Economy:
Holiday Spending Increased, Defying Fears of a Decline - The New York Times Mastercard reported that spending increased by 3.1% between 11/1 to 12/24 compared to the same period in 2022.
Consumer spending increases heading into holidays - The Washington Post
November 2023 New Residential Home Sales: Census Bureau.pdf
Average Sales Price: $488,900
Months of Inventory at Current Sales Rate: 9.2
Nike says it will cut $2 billion in costs in a major warning for consumers | CNN Business
Inflation has created a dark cloud over how everyday Americans view the economy No more than 10% of voters IMO have even a basic understanding of what caused problematic inflation in 2021-2022. Consequently, Biden will be blamed and federal spending will be assigned as the cause.
I would note that the F/Y deficits have gone over $1T, unadjusted for subsequent inflation, without problematic inflation occurring. In the fiscal year ending 9/30/20 (Trump was President), the budget deficit was $3.13T.
Inflation has been coming down for more than a year now, even though the last annual deficit for the F/Y ending 9/30/23 increased to $1.7 trillion.
Annual PCE Inflation Through November 2023: 2.6%, down from 3% through October. Sourced: Personal Income and Outlays, November 2023 | U.S. Bureau of Economic Analysis (BEA) That 2.6% annual PCE inflation through November 2023 was down from a 6.2% increase for the 12 months ending in September 2022. Personal Income and Outlays, September 2022 | U.S. Bureau of Economic Analysis (BEA) PCE inflation was down .1% month-to-month in November 2023
Allocation Shifts Discussed in this Post:
I went into a net sell mode last week for U.S. common stocks.
In response to lower long term interest rates, I took my positions in EAI, an exchange traded first mortgage bond issued by the electric utility Entergy Arkansas, up to 100 shares in two accounts.
Treasury Bills Purchased at Auction: $22,000 (pile up continues in maturing securities)
Corporate Bonds $1,000 Par Values: None. I have lost interest with the lower yields.
Schwab Treasury Money Market Fund SNOXX: +$2,000
This is a purchased MM fund that has a current 7 day yield of 5.07%. I view the fund as a short term alternative to Schwab's sweep account that pays .45%.
If and when I need funds in that account to pay for a purchase, I will have to enter a sell order prior to the market closes. I will then have the funds available in my sweep account to pay for a purchase.
I added $8,000 to SNOXX in December. I received a $106.13 monthly dividend on 12/29/23.
A comparable fund offered by Vanguard, VMFXX, which is a sweep account, has a current 7 day yield of 5.31%. The higher yield is due to a lower expense ratio. I am content keeping excess funds in that MM fund.
December 2023 VMFXX Dividends - Taxable Account:
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| Non-Settlement VMFXX = $664.51 |
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| Settlement VMFXX +$83.23 |
While it makes no sense to have both a settlement and non-settlement VMFXX positions, the origin as I recall traces back to a time when Vanguard had a lower yielding sweep MM fund compared to the Vanguard Prime MM which is no longer offered. Money market funds for short-term investing goals | Vanguard I have kept the two positions to slow down my risk purchases, limiting the purchase amounts to the then available balance in the settlement fund, which is purely a psychological thing.
Exchange Traded First Mortgage Bonds ($25 par value): +$1,293.8
(weighted yield at 5.65%)
Canadian Reset Equity Preferred Stock = - C$1,941 minus C$1 commission (profit at +C$535.5).
Individual Common Stocks: -$2,155.16
(consisting of $2,338.36 in proceeds minus $183.2 in purchases)
Stock CEFs: +$382.9
Net Outflows Stocks/Stock Funds: -$1,772.26
Total: 2023 Net Outflows Stocks/Stock Funds: -$27,091.82 (discussed in posts)
The primary reason for this net outflow is the yields available from treasury bills, CDs, MM funds and short term investment grade corporate bonds, taking into account my investment priorities.
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Trump and His Cult:
RealClearPolitics-Election-2024 Republican Presidential Nomination Trump is leading his nearest contender by 51+%.
It is obvious that soaring illegal immigration, and Biden's failure to effectively deal with it, will provide invaluable assistance to Demagogue Don winning a second term.
Migrant crossings at U.S. southern border reach record monthly high in December - CBS News This issue could easily cause moderates to stay at home next November. What we know about unauthorized immigrants living in the U.S. | Pew Research Center;Undocumented Immigrants and the U.S. Economy - New American Economy
{My proposal, which is cost effective and has no chance of being passed by Congress due to objections by both political tribes, is to eliminate the provision that a person may seek asylum at the U.S. border or inside the U.S.. All future asylum requests have to be made through the U.S. embassy in the person's country of origin. Anyone applying for asylum at the border would be denied entry. That would cut down illegal immigration at no cost. Another aspect would be to return immediately anyone caught by the border patrol to their country of origin without a hearing unless the person claims U.S. citizenship. In exchange for that major concession by Democrats, the DACA children, who have not been convicted of a felony, would be provided a pathway to citizenship. The expense side of the deal would be more funds for border enforcement and patrol, at least until the effectiveness of the law change can be fully evaluated.}
Trump augurs divisive year in angry Christmas rant | CNN Politics It is disturbing that tens of millions view these juvenile and mean spirited rants as funny.
