ARGOPRA, EAI, FCNTX, FENY, FHB, FNB, FSPTX, HPP, KREFPRA, NBGNX, RTL, TCBIO, VNO

Economy: 

Jobs report December 2022: Nonfarm payrolls rose 223,000 in December, as strong jobs market tops expectations

Employment Situation Summary - December 2022 Results

December Payrolls: +223,000

Unemployment Rate = 3.5% (matches 55 year low), down from 3.7% in November

Average Hours Earnings: +$.09, up .3% to $32.82-consensus at .4%

Average Hourly Earnings 12 months: +4.6%, down from 4.7% in November with the consensus at 5%. 

Average Hourly Work Week: -.1 hour to 34.3 

Revisions to October and November: -28,000

U-6 Number: 6.5%, down from 6.75%, Table A-15. Alternative measures of labor underutilization - 2022 M13 Results

The lower than expected wage gains, which continued a downtrend, lent more credence to the growing belief that problematic inflation is in the rear view mirror. Since problematic inflation was the dominant cause for the bear markets in bonds and stocks last year, a continued downtrend in factors that led to problematic inflation are generally met with gains in both stocks and bonds which happened last Friday. 

The next CPI report is scheduled for release on 1/12. 

Last week, Amazon announced that it was cutting more than 18,000 employees. 

Amazon CEO says company will lay off more than 18,000 workers-NPR (1/4/23)

Salesforce's Marc Benioff hints at more potential layoffs  Salesforce just laid off 10% of its workforce. Prior to announcing those cuts, Benioff claimed that recent hires who demanded to work from home were less productive, which I would expect to be case. Marc Benioff says newer Salesforce employees are less productive An office environment enhances productivity through collaboration, exchange of ideas and information, and most importantly requires more focus on the job and less goofing off.  

The December ISM Services index fell to 49.6% from 56.5 in November. The new orders component declined to 45.2 from 56 in November, a troubling leading indicator. Services PMI® at 49.6% Numbers below 50 indicate an ongoing contraction. 

Samsung Q4 earnings guidance preview: Memory prices to weigh on profit The revised guidance is roughly a 50% decline in earnings compared to the 2021 4th quarter. Previous warnings from other memory chip manufacturers are consistent with Samsung's warning. 

New covid variant quickly growing in United States - The Washington Post; New XBB.1.5 coronavirus subvariant ‘most transmissible,’ WHO says - The Washington Post

++++

Allocation Shifts Discussed in this Post: 

Treasury Bills:  +$15,000

Corporate Bonds: +$6,000 (discussed in Item # 5)

Common Stocks: -$1,516.74

(consisting of $1,669.72 in proceeds minus $152.98 in purchases) 

Weighted Average Yield Common Stock Purchases:  10.2%

Equity Preferred Stocks: +$447.85

Weighted Average Yield Preferred Stock Purchases: 8.79%

Exchange Trade First Mortgage Bond (EAI) = +$40.46

Stock Mutual Funds: +$150 

+++

According to Vanguard, the 60/40 portfolio, consisting of 60% in the S&P 500 and 40% in the Bloomberg U.S. Aggregate Bond Index would have lost 16% in 2022, which was the second worse total return since 1976. The worst was a 21% decline in 2008 when the S&P 500 declined 37% but the bond side did its job by going up about 5%. In 2022, bonds and stocks were down meaningfully. 

2023 Performance Numbers Taxable Accounts: 

Fidelity Account

Schwab Account

Vanguard Account: -1.9%

Interactive Brokers Account: -6.39% (smallest taxable account; higher loss than the other accounts due to significant depreciation in Canadian reset equity preferred stocks; ENB.PRP, for example, started the year at C$19.85 and finished at C$15.6; FTS.PRM started at C$23.15 and ended at C$16.55;  price downdraft due to the interest rate spike last year even though coupons may reset at higher rate)

T.Rowe Price: I have sold all of my mutual funds owned in this account except for the T. Rowe Price Capital Appreciation Fund (PRWCX) which I would characterize as a balanced fund. Proceeds from several stock fund eliminations, all executed prior to 2022, were redirected into a Treasury MM fund. The 2022 total return for PRWCX was -11.94%.    

While I did better than bond and stock index benchmarks, I am not satisfied going down substantially less than the indexes. 

The depreciation in owned bonds as of 12/31/22 will recover and turn to profits as those bonds mature. 

