Economy:
As expected, the FED raised the FF rate by .75% last week. The new range is 3% to 3.25%. The market was not spook by that increase but by the FED raising its projection of the appropriate year end FF rate for both 2023 and 2024 and lowering its projections for real GDP growth:
The Fed - September 21, 2022: FOMC Projections materials, accessible version
The downward revisions in real GDP growth for 2022-2023 will feel like a recession to many businesses.
Dot plot:
Of the 19 members, 12 are predicting at least a 4.75% FF midpoint by year end 2023.
A question is whether the FED will continue raising the FF rate when the data clearly shows the economy entering a recession.
The current treasury yield curve is consistent with a FF rate somewhere in the 4.25% to 4.75% range starting late this year, rising to 4.5% to 5% by year end 2023, with no cut prior to 2024. Prior to this release, the Bond Ghouls and Stock Jocks were expecting a rate cut sooner and lower tops in 2022 and 2023.
Interest rates continue to surge and that has taken the USD to new highs against other major currencies.
 |
| 10 year at highest yield in 12 years |
To keep the current 10 year treasury yield in historical perspective:
The Dollar Index hit a new 20 year high. U.S. Dollar Index Price - Barchart.com
1 Euro will currently buy about US$.96. Euro to US Dollar Exchange Rate Chart | Xe
The strength in the USD will restrain inflationary pressures by reducing the cost of imports. However, the products of U.S. exporters become less competitive in international markets; U.S. multinationals will take accounting hits to earnings; and foreigners will be less willing at some point to use their weak currencies to buy assets priced in USDs. While I generally view the strong USD as a net plus, the recent parabolic rise is doing more harm than good IMO, more so in the stock market than in the economy.
The rapid rise in interest rates and the USD are major contributing causes to downside movements and major disruptions/volatility in the stock, bond, commodity and other markets.
YTD Total Returns through 9/26/22 (based on price):
PIMCO 25+ Year Zero Coupon US Treasury ETF | Morningstar -36.86%
iShares 20+ Year Treasury Bond ETF (TLT)-Morningstar -29.08%
iShares 7-10 Year Treasury Bond ETF | Morningstar -16.33%
iShares Investment Grade Corporate Bond ETF (LQD)-Morningstar -20.82%
Invesco DB US Dollar Bullish | Morningstar +19.63%
SPDR® S&P 500 ETF Trust | Morningstar -22.41%
Vanguard Real Estate ETF | Morningstar -28.49% (a sector viewed by many investors as a bond substitute)
++++
War Crimes Have Been Committed in Ukraine, U.N. Experts Say - The New York Times ("Russian soldiers have raped and tortured children in Ukraine".) War crimes are committed by Russian soldiers virtually every day. Russian soldiers have a long history of raping children and women. Rape during the occupation of Germany - Wikipedia (estimates in the hundreds of thousands)
Putin once again threatened nuclear holocaust unless the western democracies cease providing arms that make Ukraine more able to defend its democracy against Russia's unprovoked invasion. Putin Raises Nuclear Threat Following Battlefield Losses | Time; Putin flirts again with grim prospect of nuclear war – this time he might mean it | Russia | The Guardian; Putin issues ominous nuclear threat after losses in Ukraine - YouTube; Zakaria explains what Putin's nuclear threat tells us about him - YouTube If Putin wants to use tactical nuclear weapons in Ukraine, no one in Russia can stop him or hold him to account.
Putin announced last week that Russia would mobilize 300,000 for his war. Russia calls up 300,000 reservists, says 6,000 soldiers killed in Ukraine-Reuters
There was no mobilization for Russia's war in Afghanistan. The prior two mobilizations were in WWI and WWII.
The Russian Defense Minister, Sergei Shoigu, assured those who will be sent to Ukraine and their families there was no reason for concern since only 5,937 Russian soldiers have been killed in action according to Shoigu, an obvious farcical and false claim. The war is going so swimmingly for Russia that it only had to call up 300,000 reservists. Russia's regular military and a very large contingent of mercenaries hired by Putin are losing the war against Ukraine. The number of Russian soldiers killed in action or wounded is close to 100,000 according to independent observers. That is why Russia needs an additional 300,000 troops.
Video Reveals How Russian Mercenaries Recruit Inmates for Ukraine War - The New York Times; Russian mercenary group recruits prisoners to fight in Ukraine - YouTube; Ukraine hits Russian Wagner mercenary HQ in east - BBC News
Russia is escalating the conflict by annexing into the Russian federation more of Ukraine's internationally recognized territory. Almost the entire world will reject that annexation as a violation of international law by a rogue nation that its digging itself deeper into a permanent pariah status among civilized countries. Russia rounds up Ukraine voters at gunpoint for staged referendums - The Washington Post This escalation makes a peace treaty even more unlikely. Putin is all in.
Russia is forcing Ukrainians to join its fight against Ukraine and their fellow countrymen. Russia Begins Mobilizing Ukrainians to Fight Against Their Own Country - The New York Times, republished at MSN.com, Russia Begins Mobilizing Ukrainians to Fight Against Their Own Country
Putin started the war in eastern Ukraine back in 2014, shortly after Russia seized Crimea, internationally recognized as part of Ukraine, and is consequently responsible, along with his Russian controlled proxies, for all Ukrainian casualties on both sides. Russo-Ukrainian War - Wikipedia; Russian military vehicles enter Ukraine-The Guardian (8/15/14)
Russia's Sergey Lavrov Warns U.S. It Risks Becoming Combatant in Ukraine War Russia is losing a war against the Ukrainian army, so Putin's toad Lavrov apparently wants to involve the U.S. armed forces directly in a shooting war. Putin, Lavrov, Medvedev, the Russian "parliament", the Putin news media, and Russia's Kleptocrats are the enemies of the Russian people. They are the traitors and deserve to be treated as such.
