Economy:
The decline in the 10 year treasury yield yesterday was most likely in response to the October jobs report.
October Jobs Report:
+150,000 Jobs
The UAW strike resulted in about 33,000 few workers.
Jobs gains in August and September were revised down by 101,000.
Unemployment at 3.9%, up from 3.8% in September
Annual Wage Growth at 4.1%, down from 4.3% in September
October Average Hourly Earnings: Up 7 cents to $34
Employment Situation Summary - 2023 M10 Results
U-6: 7.2%, up from 7% in September: Table A-15. Alternative measures of labor underutilization - 2023 M10 Results
 |
| In Thousands |
Bureau of Labor Statistics Data
Target CEO says shoppers are pulling back, even on groceries
Jeff Gundlach says 'massive interest-expense problem' could cause the next U.S. financial crisis | Morningstar On the flip side, the spike in interest rates has resulted in more household discretionary income from risk-free savings that can be used to reduce debt, increase savings and/or fund discretionary consumer purchases without incurring more debt. I am referring to households who have refinanced their home mortgage debt long term at historically low rates and the 1/3rd of homeowners who are mortgage free. And, a ten year yield close to 4.5% is close to the historical norm with the anticipated inflation running at an annual average 2 to 2.5%.
Last week's stock market rally was driven by a significant percentage decline in intermediate and longer term treasury yields.
10 Year TIP Breakeven Inflation Rate as of 11/3/23: 2.39%
10 Year Treasury Nominal Yield as of 11/3/23: 4.57%, down from a 4.88% close on Monday 10/31/23 and a high close of 4.95% on 10/25/23.
Resource Center | U.S. Department of the Treasury
The closing yield last Friday is close to the historical 2% spread to the forecasted annual average inflation rate which would put the nominal yield at 4.39%.
10 Year TIP Real Yield as of 11/3/23: 2.18%
Resource Center | U.S. Department of the Treasury
The CME FedWatch Tool has the probability at 95.2% that the FF will remained unchanged after the FED's December meeting. The probability of a .25% hike is at 4.8%, down from 19.8% on 11/2/23. CME FedWatch Tool - CME Group
+++
Allocation Shifts Discussed in this Post:
Treasury Bills: $5,000 in principal amount
Purchases of T Bills at auction will pick up in November given the dollar amount of maturing bills ($50K).
Corporate Bonds: +$4,000 in principal amount
FDIC Insured CD: +$4,000 (monthly interest)
Schwab Treasury Obligations Money Fund (SNOXX)(Schwab Purchased MM Fund) +$2,000
(Since the Schwab sweep account pays only .45%, I will move some proceeds received from maturing securities into SNOXX that has a current yield of 5.05%. When my best guess is that short term rates are starting a dominant downtrend, I will move $10K out of this MM fund to buy a short term investment grade corporate bond, defined as maturing no more than 3 years from the purchase date. )
Common Stocks (no sales): +$1,608.41 (weighted yield at 7.52%)
Stock CEFs: +$144.45
Net Inflow Stocks and Stock Funds: +$1,752.86
U.S. Equity Preferred Stocks (paying the greater of 4% or a float over the 3 month SOFR rate + the tenor spread): +$212.8
(Most of the preferred stocks bought last week will be discussed in my next post. It is not possible to calculate the yield of the two preferred stocks discussed below since both are currently paying a variable rate coupon)
Exchange Traded Bonds: +$100.15 (first mortgage bond, yield at 6.085%)
Net 2023 Outflow Stock/Stock Funds: -$34,208.68
Under my trading rules, designed primarily to achieve capital preservation and income goals, I am permitted to buy up to $34,208.68 in stocks and stock funds prior to year end. I made a small dent in that number last week.
++++
Viper Don and his Party:
RealClearPolitics - Election 2024 - 2024 Republican Presidential Nomination
Trump continues to maintain a 45+% lead over his nearest rival. In the 2020 election, over 75+M voters wanted to give Donald a second term, and an equal or higher number are ready to reelect him in 2024.
Since Donald is IMO an obvious psychopath and malignant narcissist, is ignorant and unwilling to learn, a vicious person with no redeeming personality characteristics, and is without question an authoritarian demagogue who wants to undermine Democracy in America and institutions necessary for a democracy to function properly, the fact that so many want to restore him to the Presidency is, needless to say, troubling. And that is before one addresses whether he has committed several felonies and deserves to serve out his remaining years in the slammer.