The average weighted maturity of my treasuries and corporate bonds is close to 2 years (over $700K maturing within 2 years), and all of them were bought at discounts to par value. 

The key point is simply that my individual investment grade corporate bonds, unlike common stocks or a bond fund, promise to pay a precise principal amount at maturity, or earlier when the issuer exercises an optional redemption right. 

Provided there is no bankruptcy, and I do not currently expect any impacting the corporate bonds that I own, I know precisely what my total return will be down to the penny, and the return will be a positive number. 

So the bonds that contributed to negative returns in 2022 through unrealized losses, which were increased by third party pricing services valuation marks below both fair market values and last trades, will soon contribute to positive returns and provide a lift to those returns particularly in 2023 and 2024. The third party pricing services used by brokers will get the valuation mark right on the maturity date. 

Hopefully stocks will do better this year. 

Income generation will significantly increase in 2023 due to my significant 2022 bond buys; to a greater allocation to higher yielding common and preferred stocks; and to higher MM rates for an entire year. 

My 2023 goal is a total return of +15%. That will be impossible if the bond and stock markets do a repeat of 2022 returns.  

+++

Putin and His Servile Russian Orcs: 

Russia’s Depraved Decadence - The Atlantic

Russia Losses in Ukraine Surpass New Milestone (over 110,000 killed in action)

Video shows moment of explosion at Russian ammo depot | CNN

Russia Runs Out Of Hospital Beds For Wounded Soldiers As Putin Blames Troops

Putin's Troops Using Bodies Of Dead Soldiers To Protect Against Enemy Forces

Ukraine Finds Sexual Crimes in Regions Russia Occupied - The New York Times

PMC Wagner's Extrajudicial Executions: How they kill their own people - YouTube How many countries are even capable of recruiting imprisoned  and violent criminals to fight in a war and then pardon them after 6 months of service, releasing them back into the general population to cause more mischief and harm. There is only one IMO. The CEO of Wagner, Putin's former cook, Yevgeny Prigozhin, told the first group of pardoned Russian criminals to avoid raping women in Russia. Vladimir Putin ally Yevgeny Prigozhin pardons convicts who fought in Ukraine And when those criminals commit violent crimes after their early release, Putin controlled media organizations will not inform the public of those crimes.  

U.S. to send Bradley Fighting Vehicles to Ukraine - The Washington Post

I would agree with Condoleezza Rice and Robert Gates that Putin is fully committed to conquering all of Ukraine or destroying it as a viable country. Opinion | Condoleezza Rice, Robert Gates: It's time to repel Russia from Ukraine - The Washington Post No other conclusion is possible. If Putin is successful in conquering Ukraine, other eastern European countries will be next. Dramatic increases in military aid from the West is now necessary to give Ukraine an opportunity to expel the Russian aggressors from their territory. 

'Ukraine will liberate Crimea by the end of August' | General Ben Hodges - YouTube

Ex-NATO chief: Russian forces in Ukraine will be ‘burned through and exhausted’ by end of winter | The Hill If that proves accurate or is now recognized by Putin as likely to happen, then another massive mobilization will soon occur. Russia has probably burned through the number of prison inmates that it can send to die in Ukraine.   

This is just another 100% pure Orwellian statement made by a senior Russian official: "The events in Ukraine are not a confrontation between Moscow and Kiev, it is a military confrontation of NATO, and above all the United States and the United Kingdom, against Russia." Words from Russia's Security Council Secretary Nikolai Patrushev. 

Nikolai Patrushev l The Man Behind Conspiracy Theories Weaponized By Putin To Justify Ukraine War - YouTube

Crazy psychopaths, even ones whose pathologies are exposed by independent news organizations, can rise to lead a western democracy, as we well know in the U.S., but the democratic system at least shines a bright and illuminating light on them and adjustments can, and hopefully will always, be made. That is not the case in Russia where there is no transparency and no way to remove or even hold accountable an authoritarian leader who controls the media, the judiciary, the "parliament", the secret police and the military. 

++++

"Trump Derangement Syndrome" and "Russia Phobia":  

Putin, Lavrov and ordinary Russians frequently refer to those speaking the truth about Russia as suffering from Russia Phobia. 

Trumpsters refer to those making accurate statements about Don the Authoritarian as suffering from Trump Derangement Syndrome. 

