BMY, CAG, CTOPRA, DPG, FHN, FSK, GLADZ, GNLPRD, GRX, OGN, SNVPRE, STAG, THQ, WSBC

Economy: 

Consumer Price Index Summary - 2023 M08 Results

Gasoline accounted for 1/2 of the increase with a 10.6% rise month-to-month. The rise in the crude oil price is due to Saudi Arabia's production cuts and to a lesser extent from Russia. Saudi Arabia extends oil production cut even as US gas prices hit nine-month highs 

August CPI: 

Annual CPI = 3.7%, up from 3.2% 

Core CPI =  4.3%, down from 4.7% 

August Compared to July: 

CPI = .6%

Core CPI +.3%

Table 2. Consumer Price Index for All Urban Consumers (CPI-U): U. S. city average, by detailed expenditure category - 2023 M08 Results

"Owners equivalent rent", weighted at 25.616%, was up 7.3% YOY and .4% month-to-month down from .5%.  

Discussed at CPI report August 2023: Inflation rose 0.3%

Sticky Price Consumer Price Index less Food and Energy -St. Louis Fed

Sticky-Price CPI - Federal Reserve Bank of Atlanta

Median CPI- Federal Reserve Bank of Cleveleand

Monthly Retail Trade - Sales Report For August, sales were up .6% compared to July. The June to July increase was revised to .7% from .5%. 

Industrial production increased by .4% in August.  Federal Reserve Board - Industrial Production and Capacity Utilization - G.17

The more likely than not probability is that the FED is done raising rates this year. 

For the December 2023 FED Meeting

September Treasury Yield Curve: 

The treasury bill rates are consistent with the FF rate remaining unchanged. 

10 Year TIP Breakeven Inflation Rate: 2.35%

Real Rate 10 Year TIP: 1.98%

+++

Allocation Shifts Discussed in this Post: 

Treasury Bill Purchases at Auction: $8,000 in principal amount 

Corporate Bonds: $2,000 in principal amount

Exchange Traded SU Bond = + $124.68 (yield 7.518%)

Equity Preferred Stocks: +$311.7 (weighted yield at 7.27%)

Net Outflow Common Stocks: -$1,422.1

(consisting of $2,089.55 in proceeds minus $667.45 in purchases)

Realized Gains Common Stocks +$1,089.84

Stock Funds: +$183 (weighted yield at 7.62%)

Net Outflow Common Stocks/Stock Funds: -$1,2539.1

2023 Net Outflow Common Stocks/Stock Funds: -$38,786.53

The primary reason for the net outflow is the risk free yield in treasury bills. 

++++

Putin and His Pathological Orc Empire of Misery: 

Russian General Admits Ukraine Just a 'Stepping Stone' to Invade Europe This admission was made by Colonel-General Andrey Mordvichev, the third highest ranking officer in the Orc's army and commander of the Central Military District and Russia's forces in Ukraine.  

Last weekend, Russia murdered two international aid workers who were trying to aid wounded people. NGO reports 2 foreign aid workers killed by Russian shelling | PBS NewsHour Russia will frequently target civilians including those who are first responders to a previous Russian missile or drone attack. 

Russia's Dear Leader claimed the U.K. was training Ukrainian soldiers to attack a Russian nuclear power plant. Ranting Putin threatens Sunak as he claims UK 'backed nuclear plant raid' with wild claim | The Independent;Russia says it will make official diplomatic protest to Britain over Putin's claims UK trained Ukrainian nuclear power plant hit squad - after Vladimir warned of 'consequences' | Daily Mail Online Putin assured everyone that he was speaking the "pure truth". 

Ukraine launches its largest attack yet on occupied Crimean port with cruise missile blitz just ahead of Putin's meeting with Kim Jong Un | Daily Mail Online Ukraine hit a Russian Kilo class submarine and a large landing ship called the Minsk.  

Last Thursday, Ukraine successfully destroyed a Russian S-400 mille system located in western Crimea using drones and Ukrainian made cruise missiles which have about a 200 mile range. The Ukrainian made cruise missiles is a modification of the Neptune anti-ship missile that are now capable of hitting targets on the ground. Earlier in the war, this missile was used to sink the Russian warship Moskva. Ukraine’s R-360 Neptune Missile, The Killer Of Moskva, Continues To Haunt Russia; Strikes Triumf System In Crimea - Reports The Russian government, incapable of telling the truth, claims that this ship experienced a munitions explosion and then sank in stormy seas.  

Ukraine Claims to Have Retaken Oil and Gas Platforms in the Black Sea - The New York Times The platforms are called the Boyco Towers and were seized illegally by Russia in 2015. 

++++

Don the Authoritarian and His Party: 

RealClearPolitics - Election 2024 - 2024 Republican Presidential Nomination

RealClearPolitics - Election 2024 - General Election: Trump vs. Biden

Trump is explaining exactly how wild and extreme his second term would be Trump is an authoritarian demagogue who is incapable of telling the truth but is nonetheless viewed as honest and a role model for children by tens of millions.  

Wisconsin Republicans Are Unleashing a Very Trumpy Attack on the Democratic Process | Vanity Fair  The republican controlled legislature  fired the Wisconsin Elections Commission Administrator, Meagan Wolfe, who did not accept their fact free conspiracy theories about the 2020 election. The Wisconsin senate vote was a party line 22 to 11. Note that democrats have won most statewide elections; and the Democrat presidential candidate has won most of the elections in that state. Yet, the democrats only have 1/3rd of the state senate seats. The anti-democracy party in Wisconsin also wants to impeach the recently elected state Supreme Court Justice, who won a landslide victory over her republican opponent, before she can cast a vote on their gerrymandered voting maps. At least they are consistent in their willingness to quickly sacrifice the fundamental principles of democracy in pursuit of power.        

