Economy:
Why economists are getting worried about 2021 The concern is that the first quarter will be negatively impacted by an uncontrolled Covid-19 surge linked to family gatherings for Thanksgiving and Christmas, resulting in more shutdowns and layoffs. The infection rate could easily be significantly higher than the rapid acceleration seen over the past 30 days. In addition, several federal assistance programs have terminated or are in the process of winding down by year end with no new stimulus plan in sight.
Home prices see biggest spike in 6 years in September
New claims for unemployment benefits for the W/E 11/21/20 were reported at 778K vs. consensus estimate of 730,000. U.S. weekly jobless claims The rise is probably due to the rapid rise in Covid-19 infections.
Personal Income and Expenditures for October:
Mnuchin clawback of Fed funds 'deeply irresponsible,' Biden team says | Reuters; Yellen would need Congress to approve use of clawed-back Fed loan funds, Treasury says There is IMO no legitimate reason for Mnuchin's decision. That leaves only a political one, and a petty one at that, based solely on Biden's victory. The Trump administration is salting the earth before leaving.
Advanced U.S. trade deficit in goods widens to $80.3 billion in October - MarketWatch
Black Friday online shopping on track to hit record, Adobe says Shoppers are skipping brick and mortar retailers.
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Markets and Market Commentary:
S & P 500 P/E Ratios as of Wednesday 11/25/20:
GAAP Trailing 12 Months: 41.34
Non-GAAP Estimated Forward 12 months: 25.95
Dividend Yield: 1.65%
Sourced: P/E & Yields
Shiller PE Ratio = 33.24
Market Cap to GDP - The Buffett Indicator - Updated Historical Chart (to 11/24/20)
Cramer calls this stock market 'the most speculative' he's ever seen
I discussed other valuation measures in an 11/26/20 comment.
The S&P 500 Could Jump 20% Next Year. Three Strategists Explain Why. | Barron's Goldman Sachs has a 4,300 SPX target by 12/31/21. That target is based on 2022 non-GAAP estimated SPX earnings per share of $195 and then placing a 22 multiple on that non-GAAP estimate. The forecast is based on a continued V-shaped recovery during 2021 whose dynamics will favor value stocks whose prices are more correlated to changes in the economy compared to growth stocks.
The average forward multiple using non-GAAP is closer to 15 starting in 1982. Yardini has a chart starting in 1982 that shows the average forward P/E at 15.3: Figure 5 Stock Market Briefing: Selected P/E Ratios
1982 marked the start of a 18 year long term secular bull market in stocks.
If I took the $195 earnings estimate for 2022, and slapped a 15 multiple on it, the S & P 500 would be at 2,925 or 712 points below its closing level yesterday and 1,375 points below the GS target for 2022. And those calculations assumes that it is appropriate to use forward estimated non-GAAP earnings; and that $195 is a reasonable estimate using that criteria for 2022 S & P 500 earnings.
One persistent Stock Jock delusion, similar to 81% of republicans believing Donald is honest, is that S & P 500 earnings estimates for the next 12 months are worthy of reliance when, almost invariably, those estimates are far too optimistic. I have documented in prior posts examples of estimates made as of 12/31 for the following year being too high by over 30% compared to the actual results. And that has occurred in a growth economy. I would expect the estimates to be way off that were in existence as of 12/31/19 for 2020.
And the 2020 recession raises another issue about using forward estimates using a robust growth year as the benchmark. In the real world, businesses have to navigate boom and bust years and long periods of slow growth. If I was buying a business, I would not value it at 22 times estimated earnings using a surge earnings year as the starting point.
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Portfolio Management:
In several recent posts and comments, I have discussed my current approach to the stock and bond markets.
To summarize, I will not buy $1K par value bonds (treasuries, municipals or corporates) due to abnormally low interest rates. Consequently, my entire bond portfolio is in a run-off phase.
I will selectively buy equity preferred stocks, including Canadian reset equity preferred stocks, and discuss in Item #1 below harvesting a profit in one of those.
I am wary of stocks.
To reduce risks flowing from new purchases, when risks are elevated for the stock market based on abnormally high multiples and other valuation criteria, I have resorted to my small ball trading system and have focused on stocks that have significantly higher dividend yields than the S & P 500 average. Most of the buys have dividend yields at my cost in excess of 4% though a few are closer to 3%.
The other risk mitigation technique is to concentrate purchases in rationally priced value stocks that pay those 4%+ dividends. That universe of selections is rapidly shrinking. Those stocks are generally in beaten down sectors that have not participated in the rally off the March lows until the past few weeks (e.g. regional banks).
In the last bubble that led to a 50% valuation reset in 2000-2002, I had decent alternatives to stocks. For example, the 3 month treasury bill rate was over 6% in 2000 but is now hugging zero.
3-Month Treasury Constant Maturity Rate-St. Louis Fed
So I have to adapt in a zero bound short term interest rate environment with brokerage sweep accounts and money market funds paying .01%.
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Trump:
For awhile, it looked like Dictator-Want-To-Be Don would have to be removed from the White House by Seal Team 6, but he appeared on Thursday to graciously offer to leave once the Electoral College makes the "mistake" of confirming Biden's win.
