light Trucks-St. Louis Fed

Obama’s Last Three Years Of Job Growth All Beat Trump’s Best Year; Trump’s First 3 Years Created 1.5 Million Fewer Jobs Than Obama’s Last 3 Ask a Trumpster whether more new jobs were created during Donald's first 3 years or Obama's last three.

Last 36 Months Obama: +8.074M jobs
2014 +3.004M
2015 +2.72M
2016 +2.35M  

First 36 Months Trump: + 6.519M jobs
2017  +2.109M
2018  +2.314M 
2019  +2.096M

Trump's jobs record is weaker than everyone thought.

Big Negative Benchmark Revision – UPFINA

Sleight of Hand: Dissecting the Latest Employment Data | Charles Schwab  ("In fact, 2019’s monthly average of 175k was the lowest since 2011. This data is inclusive of the annual benchmark revisions by the BLS, which shaved 514k payrolls for the 12 months ending March 2019.")

The job numbers for the last three years have been good, but not as good as claimed by Trump. I must have missed his tweet making the preceding comparison with Obama's last 3 years.  

Coronavirus effect on US-China 'decoupling' versus trade war: Milken  

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Markets and Market Commentary: 

Goldman Sachs says impact of coronavirus will be ‘limited,’ and these are the stocks to buy if it’s right - MarketWatch

Coronavirus may be smaller risk to Chinese manufacturing than feared, says JPMorgan - MarketWatch 

Except for 2 very mild anxiety attacks lasting no more than one trading day, the Stock Jocks have totally dismissed the latest coronavirus outbreak as having any material impact on the world economy. 

With China reporting fewer new confirmed cases over the past two days, the general consensus has emerged that this issue will soon resolve itself. That remains to be seen IMO. 

OPEC report: Coronavirus expected to weaken oil demand growth in 2020

Why ‘buy-the-dip’ is the stock market’s default setting-and what it would take for that to change - MarketWatch

Wharton's Jeremy Siegel: 60-40 portfolio doesn't 'cut it anymore'

Natural-gas futures down 5%, poised for lowest finish in nearly 4 years - MarketWatch (2/10/20 article)

Oil bounces higher as investors see slowdown in new coronavirus cases - MarketWatch (2/11/20 article) On Tuesday morning, China's Health Commission reported 2,478 new confirmed cases, down from 3,062 the previous day. 

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Trump: 

Recent polls have shown a republican party united behind Trump. 

The Democrats have no unifying candidate for their fractured party. Bernie Sanders and Elizabeth Warren are too far left to unite the Democrats. It looks like New Hampshire may have put a stake in Warren's candidacy.  

Only 53% of Sanders' supporters claim now that they were certainly support the eventual nominee. 

If those who voted for Sanders in the 2016 primaries had voted for Hillary, she would have carried Michigan, Pennsylvania, and Wisconsin and would have consequently defeated Trump. 

In Pennsylvania for example, 117K Sanders primary voters cast ballots for Trump who won the state by 44,292 votes. 

Yesterday's New Hampshire primary was a victory for the Democrat moderates.  

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PolitiFact | Donald Trump says Nancy Pelosi’s speech tear was illegal. That’s wrong Rated at "Pants on Fire". 

Bumblebees are dying across North America and Europe as the climate warms, scientists say

I am not surprised that Donald awarded Rush Limbaugh the medal of freedom. In TrumpWorld, Limbaugh earned that award by making thousands of repulsive comments, some of which are quoted in this article: Rush Limbaugh in His Own Words - The New York Times  

Trump Attacks Romney with Baseless Viral Claims - FactCheck.org

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Trump proposes end to student loan forgiveness program in 2021 budget

Earlier Trump budgets forecasted that the Duck would eliminate the federal budget deficit in 10 years, notwithstanding the deficit's parabolic rise to over $1 trillion in 2019 from less than $600B in 2016. Budget deficit topped $1 trillion in 2019, the first time in 7 years

Donald is now forecasting an annual budget surplus in 15 years, while implementing even more tax cuts, increasing defense spending, and paying for the massively unfunded liabilities in existing social programs particularly Medicare for the baby boomers. The Facts on Medicare Spending and Financing | The Henry J. Kaiser Family Foundation 

The CBO is forecasting that annual deficits will top $1T annually until 2029 reaching $1.7T in 2020. The Budget and Economic Outlook: 2020 to 2030 That forecast assumes a continuation of abnormally low interest rates. 