The author of this article is the Christian evangelical Tim Alberta. The Only Thing More Dangerous Than Authoritarianism - The Atlantic ("Perhaps the only thing more dangerous than authoritarianism is authoritarianism infused with religious justification.")
'High-level decision': Trump lawyer details plot to fly fake elector papers to DC in new recordings - Alternet.org; Recordings, emails show how Trump team flew fake elector ballots to DC in final push to overturn 2020 election The linchpin of this plot to overturn certified election results in several states was for VP Pence to reject the electors in those states won by Biden and to accept the fake electors appointed by Trump in their place. Just more proof of an insurrection.
Trump rails after poll shows Haley within 4 points in New Hampshire | The Hill
Trump Screed Against the Republican Governor of New Hampshire Chris Sununu: "FAKE NEW HAMPSHIRE POLL WAS RELEASED ON BIRDBRAIN. JUST ANOTHER SCAM! RATINGS CHALLENGED FOXNEWS WILL PLAY IT TO THE HILT. SUNUNU NOW ONE OF THE LEAST POPULAR GOVERNORS IN U.S. REAL POLL TO FOLLOW." Another example, among tens of thousands, that Donald never matured beyond a 13 year old brat."Birdbrain" is the nickname for Nikki Haley that Trump adopted last September. Appeals court has signaled it will approve of jailing 'petulant child' Trump: analyst - Raw Story
Governor Sununu's replied that he was the 4th most popular governor in the U.S. and had never lost an election.
Trump Argues He Has 'Absolute Immunity' for criminal prosecution in DC Court Filing
FBI says it’s investigating after reports of violent threats to Colorado judges in Trump case Trump stokes violence and violent rhetoric among his cult members.
Nikki Haley doesn't cite slavery as cause of the Civil War after question at campaign stop - ABC News This is consistent with Trump's prior comment that there were very fine people on both sides. Trump Defends White-Nationalist Protesters: 'Some Very Fine People on Both Sides' - The Atlantic; Trump Declines To Denounce White Supremacy-NPR; 'Stand back and stand by': how Trumpism led to the Capitol siege-The Guardian
Ukraine says it downed three Russian Su-34 warplanes; ‘Minus Three Russian Bombers.’ Ukraine Set Another Deadly Missile-Ambush. Ukraine claimed that it destroyed two more Russian jets last Sunday. Ukraine Says It Downed 5 Russian Planes, as Moscow Claims It Seized a Town - The New York Times The town is called Marinka, located in the Donetsk Oblast, and had a prewar population of 10,430. Russia has destroyed that town.
Ukraine claims it destroyed Russia’s tank and troop landing ship Novocherkassk in Feodosia port, Crimea-CNN; Ukraine Attacks Novocherkassk, a Russian Warship, in Crimea - The New York Times Video was released showing a large explosion in the port. Russia claimed that the ship was "damaged". Russia further claimed that it had successfully destroyed the Ukrainian missiles. Photographs show that the ship was completely destroyed. Photos of destroyed Novocherkassk landing ship emerge | Ukrainska Pravda
Last week, Russia shelled a train station and successfully murdered several civilians who were just waiting to catch a train to Kiev. Russia murdered 63 civilians, including 9 children, when it earlier attacked a train station located in Kramatorsk. Routinely committing crimes against humanity and war crimes is part of Russia's strategy to terrorize a civilian population into submission. Committing war crimes and crimes against humanity are well known and understood Russian military strategies.
Ukraine's Stolen Children: Forced Separations and Abductions by Russia - The New York Times This article describes in detail another routine Russian war crime and crime against humanity.
Uzbekistan Summons Russian Envoy Over Politician's Annexation Remark Putin or his totalitarian successors will attempt to expand Russia's territory to include currently independent nations that were once part of the Soviet Union. Ukraine is just the first and the most important one to Russia.
Russian soldiers in Kharkiv are being struck down by a mystery ‘mouse fever’ - YouTube
Putin's forces 'using chemical weapons' fired from drones to attack Ukrainian troops-Express.co.uk
Russia unleashes biggest air attack on Ukraine since start of full-scale invasion Russia targeted civilian structures including a maternity hospital and shopping mall in Dnipro, an apartment building in Odessa, and several private homes. Russia Launches One of Its Largest Attacks Yet on Ukrainian Civilians - WSJ; Russia pummels Ukraine with 'massive' wave of airstrikes; 31 killed Russia's Dictator for Life is encouraged by the republicans refusing to approve more U.S. aid to Ukraine which has now run out.
Russians are very active in publishing comments to YouTube news stories such as the following one: Russia unleashes massive attack on Ukraine - YouTube
Poland says Russian missile entered airspace then went into Ukraine
How Russia Silences Dissent about the Ukraine War - The New York Times
It is important for citizens in western Democracies to fully understand that Russia is and most likely always will be an imperialistic and totalitarian regime controlled by Kleptocrats who are willing to obliterate freedoms, to impose an Orwellian state in conquered territories, and to murder people and destroy civilian structures on a vast scale.
This chart highlights the abysmal failure of Putin's leadership:
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Pentagon says chemical tanker struck by Iranian drone in Indian Ocean- CNN The attack drone was launched from Iran's territory and struck a Japanese owned chemical tanker operating in the Indian Ocean.