In both cases, unfavorable accurate information is simply dismissed by classifying the critic as suffering from a mental illness and consequently no rebuttal is even necessary. 

For the Trumpsters and Russians who use those terms, there are several common denominators: (1) total or near total ignorance; (2) lack of mental acuity; (3) a permanent desire to remain willfully ignorant and (4) an inability to sift through information and discard the absurd, patently false, contradictory and nonsensical information.  

Abby Zwerner: Six-year-old who shot his teacher used mother's gun - BBC News

++++

1. Treasury Auction Purchases: +$15,000

I am redirecting some proceeds from maturing bills into new auctions, primarily in my Schwab account. 

If I annualized all interest payments for the bills discussed below ($5K into 91, 119, and 192 day bills), the annual payment would be 

$ 55.74 x. 4 = $222.96 91 day bill 

$ 75.53 x. 3 = $226.59 119 day bill 

$117.16 x. 2 = $234.32 182 day bill 

Total: $683.97 

I can not use that number and divide by $15,000 to arrive at an annualized  yield calculation. That calculation assumes the same purchase price for the bills until a 1 year term is reached. That number would be 4.56%. 

The actual yield would be higher since I am not paying $15,000 for those bills but a discount to their respective par values. I can earn MM dividends (or other income payments) on the difference between the principal amount and the price paid until the bill matures. 

And, that 4.56% calculation does not include MM dividend payments (or other income payments) on the interest earned and paid on those short term bills. I am not set up to make the actual annualized yield calculation but would guess that it is around 4.68% at current alternative investment yields. 

I will not be buying any treasury bills this week. I will likely buy 17 week T Bills at the 1/17/23 auction and the 52 week T Bills at the 1/19/23 auction. I will be discussing corporate bond purchases in the next post.  

A. Bought 5 Treasury Bills at 1/3/22 Auction: 

Matures on 4/6/23

Interest $55.74

91 Day Bill

Investment Rate: 4.522%

B. Bought 5 Treasury Bills at 1/3/22 Auction:  

182 Day Bill

Interest = $117.16

Matures on 7/6/22

Investment Rate: 4.812%

C. Bought 5 Treasury Bills at 1/4/23 Auction: 

4 Month/119 Day Bill 

Matures on 5/9/23

Interest = $75.53

Investment Rate: 4.705%

2. Non-REIT Equity Preferred Stocks: 

The prospectuses for the following preferred stocks have standard Stopper Clauses which enforces the preferred stock shareholders superior claim to cash vs. the common stock owner only.

I started to invest in bank holding company preferred stocks in 2008 and managed, possibly through divine intervention, to avoid any bankruptcies. 

Buying $25 preferred stocks in the single digits that continue paying dividends and are later redeemed at par value can be rewarding for those willing to take the risk. I assumed those risks in very small doses, either in equity preferred or trust preferred (junior bonds) purchases. Trust Preferred Securities: Links in One Post 

While a financial collapse was avoided, a large number of bank operating subsidiaries become insolvent and were seized by the FDIC. When that happens, a preferred stock issued by a bank holding company will become worthless.  

I have started to buy some bank holding preferred stocks when their yields crossed over the 7% yield level. An example is TCBIO discussed below. I currently own only 15 shares and will continue buying in 5 share increments provided the price continues to sink. 

Preferred stocks have both interest rate and credit risks. 

Given their lowly status in the capital structure, price volatility with a strong downside bias will be magnified during periods of financial distress. 

Fear about going to zero overwhelms existing owners, which will cause selling to accelerate when there are a shortage of buyers experiencing the same fear, driving the price down, even if the issuer continues to pay the dividends.

A. Bought 10 KREF.PRA at $16.02: 

Quote:  KKR Real Estate Finance Trust Inc. 6.5% Pfd. Series A 

Issuer KKR Real Estate Finance Trust Inc. (KREF) 

I would characterized KREF as a "paper" REIT as distinguished from an equity REIT that owns real estate. KREF "focuses primarily on originating and acquiring transitional senior loans secured by commercial real estate ("CRE") assets."

KREF SEC Filings 

KREF 10-Q for the Q/E 9/30/22 

KREF is externally managed by an indirect subsidiary of KKR.   

SEC Filed Financial Report for the Q/E 9/30/22 and Supplemental (GAAP loss of $48.4M, distributable earnings of $34.4M; loss driven by additions to credit loss reserves)  

This is my first KREF.PRA purchase. I own a few shares of KREF. 