The extent of Trump's power among voters is troubling to someone who views himself as a moderate with many true conservative opinions like a belief in Democracy and the Constitution, telling the truth and avoiding manipulating people with demonstrably false narratives and information. Those are clearly no longer values in the modern day GOP.
RealClearPolitics - Election 2024 - General Election: Trump vs. Biden
Judge reinstates gag order on Trump in federal election subversion case;Judge Reinstates Gag Order On Donald Trump
Judge Chutkan's Order.pdf The unrebutted record shows that witnesses are threatened and harassed after Trump attacks them.
Demagogue Don has continued to make incendiary comments designed to intimidate and threaten potential witnesses and others involved in his insurrection criminal trial. Trump recently attacked his former Attorney General Bill Barr and his former chief of staff Mark Meadows, both of whom will be witnesses in his criminal trial.
Pence joins Republicans eviscerated by contradicting Trump’s election lies
Donald Trump Appears to Immediately Break Gag Order After It's Reinstated:
Putin and His Orwellian Empire of Misery:
Losses ∙ Russia ∙ WarSpotting — documented material losses in Russo-Ukrainian war
If Putin actually believes the words that comes out of his mouth, then he is, of course, deeply and irreparably delusional. I would make the same observation about his soulmate, Don the Authoritarian.
Russian President Vladimir Putin Baselessly Blames Ukraine On Makhachkala Airport Incident - YouTube;Mob storms Dagestan airport in search of Jewish passengers from Israel-The Guardian; Pro-Palestinian rioters storm Russian airport, flood runway looking for Israeli flight In this incident, a mob of 1000 or so whacko Orcs stormed an airport after learning that a jet was arriving from Tel Aviv. They were looking for Jews to assault and kill. There were a few Russian Jewish citizens on the plane.
The current estimate is that 300,000 soldiers fighting for Russia have died in Ukraine trying to fulfill Putin's imperialistic wet dream. Russian losses in Ukraine 'pass 300,000' No accurate number will ever be disclosed by Putin, who like Donald, is incapable of telling the truth about almost everything. I doubt that Russians will respond with even of a murmur of dissent when that number goes over 500,000 and it will sometime next year.
Russia Lost an Entire Fuel Train in Donetsk!- YouTube
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1. Small Ball Common Stock Buys:
A. Added to CLPR-Bought 10 at $4.77; 10 at $4.6; 10 at $4.53 (Fidelity Account):
Website: Clipper Realty — A Premier New York Investment Partner
Management: Internal
Last Discussed: Item # 1.F. Added to CLPR - Bought 5 at $4.84 (10/7/23 Post) I discussed the second quarter report in that post. SEC Filed Press Release
Investment Category: Equity REIT Common and Preferred Stock Basket Strategy
New Average cost per share: $5.86 (172+ shares)
Dividend: Quarterly at $.095 per share ($.38 annually)
Clipper Realty Inc. (CLPR) Stock Dividend History & Date
Yield at New AC = 6.48%
Last Ex Dividend Date: 8/14/23
Last Earnings Report (Q/E 9/30/23): This report was released after my purchases.
SEC Filed Press Release and 10-Q for the Q/E 9/30/23 (debt discussed starting at page 14; properties described at page 7)
Revenue: $35.1M
AFFO: $6.3M
AFFO per share: $.15
"New leases continue to rent at more than 12% over previous ones and renewals at almost 7%"
Clipper announced in August that it has received construction financing for its project at 953 Dean Street in Brooklyn, NY. SEC Filing; 953 Dean — Clipper Realty The plan calls for "a
As previously discussed, Clipper recently completed a development at 1010 Pacific Street in Brooklyn and is in a lease up phase on those apartments. Pacific House — Clipper Realty
B. Added 5 LXP at $7.98; 5 at $7.8 (Schwab Account):
Quote: Lexington Industrial Trust (LXP)
Cost: $78.9
Properties | LXP Industrial Trust
LXP is a net lease REIT that focuses on single tenant properties.
Number of properties: 115
Square Footage: 53.9M
Stabilized Portfolio Leased: 99.2%
Weighted Average Lease Term: 5.8 years
Owned developable land: 523 acres.
