Wednesday, July 13, 2022

AOD, BBDC, BDN, COWZ, DOV, ETN, HPP, INCY, MATV, MRK, OPI, PDM, TXN,VYGR,

Economy

The BLS reported last week that the U.S. economy added 372,000 jobs in June. Employment Situation Summary - 2022 Q02 Results The unemployment rate was 3.6%. Average hourly earnings rose $.10 and were up 5.1% for the 12 months ending in June. The job numbers for April and May were revised down by 74,000. Both the April and May numbers remained strong at +368K and +384K respectively after the downward revisions. The U-6 number decline to 6.7% from 7.1%.  Table A-15. Alternative measures of labor underutilization - 2022 Q02 Results

Historical Job Numbers in Thousands: 

The unemployment rate can be at or near a low point just prior to a recession's onset. 

Unemployment Rate-St. Louis Fed

Most of the time, it only becomes apparent several months later that a slight rise in the unemployment rate was indeed the start of a recession. But that is just hindsight.  

The March 2020 spike was an exception, when the massive and fast increase in unemployment being  contemporaneous with a realization that the economy had entered a recession.  

In other words, the June unemployment report does not rule out a recession starting this year, but I would not predict more than an economic slowdown with the job growth this strong. Real GDP growth was up 6.9% in the 2021 4th quarter. The 2021 increase in real GDP was at +5.75%.  Real GDP growth rate by year in the U.S | Statista Continuation of problematic inflation in necessary purchases, particularly in food and energy costs, increases the odds that a recession will soon start IMO. 

Recent Recession Dates

November 1973-March 1975

January 1980-July 1980

July 1981-November 1982 (an 18 year long term secular bull market in stocks started in August 1982)

July 1990-May 1991 (the June 1990 jobs number was +17K and had been trending down from 306K in January to 42K in May)

March 2001-November 2001 (The March 2001 jobs number was a -42,000 but temporary jobs loss months occur during expansions including 3 months in 2000) 

December 2007-June 2009 (note that 79,000 jobs were added in October 2007, +110,000 in November 2007, the recession's start date, and +108,000 in December)

February 2020-June 2020 (not a typical recession)

Note the 2 and 10 year treasury yield inversion that started on 7/6/22: 

June CPI: +9.1% for the 12 months with core at 5.9%, both non-seasonally adjusted numbers. 

Inflation rose 9.1% in June, even more than expected, as price pressures intensify (the consensus estimate was at 8.8%). 

The TIP and IBond use this inflation index. 

Before the release of the CPI report earlier today, the CME FedWatch Tool had the odds of at 100% that the Fed would hike the FF rate later this month by at least .75%.  

Note the change in probability over the past week in a 1% increase, going from zero percent to 14.2%. 

After the CPI report released earlier today, the odds of a 1% increase increased substantially to 41.6% as of 7:48 CT:  

++++

How the Supreme Court Could Upend the Integrity of Our Elections - The Atlantic I discussed this case in my last post. If the Republican Justices adopt what is known as the Independent State Legislature Theory, advanced by their compatriots in Republican controlled state legislatures, that will likely IMO mark the end of Democracy by giving carte blanche and absolute authority to those state legislatures to do whatever they want regarding elections. We have already seen what those Republican politicians are willing to do.  

IRS asks watchdog to review audits of Comey, McCabe - ABC NewsComey and McCabe, Who Infuriated Trump, Both Faced Intensive I.R.S. Audits - The New York Times Both Comey and McCabe were "randomly" selected for highly intrusive audits by the IRS. Those autopsies are referred to as “an autopsy without the benefit of death.” Of the 150+M individual tax returns filed each year, only a few thousand are selected for this kind of audit. Comey's 2017 return was among the 5,000 selected for this "random" audit. In 2019, the IRS "randomly" selected 8,000 for this intrusive audit including the return filed by Andrew McCabe. The IRS commissioner appointed by Trump, Charles Rettig, was in charge of the IRS when both returns were "randomly" selected by the IRS. 

Delusional Don recently made this comment about his Presidency: Trump Claims U.S. Was Unified and 'Everybody Was Happy' Under His Presidency Before COVID-19

Don the Con asserted last week that the NY investigation into his finances and tax returns is "racist" and further claims that his civil rights are being violated. Trump calls for drug dealers to get the death penalty in somber Las Vegas campaign speech | Daily Mail Online Apparently, the racism is what happens when New York Attorney General Letitia James and Manhattan District Attorney Alvin Bragg, who are both black, investigate a white man. He had previously made this claim back in February. Donald Trump Says Letitia James Probe Into His Businesses a 'Racist Attack' He was stomping for the Trumpster candidates in Nevada running for the U.S. Senate and Nevada's Governor who welcomed his endorsements. Republican candidates continue crawling to Donald as their leader.  

Ex-Trump Adviser Peter Navarro Accuses Mike Pence Of Treason In Bonkers Rant

Judge shreds Bannon defenses ahead of contempt trial - POLITICO The judge was appointed by Donald. Bannon looks like he will be headed for jail soon. Trump's lawyer told the FBI that neither he nor Donald had requested Bannon to invoke executive privilege. Trump Lawyer Justin Clark Says Ex-President Never Bothered to Invoke Executive Privilege for Steve Bannon There was never any justification for Bannon to assert executive privilege, even if Trump had asked him to do so, since he was a private citizen on January 6th. 

Rep. Greene (R-GA) questions whether July 4 shootings were 'designed' to get Republicans to back gun control Tucker Carlson believes that women lecturing men was the cause of this mass shooting. Hear what Tucker Carlson is blaming mass shootings on - YouTubeWhy Tucker Carlson blames women for the Highland Park parade shooting

Judge orders Lindsey Graham to testify before grand jury in Trump election probe Graham's objections to appearing before the grand jury were frivolous and made in bad faith IMO. He may want to claim the 5th Amendment rather than responding truthfully to questions. 