But then he tweeted that was not enough for him to vacate:
Maybe Seal Team 6 will need to stay on standby alert, or it may be necessary to use the 101st Airborne Division for the extraction. History of the 101st Airborne Division - Wikipedia
Don the Authoritarian wanted Americans to know, when and if he voluntarily leaves the White House, that would be a huge concession for him, because everybody knows "there was massive fraud" that led to Biden winning. Trump flips out on reporter: 'I'm the President of the United States!' YouTube
So massive in TrumpWorld that Demagogue Don can not prove a single fraudulent vote was cast using evidence that would be admissible in a court. Facts do not matter in Trump's America and never will.
Donald is correct in noting that almost 80% of republicans believe Biden won only through massive voter fraud.
I would note in response that is close to the 81% who believe Don the Con is honest, and a similar number of republicans view him as a role model for their children.
Those polling results say a great deal about those who hold those beliefs, confirming at a minimum their permanent residence in an Alternate Reality.
One Trumpster donor, who gave Donald's campaign $2.5M to prove voter fraud, has filed suit wanting his money back. Donor sues pro-Trump group over failure to prove voter fraud: 'Empty promises' | TheHill
Donald is not going to stop being the most prodigious spreader of fact free conspiracy theories and false narratives after leaving office.
He will continue his #1 worldwide ranking in both categories.
The main benefit is that world leaders and the diminishing number of U.S. citizens still tethered to reality can relegate Donald to the same status as Alex Jones, probably a few pegs below, and certainly no higher.
The Inside Story of Michigan’s Fake Voter Fraud Scandal - POLITICO
Trump has asked the republicans, who control Pennsylvania's state legislature, to ignore the certified election results and to appoint a slate of electors loyal to Donald. Trump asks Pennsylvania lawmakers to 'turn around' election results during GOP event in Gettysburg - MarketWatch Donald claimed the election was rigged; and that he actually won Pennsylvania "by a lot". Trump 2024: Most Republican voters want to see Donald Trump run for president again - MarketWatch
In Pennsylvania, a republican state court judge, Patricia A. McCullough, issued a temporary restraining order last week blocking further certification of the vote count pending an evidentiary hearing. That order was issued in connection with yet another republican lawsuit seeking the invalidate the election results. The PA Supreme Court lifted the injunction shortly after it was issued by the republican judge. GOP effort to invalidate more than 2.5 million votes in Pennsylvania dealt another setback - The Washington Post (the republican judge's order "threatens to disrupt the certification of every race in the 2020 general election; foreclose the seating of elected representatives; indefinitely postpone the December 1 start of the General Assembly’s term; undermine the will of the voters; and cast a wholly unwarranted cloud over Pennsylvania’s election results.")
Obviously, in Trump's America, even if there was a landslide victory for a democrat, the election is subject to reversal and cancellation by republicans.
Tucker Carlson is facing backlash from "conservatives"; Tucker Carlson Dared Question a Trump Lawyer. The Backlash Was Quick. - The New York Times; Tucker Carlson criticizes Sidney Powell for lack of evidence in election fraud claims - The Washington Post I would make two points in response. The backlash is not from "conservatives". The second is that the Trumpsters will attack anyone who even asks for proof supporting a conspiracy theory.
Newsmax and OANN are telling lies about the election as more people tune in
The Fake News President was unhappy with the decision of a republican federal district court judge dismissing his Pennsylvania election lawsuit as meritless. Trump vows to appeal judge's dismissal of Pennsylvania election challenge | TheHill; ‘This is simply not how the Constitution works’: Federal judge eviscerates Trump lawsuit over Pennsylvania results - POLITICO
America's Mad King had sought to cancel all mail-in ballots in PA. You'll Be Back "Hamilton" Jonathan Groff - YouTube
Trump appealed that decision to the U.S. Court of Appeals for the Third Circuit. Trump appeals Pennsylvania vote case seeking to block Biden
Interestingly, the appeal does not contest the dismissal for failure to state a legal claim, but instead appeals the court's decision denying Trump's motion to amend the complaint to include a fraud allegation that had been voluntarily deleted by Trump's prior attorneys. The relief sought by Trump in that Amended Complaint was to cancel all mail-in ballots.
Leave to file an amended complaint is a discretionary decision by the judge and understandably he denied the request under the circumstances.
This is not a serious appeal but provides the Fake News networks with an opportunity to mislead their viewers.
If Trump had proof of fraud that could withstand even minimal scrutiny in a court, he could have filed a new complaint with those allegations and sought to enjoin PA's certification, resulting in the republican controlled PA legislature appointing the electors. Trump Campaign's Third Circuit Appellate Brief, Explained | Law & Crime
This is just another example of the republicans actively trying to undermine the democratic processes which is a broad based political power strategy that goes far beyond voting.
The three judge panel of the Third Circuit dismissed that frivolous appeal yesterday. Federal appeals court denies Trump campaign effort to revive Pennsylvania lawsuit saying 'claims have no merit' The 21 page opinion, was written by Trump appointee Stephanos Bibas. The other two judges on the panel were appointed by other republican presidents.