Trump’s $4.8 Trillion Budget Would Cut Safety Net Programs and Boost Defense - The New York Times 

It is all make believe. Glen Campbell - It's Only Make Believe (with lyrics) - YouTube (underrated guitar player) 

I find it interesting to read statements made by Trumpsters. What a Trump Rally Looks Like From the Inside-The New York Times A common denominator is that demonstrably false information is believed to be true. 

One of the promises made by Trump was that he would not touch Medicare or Social Security. Among Trump's budget proposals is cutting $500B from Medicare over 10 years and tens of billions from Social Security. Trump budget cuts funding for health, science, environment agencies - The Washington Post The republicans have already gutted the Environmental Protection Agency and Trump wants to cut the EPA's budget by another 26%. Trump budget calls for cutting Medicaid, ACA by $1T-TheHill; President’s budget would hinder US public health progress: Huge cuts proposed | The Nation's Health

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All trades are commission free unless otherwise noted.  

The reasons for selling the highest cost lots first are (1) to reduce my income tax obligation resulting from a sell; (2) to generate a total return in excess of the dividend payments; (3) to increase my dividend yield on the remaining shares; (4) to take advantage of normal up and down volatility by selling the highest cost lots profitably and then by buying when the price falls below the lowest price paid in the chain; (5) to make it more likely that I will buy during a meltdown after selling higher cost shares (psychological); and (6) to mitigate risk through less at risk monetary exposure. 

Risk is also controlled through small odd lot trades made economically feasible now with zero brokerage commissions.

1. Small Ball Trades:  

A. Pared FHB-Sold 40 in Schwab Account at $29.65 and 5 at $30.81 : 

Quote: First Hawaiian Inc. (FHB)

FHB Analyst Estimates

SEC Filings

Profit Snapshots: +$39.45

Dividend: Quarterly at $.26 per share $.96 annually)

Next Ex Dividend Date: 2/21/20

Average Cost Per Share Before Pares  = $28.18

Average Cost Per Share After Pare = $27.55  

Dividend Yield at Average Cost (Schwab Account) =  3.48%

Last Buy Discussion: Item # 3.A. Added 5 FHB at $23.62; 5 at $22.9; and 5 at $21.68-Used Fidelity Commission Free trades  (1/13/18 Post) 

Last Earnings Report (Q/E 12/31/19): Under the circumstances, I thought this report was okay. NIM compression is a major headwind for regional banks.

The asset quality ratios and the efficiency ratio are excellent. The charge off ratio of .2% is better than average. ROA is average. Return on tangible equity is good. The capital ratios are fine. The NIM did decline Y-O-Y from 3.23% to 3.15%. 

The loan to deposit ratio was 79%.  

First Hawaiian, Inc. (FHB) CEO Robert Harrison on Q4 2019 Results - Earnings Call Transcript | Seeking Alpha

Maximum Position (all accounts): 200 Shares

Current Position (all accounts) = 110+ after the pares discussed in this section and the ones discussed below. 

Purchase Restriction: I will require a price that at least lowers my average cost per share rather than the lowest price in the chain. 

B. Pared FHB-Sold 10 in Fidelity Account at $29.65 and 10 at $30.02 : 

These two 10 share lots were my highest cost ones in this account. 

Profit Snapshot: $21.59

Item # 1. A. Bought 10 FHB at $29.1-Used Fidelity Commission Free Trade(12/31/17 Post) 

Average Cost Per Share After Pare =  $25.15

Snapshot Intraday 2/4/20

Dividend Yield Fidelity Account =  3.82%

C. Added 3 RDS/B at $52.31; 2 at $51.8: 

Quote: RDS.B | Royal Dutch Shell PLC ADR B Overview

The stocks of large integrated energy companies are in a major bear market that has recently accelerated to the downside due to the crude oil price slide. Their earnings, as reflected in their 2019 4th quarter reports.