Excerpt Lavrov Speech at U.N. last week: “We have no doubt that Ukraine has finally turned into a Nazi-style totalitarian state where standards of international humanitarian law are trampled underfoot with impunity.” Russia is a 100% pure Orwellian state and Lavrov's comment is just more evidence of that undeniable fact. Lavrov does not care how ridiculous that he sounds.
Putin's Ukraine escalation fuels unease in Russia; Some Russians flee, others protest as Putin calls up reservists for war - The Washington Post Anyone with a functioning brain, who is not a member of Putin's kleptocracy, would have left Russia years ago. Drone video shows massive traffic jam as Russians flee the country - YouTube It will only get worse as time goes by.
Putin’s Kremlin Is in Disarray - The Atlantic
Inside Russia’s Vast Surveillance State: ‘They Are Watching’ - The New York Times Russia is of course a totalitarian state totally controlled by 1 man. This NYT article is based on 160,000 files generated by Russia's internet snoop Roskomnadzor that someone publicly released earlier this year. The Russian government surveillance of its citizens social media, telephone, message services and other communication outlets is all pervasive. I recall the joint statement released earlier this year where the totalitarian regimes in China and Russia declared that they would bring true democracy and social justice to the world.
Ivan Pechorin, Russian businessman, found dead Many of the deaths are Russian businessman associated with the two largest Russian energy companies. Russia: Lukoil chairman who criticized invasion of Ukraine dies (he "fell" from a window)
Opinion | Putin and Trump, the Solo Soulless Saboteurs - The New York Times by Maureen Dowd (Putin and Trump, " long entwined, continue on vile parallel paths. They would rather destroy their countries than admit they have lost. They have each created a scrim of lies to justify lunatic personal ambition")
New York AG sues Trump, 3 of his children and their company, charging large-scale business fraud; Read Attorney General Letitia James' lawsuit against Trump, his children and their company (more than 200 pages); New York AG Letitia James sues Trumps, their business for alleged $250M fraud - The Washington Post; 'Sweeping condemnation': Haberman reacts to NY AG's lawsuit against Trump - YouTube New York also sent criminal referrals to the IRS and the D.A. for the U.S. Southern District of New York. It is at least possible that Don the Con will receive what he so richly deserves IMO.
The Trump Organization Is Fraud All the Way Down - The Atlantic
Financial fraud charges against Trump puts light on abusive tax scheme - POLITICO
11th Circuit finds for Justice Dept. on Mar-a-Lago Trump appeal - The Washington Post; Opinion.pdf Two of the three judges were appointed by Trump. Judge Cannon ruled for Trump. Fellow Trump-nominated judges decimated her order. - The Washington Post Cannon's decision to interfere in the DOJ/FBI ongoing criminal investigations was so outrageous and legally unsupportable that 2 Trump appointed appellate judges did not want to look equally ridiculous by affirming it.
In a recent book, the authors claim that Senator Mitch McConnell, the GOP's minority leader, told his staff that everyone knew that Trump was crazy. Mitch McConnell called Trump ‘crazy’ after Capitol attack, new book says-The Guardian
Trump SPAC changes address to UPS Store as investors pull over $130 million
QAnon fans celebrate Trump's latest embrace of the conspiracy theory - YouTube
This GOP House candidate once railed against women voting - YouTube The GOP congressional candidate was endorsed by Donald. He also opposed in the past women working other than as housewives.
+++
1. Corporate Bonds:
Short term yields spiked in response to the last inflation report. Most of the bonds discussed below were purchased before that spike in July and have consequently fallen in price since their respective purchases.
I am continuing to build my bond ladder that is currently focused on buying treasury bills at auction and short term investment grade corporate bonds. I am on track to increase my interest income by over 50% next year compared to 2021.
A. Bought 1 American Water Capital 3.4% SU Maturing on 3/15/25 at a Total Cost of 99.384:
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Issuer: Wholly owned subsidiary of American Water Works Co. (AWK)
AWK Analyst Estimates-MarketWatch
SEC Filed Earnings Press Release for the 2022 1st Q
AWK guarantees payments through a support agreement:
Finra Page: Bond Detail (prospectus linked)
Credit Ratings: Baa1/A
YTM at Total Cost = 3.645%
Current Yield at TC = 3.42%
On the day of purchase, both the 2 and 3 year Treasury notes closed at 2.82%. The yields have risen to around 4%.
B. Bought 2 AvalonBay Communities 3.45% SU Maturing on 6/1/25 at a Total Cost of 98.959:
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Issuer: Avalonbay Communities Inc. (AVB)
FINRA Page: Bond Detail
Credit Ratings: A3/A-
YTM at Total Cost = 3.832%
Current Yield at TC = 3.4863%
C. Bought 1 AvalonBay Communities 3.45% SU Maturing on 6/1/25 at a Total Cost of 99.52:
%2011:15:24%20.png)
Issuer: See Item #1.B. above.
Finra Page: Bond Detail
Credit Ratings: A3/A-
YTM at Total Cost = 3.713%
Current Yield at TC = 3.47%, rounded up.