In Harsh Rebuke, Appeals Court Rejects Trump’s Election Challenge in Pennsylvania - The New York Times; republished at MSN: In Harsh Rebuke, Appeals Court Rejects Trump’s Election Challenge in Pennsylvania
Jenna Ellis, Donald's attorney, claimed that the judiciary was part of a conspiracy "to cover up the allegations of massive voter fraud". Ms. Ellis has been very specific and clear on Trump's goal-throw out the choice made by the voters and allow republican legislators pick the electors.
Another group of "republicans", led my Congressman Mike Kelly who represents PA's 16th congressional district, filed a lawsuit in a PA state court requesting an injunction declaring mail-in votes illegal or, in the alternative, to direct Pennsylvania's republican controlled legislature to pick the electors. Pennsylvania Republicans Seek to Block Vote Certification
When the GOP's legal arguments are reduced to their essence, the common theme is not to count only all "legal" votes, as that party claims, but to cancel lawful votes that made it through their voter suppression efforts.
This is a link to this ruling: Memorandum Opinion
Lawsuits related to the 2020 United States presidential election - Wikipedia
PolitiFact | Trump again flat wrong with claims about Wisconsin voter fraud Trump's claims were rated "Pants on Fire".
PolitiFact | Fact-checking false claims about the 2020 election
The Facts on Trump's Post-Election Legal Challenges - FactCheck.org
Trump tweets string of falsehoods about Wisconsin absentee voters - The Washington Post
Trump Misinformation on Georgia Ballot Rejections - FactCheck.org
Georgia Secretary of State Raffensperger: Elections call for integrity
Fact-checking Trump’s cellphone rant of election falsehoods - The Washington Post
Opinion | What Makes Trump’s Subversion Efforts So Alarming? His Collaborators - The New York Times It goes beyond the fact that virtually all republican politicians enabled Trump's most recent attack on democracy. They have been doing that for 4 years. The real enablers are the ones who are the ultimate source of their power, the people who vote for them.
The republicans have not yet explained how votes were changed from Trump to Biden or to offer any proof which of course is never needed in Trump's America before making an accusation that undermines the faith in the democratic process.
Nor have they explained why the hand recounts in Georgia produced the same result as the Dominion voting machines, nor do they mention that the machines are tested before starting the count to ensure that the tally is accurate. Never let facts get in the way of a preposterous conspiracy theory sold to the gullible True Believers.
Even with the hand count proving the machine vote tabulation, the Trumpsters still claim that voting machines deleted Trump votes and changed Trump votes to ones for Biden. It is important to fully understand and accept as a given that facts and truth can not disprove a republican conspiracy theory formed without any evidence. That is not going to change when Donald leaves office.
Voting Machine Conspiracy Theories Harm U.S. Cybersecurity | Cato @ Liberty
It is interesting that republicans managed to convince hispanic voters in Miami-Dade county, that Biden was a socialist and resembled Hugo Chavez and Fidel Castro in some manner that lacked any accurate details. This successful effort at disinformation is remarkable since those two leaders have far more in common with Trump, including a perpetual flow of B.S., false narratives, authoritarianism and demagoguery.
The republican conspiracy theory that Hugo Chavez, who died in 2013, was somehow involved in manipulating voting machines used in the 2020 U.S. election is just the latest example of asinine fact free narratives intended to manipulate the brain dead. It is noteworthy that this conspiracy theory was spread by the so-called "conservative" media outlets. No real conservative would do so.
How Misinformation ‘Superspreaders’ Seed False Election Theories - The New York Times Republicans do not need assistance from Putin to spread false information about the elections.
The democracy hangs on — by just enough Fortunately, there were two reputable republicans in critical places in Wisconsin and Georgia. Otherwise, the anti-democracy party may have succeeded in stealing those elections. That thin veneer protecting the voting process will probably IMO be an even more rare exception in the future. Republicans have learned a lesson from the 2020 election. Put sycophants who will do what they are told at key places in the election machinery.
Dialing into Pa. GOP meeting, President Trump shows no sign of concession - ABC News
I read Donald's tweets last week. I did not see any written by him referring to the pandemic or any substantive issue. Donald repeatedly claimed instead that the election was rigged and stolen from him without of course presenting any evidence. Trump knows that his party lives in an echo chamber of false information and narratives that truth will never be able to penetrate.
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Trump's appointment of Michael Pack to head the U.S. Agency for Global Media was just another example of how an authoritarian operates. That U.S. agency oversees Voice of America and related networks like Radio Liberty and Radio Free Asia. Pack is a Trump loyalist who immediately was set out to end journalist independence and to fire oversight boards. Judge slaps down Trump appointee who has sought to reshape Voice of America and related agencies - The Washington Post The judge issued a preliminary injunction prohibiting Park from communicating with journalists or threatening them. The injunction was issued in this lawsuit: PI-Brief-Turner-v-USAGM.pdf It is not surprising of course that all 53 GOP senators voted to confirm Pack's nomination. U.S. Senate: U.S. Senate Roll Call Votes 116th Congress - 2nd Session
This article summarizes just another tactic used by the anti-democracy party. A dark money mystery in Florida state senate race
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Covid-19 Updates:
The pandemic remains firmly "under control" in TrumpWorld with only a few cases popping up here and there:
 |
| As of 11/27/2020 |
Fox News is mocking CDC guidance for Thanksgiving gatherings Thanksgiving will turn into a massive superspreader event with Fox "news" and Trump facilitating or encouraging that outcome. Fox is a superspreader of Fake News and conspiracy theories but it will look responsible compared to the emerging "conservative" Fake News networks.