Opinion | Trump Is Nothing Without Republican Accomplices - The New York Times This opinion article was written by Harvard professors Steven Levitsky and Daniel Ziblatt who published last week Tyranny of the Minority: Why American Democracy Reached the Breaking Point 

Putin reiterated his support for Donald last week calling his soulmate's indictments political persecution that highlighted U.S. weaknesses and proves in Putin's opinion that the U.S. can not teach anyone about democracy. Putin Calls Trump Charges Political ‘Persecution’ | WSJ - YouTube The Orcs in the audience applauded their Dear Leaders remarks North Korean style. Trump says he's pleased by Putin's praise: 'I like that he said that'

Trump wants to close the Department of Education, joining calls by GOP rivals 

McCarthy Pulls Back Pentagon Spending Bill, Inching Closer to a Shutdown - The New York Times The republicans can not even agree on a defense spending bill. 

+++

1. Small Ball Buys: 

A. Restarted WSBC - Bought 5 at $25.69; 2 at $25.27; 3 at $24.4: 

Quote: WesBanco Inc.  (WSBC) 

Cost: $252.19

WSBC is a bank holding company whose operating bank, Wesbanco Bank, operates "more than 190 financial centers in the states of Indiana, Kentucky, Maryland, Ohio, Pennsylvania, and West Virginia."

WSBC SEC Filings

Investment Category: Regional Bank Basket Strategy

WSBC Analyst Estimates | MarketWatch (The current average 2023 E.P.S. estimate is $2.6, down from $3.04 in 2022. While that is a fairly standard downtrend for many regional bank stocks who are facing significant increases in funding costs this year compared to 2021 and 2022, WSBC has increased its 2023 1st half E.P.S. to $1.38 from $1.34. To earn just $2.6 this year, the last two quarters would have to total $1.22. I question that the those quarters will average only $.61 per share)

The last 3 shares were purchased on the ex dividend date. 

Average cost per share: $25.17 (10 shares)

Dividend: Quarterly at $.35 per share ($1.4 annually), last raised from $.34 effective for the 2022 4th quarter payment. In the 2013 4th quarter, the quarterly dividend was at $.20. There was a dividend slash from $.28 to $.14 effective for the 2009 third quarter. That was in response to the Near Depression. Most U.S. banks slashed their dividends then, with many reducing the payout to just $.01. 

WSBC Dividend History | Seeking Alpha

Yield at AC per share: 5.56%

Last Ex Dividend: 9/7/23 (owned 7 as of)

Last Earnings Report (Q/E 6/30/23): SEC Filed Press Release 

E.P.S. = $.71, up from $.67 in the second quarter.

NIM: 3.18%, up from 3,03% in the 2022 second quarter

Efficiency Ratio: 61.5%, viewed as too high by me.

Charge off ratio: .02%

Allowance for credit losses to non-performing loans: 381%

NPA Ratio .19%, down from .21%  

ROTE: 14.52%

Average loans to average deposits: 85.44%

Deposits: $12.861+B

Tangible Book Value per share: $20.08, up from $19.89

10-Q for the Q/E 6/30/23

Investment Securities Information at page 11: 

For WSBC and other regional banks, there is also far too much reliance on owning residential mortgage backed securities whose effective maturities lengthen when rates rise meaningfully, as homeowners do not pay off their mortgages and refinance, and the values of those securities decline as the duration of relatively low yielding vintage securities lengthen. 

These securities have what is known as "negative convexity". Prices will decline more when interest rates rise and rise less when interest rates decline due to mortgage prepayments. 

Many of these securities were bought by banks prior to 2022 when the FED had driven long term rates below the inflation rate and to historically low nominal yields. Consequently, while there coupons were higher than comparable maturity treasuries when purchased, the nominal yields were at what is now very low levels.   

Agency MBS in 2023: Uncharted Territory - MSCI; SVB Collapse: Focus on risk of MBS investing Silicon Valley Bank failed after announcing that there has been a deposit run and the bank had sold its investment portfolio at a substantial loss and wanted to raise new equity capital. 

Preferred Stock: I recently initiated a small ball position in the WesBanco 6.75% Preferred Series A Stock (WSBCP) The fixed coupon rate lasts to 11/15/25 when it transitions to a 6.557% spread to the five year treasury, unless called, which resets every 5 years similar to the Canadian resets that pay spreads to the 5 year Canadian government bond. 

WSBC Realized Gains to Date: $342.18. Almost all of the total was from a 50 share lot sold in 2011 that generated a $315.6 gain. 

2011 WSBC 50 Shares +$315.6

Item # 3. Sold 50 WSBC at $20.11 (2/11/11 Post)-Item # 4 Bought 50 WSBC at $13.3 (1/16/10 Post) 

B. Added 5 DPG at $9.13: 

Quote: Duff & Phelps Utility & Infrastructure Fund Inc. (DPG) - A Leveraged CEF

Cost: $45.65

Sponsor's website: Duff & Phelps Utility and Infrastructure Fund Inc.

DPG SEC Filings 

SEC Filed Semiannual Report for the Period Ending 4/30/23 

The fund owns primarily utility and energy infrastructure stocks with some exposure to railroads. 

New Average cost per share: $9.5 (15 shares) 

Dividend: Quarterly at $.21

ROC supported. 

Yield at New AC = 8.84%

Last Ex Dividend:  9/14/23 (owned all as of)

Data Date of 9/6/23 Trade: 

Closing Net Asset Value per share: $10.41

Closing Market Price: $9.13

Discount: -12.3%

Sourced: DPG- CEF Connect 

Last Elimination: Item # 1. Eliminated DPG in Schwab Account - Sold 390+ at $14.57 (6/14/21 Post)(profit snapshot = $132.63)

I recently discussed this out-of-favor CEF in a recent post and have nothing further to add here. Item # 1.A. Restarted DPG - Bought 10 at $9.68 (8/12/23 Post) 

C. Added to THQ - Bought 5 at $18.18: 

Quote: Tekla Healthcare Opportunities Fund Overview - A Leveraged Balanced CEF 

Cost: $90.9

Investment Category: Monthly Income Generation

This fund owns primarily common stocks and bonds issued by healthcare companies. The fund will own some convertible preferred stocks and will write some options against common stock positions. 