++++

1. Corporate Bonds and Treasuries

I have a major and ongoing allocation out of cash, moving gradually to $1M allocation change, into mostly short term investment grade corporate bonds and treasuries. The result is that I am now 3 months behind in discussing my bond purchases and will continue discussing some purchases out of time order.  

I am not concerned about the value of these short term bonds going down as yields rise. 

Why? 

(1) The purchases are sourced from broker sweep accounts. The income generation is expected to exceed what would have been paid by keeping those funds in broker sweep accounts; 

(2) The income being generated by new bond purchases will far exceed my personal expenses;

(3) I will receive my original investment plus a small profit when the bonds are redeemed by the issuer; 

(4) I am using a bond ladder strategy where there will be a constant flow of redemption proceeds that hopefully can be reinvested in higher yielding, similar credit risk bonds;  

(5) I am still building the bond ladder which is only about 1/2 completed so far; and 

(6) The weighted average maturity will be less than 3 years which reduces interest rate risk.  

A. Bought 2 Public Service Enterprise 2.875% SU Maturing on 6/15/24 at a Total Cost of 99.43:

Issuer: - Public Service Enterprise Group Inc.  (PEG) - A Utility Holding Company

I have owned the common stock but no longer have a position. This bond has a similar yield to the common stock and provides me with more safety as to the return of my money rather than the return on my money. For the most part, I have owned first mortgage bonds issued by a PEG subsidiary known as Public Service Electric & Gas (e.g. PSE&G 2.375% Maturing on 5/15/23 and PSE&G 2.25% Maturing on 9/15/26)

FINRA Page: Bond Detail (prospectus linked)

Credit Ratings: Baa2/BBB

YTM at Total Cost: 3.166%

Current Yield at TC = 2.89%, rounded down

B. Bought 2 Public Service Enterprise 2.875% SU Bonds Maturing on 6/15/24 at a Total Cost of 98.333

This is the same bond discussed above. 

Purchased on 6/30/22. Discussed out of time order.  

YTM at Total Cost =  3.771%

Current Yield at TC = 2.9247%

C. Bought 2 Bank of Nova Scotia 2.44% SU Maturing on 3/11/24 at a Total Cost of 98.877


Issuer: Bank of Nova Scotia  (BNS) 

FINRA Page: Bond Detail

Credit Ratings: A2/A- Credit Ratings

YTM at Total Cost = 3.095%

At the time of this purchase, a treasury maturing on 3/15/24 was trading at a 2.546% YTM.  

Current Yield at TC = 2.47%, rounded up. 

D. Bought 1 Laboratory 2.3% SU Maturing on 12/1/24 at a Total Cost of 97.415


Issuer: Laboratory Corporation of America Holdings  (LH)

FINRA Page: Bond Detail

Credit Ratings: Baa2/BBB

YTM at Total Cost = 3.389%

Current Yield at TC = 2.36%

E. Bought 2 Capital One 3.3% SU Maturing on 10/30/24 at a Total Cost of 99.264:  

Issuer:  Capital One Financial Corp.  (COF) 

COF Analyst Estimates | MarketWatch

FINRA Page: Bond Detail

Credit Ratings: Baa1/BBB

YTM at Total Cost = 3.621%

Current Yield at TC = 3.3245%

F. Bought 1 Boston Property 3.2% SU Maturing on 1/15/25 at a Total Cost of 99,01

Issuer: Operating entity for Boston Properties Inc. (BXP) 

BXP SEC Filings 

SEC Filed Earnings Press Release for the Q/E 3/31/22 

FINRA Page: Bond Detail

Credit Ratings: Baa1/BBB+

YTM at Total Cost = 3.6%

Current Yield at TC = 3.2%, rounded down. 

G. Bought 1 Treasury 2% Coupon Maturing on 5/31/24 at 98.808:

YTM = 2.62%, rounded up. 

Current Yield = 2.04%

H. Bought 1 Treasury 2% Coupon Maturing on 5/31/24 at 98.0376

Purchased 7/8/22. Discussed out of time order. 

This is the same Treasury as discussed in the preceding section. 

YTM at Total Cost = 3.077%

Current Yield at TC = 2.04%

I now own 4.  

I. Bought 2 Walgreens 3.8% SU Maturing on 11/18/24 at a Total Cost of 99.589

Purchased on 6/23/22. Discussed out of time order. 

Issuer: Walgreens Boots Alliance, Inc. (WBA) 

WBA SEC Filings 

SEC Filed Earnings Press Release for the F/Q Ending 2/28/22 (net income of $882M)

Finra Page: Bond Detail (prospectus linked)

Credit Ratings: Baa2/BBB

YTM at Total Cost = 3.98%

Current  Yield at TC = 3.8157%

J. Bought 1 Treasury 2.5% Coupon Maturing on 1/31/25 at 98.425:

Purchased on 6/24/22 and discussed out of time order. 

YTM at Total Cost = 3.109%

Current Yield at TC =  2.54%

I now own 5 bonds bought at progressively lower prices. The first one was bought on 3/29/22 at 99.8291.

K. Participated in Monday's 3 Year Treasury Auction-Bought 2 at 99.7355 Maturing on 7/15/25


YTM = 3.093%

The payment will be sourced from my Schwab sweep account that is paying .15%: 

L. Early Redemption at Par-Oneok 3.375% SU Maturing on 10/1/22

Issuer: ONEOK Inc. (OKE)

This bond was bought at a total cost of 97.01. Item # 2.C. (6/13/20 Post) 

The make whole payment attached to an optional redemption expired on 7/1/22. 