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1. Small Ball Common Stock Sells:
A. Eliminated SLG - Sold 36+ at $46.27:
Quote: SL Green Realty Corp. (SLG) - Primarily a NYC Office REIT
Proceeds: $1,685.41
"SL Green Realty Corp., Manhattan's largest office landlord, is a fully integrated real estate investment trust, or REIT, that is focused primarily on acquiring, managing and maximizing value of Manhattan commercial properties. As of September 30, 2023, SL Green held interests in 59 buildings totaling 32.5 million square feet. This included ownership interests in 28.8 million square feet of Manhattan buildings and 2.8 million square feet securing debt and preferred equity investments."
Properties - SL Green - NYC's Largest Commercial Landlord
I decided to keep the SLG preferred stock (SLGPRI) and eliminate my common stock position which has been a troublesome investment.
That decision resulted from SLG cutting for the second time its monthly common stock dividend. The cumulative preferred stock dividend paid by SLGPRI can not be reduced or eliminated by SLG. The preferred stock dividend can be deferred only after the common share cash dividend is eliminated entirely.
The dividend cuts are understandable given the work-from-home trend that has negatively impacted the NYC office market.
Last Discussed: Item # 2.B. Eliminated Duplicate Position in SLG - Sold 20+ at $39.32 (9/9/23 Post)(profit snapshot = $68.26)
Investment Categories: Equity REIT Common and Preferred Stock Basket Strategy and Monthly Income Generation
Profit Snapshot: Net of +$35.68
Dividend: Monthly at $.25, reduced from $.2708 effective for the January 2024 payment, which was reduced from $.3108 effective for the January 2023 first quarter payment.
Dividend History | SL Green Realty Corp.
Last Ex Dividend: 12/28/23
Last Earnings Report (Q/E 9/30/23): SEC Filed Press Release
FFO per share: $1.27, down from $1.66 in the 2022 third quarter.
Manhattan same store occupancy at 88.9%
"During the third quarter of 2023, the Company signed 50 office leases in its Manhattan office portfolio totaling 355,831 square feet. The average rent on the Manhattan office leases signed in the third quarter of 2023, excluding leases signed at One Vanderbilt, was $88.53 per rentable square foot with an average lease term of 6.3 years and average tenant concessions of 5.8 months of free rent with a tenant improvement allowance of $63.64 per rentable square foot. Thirty-five leases comprising 246,263 square feet, representing office leases on space that had been occupied within the prior twelve months, are considered replacement leases on which mark-to-market is calculated. Those replacement leases had average starting rents of $87.35 per rentable square foot, representing a 3.8% decrease over the previous fully escalated rents on the same office spaces." (emphasis added)
SEC Filed Supplemental for the Q/E 9/30/23
Other Recent News: SL Green Announces Sale of 625 Madison Avenue (gross sales price of $632.5M or $1,123 per square foot; net proceeds to SLG will be used to pay down debt; the 10-Q states that SLG had a 90.43% economic interest in this property, page 33)
Largest SLG Realized Gain: +$793.98
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| 2010 SLG 25 shares +$793.98 |
Other Realized Gains over $100:
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| 2009 SLG 25 Shares +$306.47 |
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| 2021 SLG 6+ Shares +$128.97 |
SLG Realized Gains +$1,421.74
SLG Preferred Stocks Realized Gains: +$1,225.65
I own the 6.5% coupon SLG-PI in two taxable accounts and 1 RI account. I intend to eliminate 1 duplicate position next year. The last ex dividend date was 12/28/23.
Last Discussed: Item # 6.A. Added to SLGPRI - Bought 3 at $17.5; 2 at $17.27 (11/25/23 Post)
SLGPRI Realized Gains: +$151
SLGPRC Realized Gain: +$1,074.65
SLGPRC was redeemed at its $25 par value in 2012. SL Green Realty Corp. Announces Redemption of 4.0 Million Shares of 7.675% Series C Cumulative Redeemable Preferred Stock
B. Pared OFS in Schwab Account - Sold 20 Shares at $11.51:
I sold only the highest cost shares purchased with dividends in this account. I sold on the ex dividend day.
As with other BDCs, OFS loans are made at spreads to short term rates.
BDC net investment income has benefited from the rise in short term rates as the FED raised the FF rate from 0-.25% to the current 5.25%-5.5%.
The market is now forecasting that the next FED move will be to lower the FF rate. The currently more likely than not probability is that the FF rate range will end 2024 at 3.75%-4%, down from the current 5.25%-5.5%:
If that proves to be the case, net investment income will start to decline as variable rate loan coupons reset at lower levels. Depending on how far the FED drives down the FF rate, and other factors impacting net investment income including the level of nonaccrual loans, dividends, which have been raised over the past year or so, may be cut.
Some BDCs have dealt with surging net investment income arising from increases in short term rates by keeping a regular dividend at or near levels that existed just prior to the FED rate increases and then paying out some of the excess as special dividends. I surmise that the reason is that the BDC does not want to cut the dividend when short term rates turn back down. Several BDCs have paid out special dividends this year.
Last Discussed: Item # 6.C. Pared OFS in Schwab Account - Sold 20 at $10.86 (9/30/23 Post)(profit snapshot = $28.94)
Profit Snapshot: +$17.65
Average cost per share after pare: $6.44
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| Price Shown is from 12/23/23 |
Dividend: Quarterly at $.34 per share ($1.36 annually)
OFS Stock Dividend History & Date
I am not reinvesting the dividend.