Leveraged: Yes, at spreads to SOFR.  

Pages 27-28 Semiannual Report, as of 3/31/23

Sponsor's website: Tekla Capital

THQ SEC Filings

SEC Filed Semiannual Report for the period ending 3/31/23 

SEC Filing- Holdings as of 6/30/23 

Tekla Healthcare Opportunities (THQ)-Morningstar (currently rated at 4 stars)

Tekla Healthcare Opportunities (THQ) Portfolio | Morningstar (lists top 25 holdings)

Last Discussed: Item # 1.D. Bought 5 THQ at $18.02 (6/6/2/23 Post);  Item # 3.B. Added 5 THQ at $18.58 (5/6/23 Post)

New Average cost per share: $18.95 (35+ shares) I have a lower cost duplicate position that I intend on selling when and if the price goes back over $19. The duplicate position is held in my Fidelity account and consists of 15+ shares with an average cost per share of $13.43. 

Dividend: Monthly at $.1125 per share ($1.35 annually), with some recent ROC support. 

I am reinvesting the dividend. 

THQ Dividend History | Seeking Alpha

Yield at New AC = 7.124%

Last Ex Dividend: 8/18/23

Data Date of 9/8/23 Trade: 

Closing Net Asset Value per share: $20.91

Closing Market Price: $18.19

Discount: -13.01%

Average 3 Year Discount: -6.68% 

Source: THQ  - CEF Connect 

THQ Realized Gains to Date: $822.23, includes a $33.52 gain on a 50 share lot sold in 2016 and $24.63 from a 6 share lot sold in 2021 which were not discussed. 

Some Sell Discussions: Item # 1.H. Pared THQ in Fidelity Account - Sold 10 at $17.55 and 10 at $17.9 - Highest Cost Lots (5/23/20 Post)(profit snapshot = $23.34); Item # 1.B. Sold Remaining THQ-61+ Shares at $17.5 (9/1/19 Post)(profit snapshot = $60.49); Item # 2.A. Sold 53 THQ at $17.98(7/31/19 Post)(profit snapshot = $44.81); Item # 5 Sold 100 THQ at $17.59-Used Commission Free Trade(7/7/19 Post)(profit snapshot = $79.88 and contains 2017 profit snapshots =$555.56); Item # 2.C. Sold  232+ THQ at 17.59 (7/3/17 Post); Item # 2.D. Sold 118+ THQ at $18.7 in a Roth IRA Account (7/3/17 Post;); Item # 3. Sold 160+ THQ at $17.41 (6/5/17 Post) 

Goal: Harvest monthly dividends and realize a gain on the shares. 

The YTD performance has been disappointing due to the plain vanilla bonds, convertible bonds, REIT and biotechnology holdings. Overall, healthcare ETFs are significantly underperforming the S&P 500 ETFs. (e.g. VHT – Performance – Vanguard Health Care ETF | Morningstar)

D. Added to GRX - Bought 5 at $9.29: 

Quote: Gabelli Healthcare & Wellness Trust Overview - a Leveraged CEF

Cost: $46.45

This fund will own stocks in the food, beverage, food and staples retailing, biotechnology, pharmaceutical, healthcare providers and services, healthcare equipment and supplies and household and personal products sectors. 

Sponsor's website: Healthcare and Wellness Rx Trust - GAMCO Investors, Inc.

GRX SEC Filings 

SEC Filed Semiannual Report for the Period Ending 6/30/23-Leveraged with preferred stocks: 

See page 20 for more information 

Gabelli Health & Wellness (GRX) Quote | Morningstar (currently rated 2 stars)

Gabelli Health & Wellness (GRX) Portfolio | Morningstar (lists top 25 holdings)

Average Cost per share: 10.78 (120+ shares) 

Dividend: Quarterly at $.15 per share

I am reinvesting the dividend. 

Yield at AC = 5.566%

Last Ex Dividend: 9/14/23 (owned all as of)

Data Date of 9/8/23 Trade: 

Closing Net Asset Value per share: $11.24

Closing Market Value: $9.28

Discount: -17.44%

3 Year Average Discount: -13.85%

Sourced: GRX - CEF Connect 

YTD performance has been poor compared to the S&P 500 as both healthcare and consumer staple sectors have struggled. The discount to net asset value per share has expanded some during 2023 which adds to the  underperformance based on price rather than net asset value per share.  

E. Added to BMY - Bought 1 at $59.82; 1 at $59.41 - Schwab Account: 

Quote: Bristol Myers Squibb Co.

Cost: $119.23

BMY SEC Filings

BMY Analyst Estimates | MarketWatch

Products and Medicines

Pharmaceutical Research & Development Pipeline

Pharmaceutical Press Releases & News 

Bristol Myers Squibb - Bristol Myers Squibb Enters Into $4 Billion Aggregate Accelerated Share Repurchase Agreements (8/10/23)

R&D Day Press Release (9/14/23): Bristol Myers Squibb Highlights Advancing Pipeline and Differentiated Research Platforms to Support Long-Term Sustainable Growth at R&D Day

Last Discussed: Item # 1.A. Eliminated BMY in Fidelty Account - Sold 14 at $74.64 (2/13/23 Post)(profit snapshot = $206.75); Item # 2. Eliminated BMY in Vanguard Taxable Account - Sold 15+ at $77.56 (5/5/22 Post)(profit snapshot = $279.11) 

Having eliminated my duplicate positions, I will add to my remaining position in 1 or 2 share lots. As previously discussed, my main concern involves the loss of exclusivity on Revlimid, which was BMY's top selling drug. Bristol Myers Squibb's Revlimid finally faces competition in the U.S. with Teva's generic launch | Fierce Pharma Revlimid revenues were $12.821b in 2021.  

Other concerns include the patent expiration for Eliquis in 2028 and its inclusion on the Medicare price negotiation list; the deceleration in other major product sales, and the revenues from new products failing to offset the declines in Revlimid by a large margin. 