M. Bought 2 Oneok 2.7% SU Maturing on 9/1/24 at a Total Cost of 96.861:

Purchased 7/12/22. Discussed out of time order. 

Issuer: ONEOK Inc.  (OKE)

OKE SEC Filings 

SEC Filed Earnings Press for the Q/E 3/31/22 

Finra Page: Bond Detail

Credit Ratings: Baa3/BBB

YTM at Total Cost = 4.306%

Current Yield at TC = 2.7875%

At the time of purchase, the 2 year treasury yield was at 3.04%, down 4 basis points.  

I now own 6 bonds, including 2 in a RI account. 

I have a small ball position in the common stock. 

2. Small Ball

As discussed in my last post, I am supposed to be redeploying the proceeds from stock sells as well as my interest and dividend income into dividend paying common stock purchases, as recently discussed, but am already way behind in doing so.  

So far, there has not been any difficulty in increasing my dividend yields, as almost everything continues to decline in price. The dominant trend in stocks remains down. 

I am expanding my horizon to include stocks that I have never owned previously.  Two of those, Eaton and Dover, are discussed in this post. So far, I have only started what I call placeholder positions in those stocks. 

I am caught up discussing my stock trades. 

YTD Total Returns (dividends reinvested) through 7/12

Vanguard Value ETF | Morningstar = -9.43%

SPDR® Dow Jones Industrial Average ETF Tr | Morningstar = -13.46%

SPDR® S&P 500 ETF Trust | Morningstar = -19.23%

iShares Russell 2000 ETF | Morningstar = -22.56%

Invesco QQQ Trust | Morningstar = -27.83%

First Trust Dow Jones Internet ETF | Morningstar = -42.21%

A. Bought 2 COWZ at $43.03


Quote: Pacer U.S. Cash Cows 100 ETF Overview

I discussed this ETF in my last post. 

New Average Cost per share = $44.95 (6 shares)

This 2 share purchase lowered my AC per share from $45.91

Sponsor's Website: COWZ | Pacer ETFs

YTD Total Return through 7/12: -7.26%. COWZ – Performance – Pacer US Cash Cows 100 ETF | Morningstar (rated at 5 stars)

B. Bought 10 AOD at $8.07


Quote: Aberdeen Total Dynamic Dividend Fund Overview

Investment Category: Monthly Income Generation


Data as of 7/6/21 Trade Date
Net Asset Value per share: $9.09
Market Price: $8.06
Discount: -11.33%

New Average cost per share = $8.04 (70+ shares)

Snapshot Intraday on 7/6/22 after add 

Dividend: Monthly at $.0575 per share ($.69 annually)

There has recently been significant ROC support for the dividend payments. The stock market's decline so far in 2022 will reduce or eliminate using capital gains to support the dividend. Dividend income is not going to cover this kind of payout.  

2021 Tax InformationForm 8937 

Yield at $8.04 = 8.58%

Last Ex Dividend: 6/21/22

Last Sell DiscussionItem #1.G. Pared AOD- Sold 1.658 Shares Purchased with Dividends at $10.01 (5/28/21 Post) 

AOD Portfolio | Morningstar(not rated)

C. Added 10 PDM at $13.13; 5 at $12.62


Quote: Piedmont Office Realty Trust Inc. Cl A  (PDM)

SEC Filings

Piedmont Office Realty Trust, Inc- Investor Relations

2021 Annual Report

10-Q for the Q/E 3/31/22

Last Buy DiscussionItem # 2.A. Restarted PDM in Schwab Account - Bought 10 at $14.92 (5/26/22 Post) I discussed the 2022 first quarter financial report in that post. SEC Filed Press Release

Last EliminationsItem # 1.A. Eliminated PDM in Schwab Account - Sold 5 at $18.71 and 34+ at $18 (12/31/21 Post)(profit snapshot = $235.88); Item # 2.H. Eliminated PDM- Sold 10 at $17.95 in Fidelity Account and 10 at $18.02 in Vanguard Taxable Account  (1/7/22 Post)(Profit snapshots = $128.95)

Investment CategoryEquity REIT Common and Preferred Stock Basket Strategy

Average cost per share = $13.74 (25 shares)

Dividend: Quarterly at $.21 per share 

PDM Dividend History-Nasdaq

Yield at AC = 6.11%

Last Ex Dividend: 5/26/22

D. Added 5 MATV at $21.65; 5 at $20.75:   


Quote:  Mativ Holdings Inc. (MATV) 

MATV Analyst Estimates | MarketWatch

Website: Speciality Materials Manufacturing 

This company was previously known as Schweitzer-Mauduit International, Inc. and traded under the SWM symbol. 

The name changed to Mativ when the company completed its acquisition of Neenah Papers (NP) earlier this month. SWM and Neenah Complete Merger to Become Mativ, a ~$3 Billion Global Leader in Specialty Materials (7/6/22) 

This was an all stock merger with Neenah shareholder's receiving 1.358 SWM shares for each NP share. 

The NP CEO and President has assumed those roles in MATV. 

Combined Company Business Segments: 

The last sentence in the previous snapshot points to a possible dividend cut.  

NP SEC Filed Earnings Press Release for the Q/E 3/31/22 (revenue at $284.8M; net income at $5.7M, hurt by input and distribution cost inflation as well as a fire at a manufacturing facility fully repaired at quarter's end)  This will be NP's last earnings release as a standalone company. 

MATV SEC Filings 

Average cost per share: $23.01 (25 shares)

Dividend: SWM was paying a quarterly dividend of $.44 per share with the last ex dividend on 5/19/22. If MATV continues that penny rate, and it is not clear that it will, the dividend yield at my current AC per share will be 7.65%. MATV will announce its quarterly dividend next month. 