Security: Prospectus 

IPO at $25 in April 2021

Par Value: $25

Yield at $16.02 = 10.14% 

Risk Level: High, as reflected in the current yield. 

Dividends: Paid Quarterly and Cumulative

Last Ex Dividend: 11/29/22

Maximum Position: 50 shares

Purchase Restriction: 5 share lot purchases with each at the lowest price in the chain.  

B. Added to TCBIO - Bought 5 at $19.48; 5 at $19: 

Quote: Texas Capital Bancshares Inc. 5.75% Preferred Series B Stock

Issuer: Texas Capital Bancshares Inc. (TCBI)

TCBI SEC Filings

SEC Filed Earnings Press Release for the Q/E 9/30/22

Last Discussed:Item # 2.I.  Started TCBIO - Bought 5 at $20.05 (12/13/22 Post) 

Prospectus

Par Value: $25

Dividends: Paid quarterly, non-cumulative and qualified. 

Average cost per share: $19.51

Yield at AC = 7.37%

Last Ex Dividend:  11/30/22 (owned 5 as of)

C. Added to ARGO.PRA - Bought 5 at $19.05: 

Quote: Argo Group International Holdings Ltd. Series A Non-Cumulative Preferred Stock

Prospectus

Par Value: $25

Placement Capital Structure: Equity Preferred Stock, senior only to common stock. 

Stopper Clause: Yes 

Dividends: Paid Quarterly, Non-Cumulative and Qualified

Coupon: 7% to but excluding 9/15/25, then, if not called, resets for 5 years at a 6.712% spread to the 5 year treasury note.  (see prospectus at pages S7-8) 

Last Discussed: Item # 3.E. Added 5 ARGOPRA at $19.65 in  Fidelity Account (12/27/22 Post) 

As previously discussed, credit risk concerns have creeped into the price of this preferred stock. Another concern is that dividends are non-cumulative and can consequently be eliminated, rather than deferred, when the common stock dividend is eliminated and no cash is used to buy common stock. So I am going easy and cautious with my purchases. 

Average cost per share: $19.68 (15 shares) 

Yield at $19.68:  8.89% (using 7%)

Last Ex Dividend: 11/29/22

3. Small Ball Buys: 

A. Added to EAI - Bought 2 at $20.23- Schwab Taxable Account:  

Quote: Entergy Arkansas 1st Mortgage Bonds 4.875% due 2066 (EAI)

Last Discussed: Item # 7.H. Added to EAI in Vanguard Taxable Account - Bought 5 at $20.82  (11/15/22 Post)

Investment Category: Income generation with a First Mortgage Baby Bond, part of the Exchange Traded Bond category. 

Prospectus

Security: First Mortgage Lien on substantially all assets. 

Par Value $25

Maturity: 9/1/66 

Optional Issuer Redemption at par value: On or after 9/1/2021

Credit Ratings: A/A2

Interest paid quarterly. 

Average cost per share this account: $22.22 (25 shares)

Yield at AC this account: 5.485%

Last Ex Interest Date: 11/29/22

Trades Flat

Maximum Position All Accounts: 300 shares

I am not concerned about credit risk for this first mortgage bond. The concern is interest rate risk given the potentially long maturity/duration. 

Purchase Restriction: 5 or 10 shares in each account with each subsequent purchase now required to be at the lowest price in the chain. 

B. Added to VNO in Schwab Account - Bought 2 at $20.78; 2 at $20.6: 

Quote: Vornado Realty Trust  (VNO)

VNO has some problems: (1) Office REIT; (2) Excessive use of variable rate debt; (3) debt levels; (4) dividend cut coming; and (4) work from home trend.   

VNO SEC Filings

Investment Category: Equity REIT Common and Preferred Stock Basket Strategy

Last Buy Discussions: Item # 6.L. Added to VNO in Schwab Taxable Account - Bought 1 at $22.12; 1 at $21.54; 1 at $21 (10/18/22 Post); Item # 3.F. Added to VNO in Schwab Account - Bought 3 at $25.6 (9/6/22 Post) 

Average cost per share: $24.15 (24+ shares)

Dividend: Quarterly at $.53 per share ($2.12 annually)

VNO Dividend History | Nasdaq

I am currently reinvesting the dividend. 