The Bristol Myers Squibb-Pfizer Alliance is pleased with the decision by the U.S. Court of Appeals for the Federal Circuit upholding the Eliquis® Patents; Eliquis and Jardiance among 10 drugs up for Medicare price negotiation

The major positive from BMY's existing portfolio is continued strong sales in Opdivo. 

New Average cost per share: $60.27 (17+ shares)

Dividend: Quarterly at $.57 per share ($2.28 annually). The last raise was from $.54 effective for the 2023 first quarter. The $.54 was an increase from $.49 effective for the 2022 first quarter. 

Dividend History - Bristol Myers Squibb

Yield at AC = 3.783%

Last Ex Dividend: 7/6/23

Last Earnings Report (Q/E 6/30/23): 

Bristol Myers Squibb Reports Second Quarter Financial Results for 2023

GAAP E.P.S. = $.99

Non-GAAP E.P.S. = $1.75, down from $1.93 in the 2022 second quarter. Non-GAAP E.P.S. excludes a $2.257B non-cash amortization of acquired intangibles. That noncash "expense" is entirely or almost so related to BMY's acquisition of Celgene. 

Product Sales: Note that Revlimid revenues were down 41% compared to the 2022 second quarter. 

BMY lowered its 2023 GAAP E.P.S. forecast to between $3.72 to $4.02 and non-GAAP E.P.S. to $7.35-$7.65 due to lower than expected revenues from Revlimid and Pomalyst. The previous 2023 non-GAAP E.P.S. guidance, made last April, was $7.95 to $8.25.   

The Stock Jocks are not pricing BMY IMO off the current non-GAAP E.P.S. numbers. If that were the case, the stock would be clearly undervalued with a 2023 consensus non-GAAP E.P.S. estimate of $7.47 and $8.1 in 2025. The decline in Revlimid sales due to loss of patent exclusivity is just a too big of a hole to fill and the Stock Jocks are expressing significant skepticism about the forecasts being made by the analysts as reflected in the current P/E multiples to non-GAAP E.P.S. forecasts.  

BMY Realized Gains 2009 to Date: $928.93

All of the realized gains, except for $20.33 in 2021, were from trades in 2009-2010 and 2022-2023. Among major drug companies, I would describe my trading as very light.  

Largest Gains in Roth IRAs: 5+ shares

Realized Gain Snapshots over $100 - Taxable Accounts 2009 to Date:  

2009-2010

2022-2023: 

F. Added to OGN - Bought 1 at $19.53; 4 at $19.23: 

Quote: Organon & Co. (OGN)

Cost: $96.45

OGN was spun out of Merck in 2021. Merck Announces Completion of Organon & Co. Spinoff (6/3/21). As part of that spinoff, Merck received $9B funded by new Merck debt that was assumed by OGN. Page 9, and see page 25 SEC Filing This debt assumption is a major negative, particularly given the rise in interest rates and the declining revenues and earnings.  

A significant part of that decline is due to USD strength against foreign currencies, which has resulted in a negative accounting impact on revenues and profits given OGN's reliance on international product sales. For the Q/E 6/30/23, international sales accounted for 76.9% of the total. 

Product sales have been negatively impacted by the loss patent exclusivity for products including NuvaRing, Nasonex, and Zetia/Vytorin. 

OGN Analyst Estimates | MarketWatch

OGN SEC Filings

10-Q for the Q/E 6/30/23 

Product Sales:

The birth control implant Nexplanon is the primary patented protected products. Nexplanon (birth control) | Emory School of Medicine U.S. patent protection expires in 2027. Sales increased 10% to $214M in the second quarter compared to the 2022 second quarter. (see page 11 of  SEC Filed Slide Presentation) 

Biosimilar products are becoming more important. 

Organon | Products list

Last Discussed: Item # 1.F. Added to OGN - Bought 1 at $19.55; 2 at $18.9 (6/3/23 Post); Item # 2.N. Added 1 OGN at $21.24; 2 $20.28; 1 at $20.58 (5/20/23 Post)(contains discussion of the earnings report for the Q/E 3/31/23, SEC Filed Earnings Press Release for the Q/E 3/31/23) 

Last Sell Discussion: Item # 5.A. Eliminated OGN in Vanguard Taxable Account - Sold 12 at $30.67 (1/23/23 Post)

OGN may be a value trap. Any rally in the stock this year has been sold aggressively. Earnings have been trending down, and debt levels remain high. On a P/E basis, the stock is cheap but the Stock Jocks are ignoring that number and focusing instead on the debt and the dominant trend of declining earnings. 

New Average cost per share: $24.72 (56+ shares)

Quarterly Dividend: $.28 per share ($1.12 annually)

Organon & Co. Common Stock (OGN) Dividend History | Nasdaq

I would probably be prudent IMO to eliminate the dividend and to use the saved cash to pay down debt. Conversely, given the debt and declining earnings, a dividend increase is highly unlikely. 

I am reinvesting the dividend as a means to average down. 

Yield at New AC per share:  4.53%

Last Ex Dividend: 8/17/23

I am reinvesting the dividend. The last reinvestment price was $19.49 on 9/14/23.

Last Earnings Report (Q/E 6/30/23): SEC Filed Earnings Press Release and SEC Filed Slide Presentation  

GAAP E.P.S. = $.95, up from $.92 in the 2022 second quarter

Non-GAAP E.P.S. = $1.31, up from $1.25

The adjustments to GAAP are stock based compensation, amortization, and one time expenses related to the Merck spinoff.  

Revenues: $1.608B, up from $1.585B

While the dominant trend has been a decline in non-GAAP E.P.S., the 2023 second quarter provided an exception to that trend. It remains to be seen whether this is an aberration or an indication of stabilization and a possible uptrend. 