SWM Discussions

Item # 4.C. Bought 5 SWM at $24; 5 at $23.3 (6/28/22 Post) 

I discussed the 2022 first quarter report in this post and have nothing further to add here: Item # 2.G. Bought 5 SWM at $25.35 (5/26/22 Post)

E. Eliminated MRK- Sold 7 at $93.27; 5 at $93.4


Quote: Merck & Co. Inc. (MRK)

SEC Filings

Pipeline - Merck.com

10-Q for the Q/E 3/31/22 

2021 Annual Report 

Merck nears $40B deal to buy Seagen: WSJ (7/7/22) I am not a fan of large and expensive acquisition of pharma companies unless I own stock in the company being acquired. I have never owned Seagen Seagen Inc. Stock QuoteSeagen SEC Filed Earnings Press Release for the Q/E 3/31/22 (net loss of $136.494M, net product revenues = $383M) 

Last Substantive Buy DiscussionItem # 1.I. Restarted MRK-Bought 1 at $78.12, 1 at $75.9, 1 at $75.13; 2 at $74.5; 1 at $73.49 (2/27/21 Post)

The tax cost basis was adjusted down to reflect the Organon (OGN) spinoff. I still own OGN shares. 

Profit Snapshots: +$293.74

5 shares +$116.44
7 shares +$177.30 

Dividend: Quarterly at $.69 per share, last raised from $.65 effective for the 2022 first quarter payment. MRK  Dividend History | Nasdaq

Last Ex Dividend: 6/14/22

Last Earnings Report (Q/E 3/31/22): Merck (MRK) SEC Filed Press Release 

GAAP E.P.S. continuing operations = $1.70; 

Non-GAAP E.P.S. from continuing operations = $2.14 with the consensus at $1.833; 

Revenues from continuing operations up 50% to $15.9B and up 19% excluding revenues from the new Covid drug treatment Lagevrio (Molnupiravir), profits shared equally with Ridgeback

Keytruda revenues at $4.809B, up 23% (30.25% of the total); 

Gardasil  up 59% to $1.46B; 

Animal Health business revenues up 4% to $1.482B; 

Guides 2022 non-GAAP E.P.S. to $7.24 to $7.36 

MRK Trading History: The largest prior realized gains were $741.19 in 2017 and $183.44 in 2016: 

50 shares +$183.44

113+ shares +$741.19

Item # 2.B. Sold 113 MRK at $65.28 (2/19/17 Post)

Other realized gains were below $100 per trade. {e.g. Item # 2.A. Sold 10 MRK at $61.3 (7/15/18 Post)Item # 2.A. Eliminated MRK in Schwab Account - Sold 4 at $81.57 (11/18/21 Post) and Item 1.C. Sold 10 MRK at $61.2 (1/28/18 Post)}

MRK Trading Profits to Date (starting in 2016): $1,355

F. Bought 5 OPI at $20.49; 5 at $19.88

Quote: Office Properties Income Trust  (OPI) 

Management: External

I have an unfavorable opinion of the external management company, as previously discussed, which is an opinion shared by others as reflected in the share price history and dividend yield. 

OPI SEC FILINGS

2021 Annual Report 

10-Q for the Q/E 3/31/22 (174 wholly owned properties, debt discussed at pp. 28-29, mostly SU debt)

Investment Categories: Equity REIT Common and Preferred Stock Basket Strategy and Bond Substitute

Last DiscussionItem # 2.G. Eliminate OPI-Sold 10 at $24.47 (1/7/22 Post)(profit snapshot = $54.13) 

Last Buy DiscussionItem # 2.D. Restarted OPI-Bought 5 at $20.25; 2 at $18.95; 3 at $17.9  (11/13/20 Post)

Average cost per share$20.18 (10 shares)

Dividend: Quarterly at $.55 per share ($2.2 annually)

OPI Dividend History | Nasdaq

Yield at $20.49: 10.9% 

Note the difference in yield compared to the internally managed Office REIT PDM discussed above. 

Last Ex Dividend: 4/22/22 

Last Earnings Report (Q/E 3/31/22): SEC Filed Press Release 

Net Income to FFO to CAD Calculations: 

Net Income per share: ($.28)

Normalized FFO per share: $1.30

Cash Available For Distribution (CAD) per share = $1.06, well in excess of the $.55 quarterly dividend per share 

Revenues: $147.354M

Occupancy: 88.8%

I own OPI SU bonds. 

G. Bought 1 TXN at $148.67-Placeholder in Vanguard Taxable Account


Quote: Texas Instruments Inc.  (TXN) 

52 Week High: $202.26, hit intraday on 10/25/21 

Analog | Embedded processing | Semiconductor company | TI.com

TXN SEC Filings 

2021 Annual Report: SEC Form 10-K 

3 year Summary Financials

Page 24, 10-K for 2021

TXN Analyst Estimates-MarketWatch (As of 7/10, the 2022 E.P.S. consensus was at $8.94, falling to $8.83 in 2023 and $8.64 in 2024. The peak earnings year in this economic cycle is predicted to be this year. Using the $8.83 consensus E.P.S. for 2023, the P/E at $148.67 is 16.83, which is IMO high for a cyclical company when the economy may be entering a recession soon and earnings growth is expected to be negative for at least two years starting in 2023)

I am working my way up to a 1 share position in my Fidelity account. 

I regard the stock as a blue chip that is slightly overvalued at its current price.  

When the Stock Jocks are in a state of exuberance about semiconductor stocks, which is not the case now (see 1 year VanEck Semiconductor ETF (SMH) Interactive Stock Chart), TXN may move further into overvalued territory, as it did when the price moved into a $175 to $200 channel as shown below.  