White House Thanksgiving proclamation calls for Americans to 'gather' even as Covid-19 surges
Fox "news" bears significant responsibility for downplaying the pandemic that contributed to its rapid spread including but not limited to falsely comparing Covid-19 to the seasonal flu.
AstraZeneca Covid vaccine study results clouded by manufacturing error
Covid vaccine: CDC should warn people the side effects from shots won't be 'walk in the park' (participants in the Pfizer and Moderna trials experienced "high fever, body aches, bad headaches, daylong exhaustion and other symptoms after receiving the shots. While the symptoms were uncomfortable, and at times intense, the participants said they often went away after a day, sometimes sooner." The concern is that many will not return for the second shot, and a large segment of the population will refuse to take any.
Doctors slam Ron Johnson over hearing on COVID-19 treatments Senator Johnson (R-WIS) is a pure Trumpster and, as such, is still angrily touting hydroxychloroquine notwithstanding overwhelming evidence that this drug is ineffective and may cause harm to some patients. During the hearing, Johnson pushed one of the republican conspiracy theories that doctors were not administering this drug because it was cheaper and consequently they would make less money. Fox "news" spread disinformation about this drug.
It is important to remember that the Alternate Reality of TrumpWorld has many creators but still requires tens of millions to accept the false claims as true in order to work.
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1. Canadian Reset Equity Preferred Stocks:
A. Sold 150 BMOPRS at C$19.10 (IB account):
Quote: BMO-PS.TO
Profit Snapshot: +CAD$805 or +US$618.46
Item # 1.A. Added 50 BMOPRS at C$12.67 and 50 at C$10.59 (4/25/20 Post); Item # 1.A. Bought 50 BMOPRS at C$17,85 (10/16/19 Post) My average total cost for 150 shares was C$13.72.
Investment Category: I classify the Canadian reset preferred stocks as part of my Equity Preferred Floating Rate Securities
Security: Reset Equity Preferred Stock
Dividends: Quarterly and non-cumulativeCurrent Coupon: 3.852% until 5/24/24
Resets: Every 5 years at a 2.33% spread 5 year Canadian government bond.
The prospectus can be accessed here.
Issuer: Bank of Montreal
Last Dividend Payment:
2. Small Ball:
A. Added 8 GLQ at $10.95:
Quote: Clough Global Equity Fund Overview
Closing Price 11/27/20: GLQ $12.62 +$0.06 +0.48%
"Having a global, flexible mandate, the Fund will invest at least 80% in equity and equity-related securities in U.S. and non-U.S. markets, and the remainder in fixed income securities, including both corporate and sovereign debt, in both U.S. and non-U.S. markets."
The fund will do some short selling as well.
Sponsor's Website: Clough Global - GLQ
Holdings as of 7/31/20 (SEC Filing)
Leveraged: Substantial
Last Discussed: Item # 1.C. Added 2 at $11.11 ( 10/24/20 Post); Item #1.H. Started GLQ-Bought 10 at $11.37; 10 at $11.18 (8/8/20 Post)
Average Cost Per Share this account: $11.08 (20+ shares)
Dividend: Monthly at $.1104 per share($1.3248 annually)
Supported by ROC (RETURN OF CAPITAL)
Return of Capital and CEFs - Fidelity; Return of Capital and CEFs: Part 3 - Fidelity
Yield at AC = 11.96%
Last Ex dividend: 11/19/20
Data as of 10/29 Trade:
Closing Net Asset Value Per Share: $13.17
Closing Market Price: $10.97
Discount: -16.7%
Sourced: GLQ- CEF Connect (Click "Pricing Information" tab)
Goal: Total Return (before ROC adjustments to cost basis) in excess of the dividend payments.
B. Added 10 EXG at $7.25; 10 at $7.1:
Quote: Eaton Vance Tax-Managed Global Diversified Equity Income Fund Overview
Closing Price 11/27: EXG $8.29 +$0.02 +0.24%
Sponsor's Website: Tax-Managed Global Diversified Equity Income Fund (EXG) | Eaton Vance
Holdings as of 7/31/20 SEC Filing
Last SEC Filed Shareholder report EXG (semiannual, period ending 4/30/20)
Last Discussed: Item # 1.P. Added 20 EXG at $7.4(10/24/20 Post); Item # 1.A. Bought 100 EXG at $7.42 (7/11/20 Post) I discussed in that last linked post some of the disadvantages of this fund.
Data as of 10/29 Trade:
Closing Net Asset Value Per Share: $8.17
Closing Market Price: $7.25
Discount: -11.26%
Sourced: EXG-CEF Connect (click "Pricing Information" tab)
Average Cost Per Share This Account: $7.38 (144+ shares)
Dividend: Monthly at $.0616 (annually at $.7392)
Substantial ROC Support
Return of Capital and CEFs - Fidelity; Return of Capital and CEFs: Part 3 - Fidelity
Yield at AC = 10.02%
Last Ex Dividend: 11/20/20 (owned all as of)
Dividend Reinvestment: Yes, in this account. I may start taking the dividend in cash when the discount to net asset value per share narrows to around 5%.