D. Bought 2 Lincoln National 3.35% SU Maturing on 3/9/27 at a Total Cost of 98.872:
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Issuer: Lincoln National Corp. (LNC)
LNC Analyst Estimates | MarketWatch
I own the common stock only in a RI account, having bought the position during the 2020 meltdown.
FINRA Page: Bond Detail
Credit Ratings: Baa1/A-
Fitch is at BBB+. Fitch Rates Lincoln National Corp.'s New Senior Unsecured Notes 'BBB+'
YTM at Total Cost = 3.797%
Current Yield at TC = 3.388%
E. Bought 2 Autozone 3.25% SU Maturing on 4/15/26 at a Total Cost of 98.146:
%204:15:25.png)
Issuer AutoZone Inc. (AZO)
AZO Analyst Estimates | MarketWatch
SEC Filed Earnings Press Release for the F/Q Ending 5/7/22
Finra Page: Bond Detail (prospectus linked)
Credit Ratings: Baa1/BBB
YTM at Total Cost = 3.965%
Current Yield at TC = 3.3114%
F. Bought 2 Brookfield Finance 4% SU Maturing on 4/1/24 at a Total Cost of 99.77:
%204:1:24%204%25.png)
Issuer: Wholly owned subsidiary of Brookfield Asset Management Inc. Cl A (BAM) who guarantees the notes.
I have owned BAM, but do not have a position now.
BAM Analyst Estimates | MarketWatch
Finra Page: Bond Detail (prospectus linked)
Credit Rating: Baa1
YTM at Total Cost = 4.137%
G. Bought 1 WPP Finance 3.75% SU Maturing on 9/19/24 at a Total Cost of 98.038:
.png){kind=small}
Issuer: Wholly owned subsidiary of WPP PLC ADR (WPP) who guarantees the notes.
WPP Analyst Estimates | MarketWatch
WPP Reuters Profile Page (stock price in British Pence)
Finra Page: Bond Detail (prospectus linked)
Credit Ratings: Baa2/BBB
Credit ratings | Investors | WPP
YTM at Total Cost = 4.705%
Current Yield at TC = 3.825%
H. Bought 1 GATX 3.25% SU Maturing on 3/30/25 at a Total Cost of 97.352:
%20.png)
Issuer: GATX Corp.
SEC Filed Earnings Press Release for the Q/E 3/31/22
GATX Analyst Estimates | MarketWatch
FINRA Page: Bond Detail (prospectus not linked)
Credit Ratings: Baa2/BBB
YTM at Total Cost: 4.3%
Current Yield at TC = 3.3384%
I now own 2 bonds.
I. Bought 2 Kilroy 4.75% SU Maturing on 12/15/28 at a Total Cost of 99.26:
%204.75%25%2012:15:28%20.png)
Issuer: Operating entity for Kilroy Realty Corp. (KRC)
SEC Filed Supplemental Financial Report for the Q/E 6/30/22
FINRA Page: Bond Detail (prospectus not linked)
Prospectus (note guaranteed by KRC)
Credit Ratings: Baa2/BBB
YTM at Total Cost: 4.886%
Current Yield at TC = 4.7854%
J. Bought 1 Ventas L.P. 3.5% SU Maturing on 2/1/25 at a Total Cost of 96.767:
Purchased on 9/20/22. Discussed out of time order.
Issuer: Operating entity for Ventas Inc. (VTR) who guarantees the notes.
SEC Filed Earnings Press Release for the Q/E 6/30/22
FINRA Page: Bond Detail (prospectus linked)
Credit Ratings: Baa1/BBB+
YTM at Total Cost = 4.968%
Current Yield at TC = 3.6169%
I now own 2 bonds.
K. Bought 1 Federal Realty 2.75% SU Maturing on 6/1/2023 at a Total Cost of 98.945:
%202.75%25%206:1:2023.png)
Purchased 9/22/22. Discussed out of time order.
Issuer: Federal Realty Investment Trust (FRT)
FRT SEC Filed Earnings Report for the Q/E 6/30/22
10-Q for the Q/E 6/30/22 (debt listed at page 32) The 2.75% SU will be the first bond to mature.
Finra Page: Bond Detail (prospectus linked)
Credit Ratings: Baa1/BBB+
YTM at Total Cost = 4.335%
Current Yield at TC = 2.78%
I now own 3 bonds including 1 in a RI account.
L. Bought 1 Public Service of Colorado 2.9% First Mortgage Bond Maturing on 5/15/25 at a Total Cost of $95.30:
%202.9%25%205:15:25.png)
Purchased 9/26/22. Discussed out of time order.
Issuer: Wholly owned subsidiary of Xcel Energy Inc. (XEL), a utility holding company. XEL SEC Filings
Security: First Mortgage
FINRA Page: Bond Detail (prospectus linked)
Credit Ratings: A1/A
YTM at Total Cost = 4.822%
Current Yield at TC = 3.043%
I now own 3.
In my last post, I discussed a 1 bond purchase at a 96.738 TC, made on 9/13/22. I will likely continue averaging down in 1 bond lots.
M. Bought 2 Welltower 4.5% SU Maturing on 1/15/2024 at a Total Cost of 99.234:
%201:15:24%204.5%25%20.png)
Purchased 9/26/22. Discussed out of time order.
I believe this is the first Baa1 rated bond, maturing within 2 years, that I have bought with a 5%+ YTM in at least 15 years.