In this account, I received a cash quarterly dividend of $37.87 yesterday.
Yield at $6.44 AC Using $1.36 = 21.12%
Last Ex Dividend: 12/21/23
I also have a position in my Fidelity account with a $3.89 average cost per share. See Item # 3.B: Item # 3.A. Eliminated OFS in Vanguard Account - Sold 20 at $10.2 and Item # 3.B. Pared OFS in my Fidelity Account-Sold 10 at $10.15 (8/19/23 Post)(profit snapshots = $182.5) Item #3.B. also contains snapshots of prior realized gains. The yield at $3.89 is 34.96% using the current annual dividend.
Net Asset Value Per Share History:
9/30/23: $12.74
6/30/23: $12.94
12/31/22: $13.47
6/30/22: $14.57 10/Q for the Q/E 6/30/22 at page 3
03/31/21: $11.96 10-Q at page 3
12/21/20: $11.85 10-K at page 69
6/30/20: $10.10
3/31/20: $ 9.71
12/31/19: $12.46
9/30/19: $12.74
6/30/19: $12.95 Page 2 10-Q
3/31/19 $13.04 10-Q
12/31/18 $13.10
6/30/18 $13.70
03/31/18 $13.67
12/31/17 $14.12
12/31/16 $14.82
12/31/15 $14.76
12/31/14 $14.24
12/31/13 $14.54
IPO Offering Price at $15 (November 2012) with proceeds after the underwriters' discount at $13.05 Final Prospectus Supplement
Net Investment Income per share: $.40
Weighted Average Yield of Performing Loans = 14.6%
94% of portfolio of loan portfolio, based on "fair value", is at variable rates while 70% of the outstanding debt is at fixed rates. 89% of outstanding debt matures in 2026 or later.
OFS Capital Corporation Q3 2023 Earnings Call Transcript - Insider Monkey "During the quarter, we placed loans with an aggregate fair value of $6.4 million on nonaccrual status."
10-Q During the third quarter, "loans with an aggregate fair value of $6.4 million were placed on non-accrual status. As of September 30, 2023, our loan portfolio had non-accrual loans with an aggregate fair value of $16.7 million, or 3.7% of our total investments at fair value." page 55
The summary of investments starts at page 8. A name with a (6) beside it indicates that the loan is on nonaccrual.
AC = Amortized Cost
FV = "Fair Value"
Astro One Acquisition: Earlier this year, Moody's downgraded the senior secured debt to Ca from Caa1. (This senior secured loan was on accrual status in the second quarter but the FV had already been marked down to $1.113M)
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| AC $2.704M; FV = $385K |
Diamond Sports Group: Sinclair Broadcasting wants to scoop up Diamond Sports: sources (Diamond is current in Bankruptcy Court)
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| AC = $2.183M; FV = $178K |
Envocore Holdings: Innovative Energy Solutions Reduce Variable Utility Costs (PIK loan on nonaccrual, cash loan is not)
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| AC = $6.584M; FV = $3.528M |
Excelin Home Health: Excelin Health (not on nonaccrual in the second quarter)
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| AC = $4.231M; FV = $3.443M |
Planet Bingo: Home | Planet Bingo
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| AC = $14.113M; FV = $6.588M |
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| AC = $4.68M; FV = $100K |
Company assessment of credit risks:
Pfanstiehl Holdings-Equity Investment:
During the quarter, OFS wrote down its common equity investment in Pfanstiehl Holdings by $5.7M. That investment was written down by $2.7M in the 2023 second quarter, page 64. That equity investment was valued at $77.105M as of 9/30/23, page 16, with an amortized cost of $217,000.
 |
| 400 common shares |
Looking at the 2019 OFS Annual Report, I noted that the 400 common shares was valued at $4.755M as of 12/31/2019. OFS then had outstanding a 10.5% subordinated loan of $3.768M outstanding. That loan matured in 2021 leaving OFS with just the equity position. (p. 96, 10-K) Frequently equity positions will be acquired by a BDC as part of a loan transaction.
Given the small size of this BDC, with a market capitalization near $154M at an $11 price, the value placed on the 400 shares of Pfanstiehl will continue to have a substantial impact on the reported net asset value per share.
I am not able to assess the risk associated with that investment. I do know, as mentioned above, that the investment was valued at just $4.755M as of 12/31/2019 and at $77.105M as of 9/30/23.
I have no factual basis to either accept or reject any of the valuation marks made by OFS. I just makes me queasy.