Narrows 2023 revenue range "to $6.25 billion to $6.45 billion, primarily reflecting current foreign currency exchange rates" ''As of June 30, 2023, cash and cash equivalents were $326 million, and debt was $8.7 billion." "Biosimilars revenue increased 14% as-reported and 15% ex-FX in the second quarter of 2023, compared with the second quarter of 2022 primarily driven by Renflexis® (infliximab-abda) which grew 20% ex-FX due to continued demand and strong volume growth in United States and Canada. Growth in the biosimilars franchise was partially offset by a 7% ex-FX decline in Ontruzant® (trastuzumab-dttb) primarily related to ongoing competitive pressures in Europe. On July 1, 2023, the company launched Hadlima, a biosimilar to Humira (adalimumab) (a trademark of AbbVie Biotechnology Ltd.) in the United States. Organon already markets Hadlima in Canada and Australia."

Purchase Restriction: Maximum position 100 shares. Each subsequent purchase must lower my average cost per share. 

G. Added to CAG - Bought 2 at $28.47; 3 at $28.38: 

Quote: Conagra Brands, Inc.

Cost: $142.08

CAG SEC Filings

CAG Analyst Estimates | MarketWatch

Brands | Conagra Brands

Conagra Brands, Inc. (CAG) Dividend History | Seeking Alpha

New average cost per share: $30.09 (30 Shares)

Maximum Position: 100 shares

Dividend: Quarterly at $.35 per share ($1.4 annually)

Yield at New AC = 4.65%

Last Ex Dividend: 7/28/23

As previously discussed, packaged food companies have limited earnings growth potential, where mid-single digit earnings growth being close to optimal, and have recently experienced significant profit margin pressure caused by input cost inflation that has resulted in higher product prices and lower volumes. 

The Stock Jocks are currently negative on this sector, which is reflected in sector wide stock price declines that has resulted in P/E multiple shrinkages which makes the sector slightly more attractive to me.

For CAG at its current price or lower, I will not require much of a price decline before buying more small lots.

I discussed the last earnings report in this post and have nothing further to add here: Item # 3.E. Restarted CAG - Bought 5 at $33 (7/15/23 Post); SEC Filed Earnings Press Release

Goal: 6% to 8% annualized total return with the dividend providing more than 1/2. 

H. Added 5 FHN at $11.5: 

Quote: First Horizon Corp. (FHN)

Cost $57.5 

FHN Analyst Estimates | MarketWatch When I last discussed FHN back in May 2023, the consensus 2023 E.P.S. estimate was $1.84. The estimate is now at $1.6. The consensus for 2024 is at $1.38. I would not expect much share price appreciation until there is a significant increase in E.P.S. expectations for 2024. 

Investment Category: Regional Bank Basket Strategy

FHN SEC Filings 

Last Buy Discussion:  Item # 3.F. Added to FHN - Bought 5 at $9.51 (5/13/23 Post) I also discussed in that post a FHN preferred stock that TD bought when it first announced the acquisition that may restrain common stock dividend increases.  

Last Sell Discussions: 

Item # 1. Eliminated FHN - Sold 5 at $24.38; 20+ at $24.47; and 47+ at $24.38  (11/15/22 Post)(profit snapshot = $1,071.04); 

 

Item # 1. Pared FHN in Fidelity Account - Sold 450 at $24.33 (11/1/22 Post)(profit snapshot = $1,261.77); 

Item # 5.K. Pared FHN in Fidelity Taxable Account - Sold 26+ at $24.02 and Item # 5.L. Pared FHN in Schwab Account - Sold 10 at $24.15 (10/25/22 Post)(profit snapshots = $107)

The FHN stock price was crushed after Toronto Dominion (TD) withdrew its $25 per share cash offer for FHN. TD Bank and First Horizon Mutually Agree to Terminate Merger Agreement - May 4, 2023

The acquisition faced some kind of opposition from at least 1 of the 2 U.S. regulatory authorities. As part of the agreed upon termination of the deal, Toronto Dominion paid FHN $200M plus an additional $25M reimbursement for costs. 

I had previously placed about a $15 to $17 fair value price range for FHN as a standalone company. Prior to the acquisition termination announcement, I discussed that FV range when buying a few shares after I eliminated my position: Item # 2.G. Restarted FHN - Bought 5 at $16.72; 5 at $15.9; 5 at $14.71 (3/19/23)   

That opinion was based in part on the trading range before the merger announcement and partly on what I viewed as a reasonable P/E multiple discounted by a poor dividend history. 

My range is lower now given where comparable regional bank stocks are currently trading, the heightened levels of risks associated with this sector, NIM compression, the recent decline in earnings estimates, and a stock bear market in the sector that shows no signs yet of abating IMO.  

My FV range is now $12 to $14 and that assumes no more than a mild two negative real GDP quarters within the next year and no deposit runs that significantly destabilize the bank. Until I adjust that FV range, I am likely to buy small ball lots when the purchase lowers my average cost per share and is below $12. 

New Average cost per share: $13.67

Dividend: Quarterly at $.15 per share 

First Horizon Corporation (FHN) Dividend History | Seeking Alpha

Dividend History: Poor. 

I am not anticipating a dividend increase prior to 2025. 

The reasons are the current turmoil in the regional bank sector, the bank's unrealized losses on its security positions, rising costs of deposits and debt refinancing costs, and the existence of almost $500M in convertible preferred stock, with a $25 conversion price, that was sold to TD whose dividend is tied to the common share dividend. 

Yield at New AC = 4.39%

Last Ex Dividend: 9/14/23 (owned all as of) 

Last Earnings Report (Q/E 6/30/23): SEC Filed Press Release 

GAAP E.P.S. = $.56

GAAP E.P.S. includes a $225M gain from the TD termination payment. 

GAAP E.P.S., ROA, ROE, and efficiency ratio were all skewed higher due to that payment.  

Non-GAAP E.P.S. = $.39

GAAP to Non-GAAP Reconciliation: 

Deposits increased by $4B or 6% compared to the first quarter and were up 3% YTD. 

Financial Ratios: GAAP and Adjusted for Items

NIM: 3.38%, up from 2.74% in the 2022 second quarter, but down from 3.88% in the 2023 first quarter. 

Charge off Ratio: .16%

NPL Ratio: .66%

Coverage Ratio: 183%

Tangible Book Value per share: $11.5, up from $10.18 in the 2022 second quarter. 