Issuer: Welltower Inc. (WELL), formerly known as Health Care REIT, Inc.
SEC Filed Earnings Press Release for the Q/E 6/30/22
Finra Page: Bond Detail (prospectus linked)
Credit Ratings: Baa1/BBB+
YTM at Total Cost = 5.112%
Current Yield at TC = 4.5347%
2. Treasury Auction Purchases:
A. Bought $10,000 Treasury Bill at 9/22/22 Auction:
%2011:22:22%20.png){kind=small}
56 Day Bills
Matures on 11/22/22
Investment Rate: 3.046%
Funds were sourced from my Schwab sweep account that pays .25%.
B. Bought $10,000 Treasury Bill at 9/26/22 Auction:
91 Day Bills.
Matures on 12/29/22
Investment Rate: 3.343%
I redirected proceeds from a 2 month T Bill that matured today that was bought at an investment rate of 2.248%.
The funds were sourced from my Fidelity sweep account that currently has a 7 day SEC yield of 2.32%, up from .01% in early May 2022.
C. Bought $2,000 Treasury Bills at 9/26/22 Auction:
%203:30:23.png){kind=small}
182 Day Bills
Matures on 3/30/23
Investment Rate = 3.85%
3. Treasury Secondary Market Purchases:
Since these purchases were made, short term interest rates have increased in response to the Federal Reserve increasing its FF rate increase forecasts, as discussed above, and the last monthly inflation report.
I am placing more emphasis of redirecting proceeds from maturing bonds into Treasury Bill auctions.
A. Bought 1 Treasury 1.625% Coupon Maturing on 4/30/23 at 98.937:
%201.625%25%204:30:23.png){kind=small}
YTM at Total Cost = 3%
Current Yield at TC = 1.6425%
I now own 4 bonds with 1 held in a RI account.
B. Bought 1 Treasury 2.125% Coupon Maturing on 11/30/24 at 97.554:
%202.125%25%2011:30:24.png)
YTM at Total Cost = 3.23372%
Current Yield at TC = 2.1782%
C. Bought 1 Treasury 2.125% Coupon Maturing on 9/30/24 at 97.804:
%202.125%25%209:30:24.png)
YTM at Total Cost: 3.201089%
Current Yield at TC = 2.1727%
I now own 3 bonds including 1 in a RI account.
4. Small Ball:
For the most part, I am averaging down in small lots. I am not having to wait long before being afforded the opportunity (?) to average down.
The focus is on relatively high yielding stocks.
There will be several small ball purchases in the Equity REIT sector as prices plunge, with many of these stocks back to their March 2020 prices.
When I recently discussed the last earnings report, I will simply link that post and provide information on my new dividend yield.
I do not see anything in the S&P 500 chart that points to a bottom formation.
My current best guess is that the S&P 500 will fall to around 3,300-3,380, the take off point in September 2020 after recovering from the pandemic related selloff and near the pre-pandemic high in February 2020.
NYSE New 52 week Highs and Lows on 9/26/22: New 52 Week Highs and Lows
New Highs: 11 (irrelevant stocks)
New Lows: 1085
While I did not compare the new lows for 9/26/22 to the new lows last week, many of the same stocks are hitting news lows everyday now.
I did increase my stock buying yesterday but will not be discussing more than half of my small ball buys given their number.
CBOE Volatility Index (^VIX) 9/26/22 Close: 32.26 +2.34 (+7.82%)
Current Pattern: Unstable VIX, marked by relatively brief movements below 20, following by spikes into the high 20s and 30s, with a catastrophic pattern having an enhanced possibility.
A. Pared FNB in Vanguard Taxable - Sold 10 at $12.19:
Quote: F.N.B. Corp.
2021 Annual Report (Diluted E.P.S. at $1.23)
FNB Analyst Estimates | MarketWatch
Investment Category: Regional Bank Basket Strategy
Profit Snapshot = $23.65
Last Buy Discussion: Item # 1.C. Added to FNB-Bought 3 at $7; 5 at $6.47; 10 at $6.81 (6/20/20 Post); Item # 4.B. Added 5 FNB at 8.8; 5 at $8.43; 5 at $7.62; 5 at $6.6 (4/30/20 Post)
Average cost per share before pare: $7.70 (67+ shares)
Average cost per share after pare: $7.33 (57+ shares)
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| Price as of 9/20/22 Close |
Dividend: Quarterly at $.12 per share
As previously discussed many times, FNB's dividend history is unfavorable. While it is understandable that the dividend was slashed from $.24 to $.12 in 2009, FNB has not raised the rate since that slash. F.N.B. Corporation (FNB) Dividend History | Seeking Alpha
Part of the problem is FNB's growth through acquisitions has not generated E.P.S. growth to justify much of a dividend increase given the current dividend payout ratio.
Diluted E.P.S. was at $.79 in 2012 ( page 39 10-K) and at $1.16 in 2019 (page 36 10-K)
2020 was an understandable down year.
The payout ratio in 2021 was 39% based on the $1.23 diluted E.P.S.
Even if FNB went to a 50% payout ratio, the annual rate using that $1.23 E.P.S. number would increase to just $.615 from the current $.48.
I quit reinvesting the dividend in this account effective with the 2021 second quarter payment.
E.P.S. 2012 = $.79
E.P.S. 2021 = $1.23
Up $.44 over that period or 55.7%
Yield at AC = 6.55%
Last Ex Dividend: 9/1/22 (owned all as of)
Last Earnings Report (Q/E 6/30/22): SEC Filed Press Release
Comparisons are to the 2021 second quarter.