The CEO stated in the third quarter earnings call that VNO intends to right size the dividend commensurate with VNO's projection of net income. The CEO refused to make a prediction on how much the dividend will be cut. Capital gains from property sales would be included in GAAP net income and excluded in the FFO calculation. That statement signals a significant cut. 

Yield at $24.15 AC per share: 8.78%

Yield at $20.6 (last purchase price) = 10.29%

Last Ex Dividend: 11/4/22

Last Earnings Report (Q/E 9/30/22): SEC Filing 

Total Revenue: $457.431M

FFO = $152.461M

FFO per share = $.79, down from $.81 in the 2021 third quarter

I did not see a CAD number.  

VNO did provide some number relevant to a CAD calculation for the 9 months ending on 9/30/22: 

Supplemental at page 23 

CAD would be substantially lower than FFO. 

Debt: P. 34 Supplemental

Occupancy: P. 37 Supplemental

Vornado Realty Trust (VNO) Q3 2022 Earnings Call Transcript | Seeking Alpha (dividend cut coming in 2023)

Maximum Position All Accounts: 100 shares, averaging down only in 1 to 5 share lots. 

VNO owns premium properties in NYC, Chicago (The Mart) and San Francisco (555 California Street), so I am willing to overlook, to a very limited decree, its numerous and significant current problems. Overview Portfolio | Vornado Realty Trust

C. Added 4 RTL at $5.93 - Fidelity Taxable Account: 

Quote: Necessity Retail REIT Inc. (RTL)

As of 9/30/22, RTL's portfolio "consisted of 1,050 net leased properties located in 47 states and the District of Columbia and comprised approximately 28.8 million rentable square feet".

Investment Category: Equity REIT Common and Preferred Stock Basket Strategy

2021 Annual Report (summary of risk factors starts at page 4 and ends at page 33)

10-Q for the Q/E 9/30/22 (debt listed and discussed starting at page 22; mortgage debt is at fixed rates; RTL also has a $500M 4.5% SU note maturing in 2028; Bond Detail, currently trading near 75-76-Rule 144A trades/private placement, rated at BB+) 

Last Discussed: Item # 4.J. Added 5 RTL at $6.75; 5 at $5.85 (9/27/22 Post) 

Last Substantive Discussion: Item # 3.H. Added to RTL in Fidelity Taxable - Bought 2 at $7.7  (8/10/22 Post)

Average Cost per share: $7.69 (195+ shares)

Snapshot Intraday on 1/3/23 after add 

Dividend: Quarterly at $.2125 per share ($.85 annually)

I started to reinvest the dividend effective for the July 2022 payment. 

Yield at $7.69 AC per share: 11.05%

Yield at 5.93 Purchase Price = 14.33% 

Next Ex Dividend: 1/12/23

Interactive Stock Chart - Yahoo Finance

Both the current dividend yield and long term chart emphatically confirm RTL's disfavored status among investors who count. The origin of that disdain is the the identify of the external manager (AR Global) and the compensation paid.  

There is a proxy fight ongoing for election the election of 2 independent directors. SEC Filing The Board, subservient to the external management company, is trying to prevent a vote on the alternate slate of candidates offered by Blackwells, a hedge fund. The reason is that RTL would lose 2 of its existing Board members. Management internalization can occur when more than 67% of the directors have approved the internalization. (p. F-41) Even if the 2 "independent directors" are replaced with real independent directors, there would still be 3 directors controlled by AR Global. Other proxy proposals offered by Blackwells would make it easier to replace those directors. The external managers need to be fired but it is speculative at this time to predict whether or not that will eventually happen.  

Last Earnings Report (Q/E 9/30/22): SEC Filed Earnings Press Release for the Q/E 9/30/22 and Supplemental

Revenue = $116.186M

FFO per share = $.22

AFFO per share = $.26

92.6% leased, with 7.0 years remaining weighted-average lease term

63.9% of leases have weighted-average contractual rent increases of 0.9% based on annualized straight-line rent 

Other Recent News: THE NECESSITY RETAIL REIT EXPECTED TO COMPLETE OVER $400 MILLION DISPOSITIONS IN 2022, INCLUDING $74 MILLION IN FOURTH QUARTER (12/21/22)

Goal: Any profit in excess of the dividends paid.   