2 Year Chart as of 7/8/22:  

TXN Stock Historical Prices & Data - Yahoo Finance

TXN is properly classified as a cyclical company and consequently its earnings during peak economic periods need to be discounted and smoothed out when placing a multiple on E.P.S. The cyclicality is being expressed in analyst forward E.P.S. estimates and in TXN's earnings history. 

Dividend: Quarterly at $1.15 per share

Yield at $148.67 = 3.094%

Last Ex Dividend Date: 5/6/22

Last Earnings Report (Q/E 3/31/22): SEC Filed Press Release

E.P.S.  = $2.35, up from $1.87 in the 2021 first quarter 

Consensus at $2.18

Revenues: $4.905B

Free Cash Flow $1.701B

Cash Return to Shareholders through Dividends and Share Repurchases: 


Due to issues relating to China's Covid lockdowns, TXN reduced the mid-point of its 2nd quarter guidance by 10%. 


Prior Round-Trips: None

Analyst Reports (available to Schwab customers): 

Morningstar (4/27/22): 3 stars with a $166 FV, reduced from $172, wide moat. 
S&P (4/27/22):  3 stars with a 12 month PT of $175
Argus (4/27/22): Buy with a PT of $225.  
Credit Suisse (4/27/22): Outperform with a 12 month PT of $195, reduced from $200 

Purchase Restriction: 1 share lots with each subsequent purchase having to be at the lowest price in the chain. 

H. Bought 1 ETN at $128.36- Placeholder

Quote: Eaton Corp. PLC  (ETN) 

52 week high: $175.72, hit intraday on 11/16/21. The percentage decline from $175.72 to $128.36 is 26.95%.  

ETN Analyst Estimates | MarketWatch (As of 7/11/22, the consensus E.P.S. for 2022 was at $7.5; at $8.31 for 2023; and at $8.92 for 2024. Using the 2023 E.P.S. estimate and a $128.36 price, the P/E is 15.45, which is about right IMO assuming no recession crushes the forward estimates). 

ETN Profile-Reuters 

ETN Key Metrics-Reuters 

ETN SEC Filings 

SU Credit Ratings: Baa1/A-  

Of the outstanding bonds, I am considering a purchase of one: 3.103% SU Maturing on 9/15/27 

10-Q for the Q/E 3/31/22 

2021 Annual Report 

3 Year Financial Data Summary: 

Page 24, Annual Report

Recent Article Discussing ETNBuy Eaton Stock. Shares Could Jump 30%. | Barron's (subscription publication). 

Dividend: Quarterly at $.81 per share ($3.24 annually), raised from $.76 effective for the 2022 first quarter payment. 


Yield at $128.36 = 2.52%, rounded down. 

Last Ex Dividend: 5/12/22

Last Earnings Report (Q/E 3/31/22): SEC Filed Press Release 
GAAP E.P.S. = $1.33
GAAP Net Income = $532M 
Non-GAAP E.P.S. = $1.62, up 13%
Consensus Non-GAAP E.P.S. = $1.6
10% Organic Sales Growth
Revenues: $4.843B

Reconciliation of GAAP to Non-GAAP: 


Analyst Reports (available to Schwab customers): 

Morningstar (5/4/22): 4 stars with a FV of $154, narrow moat. 

Credit Suisse (5/4/22): Outperform with a 12 month PT of $179. 

Argus (5/27/22): Buy with a $180 target price

S&P (5/17/22): 3 stars with a 12 month PT of $154

I do not have access to the Barclay's 7/8/22 report, where its analyst lower the PT to $112 from $120, and reiterated an underweight ratings. In the Barron's article linked above, the author cites a Morgan Stanley analyst who has a $180 PT based on a 20.75 times multiple. IMO, that multiple is too high give the cyclicality. 

Prior Round Trips: None

Purchase Restriction: 1 or 2 share lots with each subsequent purchase having to be a the lowest price in the chain. 

I. Bought 1 DOV at $122.28- Placeholder:  


Quote: Dover Corp.  (DOV) 

52 Week High: $184.05 

Dover Profile-Reuters 

Dover Key Metrics-Reuters 

I regard Dover as a blue chip industrial stock that serves primarily niche markets where it has a 1 or 2 leadership position. 

When I have looked at a possible purchase, I thought the valuation was too high and the dividend yield too low. 

Most of the time, however, the stock has just been out-of-sight and out-of-mine for me. 

After I recently noticed that the $60+ per share price collapse from the October 2021 high, which brought the stock into what I viewed as a fair value range, I decided to pay more attention to this stock going forward which resulted in a 1 share placeholder purchase. 

DOV Analyst Estimates | MarketWatch (Unlike TXN, the analyst's expect earnings growth for DOV. The consensus E.P.S. for 2022 was at $8.51 as of 7/10/22; at $9.25 in 2023; and at $10.02 in 2024.) 

DOV SEC Filings 

2021 Annual Report 

10-Q for the Q/E 3/31/22 ( "A majority of the Company’s revenue is short cycle in nature with shipments within one year from order. A small portion of the Company’s revenue derives from contracts extending over one year.")

3 Year Financial Summary:

Page 31, Annual Report

Long Term Debt

Amounts in Thousands

SU Credit Ratings: Baa1/BBB+

Of those bonds, I am looking at 2 for potential purchases: 2.95% Maturing on 11/4/2029 and 3.15% Maturing on 11/15/25 

Dividend: Quarterly at $.50 per share, last raised from $.495 effective for the 2021 third quarter payment. 

DOV Dividend History | Nasdaq

While Dover has increased its dividend for 66 straight years, the percentage rate is slow. The 2013 quarterly dividend was at $.375 per share. Dividend Aristocrats In Focus: Dover Corporation - Sure Dividend

Yield at $122.28 = 1.64%, rounded up. 