GAAP E.P.S. = $.30
Non-GAAP E.P.S. = $.31 (excludes 1 cent per share in merger related expenses)
NIM = 2.76%, up from 2.7%
Efficiency Ratio = 55.18%, down from 56.63%
NPL Ratio = .33%, down from .51%
Coverage Ratio = 408.9% (allowance for loan losses to non-performing loans)
Charge off Ratio = Net recovery of .01%.
ROA = 1.05%
ROE = 8.05%
ROTE = 15.53%, down from 15.85%
Tangible Book Value per share = $8.1, down from $8.2
Some Sell Discussions: Item # 2.I. Pared FNB in Schwab Account - Sold Highest Cost 12 Shares at $12.41 (12/10/21 Post)(profit snapshot = $32.89; AC per share reduced to $7.47, 65+ shares); Item # 1.E. Pared FNB in Vanguard Taxable Account-Sold 115 at $12.17 and Item #1.F Pared FNB in Schwab-Sold 100 at $12.95 (2/13/21 Post)(profit snapshots = $123.87); Item # 1.N. Continued to Pare FNB in Schwab Taxable Account-Sold 31 at $13.23 (3/20/21 Post)(profit snapshot = $79.15); Item # 2.C Sold 31 FNB at $12.17 and Item # 2.D Sold 100 FNB at $12.17 (11/2/19 Post)(profit snapshots = $122.59); Item # 5.A Sold 20 FNB at $11.42 (9/28/19 Post)(profit snapshot = $18.59); Item # 3.A. Sold 30 FNB at $11.95-Used Fidelity Commission Free Trade (5/18/19 Post)(profit snapshot = $28.09); Item # 1.A. Sold 50 FNB at $13.65-Used Commission Free Trade (9/5/18 Post)(profit snapshot = $28.54); Item # 1.D. Sold 50 FNB at $13.9-Used Commission Free Trade (6/18/18 Post)(profit snapshot = $51.59);Item 2.A. Sold 60 FNB at $14.59 (3/5/2018)(profit snapshot = $66.17); Item # 4.A. Sold 100 FNB at $13.94-Satellite Taxable Account (10/23/17 Post)(profit snapshot = $137.21); Item # 2.C. Sold 57+ FNB at $14.12 (7/3/17 Post)(profit snapshot = $335.42-largest single gain to date); Item 3.A. Sold 50 FNB at $15.53 (3/16/17 Post)(profit snapshot = $182.4); Comment (10/22/16) Sold 100 FNB at $12.9 (no profit snapshot); Item # 1 Sold 50 FNB at $13.13 - Update For Regional Bank Basket Strategy As Of 3/17/16 | Seeking Alpha (profit snapshot = $84.54); Item # 1 Pared FNB: Sold 50 at $10 and 50 at $10.18 (12/23/2010)(profit = $84.25) Other profit snapshots are in my Gateway post for the Regional Bank Basket Strategy.
FNB Realized Gains to date: $1,644.5
B. Pared GIS in Fidelity Account - Sold 5 at $80.65:
Quote: General Mills Inc
General Mills: Brands overview
The shares popped on 9/21/22 in response to an earnings report released earlier that day. In a 9/21 comment, I discussed that report and mentioned that I would probably sell 5 shares later in the day which I did.
As previously mentioned several times, GIS is my favorite packaged food company. I have a favorable opinion of the diversification into pet foods/treats and and organic food offerings.
Profit Snapshot: +$112.89 (9/21/22 sale only)
New Average cost per share this account: $55.94 (55 shares)
 |
| Snapshot Intraday on 9/21/22 |
Dividend: Quarterly at $.54 per share ($2.16 annually), last raised from $.51 effective for the 2022 third quarter payment. General Mills, Inc. (GIS) Dividend History | Seeking Alpha
Yield at New AC = 3.86%
Last Ex Dividend: 7/7/22
Last Earnings Report (1st Fiscal Quarter ending 8/28/22)
GAAP E.P.S. = $1.35, up 32%
Non-GAAP E.P.S. = $1.11, up 13% in constant currency.
"Net Sales increased 4 percent to $4.7 billion, including a 5-point headwind from net divestiture and acquisition activity and 1 point of unfavorable foreign currency exchange. Organic net sales increased 10 percent, driven by positive organic net price realization and mix, partially offset by lower organic pound volume, including the impact of a voluntary recall on certain international Häagen-Dazs ice cream products."
"First-quarter net sales for the Pet segment increased 19 percent to $580 million, primarily driven by favorable net price realization and mix. Net sales results included a 5-point benefit from the pet treats acquisition. Organic net sales were up 14 percent. Segment operating profit increased 7 percent to $123 million, primarily driven by favorable net price realization and mix and HMM cost savings, partially offset by input cost inflation and higher SG&A expenses."
Organic net sales in the North America retail segment rose 12% and the operating profit was reported at $778M, up 20%.
While sales to the foodservice segment (e.g. restaurants) has recovered from the pandemic, with organic sales up 18%, cost pressures caused a 25% reduction in profit to $54M.