C. Added to SCM-Bought 5 at $8.15 (Fidelity Taxable):
Quote: Stellus Capital Investment Corp. (SCM)- a tiny BDC
Closing Price 11/27: SCM $11.40 +$0.10 +0.88%
Website: Stellus Capital
Management: External
10- Q for the Q/E 9/30/20 (summary of investments starts at page 6)
2019 Annual Report (risk factor summary starts at page 31 and ends at page 59)
Dividend: Quarterly at $.25 per share, reduced from $.34 per quarter earlier this year-paid in monthly installments.
Last Ex Dividend: 9/14/20
Last Buy Discussion: Item # 1.E. Bought 5 SCM at $7.41 in Fidelity Account (8/15/20 Post). I discussed the second quarter earnings report in that post.
Net Asset Value Per Share History:
9/30/20: $ 13.17 10-Q at page 2
6/30/20: $13.34
3/31/20: $11.55
12/31/19: $14.14
12/31/18: $14.09
12/31/17: $13.81
12/31/16 $13.69
12/31/15: $13.19
12/31/14: $13.94
12/31/13: $14.54
November 2012: IPO at $15 ($14.46 after underwriters discount)
Equity Offerings:
Last Earnings Report (9/30/20): Stellus Capital Investment Corporation Reports Results for its Third Fiscal Quarter Ended September 30, 2020
NII per share Q/E 9/30/20: $.27, down from $.31 for the 2019 3rd quarter
NII per share 9 months 2020: $.87, up 1 cent compared to same period in 2019
Asset Quality Claims as of 9/30/20:
I have recently pared my position in the Fidelity taxable account, which I will discuss in a subsequent post. I sold 20 shares at $11.08. The pare reduced my average cost per share to $8.15 in that account and increased my dividend yield to 12.27%.
D. Added to DBX-Bought 1 at $18.1; 1 at $17.79:
Quote: Dropbox Inc. (DBX)
Closing Price 11/27: DBX $19.54 +$0.43 +2.25%
Website: Dropbox
Investment Category: Lottery Ticket Basket
Last Discussed: Item # 1.C. Started DBX as a Lotto-Bought 5 at $19.1; 1 at at $19.1; 1 at $18.87; 1 at 18.7 (10/17/20 Post) I discussed the 2nd quarter earnings report in that post.
IPO: $21 in March 2018 Prospectus
The price signal sent by the current price compared to the $21 public offering price expresses meaningful doubt IMO, rather than certainty, that Dropbox will be able to succeed longer term against its competitors. The decline in price since the IPO is with the strong headwind of movement toward cloud based services.
Last Earnings Report (9/30/20): SEC Filed Press Release
"Net cash provided by operating activities was $200.9 million, as compared to $149.7 million in the same period last year. Free cash flow was $187.0 million, as compared to $102.5 million in the same period last year.
"Paying users ended at 15.25 million, as compared to 14.00 million for the same period last year. Average revenue per paying user was $128.03, as compared to $123.15 for the same period last year."
GAAP:
Non-GAAP:
Cash & Short Term Investments: $1.2265B
LT Debt: None
"GAAP gross margin was 78.8%, as compared to 75.5% in the same period last year. Non-GAAP gross margin was 80.0%, as compared to 76.7% in the same period last year."
E. Added to LGI-Bought 5 at $14.77:
Quote: Lazard Global Total Return & Income Fund Overview
Closing Price 11/27: LGI $17.23 +$0.13 +0.76%
SEC Filed Semiannual Report (period ending 6/30/20)
Holding as of 9/30/20 SEC Filing
(Cost= $202.388+M/Value=$259.436+M)
Last Discussed: Item # 1.K. Bought 10 LGI at $15.18 (8/15/20 Post)
Average Cost Per Share This Account: $15.1 (25 shares this account)
Dividends: Monthly at $.1065 per share ($1.278 annually)
Substantial ROC support
Yield at AC = 8.46%
Data Date of 10/30/20 Trade:
Closing Net Asset Value Per Share: $17.14
Closing Market Price: $14.76
Discount: -13.89%
Sourced: LGI-CEF Connect
F. Started SEM-Bought 5 at $20.98:
Quote Select Medical Holdings Corp.
Closing Price 11/27/20: SEM $24.65 -$0.15 -0.60%
"Select Medical is one of the largest operators of critical illness recovery hospitals, rehabilitation hospitals, outpatient rehabilitation clinics, and occupational health centers in the United States based on number of facilities. . . .As of September 30, 2020, Select Medical operated 100 critical illness recovery hospitals in 28 states, 29 rehabilitation hospitals in 12 states, and 1,777 outpatient rehabilitation clinics in 37 states and the District of Columbia. Select Medical’s joint venture subsidiary Concentra operated 523 occupational health centers in 41 states. At September 30, 2020, Select Medical had operations in 46 states and the District of Columbia."