I am also aware that the valuation bounces around a lot. In the 2022 first quarter, for example, the valuation increased by $9.6M to $75.308M (pages 17, 55 10-Q)
I am aware that Pfanstiehl was sold by Ferro in 2013 SEC Filing "Consideration was comprised of a $16.9 million cash payment and an earn-out incentive payment of up to $8 million, payable over two years based on attained earnings targets."); Med Opportunity Partners, LLC Makes Strategic Investment in Pfanstiehl, Inc. (4/1/2013)
Company Assessment of Interest Rate Risks:
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| Page 71 |
Last Buy Discussions: Item # 3.F. Bought 40 OFS with an Average Cost Per share of $4.18 (11/7/20 Post); Item # 2.L. Added 5 OFS at $3.97-Fidelity Taxable (11/28/20 Post); Item # 1.K. Added 3 OFS at $4.5 -Fidelity Taxable (8/8/20 Post); Item # 3.E. Added 5 OFS at $9.66; 5 at $9.2; 5 at $8.7; 5 at $6; 5 at $5.65; 2 at $3.7; 10 at $3.79 (4/11/20 Post)
Some Other Sell Discussions: Item # 3.D. Pared OFS in Fidelity Account - Sold 13.82 Shares at $11.32 (8/16/22 Post); Item # 4.B. Pared OFS in Fidelity Account - Sold 15.427 at $12.49 (6/15/22 Post)(profit snapshot = $60.07; contains snapshots of realized gains prior to 2022); Item # 4.D. Pared OFS in Fidelity Account - Sold 29+ at $13.06 (4/21/22 Post)(profit snapshot = $69.88); Item # 1.H. Pared OFS in Fidelity Account Sold 35 at $10.07- Highest Cost Lots That Could be Sold Profitably (7/22/21 Post)(profit snapshot = $12.44);; Item # 2.M. Pared OFS in Vanguard Taxable-Sold 20 at $7.2 (12/25/20 Post)(profit snapshot = $56.8); Item # 3.B. Sold 10 OFS at $12.04 (11/30/19 Post)(profit snapshot = $7.04); Item # 4.B. Sold 60 shares at $12 (11/13/19 Post)(profit snapshot = $13.11); Item # 3.A. Sold Highest Cost OFS Lots in Schwab Account - 50 shares at $12.27 and 50 at $12.47 (5/5/19 Post)(profit snapshots = $69.55)
Goal: Any total return before ROC adjustments to the tax cost basis in excess of the dividends.
C. Pared IVZ - Sold 10 $17.82- Highest Cost Lots Using FIFO:
Quote: INVESCO Ltd. (IVZ)
Proceeds: $178.25
Profit Snapshot: +$36.15
Last Discussed: Item # 1.G. Added to IVZ - Bought 5 at $12.55 (10/28/23 Post) I discussed the last earnings report in that post. SEC Filed Earnings Press Release for the Q/E 9/30/23
Other Recent Buy Discussions: Item # 1.D. Added to IVZ - Bought 5 at $13.2; 5 at $12.95; 5 at $12.75 (10/21/23 Post); Item # 1.H. Added to IVZ - Bought 5 at $13.58 (10/7/23 Post)
New Average Cost per share: $13.01, down from $13.35
Dividend: Quarterly at $.20 per share
IVZ Stock Dividend History & Date
Yield at New AC = 6.15%
Last Ex Dividend: 11/9/23
Last Elimination: Item # 4.C. Eliminated IVZ - Sold 20 at $19.5 (11/22/22 Post)(profit snapshot = $69.66)
Largest Gain: Item # 1.A. Sold 83+ at $17.3-Schwab Account and Item # 1.B. Sold 71+ IVZ in Fidelity Taxable Account at $17.39 (1/1/21 Post)(profit snapshots = +330.88)
IVZ Realized Gains to Date: +$542.6
Risk Management: This kind of pare is part of my risk management strategy, where I move slowly into a position and then profitably sell my highest cost lots first, which lowers my average cost per share and increases my dividend yield. At some point, the entire position may be eliminated.
IVZ Bonds: I own 2 IVZ Finance 4% SU bonds, guaranteed by IVZ, that mature on 1/30/24, rated at A3/BBB+.
D. Eliminated Duplicate Position in MOR (Fidelity Account) - Sold 25 at $9.78:
Quote: MorphoSys AG ADR - A German Biotech
Proceeds: $244.5
Website: MorphoSys | A global biopharmaceutical company
MOR Analyst Estimates | MarketWatch (heavy losses predicted through 2025)
MOR SEC Filings (foreign company forms)
Form 20-F (2022 annual report, contains a detailed description of compounds in trials)
Profit Snapshot: $10.87
I am keeping the 40 share position in my Schwab account.
The future will partly depend on whether at least one of the two compounds acquired through MOR's $1.7B acquisition of Constellation Pharmaceuticals proves to be a commercial success.
One of those compounds is Pelabresib. MOR SEC Filing ("Pelabresib has the potential to be a first- and best-in-class BET inhibitor and is currently in a Phase 3 clinical trial for myelofibrosis, a bone marrow cancer that disrupts the body’s normal production of blood cells."), MorphoSys Commences Cash Tender Offer for All Outstanding Shares of Constellation Both compounds are still in clinical trials.
The stock closed at $22.08 the day prior to the announcement and at $19.2 the next day. The Stock Jocks hated this deal and have grown to hate it more over time.
I am just not sure that the hatred is warranted, at least to the decree reflected in the current stock price. That is not based on any medical or scientific knowledge but a gut reaction derived from reading the trial results possibly influenced to a very minor decree by some intelligence. I am using the recent rally to sell a duplicate position.
An approved product developed using MOR's technology is the psoriasis drug Tremfya sold by Johnson and Johnson. MOR has sold 100% of its Tremfya royalties.
MorphoSys Buys Constellation Pharma in $1.7B Deal. Is Biotech M&A Back? | Barron's
The purchase price was financed by selling, in whole or in part, MOR's royalty streams for products either approved or in trials using a proven technology involving monoclonal antibodies.
MOR has 1 approved drug, Monjuvi, that is used "with lenalidomide to treat adults with certain types of diffuse large B-cell lymphoma (DLBCL) that has come back (relapsed) or that did not respond to previous treatment (refractory) and who cannot receive a stem cell transplant."