10-Q for the Q/E 6/30/23:

Investment Securities as of 6/30/23- Page 16 

In Millions

FHN Realized Gains to Date: $2,818.19

FHN Preferred Stock: I own 5 shares of FHNPRE which has a 6.5% coupon paid on a $25 par value. 

FHN SU Bonds: I own 2 FHN 4% SU bonds that mature in 2025. Bond Page | FINRA.org The current YTM is more consistent with a Ba2 or Ba3 rating than the current Baa3 from Moody's. Moody's Rating Scale.pdf The Bond Ghouls assign more credit risk than Moody's as reflected in the current price and trading range.  

2. Equity Preferred Stocks: 

Many investors were surprised when PennyMac Mortgage Investment Trust (PMT) announced that it would not be using the 3 month SOFR rate as a replacement for the 3 month Libor to calculate the floating rate coupons in two of its preferred stocks. 

Instead, relying on the language in the prospectuses for those preferred stocks, PennyMac will continue using the fixed coupon rate even though the fixed coupon periods have expired. PennyMac Mortgage Investment Trust Announces LIBOR Replacement Rate for its Series A and Series B Preferred Shares 

The language relied upon in that determination is the last sentence in this paragraph, particularly that part of the sentence that states "or, if there was no such dividend period, the dividend shall be calculated at the dividend rate in effect for the immediately preceding dividend period."

So it will be important to check to see if that language is in the prospectus going forward. 

If that sentence had not been in prospectus, then the Company would not have an argument IMO that it could continue using the fixed rate coupon rather than the 3 month SOFR + the tenor spread as required by the Adjusted Interest Rate Act passed by Congress and FED rules adopted to implement that law. Federal Register-Regulations Implementing the Adjustable Interest Rate (LIBOR) Act  

I also discussed this issue in a recent comment. 

A fixed-to-floating rate preferred issued by the Mortgage REIT Annaly Capital, NLYPRG, did recently transition from its fixed coupon to a floating rate. The fixed coupon was 6.5%. The floating rate is a 4.172% spread to the 3 month Libor rate. 

The prospectus for that preferred stock does not contain the quoted language above from the PMT prospectus. 

The following language in the NLYPRG prospectus IMO required the use of the 3 month SOFR + the tenor spread in lieu of the 3 month Libor: "if we determine on the relevant Dividend Determination Date that the LIBOR base rate has been discontinued, then we will appoint a Calculation Agent and the Calculation Agent will consult with an investment bank of national standing to determine whether there is an industry accepted substitute or successor base rate to Three-Month LIBOR Rate. If, after such consultation, the Calculation Agent determines that there is an industry accepted substitute or successor base rate, the Calculation Agent shall use such substitute or successor base rate." (emphasis added); Prospectus at page S-20 

The industry accepted replacement rate or the successor rate for the 3 month Libor is the 3 month SOFR + the tenor spread. 

I do not own any Mortgage REIT preferred shares. 

A. Bought 10 SNVPRE at $21.47: 

Quote: SNV-PE 

Cost: $214.7

Issuer: Synovus Financial Corp.  (SNV)  - A Bank Holding Company  

SNV Analyst Estimates | MarketWatch

SNV SEC Filings 

SNV SEC Filed Earnings Press Release for the Q/E 6/30/23 

SNV has two fixed-to-floating rate equity preferred stocks. 

I bought the series E preferred shares. This preferred stock has a fixed coupon rate of 5.875% that will transition to a floating, if not called by SNV, effective for the 2024 third quarter payment. The floating rate is a 4.127% spread to the five year treasury rate. Prospectus The coupon then resets every five years until called at par on a reset date. So call protection lasts for five years if SNV does not call on a reset date.  

The SNV series D preferred shares reset its coupon effective for the 2023 third quarter at a 3.452% spread to the 3 month SOFR rate + the tenor spread of .26121% as the alternate rate to the defunct 3 month Libor. Prospectus; Term SOFR - CME Group (I did not see a press release where SNV stated that it would be using the SOFR alternate rate but there is no out for continuing to use the fixed rate in the prospectus as discussed above in reference to the PennyMac fixd-to-floating rate preferred stocks.) The fixed coupon rate was 6.3%. The change to the floating rate increased the third quarter dividend from the fixed rate of $.3938 per share to $.5603. The coupon resets quarterly until the issuer exercises its optional redemption right.

Details for SNV.PRE

Par Value = $25

Dividends: Paid quarterly, qualified and non-cumulative. 

Stopper Clause: Standard

Fixed Coupon: 5.875% to but excluding 7/1/24

First Call Date: 7/1/24 and, if not called then, on the next reset date on 7/1/29. 

Floating Rate: 4.127% spread to the five year treasury note, resets if not redeemed every five years. This is similar to the Canadian reset equity preferred stocks that reset every five years. The reset determination date  "the day falling two business days prior to the beginning of such reset period." (p. S -17)

U.S. 5 Year Treasury Note Overview-MarketWatch

Yield at Total Cost (using 5.875% fixed coupon): 6.84%

Last Ex Dividend:  9/14/23 (owned as of)

If I assumed that the five year treasury yield was 4% on the first reset date, the coupon would then become 8.127% and the yield would increase to 9.46% at my TC.

It is possible that SNV will call the preferred stock at par value rather than pay the first reset coupon for five years.  

I could have bought the Series D at no higher than $24.88 when I decided to buy the Series E instead: 

While the Series E currently has a higher coupon based on its first quarterly reset, the current coupon advantage is significantly reduced by the higher price. The issue is not the coupon but the current yield at cost and a probability prediction on whether a 5 year reset next July based on a 4.127% spread to the five year treasury will end up producing more income over the next 6 years than a reset based on a 3.452% spread (+ the tenor adjustment) to the 3 month SOFR. 

The Series D resets every three months and the reset rate may start to trend down in 2024, taking away some of its current yield advantage. 

And if the 5 year treasury is higher than 1.748% on the first Series E reset date, the reset rate will be higher than the current fixed rate and possibly significantly higher. 