Raised Fiscal 2023 Guidance:
Buy Discussions: Item 3.L. Added to GIS in Fidelity Account-Bought 1 at 58; 1 at $57.67 (8/20/21 Post); Item # 1.G. Added to GIS in Fidelity Taxable Account-Bought 5 at $55.9; 5 GIS at $55.5; 5 at $55.2; 5 at $54.9; 5 at $54.5; 5 at $54 (2/6/21 Post); Item # 1.A. and 1.B. Started GIS in Schwab Taxable account and Added to GIS in Fidelity Taxable Account (1/9/21 Post)
The lowest price paid over the past 5 years was $36.75. Item # 5 A. Bought 2 GIS at $40.25, 2 at $39.45, 10 at $38.3 and 5 at $36.75-Used Commission Free Trades (12/29/18 Post)
Last Sell Discussions: Item # 2.B. Sold 2+ GIS at $67.1 and 3 at $69.22 (1/7/22 Post)(profit snapshots = $46.67); Item # 3.B. Sold 1.582 GIS at $64.42 - Eliminated Shares Bought with Dividends (6/4/21 Post)(profit snapshot = $8.09); Item # 1.A. Pared GIS in Fidelity Taxable-Sold 4 at $61.37 (4/17/21 Post)(profit snapshot = $9.95); Item # 1.A. Eliminated GIS-Sold 27+ at $54.86 (3/21/20 Post)(profit snapshot = $426.37); Item # 1.A. Sold 13 GIS at $55.02-Used Commission Free Trade (8/17/19 Post)(profit = $134.13); Item 1.B. Sold Highest Cost GIS lots at $51.69 (4/7/2019 Post); Item #2.A. Sold 10 GIS at $56.18-Used Commission Free Trade (12/21/17 Post) Snapshots of 2007 through 2017 round-trip trades can be found in Item 1.B (+$1,809.99). The largest single gain was $1,285.51 realized on a 52 share lot in 2016. There have not yet been any realized losses.
GIS Realized Gains to Date = $2,532.25
C. Added 2 NVS at $78.3; 1 at $76.2; 1 at $74.56 :
Quote: Novartis AG ADR
52 week price range: $74.09 (hit yesterday)-$94.26
2021 SEC Filed Annual Report: 20-F
NVS Analyst Estimates | MarketWatch
Novartis AG (ADR) Key Metrics | Reuters
Novartis Pipeline | Novartis- Extensive
Last Buy Discussion: Item # 2.D. Added 1 NVS at $79.4 (4/7/22 Post)
Investment Categories: Dividend Growth/Large Cap Valuation
New Average Cost per share = $81.17 (12 shares) I am currently averaging down in 1 or 2 share lots.
Dividend: Paid annually in Swiss Francs, converted into USDs for the owners of NVS at the then prevailing CHF/USD exchange rate. Swiss Franc to US Dollar Exchange Rate Chart | Xe
The Switzerland/U.S. tax treaty allows Switzerland to withhold a 15% tax, but more may be withheld when a broker fails to claim treaty rights for their customers.
A small fee for the ADR custodian, based on the number of shares owned, will be collected from the NVS dividend.
The last USD dividend was at $3.3252497.
Yield Using US$3.325 and $81.17 AC = 4.0966%
Last Ex Dividend: 3/8/22
Other Material Recent News:
Novartis dons 'US-first' mindset amid group wide overhaul
Novartis sold its stake in Roche last December for $20.7B
Last Earnings Report (Q/E 6/30/22): Underwhelming IMO.
Comparisons are to the 2021 second quarter,
Reported in USDs
CC = Constant Currency
Non-GAAP E.P.S. = $1.56 with consensus at $1.50, down from $1.66 (up 1% in CC)
Excluding the impact of Roche core income included in the NVS 2021 second quarter results, earnings rose 2% as reported and 10% in CC.
GAAP E.P.S. = $.77
Revenue = $12.781B, down 1% in USDs and +5% in CC.
Free Cash Flow = $3.304B, down from $4.325B, "mainly due to lower divestment proceeds and unfavorable changes in working capital."
Growth Drivers:
Last Sell Discussions: Item # 3 Sold 108+ NVS at $83.66 (9/12/18 Post)(profit snapshot = $968.85, the largest single trading gain to date); Item # 1 Eliminated NVS-Sold 29 at $86.35 (10/24/18 Post)(profit snapshot $298.77); Item # 3.D Sold 10 NVS at $85.96 and 5 at $86.5-Used Commission Free Trades (10/10/18 Post)(profit snapshot = $32.98); Item 2.A. Sold 30 NVS at $93.85 (2/3/18 Post)(profit snapshot = $184.26); Item # 3 Sold 50 NVS at $41.86 (6/17/2009 Post)(profit snapshot +$230.94) Since those sell discussions, NVS spun out Alcon Inc. (ALC).
NVS Realized Gains to Date: $1,715.8
Analyst Reports (available to Schwab customers):
Morningstar (9/19/22): 4 stars with a FV of US$90 and a wide moat
S&P (8/29/22): 3 stars with a 12 month PT of $96
Argus (7/29/22): Hold. The concerns expressed by this analyst include shrinking margins in the Sandoz generic business, increasing competition from generics in its oncology portfolio, and competition for the largest revenue drug Cosentyx.
D. Added to GMRE - Bought 5 at $9.45; 5 at $9.10 - Schwab Taxable Account:
Quote: Global Medical REIT Inc. (GMRE)
52 week range: $8.65 (hit yesterday)-$18.51
10-Q for the Q/E 6/30/22 (too much debt based on spreads to SOFR)
Average cost per share this account: $9.96 (25 shares)
Working my way up to 100 shares in 5 share lot purchases.