MOR has a collaboration agreement with Incyte for Monjuvi, see page 62 of the 2022 Annual Report
In 2020, MOR received from Incyte a $750M upfront payment and milestone payments for a collaboration agreement on Monjuvi. Incyte also bought $150M in MOR stock at a premium price. "In the U.S., MorphoSys and Incyte co-commercialize Monjuvi, with MorphoSys leading the commercialization strategy and booking all revenues from sales of tafasitamab. Incyte and MorphoSys are jointly responsible for commercialization activities in the U.S. and share profits and losses on a 50:50 basis. Outside the U.S., Incyte has exclusive commercialization rights, and leads the commercialization strategy and books all revenues from sales of tafasitamab, paying MorphoSys royalties on ex-U.S. net sales." MOR is obligated to pay royalties to Xencor for a license connected with this compound (page 61)
The results from the Phase 3 trial of Pelabresib were released on 12/10/23. MorphoSys’ Pelabresib Improves All Four Hallmarks of Myelofibrosis in Phase 3 MANIFEST-2 Study The Stock Jocks has a negative reaction to this earlier press release. MorphoSys’ Phase 3 Study of Pelabresib in Myelofibrosis Demonstrates Statistically Significant Improvement in Spleen Volume Reduction and Strong Positive Trend in Symptom Reduction (11/20/23)
Other compounds in trials run by "partners":
Last Loss Report (Q/E 9/30/23): MorphoSys AG Reports First Nine Months and Third Quarter 2023 Financial Results or SEC Filing
MOR Monjuvi U.S. product sales of $23.4M. This is not going to cause a reversal in the share price decline IMO. MOR acknowledge that "competition has increased as additional second-line treatment options for relapsed or refractory diffuse large B-Cell lymphoma have recently been approved". The primary benefit that MorphoSys will derive from Monjuvi is the cash received from Incyte in 2020 IMO.
Other Monjuvi indications are in trials.
Cash: €642.2M
E.P.S. -(€3.5)
Other recent news:
MOR sold shares in December 2023 that raised gross proceeds of €102.7M.
MorphoSys Receives U.S. FDA Fast Track Designation for Tulmimetostat in Endometrial Cancer (12/9/23)
2. Pared PWFPRT - Sold 100 of 200 shares at C$19.41:
Quote: PWF-PT.TO
Issuer: Power Financial is a wholly owned subsidiary of Power Corp. of Canada (POW:CA). I still own 100 shares of POW:CA. Item # 1. Bought 100 POW:CA at C$21.37 (5/30/20 Post)
This preferred stock resets its coupon at a 2.37% spread to the five year Canadian government bond on 1/31/24, using the yield of that bond as of the 30th day prior to the reset date. So the reset is not far away. Once the coupon resets, it will stay in effect for 5 years.
When I last discussed this preferred stock in a post published on 8/19/23, the 5 year Canadian government bond was trading at a 4.03% yield and had fallen to 3.21% on 12/27/21 and slightly lower yesterday. Canada 5 Year Government Bond Overview | MarketWatch This yield decline makes PWFPRT slightly less attractive to me.
A 3.21% 5 year Canadian bond yield on the reset date will result in a coupon of only 5.58% that will remain in effect for 5 years. While that coupon is still modestly attractive to me, taking into account my average cost per share, harvesting the gain of $535.5 now was more important to me than receiving a 5.58% or so coupon for the next 5 years.
Profit Snapshot: C$535.50
Most of my unrealized gain was in this 100 share lot that was acquired in two 50 share purchases. Item # 2.A. Added to PWFPRT:CA - Bought 50 at C$11.11 (5/23/20 Post); Item # 1.A. Bought 50 PWFPRT at C$16.94 (11/20/19 Post)
Last Discussed: Item # 1. Added 100 PWFPRT:CA at C$18.65 (8/19/23 Post)
Par Value: C$25
Dividends: Paid quarterly and non-cumulative
Coupon: 2.37% spread to the 5 year Canadian government bond
Next Reset: 1/31/2024, using the 5 year Canadian bond yield 30 days prior to the reset date. If that day is a holiday, which it is, then the yield for the first business day thereafter (1/2/24) will be used in the coupon calculation.
Last Reset Coupon: January 2019 at 4.215% That coupon indicates that the 5 year Canadian Bond yield was then at 1.845%.
Credit Rating for Preferred Stock: A-/P-1 low from S&P and Pfd-2-High from DBRS. The DBRS Pfd-2 high rating is equivalent to BBB+ for S&P. (see page 8, Raymond James Canadian Preferred Shares.pdf This is an investment grade preferred stock.
Taxation: Canada will withhold a 15% tax for dividends paid into a U.S. citizens taxable account which is where I own the Canadian reset equity preferred stocks.
Claiming Foreign Taxes: Credit or Deduction? | Charles Schwab
Goal: As with all Canadian preferred stocks, the goal consists of both income generation and trading gains. I want to earn more on my long term CAD position than I would by leaving the cash idle.
3. Small Ball Stock CEF Buys:
A. Added to STEW - Bought 10 at $13.9:
Quote: SRH Total Return Fund Inc. (STEW) - Stock CEF
Cost: $139
Sponsor's Website: SRH Total Return Fund - The Fund
Management: External
Leveraged: Yes with $250M in senior unsecured bonds. The coupons are favorable given the current interest rates.