Key Developments-Select Medical Holdings
Closing Price Day of Purchase (10/30/20): $20.98, down $1.08 or 4.9%.
Prior to this purchase, I do not recall owning SEM's common stock, but I have owned its senior unsecured bonds during a period when I was speculating in junk rated bonds due to their yield spreads being unusually high compared to investment grade bonds. That was occurring mostly in 2011-2012.
SEM's debt level has made me nervous about owning the bonds and the lack of dividend was a turnoff for the common stock given the elevated risk associated with the firm's leverage and its dependence on Medicare as a source of funding.
10-Q for the Q/E 9/30/20 at page 15 (credit facility and bond debt =$3.403+B); Select Medical Corporation Announces Pricing and Upsizing of its Offering of an Additional $675 million of its 6.250% Senior Notes due 2026 (12/5/2019) rated at B- by S & P and B3 by Moody's. The Moody's report notes that deleveraging is "challenged by Select's use of debt to fund at least part of the acquisition of the remaining stake in Concentra".
I have the common stock on a monitor list and noticed the decline 4.9% decline on 10/30/20. I was busy doing other tasks that day so I spent only a minute researching recent news and consequently bought only 5 shares as a tickler to perform more research.
Stock Information as of 11/27/20:
SEM Analyst Estimates | MarketWatch
5 Year Financials:
Dividend: None
5 Year Chart:
Last Earnings Report: SEC Filed Press Release
"Earnings per common share was $0.57 on a fully diluted basis for the third quarter ended September 30, 2020, compared to $0.23 for the same quarter, prior year. Adjusted earnings per common share was $0.56 on a fully diluted basis for the third quarter ended September 30, 2020, compared to $0.33 for the same quarter, prior year. Adjusted earnings per common share excludes the gains on sales of businesses and related tax effects for the third quarter ended September 30, 2020. Adjusted earnings per common share excludes the losses on early retirement of debt and related costs, and their related tax effects, for the third quarter ended September 30, 2019."
G. Restarted CIO-Bought 20 at $6.3:
Quote: City Office REIT Inc. (CIO)
Closing Price 11/27: CIO $9.08 -$0.06 -0.66%
Website: City Office REIT
Our Properties-City Office REIT
2019 Annual Report SEC Form 10-K
Last Elimination: Item # 1.H. Eliminated CIO-Sold 20 at $8.3 and 10 at $8.52 (6/6/20 Post)(profit snapshot $34.64)
Last Buy Discussions (shares sold): Restarted CIO-Bought 10 at $7.3; 5 at $7 (3/28/20 Post); Item # 4.D. Added 5 CIO at $6.8 (4/4/20 Post)
Investment Category: Equity REIT Common and Preferred Stock Basket Strategy
Dividend: Quarterly at $.15 per share, reduced from $.23 effective for the 2020 2nd quarter payment.
City Office REIT, Inc. Common Stock (CIO) Dividend History | Nasdaq
Last Ex Dividend: 10/7/20
Yield at $6.3 = 9.52%
5 YEAR CHART:
Last Earnings Report (9/30/20): Released after my purchase.
City Office REIT Reports Third Quarter 2020 Results
I view the AFFO per share as the most relevant cash flow number for an office REIT:
 |
| AFFO Per Share $.23 |
CIO's Definition of AFFO:
Full Year 2020 Guidance:
Discussed at City Office REIT FFO beats by $0.05, beats on revenue (NYSE:CIO) | Seeking Alpha
Other CIO Sell Discussions:
Item # 1.C. Sold 10 CIO at $11.58 (5/17/2018 Post)(profit snapshot = $13.94)Item # 8 Sold 100 CIO at $13.5: Update For Equity REIT Basket Strategy As Of 7/28/16 - South Gent | Seeking Alpha (profit snapshot= $207.97);Item # 1. Sold 50 CIO at $12.38: Update For Equity REIT Basket Strategy As Of 3/7/16 - South Gent | Seeking Alpha (profit snapshot $61.04 plus one dividend
CIO Trading Profits to Date: $317.59
CIO Preferred Stock: I also own CIOPRA in several of my accounts. City Office REIT Inc. 6.625% Cumulative Preferred Series A ($25 par value).
Last Buy Discussions: Item # 1.A. Bought 20 CIOPRA at $20.6; 5 at $19.14; 5 at $18.6; 5 at $18.35; 5 at $17.5; 5 at $15.15; 5 at $13.56; 10 at $16.5(3/28/20 Post)
Sell Discussions: Item # 3.B. Pared CIOPRA in Schwab Account: Sold 10 at $24.47-Highest Cost Lots (8/22/20 Post)(profit snapshot = $55.99); Item # 6.A. Pared CIOPRA-Sold 10 at $21.17 and 10 at $22.25-Highest Cost Lots (6/6/20 Post)(profit snapshot = $22.17); Item # 1.A. Eliminated CIOPRA-Sold 50 at $24.77-Used Commission Free Trade (4/24/19 Post)(profit snapshot = $155.22); Item # 4.A. Sold 50 CIOPRA at $24.14-Used Commission Free Trade (3/17/19 Post)(profit snapshot = $20.86); Item 3.A. Sold 50 CIOPRA at $25.21 (1/27/17 Post)(profit snapshot = $146.97). CIOPRA realized gains to date are $401.21.