If both are called at their $25 par values, the Series E would generate a $3.53 per share capital gain whereas the Series D, bought at $24.88 would only have a $.12 per share gain.        

B. Added 5 CTOPRA at $19.4: 

Quote: CTO-PA

Cost $97

Issuer: CTO Realty Growth Inc.  (CTO) - Externally Managed REIT

CTO SEC Filings

I have a small ball position in the common shares. 

Last Discussed: Item # 3.B. Added to CTOPRA - Bought 5 at $18.9 (7/15/23 Post) 

Prospectus

Par Value: $25

Coupon: 6.375%

Dividend: Paid quarterly, cumulative and non-qualified. 

New Average Cost per share = $19.38

Yield at New AC = 8.22%

Last Ex Dividend: 9/13/23  (owned all as of) 

Stopper Clause: Standard 

C. RTLPP Exchanged for GNLPRD: 

Quote: Global Net Lease Inc. 7.50% Cumulative Series D Stock (GNL.PRD) 

RTLPP was a 7.5% equity preferred stock issued by Necessary Retail that was acquired by Global Net Lease on 9/12/23. The RTLPP was exchanged for GNLPRD that has the same coupon and other terms. 

For no rational reason, I ended up with small RTLPP positions in 3 taxable accounts. These are a snapshots of the exchanges in my Fidelity and Schwab accounts: 

I also owned 5 shares in my Vanguard taxable account and 10 in my Vanguard Roth IRA account.

In my list of symbols to the right, my prior discussions of RTLPP can be are now linked as GNLPRD-RTLPP. 

I will eventually consolidate the GNLPRD taxable account positions in just 1 account.  

 3. Treasury Auction Purchases: 

The purchase of treasury bills at auction will pick up next month when I will be receiving $75K from maturing treasuries, corporate bonds and CDs. 

A. Bought 5 Treasury Bills at 9/11/23 Auction: 

91 Day Bill

Matures on 12/14/23

Interest: $67.18

Investment Rate: 5.477%

B. Bought 3 Treasury Bills at the 9/14/23 Auction: 

56 Day Bill

Matures on 11/14/23

Interest: $24.71

Investment Rate: 5.428%

4. Small Ball Sells: 

A. Eliminated Duplicate Position in STAG (Interactive Brokers Account) - Sold 50 at $37.22: 

Quote:  STAG Industrial Inc.  (STAG) 

Proceeds: $1,869.04 after $1 IB commission and .02 fee. 

SEC Filings

Website: Home Page | STAG Industrial

558 Buildings located in 41 states with 111.1M square feet

Profit Snapshot = $1,075.13

Item # 2. Added to STAG in IB Account-Bought 50 at $17.55-Update For Equity REIT Basket Strategy As Of 1/21/16 - South Gent | Seeking Alpha

Last Discussed: Item # 1.G. - Sold 4 at $33  (4/1/21 Post)(profit snapshot = $32.49) 

Last Buy Discussion: Item # 2. Bought 50 STAG at $20.9 (3/28/2020 Post)

Investment Category: Equity REIT Common and Preferred Stock Basket Strategy

Dividend: Monthly at $.1225 ($1.47 annually), last raised from $.1217 effective for the 2023 first monthly payment. The monthly rate was $.10 in 2013. I do not view the dividend growth as consequential. 

STAG Dividend History | Seeking Alpha

Next Ex Dividend: 9/28/23

Last Earnings Report (Q/E 6/30/23): SEC Filed Press Release 

Core FFO per share: $.56, unchanged from the 2022 second quarter

Cash available for distribution ("CAD") was $87.2M, unchanged as well. 

CAD per share = $.485 using 179.738M weighted average diluted shares. 

Quarterly dividend per share: $.3675, well covered by CAD. 

Occupancy rate: 97.7%

10-Q for the Q/E 6/30/23 (debt listed and discussed starting at page 11) 

Net Income to CAD calculation: 

Remaining Taxable Position-Schwab Account: 100+ shares with an average cost per share of $17.22. 

Price as of 9/8/23 Close-Unrealized Gain = $1,950.38

Yield at $17.22 AC and $1.47 annual per share rate: 8.54% 

STAG Realized Gains: $1,915.36  

Some Other Prior Sell Discussions: Item # 7-Pared STAG Sold 42 at $25.2: Update For Equity REIT Basket Strategy As Of 7/28/16 | Seeking Alpha (profit snapshot = $271.32); Item # 2. Pared STAG-Sold 54 Shares at $23.81: Update For Equity REIT Basket Strategy As Of 7/1/16- South Gent | Seeking Alpha (profit snapshot = $318.54); Item # 2. Pared STAG -Sold 50 of 240 at $22.74: Update For Equity REIT Basket Strategy As Of 6/24/16 - South Gent | Seeking Alpha

B. Eliminated 1 of  3 Taxable Account Duplicate Positions in FSK - Sold 12 at $20.35: 

Quote: FS KKR Capital Corp. - Externally Managed BDC

Proceeds: $229.51

FSK SEC Filings

Website: FS/KKR Advisor, LLC  

2022 Annual Report (Risk factor summary starts at page 17 and ends at page 43)

There was a 1 for 4 reverse split in June 2020. FS KKR Capital Corp. Announces Effectiveness of Four-to-One Reverse Stock Split

After this elimination, I still own FSK in three taxable accounts and in 2 Roth IRA accounts. I intend to eliminate the other 2 taxable account duplicate positions when the spirit moves me. 

Last Discussed - Fidelity Account Adds: Item # 4.E. Added to FSK - Bought 5 at $18.66 (6/24/23 Post); Item # 2.C. Added 10 FSK at $19.6 (6/17/23 Post); Item # 2.O. Added 2 FSK at $19.88 (6/10/23 Post)  

Profit Snapshot: $14.71

Dividend: Quarterly at $.64 per share (regular only)

FS KKR Capital Corp (FSK) Dividend History | Seeking Alpha

Several special dividends have been paid including 6 monthly payments this year totalling $.33 per share. 