I discussed the Royal Dutch Shell 4th quarter report in an earlier post: Item # 1.E. (2/2/20 Post); SEC Filed Press Release

Quarterly Dividend: Quarterly at $.94 per share ($3.96 annually)

Next Ex Dividend Date: 2/13/20 (tomorrow)

Current Position: 27 shares

Maximum Position: 50 shares

Purchase Restriction: Small Ball Rules

I will likely buy more shares in 1 to 3 share lots as the stock declines below $50. I will be reinvesting the dividends as a means to average down.

Morningstar Analyst (1/31/20): 5 stars with a fair value of $78 and narrow moat rating

D. Added 50 CJREF at $3.8: 

Quote: Corus Entertainment Cl B NV (U.S. Pink Sheets)

Category: Lottery Ticket Basket Strategy 

I have nothing to add to my recent discussion: Item # 1.D. Bought 100 CJREF at $4.08 (1/22/2020 Post) 

E. Pared IRM-Sold 10 at $32.1:

Quote: Iron Mountain Inc. (IRM)
Website: Data & Records Management | Shredding | Iron Mountain

Profit Snapshot: +$8.56

My average cost per share is impacted by ROC adjustments. This 10 share lot was bought at $31.95. The cost basis had been lowered by those adjustments to $31.24  

Iron Mountain Incorporated Announces Tax Treatment of 2019 Distributions

When engaged in largely rules based small ball trading, I am supposed to sell my highest cost lot or lots at a price higher than my original, unadjusted tax cost basis. That requires me to look up my original cost basis before selling a lot which I did do for this lot. The goal in small ball trading for risky, high dividend stocks is a total return in excess of the dividend payments. I achieved that objective with this 10 IRM share lot.

The portion of the dividend classified as ROC is not taxed in the year paid but when the shares are sold. If the shares are held long term, the ROC portion of the dividend can result in a long term capital gain taxed at a lower rate than a non-qualified ordinary income dividend.   

I view IRM as having above average risk. 

That message is in part conveyed by a five year chart: 

Snapshot Intra-day 2/4/20

Five years ago, the stock price was near $40. Starting in 2018, the stock price has been in a whipsaw channel pattern moving mostly between $30 to $34. 

While SeekingAlpha authors frequently recommend this stock for its dividend yield, institutional investors have a less optimistic take on IRM's total return potential and overall risk level. 

Last Earnings Report (Q/E 9/30/19): Iron Mountain Reports Third-Quarter 2019 Results

Per Share: FFO Normalized = $.62/Dividend = $.6185

IRM's FFO Normalized to its Definition of Adjusted Funds from Operations:

The 4th quarter report is scheduled for release tomorrow: Iron Mountain Schedules Fourth Quarter and Full Year 2019 Earnings Release and Conference Call I would prefer to see an ugly one. 

Analyst Reports: I have access to two. 

The Credit Suisse analyst may be the most bearish with an underperform rating and a $21 PT. That analyst is concerned about a dividend cut. I would be critical of this analysis since it is primarily based on the average yield of data center REITs. IRM is increasing its ownership of those centers but it still has other significant operations that throw off steady cash flows. 

In a report dated last November, the S & P analyst gives IRM a 3 star rating with a 12 month price target of $35.      

Dividend: Quarterly at $.6185 ($2.474 annually)

Iron Mountain - Stock - Dividend History and Tax Treatment

Last Ex Dividend Date: 12/13/19

Dividend Yield at Average Cost of  $30.02 = 8.24% 

Last Sell Discussions: Item # 5.A. Sold 50 IRM at  (9/7/19 Post); 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 = $396.06)

IRM Trading Profits To Date: +$438.42  ($429.86 in prior trades)

2. Bungee Jumper Trading: 

A bungee jumper stock is one that has significant percentage up and down moves in a channel. Once identified, I will trade them, sometimes in two or more accounts which is the case for Graftech International (EAF). 

For EAF I am trading the stock in 3 accounts, including a Roth IRA where I do not discuss transactions here. The other 2 are taxable accounts at Fidelity and Schwab.  