H. Started BCBP-Bought 10 at $9.2:
Quote: BCB Bancorp Inc.
Closing Price 11/27: $10.75 -$0.10 -0.92% (regional bank stocks retreated last Friday: KRE $49.43 -$0.72 -1.44%: SPDR S&P Regional Banking ETF, up from $41.15 close on 10/30/20)
Stock Information as of 11/27/20:
"Established in 2000 and headquartered in Bayonne, N.J., BCB Community Bank is the wholly-owned subsidiary of BCB Bancorp, Inc. (NASDAQ: BCBP). The Bank has 31 branch offices in Bayonne, Carteret, Colonia, Edison, Hoboken, Fairfield, Holmdel, Jersey City, Lodi, Lyndhurst, Maplewood, Monroe Township, Newark, Parsippany, Plainsboro, River Edge, Rutherford, South Orange, Union, and Woodbridge, New Jersey, three branches in Hicksville and Staten Island, New York."
Investment Category: Regional Bank Basket Strategy
BCBP Analyst Estimates | MarketWatch
Current consensus at $.90 per share for 2021.
Dividend: Quarterly at $.14 per share ($.56 annually)
BCB Bancorp, Inc. Declares Cash Dividend of $0.14 Per Share
Yield at $9.2: 6.09%
Last Ex Dividend Date: 11/5/20 (owned as of)
5 Year Financials:
Properties:
Owned Securities Available for Sale as of 9/30/20:
Last Earnings Report (9/30/20): BCB Bancorp, Inc. Reports Third Quarter 2020 Net Income of $8.3 Million; Strong Results for Loan Deferrals and Net Interest Margin
"net income of $8.3 million for the third quarter of 2020, compared to $2.7 million for the second quarter of 2020, and $5.2 million for the third quarter of 2019. Earnings per diluted share for the third quarter of 2020 were $0.47, compared to $0.14 in the preceding quarter and $0.30 in the third quarter of 2019. For the first nine months of the year, net income was $13.6 million, or $0.73 per diluted common share, compared with $15.9 million, or $0.91 per diluted common share, for the first nine months of 2019."
Tangible Book Value Per Share: $12.53
I. Started DDD-Bought 10 at $6; 5 at $5.8:
Investment Category: Lottery Ticket Basket
5 year Financials: Profits are not required apparently.
2019 Annual Report at page 25
5 Year Chart:
Last Earnings Report (Q/E 9/30/20):
3D Systems Announces Sale of Cimatron and GibbsCAM Businesses | 3D Systems ("purchase price of $65 million, subject to certain closing adjustments.")
J. Eliminated PFBI-Sold 25 at $12.31:
Quote: Premier Financial Bancorp Inc. (PFBI)
Investment Category: Regional Bank Basket Strategy
Profit Snapshot: +$25.73 (includes prior sell)
Discussed at Item # 1.H. Started PFBI-Bought 10 at $12; 5 at $11.85, 5 at $11.4; 5 at $11.2 (10/3/20 Post); Item #1.B. Added to PFBI-Bought 5 at at $10.7 and Sold Highest Cost Lot at $12.75 (10/24/20 Post)
Dividend: Quarterly at $.15 per share
Last Ex Dividend: 9/15/20
Investment Category: Regional Bank Basket Strategy
Rationale: I did not like the third quarter report.
Last Earnings Report (Q/E 9/30/20):
"Premier realized net income of $5,624,000 (38 cents per diluted share) during the quarter ended September 30, 2020, a 10.3% decrease from the $6,267,000 of net income reported for the third quarter of 2019."
K. Started MJ-Bought 10 at $11.37:
Quote ETFMG Alternative Harvest ETF Overview
Closing Price 11/27: MJ $15.21 +$0.86 +5.99%
5 Year Chart:
I discussed this buy in a 11/5/2020 comment.
"Investment" Category: Lottery Ticket Basket
This buy was in response to growing marijuana legalization movement in the U.S.
In the recent election, voters in several states approved ballot measures legalizing marijuana used recreationally or medical purposes. Weed now legal in Arizona, New Jersey, South Dakota, Montana
I do not expect the companies involved in this industry to report GAAP profits anytime soon.
Sponsor's website: MJ - ETFMG® (has a map of current status of state legalizations)
Expense Ratio: .75%
Top Holdings as of 11/26/20:
I was previously more adventuresome in trading another marijuana ETF, priced in Canadian dollars and traded on the Toronto exchange. Horizons Marijuana Life Sciences Index ETF Overview (CA:HMMJ) Fortunately, I eliminated my last position before the price bubble burst, realizing a total gain of C$889.5. I last eliminated a position in January 2019: Item # 4.B Eliminated CA:HMMJ-Sold 50 at C$18.31 (1/30/19 Post)(profit snapshot =C$216); Prior Trade Snapshots (profit snapshots = C$673.5 consisting of C$418.5 for 50 shares and C$255 for 50 shares )
There was an irrational frenzy in marijuana stocks in 2018 that started with Canada's move to legalize use. MJ topped out in $43 to $45 range.