Last Ex Dividend: 9/12/23 (owned in 3 taxable accounts as of) The dividend was for $.70 per share, which included a $.06 special dividend.  

Last Earnings Report (Q/E 6/30/23):  SEC Filed Press Release 

Net Asset Value per share: $24.19, down from $27.17 as of 12/31/22

Net Investment Income per share: $.82

Adjusted NII per share: $.78 

The adjustment of $.04 is accretion resulting from merger accounting which needs to be excluded when calculating NII available for distribution. 

% of investments on non-accrual: 2.5%

10-Q for the Q/E 6/30/23 (summary of investments starts at page 6; debt list and discussion starts at page 71)

Company assessment of portfolio risk: 

Page 86, 10-Q

Composition of Portfolio: 

Page 84, 10-Q

I currently own 4 FSK SU bonds including 2 that mature next year. 

5. Corporate Bonds: 

A. Bought 1 DTE Energy 4.22% SU Maturing on 11/1/24 at a Total Cost of 98.143: 

Issuer: DTE Energy Co.  (DTE)  - Utility Holding Company

DTE  Analyst Estimates | MarketWatch

DTE SEC Filings 

DTE SEC Filed Earnings Press Release for the Q/E 6/30/23 

Credit Ratings: Baa2/BBB 

YTM at Total Cost: 5.91%

Current Yield at TC = 4.3%

I now own 2 bonds. 

B. Bought 1 Site Centers 3.625% SU Maturing on 2/1/25 at a Total Cost of 95.492- IB Account: 

Issuer: SITE Centers Corp. (SITE)  (formerly known as DDR Corp.) - A REIT

SITC SEC Filings

SEC Filed Report for the Q/E 6/30/23

New Finra Page: Bond Page | FINRA.org

Credit Ratings: Baa3/BBB- 

YTM at Total Cost: 7.134%

Current Yield at TC = 3.796%

I now own 4 bonds. 

6. Exchange Traded Bonds: 

A. Started GLADZ - Bought 5 at $24.94: 

Quote: Gladstone Capital Corporation 7.75% Notes due 2028 (GLADZ) 

Cost: $124.68

Issuer: Gladstone Capital Corp. (GLAD) - An Externally Managed BDC

GLAD SEC Filings

GLAD SEC Filed EarningsPress Release for the Q/E 6/30/23 

Website: Gladstone Capital Corporation (GLAD)

Contrary to the description of this security in the previous snapshot as a preferred stock, GLADZ is a senior unsecured bond.  

This is made clear in the prospectus. 

Prospectus: "The Notes will be our direct unsecured obligations and rank equal in right of payment with all outstanding and future unsecured, unsubordinated indebtedness issued by us (including our 3.75% Notes due 2027 and 5.125% Notes due 2026). Because the Notes will not be secured by any of our assets, they will be effectively subordinated to any future secured indebtedness of Gladstone Capital Corporation (or any indebtedness that is initially unsecured as to which we subsequently grant a security interest) to the extent of the value of the assets securing such indebtedness." 

Referring to this note as "unsecured, unsubordinated indebtedness" indicates that the security is a senior unsecured bond, not a preferred stock. 

Investment Category: Exchange Traded Baby Bonds

Exchange Traded: Trades flat on the stock exchange.  

Coupon: 7.5%

Par Value: $25

Maturity:  9/1/2028

Optional Call at par value: On or after 9/1/2025

Interest Payments: Made Quarterly

Yield at Total Cost: 7.518%

First Ex Interest Date: 11/14/23

The first payment includes 1 full quarterly period and a partial quarter. The amount will be $.5597+ per share. The regular quarterly interest payment thereafter will be $.46875.

First Interest Payment Date: 12/1/23

Gladstone Capital Corporation Prices Public Offering of 7.75% Notes due 2028 (10/10/23)

7. Cash Flow into Fidelity Account on 9/15/23: 

One portfolio objective is to develop a constant income stream. In this account, I receive dividends and/or interest payments almost every business day throughout the year. 

A majority of the payments are received on the 1st or last business day. 

The third largest stream occurs on the 15th. 

Corporate Bonds: $366.29

(National Rural Utilities Finance bonds pay monthly as does the GS bond. I believe that all of them are 1 bond lots. The rest pay semiannually)

Common Stocks: $198.47

Equity Preferred Stocks: $18.68 (I am adding in tiny amounts to my U.S. equity preferred allocation given the price correction making the yields more enticing. The riskiest equity preferred stock that I own is SQFTP, which I would put in the extreme risk basket)

"Preferred" Stock CEF  (FPF pays monthly): $7.56

I have just started to build a position in Golub Capital (GBDC).

I have not yet started any withdrawals from my 4 brokerage accounts to pay expenses (Fidelity, Schwab, Vanguard, and Interactive Brokers). The intent is to build up the cash flow in those 4 accounts and then partially withdraw dividend and interest income as needed, possibly starting in 3 or 4 years, without reducing the amount of income producing securities. 

Before doing that, I will continue funding expenses with SS benefit payments, redeeming more spare cash out of my T.Rowe Price account, redeem more IBonds with low fixed coupon rates, and possibly redeeming a whole life insurance policy that was purchased in 1977 which, if cashed out, will fund over 2 years of ordinary living expenses. I have paid the policy premium out of dividends for over 20 years and have been using the excess to buy more paid up insurance over the last 10 or so years which has added to the cash value.  

8. Cash Flow into Interactive Brokers Account on 9/15/23: 

Bond Redemption: $2,000

Dividends/Interest Payments:  

The two Canadian stocks pay monthly dividends (C$54.19 total).    

Corporate Bond Interest: $237.75

The USD dividend paid by STAG is the last dividend that I will receive in this account having sold the position as noted above. 

In this account, my primary positions are corporate bonds, Canadian reset equity preferred stocks, Canadian stocks priced in CADs and bought on the Toronto exchange, and foreign currencies (CADs and AUDs). The weighting in U.S. stocks is less than 5%.

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.