The market reacted negatively to the EAF 4th quarter report as it did when the company announced third quarter earnings. In both cases, I thought the negative reaction was too strong so I bought a few shares. 

I sold all of my shares bought after the third quarter report. Item #3.C. Sold 25 at $14.48 (12/1819 Post)(profit snapshot = $125.38); Item # 2.A. Sold 110 EAF at $13.48 (11/20/19 Post)(profit snapshot +$61.69).  

The 4th quarter report was released before the open on 2/6/20. 

On 2/5/19, EAF closed at $11.39.

On 2/6/19, the stock closed at $10.22, down $1.17 or -10.27%. 

The volume was heavy at 7.419+M with a high of $11.9 and a low at $9.99. I bought another 50 shares in my Schwab account that day. My limit order of $10.5 was below the then existing bid price when the order was placed, but the price subsequently blew through that limit on the way down to $9.99. 

I also bought a few shares in my Fidelity account on 2/6/19 and eliminated my position on 2/10. 

The general idea is to trade the stock with short holding periods, with the holding period longer and the share position larger in my Schwab account. I will generally try to hold the shares held in the Schwab account through at least 1 quarterly ex dividend date.   

Another criteria for bungee jumper selections is a willingness to hold the stock long term at my cost basis. 

Maybe the bungee jumping trades are just giving me something to do.     

A. Bought 50 EAF at $10.5-Schwab Account: 

Quote: GrafTech International Ltd.
EAF | GrafTech International Ltd. Analyst Estimates
2020 E.P.S. Estimate at $2.12 (as of 2/10/20)
P/E at $10.5 = 4.95
2021 E.P.S. Estimate = $2.65 
P/E at $10.5 = 3.96
 
The P/E ratios are indicative of concerns about the sustainability of profits anywhere near 2020-2021 levels. 

Without going into detail, the issue can generally be described as the spot price for EAF's graphic electrodes being substantially below the prices in its take-or-pay contracts expiring in the 2020 through 2022 time frame. And, some of those customers are going bankrupt.  

Factbox: What are graphite electrodes and needle coke? - Reuters Needle coke is the main raw material used to make graphite electrodes but is also used in lithium ion batteries. EAF is vertically integrated, meaning it manufactures needle coke as well. (see discussion at pages 7-12, 21-24 2019 Annual Report)

SEC Filings

Company Website: GrafTech International Ltd. - Home

Dividend: $.085 per share ($.34 annually)

Next Ex Dividend Date: 2/27/20

Dividend Yield at Average Cost: 3.09%

Dividend Reinvestment: Yes at below $14 per share

Current Average Cost Per Share: $11

Current Position this Account: 100 Shares

The other 50 shares were bought in two 25 lot transactions: Item # 1.A. Added 25 EAF at $11.27 (1/11/20 Post); Item # 1.B. Bought 25 EAF at $11.72  (12/18/19 Post)  

Average Total Cost Per Share = $11.49

Maximum Position: 150 shares

Last Earnings Report (Q/E 12/31/19): 

For the 4th quarter, EAF reported GAAP E.P.S. of $.61 per share, down from $.79 in the 2018 4th quarter. 

For 2019, Graftech "generated over $800 million of cash flow from operating activities, returned $360 million to shareholders in the form of dividends and share repurchases and also repaid $350 million of debt." 

GrafTech Reports Unaudited Full Year and Fourth Quarter 2019 Results | Business Wire

Sourced from SEC Filed 4th quarter Earnings Presentation 

Broker Reaction to 4th Quarter Earnings Report: 

The CS analyst kept an outperform rating but lower the PT to $17 from $18. That report is available to Charles Schwab customers. 

Given the cyclicality of EAF's business, and its significant debt load, using cash flow to buy back stock is not going to help the stock price IMO. Reducing debt even more would be the better option.   

B. Eliminated EAF in Fidelity Account Again-Sold 27 at $11.2: 

Profit Snapshot: +$17.94 (2/10 sell only)

Buying in this account can restart at below $10.5. 

Yesterday's Close: EAF $10.77 -$0.38 -3.41% 

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.