D. Added $50 to FSPTX at $17.62: 

Quote: FSPTX | Fidelity Select Technology Portfolio Overview 

FSPTX – Fidelity® Select Technology Fund - Morningstar (currently rated 4 stars)

FSPTX – Portfolio – Fidelity® Select Technology | Morningstar

2022 Total Return = -36.87%

10 Year Annual Average Total Return: +15.8% (through 1/5/23)

The total returns in 2019, 2020 and 2021 were 51.07%, 63.71%, and 21.97% respectively. This sector went up too much and is currently in the process of giving back some of those recent gains. My gut has informed me that technology stocks will have another tough year in 2023 so I am going slow adding to this position.  

Dividends have been entirely sourced from short and long term capital gains. 

2022: $.705 per share paid in April

2021: $3.383 per share semiannual total

December 2020: $4.341 per share

E. Added to HPP in Fidelity Taxable Account - Bought 5 at $9.3: 

Quote: Hudson Pacific Properties Inc.  (HPP)

Working my way up slowly to 100 shares. Given the recent price decline and current dividend yield for new purchases, I do not require much of a lower price before buying again. 

HPP SEC Filings 

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

Investment Category: Equity REIT Common and Preferred Stock Basket Strategy

Last Discussed: I discussed the last earnings report in this post. Item # 3.B. Added to HPP - Bought 5 at $9.7; 5 at $9.48 (12/27/22 Post); SEC Filed Press Release and SEC Filed Supplemental

Average cost per share this account: $11.86 (55 shares)

Snapshot Intraday 1/5/23 after add

Dividend: Quarterly at $.25

Yield at $11.86 = 8.43%

Yield at $9.3 purchase price = 10.75%

F. Added to NBGNX - Bought $50 at $53.87: 

Quote: Neuberger Berman Genesis Fund 

This fund is characterized by Morningstar as investing in small cap growth stocks. I generally do not own any or many stocks so characterized, but do own small cap value stocks. I do not own any of the top 25 holdings.  

NBGNX-Neuberger Berman Genesis Fund-Morningstar (currently rated 4 stars)

Expense Ratio = .99%

2022 Total Return: -19.25%

Annual Average Total Returns Through 1/5/23: 

3   Years: + 5.56%

5   Years: + 6.93%

10 Years: +10.01%

The fund has recently generated sizeable per share capital gains: 

I am reinvesting the dividends. 

G. Added $50 to FCNTX at $12.1: 

Quote: FCNTX | Fidelity Contrafund Overview 

Sponsor's Website: FCNTX - Fidelity ® Contrafund ® | Fidelity Investments

FCNTX – Fidelity® Contrafund® Fund Stock Price | Morningstar (currently rated 4 stars)

FCNTX – Portfolio – Fidelity® Contrafund® | Morningstar (of the top 25 holdings, I currently have small ball positions in BRK/B, META, GOOGL, XOM, QUAL, BAC, and JPM (probably less than $1,500 in total outlays)

Dividends (not adjusted for 10 for 1 split, effective in August 2018, on the "reinvestment price"): Mutual Fund Share Splits | August 2018 | Fidelity Investments

I would generally anticipate that the expense ratio of .81% will eat up all or most of the ordinary dividend income which is confirmed in the previous snapshot. The fund owns a number of non-dividend or low dividend paying stocks. Capital gains will be the only meaningful source of dividend income. 

2022 Total Return: -28.26

Total Annual Average Returns through 1/6/23: 

3   Years:  +5.57%

5   Years:  +7.97%

10 Years: +12.22% (in line with SPY, so not a recommendation to buy the fund rather than the lower cost S & P 500 index fund)

4. Small Ball Sells: 

A. Eliminated FNB in Schwab Account = Sold 50+ at $13.045: 

Quote: F.N.B. Corp.

FNB SEC Filings

FNB Analyst Estimates | MarketWatch

2021 Annual Report 

Investment Category: Regional Bank Basket Strategy

Last Discussed: Item # 6.F. Pared FNB in Schwab Taxable Account - Sold 5 at $14.19 (11/8/22 Post) 

Last Earnings Report: I discussed the better than expected third quarter earnings report in this post: Item # 5.M. Pared FNB in Schwab Taxable Account - Sold 5 at $12.78; 5 at $13.47 (10/25/22 Post); SEC Filed Press Release

Last Buy Discussions: 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)

While FNB financial results have recently improved, E.P.S. had been stagnant for a long period; and the quarterly dividend has remained at $.12 per share since it was slashed from $.24 in 2009. F.N.B. Corporation (FNB) Dividend History | Seeking Alpha

Diluted E.P.S. was $.79 in 2012  (page 39 10-K) and $.85 in 2020. Results started to improve in 2021 with E.P.S. reported at $1.23 (page 48, 10-K) 

It is impossible to know now whether the recent results starting in 2021 and and carrying through 2022 are likely to continue longer term or are more of a short term aberration and a temporary respite from the longer term historical trend of poor or mediocre results. So I sold and harvested some profits. 