Last Ex Dividend: 5/27/22

Last Earnings Report (Q/E 3/30/22): SEC Filed Press Release 

GAAP E.P.S. = $1.56

Non-GAAP E.P.S. = $1.9

Consensus Non-GAAP = $1.83

GAAP to Non-GAAP Reconciliation: The most significant adjustment is for acquisition related amortization. 

Revenues: $2.052B, up from $1.868B in the 2021 first quarter. 

"In 2022, Dover expects to generate GAAP EPS in the range of $7.39 to $7.59 (adjusted EPS of $8.45 to $8.65), based on full year revenue growth of 8% to 10% (7% to 9% on an organic basis)."

Analyst Reports (available to Schwab customers): 

Morningstar (4/21/22): 4 stars with a FV of $169 with a narrow moat. 

S&P (4/25/22): 4 stars with a 12 month PT of $180.  

Prior Round-Trips: None

Purchase Restriction: 1 or 2 share lots with each subsequent purchase having to be at the lowest price in the chain. 

J. Added 5 HPP at $14.41

Quote: Hudson Pacific Properties Inc.  (HPP)

Website: Hudson Pacific Properties: A West Coast Real Estate Group

HPP SEC Filings

2021 Annual Report

Investment Category: Equity REIT Common and Preferred Stock Basket Strategy

Average cost per share =  $14.83 (10 shares)

Dividend: Quarterly at $.25 per share

Yield at new AC = 6.74%

Last Ex Dividend: 6/16/22

I discussed HPP in my last post and have nothing further to add here. Item # 5.C. Started HPP with a 5 Share Purchase at $15.26 (7/6/22 Post) 

K. Added 5 BBDC at $9.49-Vanguard Taxable

Quote: Barings BDC Inc.  (BBDC)

Website: Company Overview

Management: External

BBDC SEC Filings

2021 Annual Report

10-Q for the Q/E 3/31/22 Summary terms of investments starts at page 8. Borrowings discussed staring at page 75. 

Last DiscussedItem #2.A. Bought 20 BBDC in Vanguard Taxable Account at $10.34 (4/7/22 Post) I discussed the 2021 4th quarter report in that post. SEC Filed Press Release

Average cost per share this account$10.17 (25 shares)

Dividend: Quarterly at $.23 per share 

Dividend History-BBDC

Yield at new AC this account: 9.05%, rounded up.

Last Ex Dividend: 6/7/22

Last Earnings Report (Q/E 3/31/22): Barings BDC (BBDC) SEC Filed Press Release

Net investment income of $19M or $.23 per share, in line with consensus; 

Net asset value per share = $11.86, up from $11.36 as of 12/31/21; 

Weighted average yield on performing debt investments = 7.3%; 

Increased the quarterly dividend to $.24 per share from $.23 

L. Added 5 BDN at $9.05

Quote: Brandywine Realty (BDN)

SEC Filings

2021 Annual Report

Our Properties | Brandywine Realty Trust

New Average cost per share: $9.97 (20 shares)

Dividend: Quarterly at $.19 per share ($.76 annually)

Yield at New AC = 7.62%, rounded down. 

Last Ex Dividend:  7/5/22 (owned 15 as of) 

Last DiscussedItem # 2.G. Bought 5 BDN at $9.27 (6/22/22 Post) 

Last Substantive DiscussionItem # 2.E. Restarted BDN - Bought 10 at $10.79 (5/26/22 Post) I discussed the first quarter report in that post and have nothing further to add here.  

Last EliminationItem # 2.F. Eliminated BDN - Sold 15+ at $13.51 in Schwab Account and 20 at $13.5 in Fidelity Account  (1/7/22 Post)

BDN Realized Gains to Date: $440.52

K. Eliminated INCY in Schwab Taxable Account - Sold 5 at $81.13


I am gradually culling non-dividend paying stocks where I still have a profit.  

Quote: Incyte Corp.

INCY Analyst Estimates

INCY SEC Filings

2021 Annual Report

Profit Snapshot: $66.15

Dividend: None and none expected. 

Last Substantive DiscussionItem # 4.G. Eliminated INCY in Vanguard Taxable Account - Sold 4 at $80.12; Item #4.H. Pared INCY in Schwab Taxable Account -Sold 2 at $80.12; and Item #4.I. Pared INCY in Fidelity Taxable Account-Sold 2 at $81.1 (4/21/22 Post)(profit snapshots = $46.27). I discussed the 2021 4th quarter earnings report in that post. 

Last Buy DiscussionItem # 1.I. Added to INCY in Fidelity Taxable- Bought 2 at $72.8; 1 at $71.5; 1 at $70.5; 1 at $69.3; 1 at $68.18; 1 at $66.8; 1 at $65.28 (4/29/22 Post) I still own 10+ shares in that account with an AC at $69.6 per share. I will probably eliminate that position somewhere in the $82 to $85 range.  