Dividend: Quarterly at $.21 per share
I just changed my reinvestment option from cash to reinvestment.
Yield at Average cost per share = 8.4337%
Ex Dividend: The 2 five share lots were bought shortly after the ex dividend date.
I discussed this MOB REIT in a recent post and have nothing further to add here. Item # 3.A. Restarted GMRE Again - Bought 10 at $10.66 -Vanguard Taxable Account (9/13/22 Post)
I am just averaging down until I hit 200 shares in all accounts.
E. Added 1 NWL at $16.03; 3 at $15.5; 2 at $14.92; 3 at $14.53-Schwab Taxable :
Quote: Newell Brands Inc.
52 week price range: $14.19- $26.45
NWL Analyst Estimates | MarketWatch
Last Discussed: Item # 3.B. Added to NWL in Schwab Taxable Account- Bought 2 at $18.56; 3 at $18.26; 5 at $17.5 (9/6/22 Post) I discussed the last earnings report in that post. SEC Filed Earnings Press Release
Average cost per share this account: $17.77 (30+ shares)
Working my way up to 100 shares this account, with each subsequent purchases being 1 to 5 shares lots at the lowest prices in the chain.
Dividend: Quarterly at $.23 per share.
Yield at $17.77 AC per share = 5.1773%
Last Ex Dividend: 8/30/22 (owned 10 shares as of)
F. Added to AQN-Bought 5 at $12.88:
Quotes:
USD: Algonquin Power & Utilities (U.S.: NYSE)
CADs: Algonquin Power & Utilities (Canada: Toronto)
AQN Analyst Estimates in USD | MarketWatch
Last Discussed Item # 4.A. Added to AQN in Schwab Taxable Account - Bought 5 at US$13.19 (6/28/22 Post) I discussed the 2022 first quarter report in that post.
I lightened up on AQN by selling 300 shares priced in CADs last April. Item # 1. Sold 300 AQN:CA at C$19.51 (4/21/22 Post)(profit snapshot = C$303)
Average Cost per share this account: $13.95 (40 shares)
Working my way to 100 shares this account. Each subsequent purchase will be 5 shares and must be at the lowest price in the chain. Part of the recent weakness is attributable to the CAD losing value against the USD.
Dividend: Quarterly at US$.1808 ($.7232 annually)
Yield at $13.95 AC = 5.1842%
Next Ex Dividend: 9/28/22
Last Earnings Report (Q/E 6/30/22): SEC Filed Press Release and Detailed Financial Statement
As discussed in that press release, AQN has hit a snag in its effort to acquire Kentucky Power from AEP. It is currently unclear whether that acquisition will be completed due to a West Virginia regulatory issue involving Kentucky Power's 50% ownership interest in the Mitchell coal generating facility located in WV. The issue involves changing operational control to Wheeling Power, another AEP subsidiary, and for Kentucky Power to exit from the plant in 2028. Algonquin Power & Utilities Corp. Announces Agreement to Acquire Kentucky Power (10/26/21 Press Release) Note in that press release that AQN has already sold stock (US$646M) to finance in part this acquisition. Pending consummation, the funds will be used to reduce borrowings under the existing credit facilities.
GAAP: Net loss of $.05 per share
Non-GAAP E.P.S. =$.16
Revenues = $624.3M
GAAP to Non-GAAP Reconciliation: Non-GAAP excludes a negative fair value adjustment to long term holdings.
G. Added to OGN- Bought 5 at $27.72; 5 at $26.4:
Quote: Organon & Co. (OGN)
OGN Analyst Estimates | MarketWatch
Last Discussed: Item # 3.I. Added to OGN - Bought 5 at $28.72 (9/6/22 Post) I discussed the last earnings report in that post. SEC Filed Press Release
Average cost per share = $28.24 (25+ shares)
Dividend: Quarterly at $.28 per share ($1.12 annually)
Yield at $28.24 = 3.966%.
Last Ex Dividend: 8/12/22
Purchase Restriction: The previous maximum position was 30 shares, which I am raising to 50 shares provided 20 shares can be bought at less than $25. Five more shares can be bought at >$25 provided the purchase lowers my average cost per share.
H. Added 1 BNS at $51.87; 1 at $49.48-Schwab Taxable Account:
Quotes:
USDs: Bank of Nova Scotia (BNS)(52 week range: $$48.57-$74.86)
CADs: Bank of Nova Scotia (Canada: Toronto)
BNS Analyst Estimates | MarketWatch
Part of the recent decline in the USD priced shares is due to the CAD declining in value against the USD. Canadian Dollar to US Dollar Exchange Rates Chart
1 Year Comparison Chart-CAD vs USD Priced Shares:
 |
| USD in Blue -20.69%/CAD in Green -13.99% |
Last Discussed: Item # 3.E. Added to BNS - Bought 1 at $53.85; 2 at $53.3 (9/13/22 Post) I discussed the last earnings report in that post. SEC Filing (F/Q ending 7/31/22)
Average cost per share this account: $60.27 (15 shares)
Working my way up to 20 shares in this account, with each subsequent purchase being 1 share at the lowest price in the chain.
Dividend: Quarterly at C$1.03
Next Ex Dividend: 10/3/22
The dividend yield will be dependent on changes in the penny rate and the CAD/USD conversion rates. When owned in a taxable account, Canada will withhold 15%. There is no withholding when a U.S. citizen owns BNS in a retirement account. The foregoing assumes that the broker asserts U.S. citizen tax treaty rights for dividends paid by regular Canadian corporations. For pass through entities like REITs, a tax will be collected for distributions into a retirement account. The difference is that regular corporations pay a tax on income before making a dividend distribution.