Proceeds: $655.27 

Profit Snapshot: +$297.9

B. Eliminated FNB in Vanguard Taxable Account - Sold 57+ at $13.28: 

See Item # 4.A. above. 

Proceeds: $767.37

Profit Snapshot: +$343.85

FNB Realized Gains to Date: +2,348.25 (currently at # 6 in the regional bank basket)

Notwithstanding the less than stellar operating results since I first started to trade FNB, buying at below $8 and selling somewhere above $12 has been rewarding. The long term chart does not support a long term hold thesis: 

10 Year Chart as of 1/6/23:

I still own 15 shares in my Fidelity account with an average cost per share of $6.75: 

Price as of 1/6/23 Close

The static dividend yield at $6.75 is 7.11%. Maybe before I pass FNB will increase the dividend and improve that yield. 

While lackluster earnings growth had many causes, including some that are generally applicable to banks such as NIM compression, the most serious restraint has been growth by acquisition that increased the share count without moving E.P.S.  

C. Pared FHB in Fidelity Account - Sold 5+ at $26.355:

Quote: First Hawaiian Inc. (FHB)

FHB Analyst Estimates | MarketWatch (as of 1/9/23, the consensus E.P.S. for 2022, 2023 and 2024 was $2.04, $2.29, and $2.29 respectively)

Investment Category: Regional Bank Basket Strategy

FHB SEC Filings

Proceeds: $132.84

Last Discussed: Item # 6.E. Added 3 FHB at $22.74 (7/6/22 Post) 

Last Sell Discussion: Item # 3.B Pared FHB in Fidelity Taxable Account - Sold Highest Cost 11 Shares at $29.21 (3/17/22 Post)

Profit Snapshot: +$18.33

Average cost per share before pare this account: $16.6

Average cost per share after pare this account: $15.61 (31 shares)

Snapshot Intraday on 1/4/23 after pare

Dividend: Quarterly at $.26 per share, last raised from $.24 effective for the 2019 third quarter. I view the dividend history as unsatisfactory. 

Yield at New AC per share = 6.66%, perhaps that tells me something. 

Last Ex Dividend: 11/18/22

Last Earnings Report (Q/E 9/30/22): SEC Filed Press Release 

Net income of $69.0 million, or $0.54 per diluted share, up from $.50 in the 2021 third quarter

Net interest margin increased 33 basis points to 2.93% (2.93% is unsatisfactory IMO for the 2022 third quarter) 

Efficiency Ratio:  53.98% (good)

NPL Ratio: .06% (excellent)

Charge Off Ratio: .08% (excellent) 

ROA:      1.10%  

ROE:    12.08% 

ROTE: 21.53% 

Total Capital Ratio: 12.92% (adequate as of 9/30/22) 

Tangible Book Value per share = $9.46 

FNB Realized Gains to Date: $520.41

D. Pared FENY in Fidelity Account - Sold 5 at $22.85: 

Quote: Fidelity MSCI Energy Index ETF

Sponsor's website: FENY | ETF Snapshot - Fidelity

FENY produced total returns of +55.69% and 63.09% in 2021 and 2022 respectively, but declined -33.15% in 2020. 

FENY – Performance – Fidelity® MSCI Energy ETF | Morningstar 

The rise in 2022 occurred notwithstanding a dominant downtrend in crude oil prices starting in June 2022.  WTI Crude Oil Prices - 10 Year Daily Chart | MacroTrends The WTI price closed at $75.21 on 12/31/21 and at $80.51 on 12/30/22 and is currently near the $75 price again. 

Proceeds: $114.24 

Expense Ratio: .08%

Average cost per share before pare: $13.46

Average cost per share after pare: +$13.19 (50+ shares)

Snapshot Intraday on 1/4/23 after pare 

Profit Snapshot: +$33.69

Dividend: Quarterly at a variable rate. 