Fitch Affirms SRH Total Return Fund's Senior Notes at 'A'
This CEF was previously called the Boulder Income & Growth Fund (BIF).
The fund is controlled by Stewart Horejsi, his related persons and entities. Stewart Horejsi & family; STEW Insider Holders & Insider Ownership (e.g. Susan Ciciora is a daughter who married John Ciciora, and the other Ciciora's mentioned are most likely their children) In response to John Train's book The Money Masters, originally published in 1980, Horejsi started to buy Berkshire stock in 1980. Early Warren Buffett Shareholder Is Worth $3 Billion, Joins Forbes 400 I have read that book. At the time of his initial investment, Horejsi was running his family's welding supply business.
SRH Total Return Fund (STEW) Portfolio-Morningstar (Lists top 25 holdings; the fund is unrated by Morningstar)
SRH Total Return Fund (STEW) Performance | Morningstar (Through 12/26/23, the 15 year average annual total return was 11.61% and 10.89% over a five year period)
This purchase slightly raised my average cost per share.
Old AC per share: $10.06
New AC per share: $10.41
 |
| Price as of 12/26/23 Close ($13.95) |
Dividends: STEW Dividend History | Nasdaq Quarterly at $.1375 per share ($.55 annually), last raised from last raised from $.125 effective for the 2024 first quarter payment which was a raise from $.12 effective for the 2023 first quarter payment.
I would describe the fund's manager as being a buy and hold investor. I do not anticipate a dividend in excess of the regular quarterly dividend.
Yield at New AC = 5.28% (regular dividend)
Next Ex Dividend: 1/23/24
Data Date of 12/27/23 Purchase:
Closing Net Asset Value per share: $17.37
Closing Market Price: $13.9
Discount: -19.98%
Average 3 Year Discount: -17.1%
Sourced: STEW-CEF Connect
This fund has historically traded at a large discount to net asset value per share.
I suspect that one reason is the large unrealized capital gain. Some investors prefer to avoid funds with substantial unrealized gains for one or more reasons, including a fund managers unwillingness to harvest them (fear of losing all or a major part of the gain) or the after tax returns for a new buyer when and if the fund does harvest capital gains to a substantial decree taking into account the gains largely originate from holdings acquired before the purchase.
Another reason is that most of the unrealized gain is in the shares of just one stock, Berkshire Hathaway, which has a weighting of over 40% in the fund when combining both share classes. This is called "concentration risk". Many investors would view that concentration as a positive.
I have periodically owned the Baby B shares but do not have a current position.
Sell Discussions (STEW-BIF): Item #3.F. Eliminated Duplicate Position in STEW (Fidelity Account) - Sold 20 at $12.64 (2/27/23 Post)(profit snapshot = $72.96); Item # 1.E. Sold 10 BIF at $11.08 (1/9/21 Post) (profit snapshot = $10)(contains prior profit snapshots that total $560.27 including the $10 profit discussed in that post); Item # 3.E. Eliminated BIF-Sold 156+ at $11.42 (12/18/19 Post)(profit snapshot = $127.2); Item # 3.C. Sold 50 BIF at $11.28 (11/13/19 Post)(profit snapshot = $1.63); Item # 3.B. Eliminated BIF: Sold 116+ (2/16/17 Post)(profit snapshot = $137.25)
STEW-BIF Realized Gains to Date: $633.23
B. Added to AOD - Bought 30 Shares at $8.13 - Fidelity Account:
Quote: abrdn Total Dynamic Dividend Fund Overview - Stock CEF
Cost: $243.9
SEC Filing - Holdings as of 7/31/23
abrdn Total Dynamic Dividend (AOD) Portfolio | Morningstar (lists top 25 holdings)
Investment Category: Monthly Income Generation.
In my Fidelity account, as previously discussed, I will be increasing my allocation to CEFs that pay monthly dividends, at least until I am able to generate $200 in monthly income from those securities.
Last Discussed: Item # 3.B. Added to AOD - Bought 5 at $7.4 (11/18/23 Post)
New Average Cost per share: $7.95 (151+ shares)
Dividend: Monthly at $.0575 per share ($.69 annually, some ROC support)
I am reinvesting the dividend.
Yield at New AC: 8.68%
Last Ex Dividend: 12/28/23 (owned all as of)
Data as of 12/27/23 Purchase:
Closing Net Asset Value per share: $9.62
Closing Market Price: $8.12
Discount: -15.59
Average 3 Year Discount: -11.64%
Sourced: AOD - CEF Connect
4. Small Ball Buys - Lottery Tickets:
These purchases are alternatives to playing a hand of blackjack for the purchase costs and is viewed primarily as entertainment by the Old Geezer.
The purchases are based primarily on the one or more financial metrics including Price to Book Value per share; Price to Sales, TTM P/E, dividend yield, net cash to market capitalization, and Price to Free Cash Flow per share. Invariably these purchases are in beaten up stocks.
I quit tracking the results of my stock lottery tickets back in 2015. Lottery Ticket Basket Strategy: New Gateway Post I also quit discussing most of the purchases. So far, I am being paid for entertaining myself. Periodically, however, I have to flush out my losers, referred to as House Cleaning in that post.