I. Added 1 SLG at $43; 1 at $41.9; 1 at $41.2; 1 at $39.65:
Quote: SL Green Realty Corp.
52 week range: $38.95 (hit yesterday)-$85.18 (intraday on 1/13/22)
Investment category: Equity REIT Common and Preferred Stock Basket Strategy/Bond Substitute
Last Discussed: Item # 2.G. Added 2 SLG at $45 (8/30/22 Post) I discussed the 2022 second quarter earnings report in that post. SEC Filing
Average cost per share this account: 54.59 (23+ shares)
Dividend: Monthly at $.3108 per share ($3.73 annually)
I have started to reinvest the dividend.
Dividend History | SL Green Realty Corp.
Yield at $54.59: = 6.83%.
Next Ex Dividend: 9/29/22
SLG is currently at a price lower than its lowest price in March 2020 which was intraday on 3/23/2020 at $41.74.
J. Added 5 RTL at $6.75; 5 at $5.85- Fidelity Taxable Account:
Quote: Necessity Retail REIT Inc.
Investment Category: Equity REIT Common and Preferred Stock Basket Strategy
Management: External
5 Year Chart: Note the 3/23/20 closing price of $6.9
Average cost per share this account: $7.86 (180+ shares)
Dividend: Quarterly at $.2125 per share ($.85 annually)
Yield at $ AC: 10.81%
I discussed the last earnings report in this post: Item # 3.H. Added to RTL in Fidelity Taxable - Bought 2 at $7.7 (8/10/22 Post)
K. Added 5 BDN at $7.48; 5 at $7.22:
Quote: Brandywine Realty (BDN)
10-Q for the Q/E 6/30/22 (debt listed and discussed at pages 22-23)
Our Properties | Brandywine Realty Trust
SEC Filed Earnings Press Release for the Q/E 6/30/22
Investment Category: Equity REIT Common and Preferred Stock Basket Strategy
Average cost per share this account: $8.7 (85 shares)
Working my way up to 100 shares.
Dividend: Quarterly at $.19 per share ($.76 annually)
I have changed my option from payment in cash to reinvestment.
Brandywine Realty Trust (BDN) Dividend History | Seeking Alpha
Yield at $8.7 AC per share = 8.7356%
Yield at $7.22 = 10.56%
Next Ex Dividend: 10/5/22
I discussed the last earnings report in a recent post and have nothing further to add here. Item # 3.F. Added to BDN - Bought 5 at $8.93; 10 at $8.75; 15 at $8.58; 10 at $8.37 - Schwab Taxable Account (8/10/22 Post)
Last Discussed: Item # 3.C. Added 10 BDN at $8.29 (8/30/22 Post)
Last Elimination: Item # 2.F. Eliminated BDN - Sold 15+ at $13.51 in Schwab Account and 20 at $13.5 in Fidelity Account (1/7/22 Post)
I recently bought 2 SU bonds. FINRA Bond Detail- Brandywine L.P. 4.15% SU maturing on 10/1/24.
L. Added 5 BBDC at $8.81- Fidelity Taxable:
Quote: Barings BDC Inc. (BBDC)
Website: Company Overview
2021 Annual Report (summary of risk factors starts at page 34 and ends at page 69)
BDCs lend money to risky borrowers. Defaults will significantly increase during a recession. Since loans are generally at spreads to short term rates, more defaults can currently be reasonably anticipated due to a combination of increased interest costs and stressed business conditions. BDC stock prices will generally fall significantly more than major stock indexes in response to a recession.
10-Q for the Q/E 6/30/22 (summary information on investments starts at page 9, debt listed and discussed starting at page 80)
Management: External
Last Discussed: Item # 2.K. Added 5 BBDC at $9.49 in Vanguard Taxable Account (7/13/22 Post); Item #2.A. Bought 20 BBDC in Vanguard Taxable Account at $10.34 (4/7/22 Post)
Average cost per share this account: $9.57 (15 shares)
Working my way to 100 shares in both the Vanguard and Fidelity accounts.
Dividend: Quarterly at $.24 per share
Yield at $9.57 this account: 10.03%
Last Earnings Report (Q/E 6/30/22):
NII per share = $.29
Net Asset Value per share = $11.41, down from $11.86 as of 3/31/22.
"The decrease in NAV per share from March 31, 2022 to June 30, 2022 was primarily attributed to a net realized loss on investments and foreign currency transactions of $0.09 per share and net unrealized depreciation on the Company's investment portfolio, credit support agreements and foreign currency transactions of approximately $0.40 per share, partially offset by net investment income exceeding the Company’s second quarter dividend by $0.05 per share."
M. Added 5 GRX at $9.8:
Quote: Gabelli Healthcare & Wellness Trust Overview- A CEF
Sponsor's website: GAMCO
Average cost per share this account: $11.62 (65+ shares)
Working my way up to 100 shares.
Dividend: Quarterly at $.15 per share (regular only)
I am reinvesting the dividend.
I discussed this CEF in my last post and have nothing further to add here. Item # 4.B. Added 15 GRX at $11.17; 10 at $10.62 (9/20/22 Post)
Yield at $11.62: 5.16% (regular only)
Last Ex Dividend: 9/15/22
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 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.