Last Earnings Report (Q/E 3/31/22): SEC Filed Press Release 

GAAP E.P.S. = $.17

Non-GAAP E.P.S. = $.55

GAAP to Non-GAAP Reconciliation: 

GAAP Revenue = $733.235M, up from $604.718M in the 2021 first quarter

INCY is still highly dependent on 1 approved drug: 

2022 Guidance:

L. Eliminated VYGR in Fidelity Account-Sold 10 at $6.82

Quote: Voyager Therapeutics Inc. (VYGR) 

VYGR Analyst Estimates | MarketWatch

SEC Filings

2021 SEC Filed Annual Report

SEC Filed Financial Report for the Q/E 3/31/22 (net loss of $21.2M; cash = $166.8M as of 3/31/22)

Investment Category: Lottery Ticket Basket 

Profit Snapshot: +$34.16  (7/12/22 sale only) 


Last Discussed
Item # 2.N. Pared VYGR in Fidelity Account- Sold 15 at $5.39 and  Eliminated VYGR in Vanguard Account - Sold 20 at $5.42(3/10/22 Post)(profit snapshots = $41.97) 

Pipeline | Voyager Therapeutics (none of those drugs have made it into trials

The shares popped in March after Novartis entered into a license option agreement. Voyager Therapeutics Announces License Option Agreement with Novartis

The shares popped last October in response to a license deal with Pfizer, but faded thereafter until popping again after the Novartis license agreement announcement. Voyager Therapeutics Announces License Option Agreement with Pfizer

The cash received by VYGR from Novartis and Pfizer will be quickly consumed in advancing VYGR's pipeline. 

I still own 15 shares in another account:

Average Cost per share = $3.71/Price as of 7/12/22 Close

DisclaimerI 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 sale 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 my family members.

17 comments:

  1. I remember unemployment being a trailing indicator.

    Also that pundits normally act like it's a leading indicator every time. Especially when it was simultaneous in the last (unusual 2020) crash.

    I've seen a lot of articles saying it may not be a recession this time because employment is strong, and isn't decreasing. I'm not taking I'm seriously.

    ReplyDelete
  2. My Texas instrument is now underwater. I bought in the 2018 dip, pretty close to the bottom. (That I bought in and out trades, so I have to check what my low price was when I get on my computer.) Garmin that I bought at the same time is still green, but they have a heavy percent of business in defense industries.

    ReplyDelete
  3. Speaking of buying low-yielding bonds to get rid of zero-yielding cash, what do you think about the solvency of TVA? (You're there, and I'm not.) They've got an exchange-traded bond, TVC, due in 2028. They've also got an exchange-traded bond due in 2029, but I haven't looked its the details lately.

    ReplyDelete
    Replies
    1. David: TVA is owned by the U.S. government and will have the same credit rating as U.S. debt. Fitch rates the bonds at AAA:

      https://www.fitchratings.com/research/us-public-finance/fitch-rates-tennessee-valley-authority-global-power-bonds-aaa-outlook-negative-13-09-2021

      The negative outlook is based on Fitch's opinion about U.S. debt.

      If TVA went bankrupt however, there is no guarantee that the U.S. would bail out the bond owners.
      https://www.gao.gov/products/gao-01-540

      TVA supplies power to public power distribution entities, municipally owned systems and cooperatives, including the Nashville Electric Service who is my provider. I am not aware of any of them ever defaulting on payments. So arguably TVA is a better credit risk than the U.S. government.

      You can buy treasury debt at higher current yields than those TVA exchange traded bonds.

      Since TVA issues publicly traded debt, it files reports with the SEC.
      https://www.sec.gov/edgar/browse/?CIK=1376986&owner=exclude

      I have not owned the TVA exchange traded bonds. The current TVE "reset" coupon is just 2.216% and can be adjusted down:

      https://tva.q4ir.com/investment-opportunities/putable-automatic-rate-reset-securities/default.aspx

      I can not find the prospectuses. The reset process is explained here:

      https://tva.q4ir.com/investment-opportunities/2020-rate-reset-calculations/default.aspx

      The reset and put options to TVA are explained here:
      https://seekingalpha.com/article/4514437-tve-and-tvc-the-safest-bonds-that-trade-on-the-exchange-are-mispriced

      Delete
  4. As of 2:49 CT, the CME FedWatch Tool has a 78.6% chance that the FED will increase the FF rate by 1% later this month, up from 14.2% shortly before the CPI report was released earlier today and 41.6% shortly after that release. The odds 1 week ago were at zero.

    I view it as almost a sure thing that the FED will raise by 1% to a 2.5% to 2.75% FF target range. Maybe there is a 10% chance of a .75% increase.

    As I have said many times here, the FED was so far behind the curve that it needed a telescope to see the curve when it continued ZIRP and QE into 2022. And, I doubt that a 2.75% FF rate will have any material impact on inflation. Perhaps investors need to review the history from the last period when inflation was this hot as background information when formulating an opinion on how effective currently anticipated increases will have on 9+% annual inflation rates.

    The ten year yield fell today, probably due in part to a belief that the FED may actually do something down the road that reduces problematic inflation to an acceptable range and will be successful in doing so. That does not seem like a rationale thought to me. A somewhat rationale reason would be a flight to safety when stocks look iffy for positive nominal returns.

    ReplyDelete
  5. JPM and MS missed earnings expectations. JPM increased its loan loss reserves in anticipation of a recession.

    "JPMorgan Chase earnings fell 28% after building reserves for bad loans, bank suspends buybacks"
    https://www.cnbc.com/2022/07/14/jpmorgan-jpm-2q-2022-earnings.html

    I own 4 JPM and 2 MS which are still in unrealized profit territory.

    The Atlanta Fed revised its forecast for 2nd quarter real GDP growth to -1.2%.
    https://www.atlantafed.org/cqer/research/gdpnow


    ILPT blew up this morning after cutting its dividend to 1 cents. The reason given is that it is having trouble arranging for long term financing for its recently closed Monmouth REIT acquisition. I had previously mentioned that I would consider rounding up my position to 100 shares when and if the price declined below $13.

    Item # 2.J.
    https://tennesseeindependent.blogspot.com/2022/06/amkby-bdn-calf-ftklx-hbi-mdt-mpw-ncz.html

    I am postponing that average down until I see news that this problem is resolved. As previously discussed, I view the external manager with extreme disfavor.