L. Added to OFS-Bought 5 at $3.97:
Quote: OFS Capital Corp
Closing Price 11/27: OFS $6.89 -$0.01 -0.14%
Last Buy Discussion: Item # 3.F. Bought 40 OFS with an Average Cost Per share of $4.18 (11/7/20 Post) I discussed the third quarter earnings report in a comment.
M. Eliminated Pfizer-Sold 6 at $36.69:
Quote: Pfizer Inc. (PFE)
PFE | Pfizer Inc. Analyst Estimates | MarketWatch
Profit Snapshot: $43.6
Dividend: Quarterly at $.38 per share
Pfizer Inc. - Stock Information - Dividend & Split History
I sold on the ex-dividend date.
I discussed the reason for selling PFE in a 11/5/20 comment. I did not want to fool with the spinoff of PFE's Viatris Inc. stock received as a result of combining its Upjohn subsidiary with Mylan.
Since the distribution of Viatris shares have now taken place, I will consider restarting a PFE position at a price lower than the current one. I may wait until after PFE cuts its dividend.
There may be a negative reaction when Pfizer cuts the dividend which will happen when Viatris shares starts paying a dividend next year. Previously, Pfizer made it clear that its payout after the spinoff will be adjusted down by the amount its shareholders will receive from Viatris which has previously stated that it will pay out 25% of its annual cash flow as dividends which is currently around $4B. Morgan Stanley's analyst estimates that Pfizer will raise the quarterly dividend by 1 cent next month and will then cut it by 10 cents when Viatris declares its first quarterly dividend in the 2021 first quarter. How a Growth-Stock Pfizer Will Pay Out Its Dividend | Barron's
Last Earnings Report (Q/E 9/30/20): SEC Filed Press Release
GAAP E.P.S. $.39
Non-GAAP E.P.S. of $.72
Revenues: 12.131B down from $12.68B in the 2018 3rd quarter (note that Upjohn accounted for $1.916B of 2020 third quarter revenues)
I do not care for a company report that has a large differential between GAAP and Non-GAAP earnings, with the Stock Jocks paying attention only to the Non-GAAP number as they have been trained to do.
I actually pay attention to both numbers. Frequently, the non-GAAP numbers exclude actual cash expense or quasi-expenses (e.g. stock compensation) items that are recurring for the company or close to it. Another category is "asset impairment" which generally indicates that the company paid too much for an asset but forget about that as well.
For me, it just takes to much time to form an opinion about those adjustments and then decide what I am willing to pay for the stock using in part historical P/E ratios. And that is before I have to do a dive into existing drug sale trends, patent expirations for major drugs and the pipeline. So all of that does not prevent me from buying, but makes me more picky about price and limits my exposure to 100 shares or less.
Look at the GAAP E.P.S. Y-O-Y Comparison:
I randomly picked out a third quarter from the past. For the Q/E 9/30/2006, Pfizer reported revenues of $12.28B. GAAP E.P.S. of $.46 and non-GAAP E.P.S. of $.54. The company announced that it was going to perform a comprehensive cost reduction initiative to create a learner and more agile company for growth ahead. SEC Filed News Release
Prior Sell Discussions: Item # 4.A. Sold Remaining 33 PFE shares at $33.44 (8/13/2017 Post)(profit snapshot = $90.67); Item # 3.A. Sold 100 PFE at $34.03 (7/13/17 Post)(profit snapshot = $143.42); Item # 3.A. Sold 100 PFE at $34.65 (3/13/17 Post)(profit snapshot =$235.86); Item # 1 Sold: 100 PFE at $31.68 (5/17/14 Post)(profit snapshot = $282.12) Buy discussions are linked in those posts.
I would note that Pfizer's stock was selling at over $45 in June 2000. Look at the chart starting in 2000.
The growth through acquisition strategy, many of them being overpriced, has not been successful IMO in creating shareholder value.
N. Eliminated FBNC-Sold 11+ at $27.02:
Profit Snapshot: +$70.16
Investment Category: Regional Bank Basket Strategy
Last Discussed Item # 1.K. Restarted FBNC-Bought 5 at $21; 5 at $20.45; 1 at $20.08 (9/26/20 Post)
Rationale: I will generally consider paring or eliminating a position into a parabolic price pop, particularly when that occurs shortly after purchasing shares which was the case with FBNC. The price pop was caused in large part by S & P's announcement that the stock would be included in its S & P SmallCap 600 index. First Bancorp Added to the S&P SmallCap 600® Index
Close Day of Trade: FBNC $27.39 +$2.97 +12.16%
O. Continued Paring FDUS-Sold 20 at $13.75 (highest cost lot in Fidelity Taxable Account):
Quote: Fidus Investment Corp.
The lot was bought at $13.75, so there was no gain or loss. Item # 1.C
This pare reduced my average cost per share in this account to $9.24.
Yield at New AC: 12.99% (regular dividend only)
In my prior post, I discussed paring my FDUS positions in my Fidelity and Vanguard taxable accounts and have nothing further to add. Items 1.L, 1.M
I am probably in a holding pattern now.
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.