Last 4 Dividends per share: $.7951

Yield at New AC  =  6.03% (assumes annual penny rate at $.7951)  

Top Ten Holdings as of 12/30/22: 

FENY Realized Gains to Date: $672.92

Other Realized Gain Snapshots: 

For natural resource stock funds, my largest position is in the CEF Adams Natural Resources Fund Inc. (PEO) which was pared last year. PEO had total returns of 53.93% and 41.8% in 2021 and 2022 respectively. Adams Natural Resources Fund (PEO) Performance | Morningstar

Price as of 1/6/23 close

I am currently considering eliminating that position due to the ongoing decline in energy prices. I quit reinvesting the dividend effective with the December 2021 payment. 

PEO was started just prior to the 1929 crash. 

5. Corporate Bonds: +$6,000

A. Bought 2 Realty Income 4.6% SU Maturing on 2/6/24 at a Total Cost of 99.57: 

Issuer: Realty Income Corp. (O) 

Realty Income SEC Filings 

SEC Filed Earnings Press Release for the Q/E 9/30/22 

10-Q for the Q/E 9/30/22 (senior unsecured notes listed at page 19; this bond is the first one that matures)

I own the common stock in my Roth IRA accounts and only 2 shares in my Schwab taxable account with a $56.8 average cost per share. Item # 6.N. Bought 1 O at $57.58; 1 at $55.83 (10/18/22 Post) I have focused on the bonds since eliminating a 100 share position back in 2016. Item # 1. Eliminated Realty Income (O)- Sold 100 at $52.37Update For Equity REIT Basket Strategy As Of 1/21/16 | Seeking Alpha (profit snapshot = $1,579.50)- Item # 6 Bough 100 Realty Income (O) at $36.96 (12/10/13 Post) I took all of the dividend payments in cash. 

Finra Page: Bond Detail (prospectus not linked)

Prospectus This bond was originally issued by VEREIT which was acquired by Realty Income, which then exchanged those bonds for ones offered by Realty Income with the same coupons and maturities while eliminating substantially all restrictive covenants contained in the VEREIT Indenture. 

Credit Ratings: A3/A-

YTM at Total Cost = 5.008%

Current Yield at TC = 4.62%

For comparison purposes, the 1 year treasury was trading a 4.76% yield when this bond was purchased, so I picked up only about .25% going with the corporate bond. That is barely worth the bother when I have no concern about the credit risk which is the case with this Realty Income bond.  

B. Bought 2 Arrow Electronics 3.25% SU Maturing on 9/68/24 at a Total Cost of 96.691: 

I now own 4 bonds. 

Issuer: Arrow Electronics Inc. (ARW) 

ARW Analyst Estimates | MarketWatch

ARW SEC Filings 

ARW SEC Filed Earnings Press Release for the Q/E 10/1/22 (net income of $342M/LT Debt at $3.187+B; cash and cash equivalents at $333.983M) 

10-Q for the Q/E 10/1/22 (debt listed at pp. 12-13; there is a 4.5% SU bond that matures on 3/1/23 and the 2024 bond would then be the next one that matures)

Finra Page: Bond Detail (prospectus not linked)

Prospectus 

Credit Ratings: Baa3/BBB- (lowest investment grade ratings)

YTM at Total Cost: 5.342%

Current Yield at TC = 3.36%

C. Bought 2 Camden Property 4.25% SU Maturing on 1/15/24 at a Total Cost of 99.084: 

Issuer: Camden Property Trust (CPT) 

CPT SEC Filings 

SEC Filed Financial Results for the Q/E 9/30/22 

10-Q for the Q/E 9/30/22 (debt listed at page 14; the $350M SU note maturing on 12/15/22 was paid off without issuing a new SU bond)

Finra Page: Bond Detail (prospectus linked)

Credit Ratings: A3/A-

YTM at Total Cost: 5.28%

Current Yield at TC: 4.29%

7. TIP Purchase - Roth IRA Account: 

A. Bought 1 TIP .125% Coupon Maturing on 4/15/25 at a Total Cost of 95.5 - Roth IRA: 

Inflation Factor: 1.15344

1.15344 Inflation Factor x. $955 total cost = $1,101.535 paid to seller in principal amount. 

Accrued Interest Paid to Seller: $.34

Total Paid to Seller: $1,101.88, rounded up. 

Nominal 2 Year Treasury Note as of Purchase Date: 4.24% 

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.