Since I am far less likely to devote cash to stocks at current levels, I am back to discussing a few Lottery Ticket purchases or eliminations.
A. Bought 10 PLTK at $8.6:
Quote: Playtika Holding Corp. (PLTK)
Headquarters is located in Herzliya, Israel. The company "is a mobile gaming entertainment and technology market leader with a portfolio of multiple game titles. Founded in 2010, Playtika was among the first to offer free-to-play social games on social networks and, shortly after, on mobile platforms."
Cost $86
10-Q for the Q/E 9/30/23 (Debt is discussed at page 13. The total is shown at $2.419B with $1.826+B borrowed under a credit facility that had a coupon of 8.18% as of 9/30/23. I view the foregoing as a negative that is partially offset by the significant cash position earning interest income. The company did sell $600M in SU notes in 2021 that have a 4.25% coupon)
Dividends: None and none expected.
PLTK Key Metrics Page at Reuters (Price to Sales = 1.21; TTM E.P.S. ex items = $.78; TTM Free cash flow = $426.7M; Cash per share quarterly = $2.39)
Last Earnings Report (Q/E 9/30/23): SEC Filed Press Release
E.P.S. : $.10, down from $.17 in the 2022 third quarter.
There was a noncash charge of $41.6M for an intangible asset impairment or about $.11 per share unadjusted for taxes. There was no impairment asset charge in the 2022 third quarter.
Cash: $878.2M
Weighted average diluted shares outstanding: 367.6M
B. Bought 20 ARC at $3.24:
Quote: ARC Document Solutions Inc. (ARC)
Cost: $97.2
ARC is a digital printing company that operates in 4 business segments:
ARC Analyst Estimates | MarketWatch (As of 12/28/23, the 1 analyst who provides estimates is predicting an E.P.S. $.29 this year; $.32 in 2024; and $.36 in 2025) Using the 2024 E.P.S. estimate, the forward P/E is about 10.13.
ARC 10 - Q for the Q/E 9/30/23
ARC Document Solutions, Inc. (ARC) Interactive Stock Chart - Yahoo Finance The stock was trading at over $30 in 2006, crashed to around $3 in March 2009 and has been in a rut since then, though with two rallies that took the stock close to $10 in 2011 and 2014. The most recent peak was near $5 in 2017. So the chart says abandon all hope, ye who enter. Hope in Dante's Divine Comedy - Part One - Politics and International Relations, University of York
Dividend: Quarterly at $.05 per share
No dividend was paid starting in the 2005 third quarter through 2019. A quarterly dividend was restarted in 2020 first quarter at $.01 per share.
Yield at AC: 6.17% but unreliable IMO.
Next Ex Dividend: 1/30/24
Last Earnings Report (Q/9/30/23): SEC Filed Earnings Press Release
GAAP E.P.S. $.07
Net Income: $3.2M
Revenues: $71.1M
Cash: $50.586M
Weighted Diluted Average Shares: 43.516M
Net Revenues for 9 months: $212.325M
Jorge Avalos, CFO. "Year-to-date cash flows remain robust and fully support our annual twenty-cent dividend and ongoing share repurchases. While we expect sales to fluctuate for the remainder of the year, we're confident in generating growth opportunities, sustaining cash flow, and consistently providing shareholder value in the foreseeable future."
The following metrics are sourced from Reuters:
Book Value per share: $3.65 (most recent quarter)
TTM Free cash flow per share: $.36
Price to Sales TTM: .5 (click valuation tab)
5. Treasury Bill Purchases at Auction:
A. Bought 2 Treasury Bills at the 12/26/23 Auction:
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Matures on 6/27/24
Interest: $51.36
Investment Rate: 5.301%
B. Bought 20 Treasury Bills at the 12/28/23 Auction:
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12 were bought in my Fidelity account. The MM alternative in that account had a 7 day SEC yield of 5%. The other 8 were bought in my Schwab account where the sweep fund pays .45%.
56 Day Bill
Matures on 2/27/24
Total Interest: $164.42
Investment Rate: 5.418%
6. Exchange Traded First Mortgage Bond:
Cost Total: $1,293.8
A. Added to EAI in Vanguard Taxable Account - Bought 10 at $21.64:
Quote: Entergy Arkansas 1st Mortgage Bonds 4.875% due 2066 (EAI)
Last Discussed: Item # 6.B. Added 5 EAI at $21.6 - Vanguard Taxable Account (12/16/23 Post); Item # 5. Added to EAI in Schwab Account - Bought 5 at $21.5; 5 at $21.22 (11/25/23 Post); Item # 5.B. Added 5 EAI at $20.1; 5 at $19.85 - Schwab Account (10/21/23 Post); Item # 7.A. Added to EAI in Schwab Account - Bought 5 at $20.62; 5 at $20.36 (10/14/23 Post)
I am barely responding to continued declines in the 30 year treasury bond yields with this kind of purchase. Market Yield on U.S. Treasury Securities at 30-Year Constant Maturity, Quoted on an Investment Basis -St. Louis Fed
Issuer: Wholly owned subsidiary of Entergy Corp. (ETR)
Investment Category: Exchange Traded Baby Bonds
First mortgage lien on substantially all assets
Par Value: $25
Maturity: 9/1/66
Issuer Optional Redemption: At par value + accrued and unpaid interest on or after 9/1/2021.
Trades Flat
Interest Payments: Quarterly
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.