    Industrial Logistics Properties Trust
    $10.45 -$3.58 -25.52%
    Last Updated: Jul 14, 2022 at 9:56 a.m. EDT
    https://www.marketwatch.com/investing/stock/ilpt?mod=search_symbol

    The impression that management had previously left was that the financing was a done deal

    ReplyDelete
  6. Notably ,Finviz doesn't include articles about Warren's letter in their newslist for FHN.
    https://finviz.com/quote.ashx?t=FHN

    So her letter's not hot stuff. It's not bubbling to the top.

    Most earnings articles don't mention the merger.
    https://finance.yahoo.com/news/why-first-horizon-fhn-down-162304214.html

    So it's not being baked in.

    Analysts, price points may explain not being at $25. (I don't take their recommendations into account. But the market does.)

    Out of 7 analysts, 0 (0%) are recommending FHN as a Strong Buy, 1 (14.29%) are recommending FHN as a Buy, 6 (85.71%) are recommending FHN as a Hold, 0 (0%) are recommending FHN as a Sell, and 0 (0%) are recommending FHN as a Strong Sell.

    Even price targets are 21, 22 as well as $25.

    https://www.wallstreetzen.com/stocks/us/nyse/fhn/stock-forecast





    ReplyDelete
    Replies
    1. Land: The current FHN price reflects significant doubt that the deal will close. If there was never a TD offer to acquire, FHN shares would probably be around $16-$17. The FHN price is currently about midway between where it would have been without an offer and the $25 per share TD offer price.

      Delete
    2. Definitely some doubt out there. I'm waiting for more down before buying more.

      Delete
  7. The Fed's next meeting is on 7/27. The probability that the FF will be increased at least .75% is still at 100%. The probability of a 1% increase has fallen to 33.2% as of 7:52 CT. There was a spike to almost 80% in that probability shortly after the last CPI report.


    The Atlanta Fed revised its forecast for 2nd quarter real GDP growth to -1.5% from -1.2%.
    https://www.atlantafed.org/cqer/research/gdpnow

    If job growth remains near 300K per month, it would be hard to characterize the 1%+ negative real GDP numbers as a "recession" but merely a significant slowdown from robust 2021 growth numbers. Some special factors are negatively impacting GDP which I previously discussed, while consumer spending has remained a positive contributor.

    The malaise created by JPM's earnings report last week was relieved by the one released by Citigroup, which rose 13.23% last Friday.

    Goldman Sachs reported better than expected earnings this morning. GS reported E.P.S. of $7.73 with the consensus at $6.56.

    ReplyDelete
    Replies
    1. Wheee. And down the market goes.

      Not sure what triggered it this time. A touch of reality dawned?

      This morning seemed to rise on the idea that the Fed would go easy on rates. I don't get it. Easy means inflation won't get tackled at all, even by that meager amount. Maybe Citi's positive earnings along among the big banks, created optimism.

      Delete
    2. Land: Optimism currently has a short shelf life. There was a Bloomberg report that Apple will be slowing its hiring and spending in anticipation of an economic slowdown. The release of that report was contemporaneous with the market's swoon. If Apple is facing a slowdown then the thinking is that just about every other company will.

      For a recession, job growth will first taper to barely positive before turning negative. Maybe that will happen soon. If it does, I would first expect a a low positive number (e.g. 50K) and a significant downward revision in the two prior months. So far, the reported job increases and upward revisions for the two prior months is not consistent with the onset of a recession.

      Delete
    3. Ah, it was the Apple report.

      I thought employment is a trailing indicator. By the time it's gone down the recession has started? So all the company slowdowns will eventually show up in that data if they continue.

      Customer sentiment is very low, yet spending isn't. That too confounds figuring out direction.

      Inflation will be down in the next report because gas prices are down. So that may shift expectations and stop a recession from materializing.

      Stocks aren't cheap across the board yet. So more correction would be a appropriate. I could use more.

      Delete
    4. Land: Employment may lag but not by much. There will generally be a trend down in growth and a low positive or negative number during a recessions first month. The unemployment rate may only tick up slightly before accelerating as businesses respond with layoffs to deteriorating economic conditions.

      NBER, who calls the start and end of a recession, will take several months to determine those dates.

      https://www.nber.org/research/business-cycle-dating

      Employers may keep hiring even though business is slowing since it is not obvious yet to them that the deterioration will be more than temporary.

      Look at the data that I provide in this post.

      Delete
    5. The nber data has recessions marked just after employment tops.

      If employment's holding up now, maybe the recession is a bit further off even though the slowdown is here.

      It's been thought in articles/media that it means there may not be a recession. It's possible the economy and inflation will improve before employment slows so won't happen. But that's quite a window to thread. (Needle to thread.)

      Otherwise, it will take more slowdown before the snowball starts. Maybe the delay is because so many optimists are running the show, and don't believe a recession can happen, even while they predict one. Yep, I'm going to bank on that. It feels consist with the last few years.

      Delete
    6. Land: It simply does not fit historically to have 300,000+ new jobs per month and an ongoing recession occurring at the same time.

      While job openings has dipped some from the recent high, the number is still robust at 11.254M in May.
      https://fred.stlouisfed.org/series/JTSJOL

      I suspect that hiring in many industries has slowed, as indicated by several recent announcements by large tech companies.

      Some firms may be trying to reduce the negative impact of inflation on margins by laying off some workers.

      On the stimulative side, millions of households will have more disposable income generated by their savings. The aggregate total is rapidly moving toward a $400B annual increase in income, give or take a $100B.

      I did a little better today investing in my cash flow, spending about $500 on new stock purchases which I will discuss in my next post.

      Delete
  8. I have published a new post:
    https://tennesseeindependent.blogspot.com/2022/07/aio-bmrn-dov-hpp-hr-matv-slrc.html

    ReplyDelete