Website: LXP Industrial Trust - Preeminent single-tenant U.S. industrial REIT
Investment Category: Equity REIT Common and Preferred Stock Basket Strategy
Last Discussed: Item # 1.L. Added to LXP - Bought 5 at $8.43; 5 at $8.2 (10/21/23 Post); Item # 1.D. Added to LXP - Bought 5 at $9.1; 5 at $8.6 (10/7/23 Post)(contains discussion of second quarter earnings report, SEC Filed Press Release)
Last Elimination: Item # 1.D. Eliminated LXP - Sold 20+ at $11.57 (2/13/23 Post)(profit snapshot = $33.37)
New Average Cost per share: $8.65 (50 shares)
Dividend: Quarterly at $.13 per share ($.52 annually), increased from $.125 effective for the 2024 first quarter payment. This announcement was made in the third quarter earnings report.
LXP Industrial Trust (LXP) Dividend History | Seeking Alpha
Yield at New AC = 6.01%
Last Ex Dividend: 9/28/23 (owned 20 shares as of)
Last Earnings Report (Q/E 9/30/23): Released on 10/31/23.
SEC Filed Press Release and Supplemental
Adjusted FFO: $51.9M
Adjusted FFO per share: $.18, in line with the consensus.
Funds Available For Distribution: $47.078M
FAD per diluted share: $.162
Quarterly dividend: $.125
Payout % to FAD = 77.16% (at the $.125 rate paid in the quarter, dividend is well covered by cash available for distribution)
Ongoing Development Projects:
Expects 2023 adjusted FFO per share to be $.68 to $.7
LXP Realized Gains to Date: $1,957.8Largest Gain: Item # 1.C. Sold 137+ LXP at $9.08 and 53 at $9.06 In 2 Separate Roth IRA Accounts (9/12/18 Post)(profit snapshot =$914.11)
Second Largest Gain: Sold 100 LXP in Fidelity Roth IRA at $11.15 (1/6/17 comment- profit of $271.9 referenced with no snapshot)
Third Largest Gain: Item # 2 Sold 250 LXP on Ex-Dividend Date in Two Taxable Accounts-Update For Equity REIT Basket Strategy As Of 4/6/16 - South Gent | Seeking Alpha (profit snapshot = $224.65)
Some Other Sell Discussions: I eliminated my position in 2019 in response to a dividend cut. Item # 1.B. Eliminated LXP - Sold 155+ at $9.46 (6/26/19 Post)(profit snapshot = $6.37); Item # 1.B. Sold 108+ LXP at $9.45-Used Commission Free Trade (2/6/19 Post)(profit snapshot = $79.9);; Item # 1 Sold 150 LXP in Vanguard Roth IRA-Update For Equity REIT Basket Strategy As Of 6/24/16 - South Gent | Seeking Alpha (profit snapshot = $80.19); Item # 1. Sold 54 LXP at $11.44 Vanguard Roth IRA (1/27/15 Post)(profit snapshot = $64.4); Item # 1 Sold 101+ LXP at $10.65 (10/28/14)(profit snapshot = $51.76)
Successful trading in LXP has been required to generate a decent total return.
SU Bonds: I currently own 5 LXP 4.4% SU bonds that mature on 6/15/24, originally issued in 2014. Bond Page | FINRA.org I am holding those 5 bonds to maturity or early redemption. The Prospectus permits an optional redemption on or after 3/15/24 at par plus accrued and unpaid interest. Prior to that date, the optional redemption requires a make whole payment calculation. (See p. S-16-17) My best guess is that LXP will redeem on 3/15/24 rather than paying the 6.75% interest on the new note, see below, and the 4.4%. A redemption prior to 3/15/24 may occur since the make whole payment would not be much, if any.
On 11/2/23, LXP priced a $300M 6.75% SU at a price of 99.423. LXP Industrial Trust Announces Pricing of Public Offering of $300M SU Bond; Prospectus Proceeds will be used to pay off $25M borrowed under the credit facility, whose interest rates are at spreads to SOFR, "and any remaining proceeds for general corporate purposes, including, but not limited to, the repayment of our outstanding indebtedness at or in advance of maturity and funding our development pipeline." The next bond maturity is the 6/15/24 SU referenced above that has $198.932M outstanding. 10-Q at page 16 As shown at that page, the REIT sold 10 year maturity $400M in debt in August 2020 and another $400M in August 2021 at 2.7% and 2.375% respectively. Give the company an "A+ grade on that and for keeping a relatively low balance on the higher cost credit facility.
C. Added 5 BNL at $14.08; 5 at $13.8 (Schwab Account) :
Quote: Broadstone Net Lease Inc. (BNL) - Internally Managed REIT
Cost: $139.4
Investment Category: Equity REIT Common and Preferred Stock Basket Strategy
2022 Annual Report (property list starts at page 9; debt discussion can be found at pages 53-54 and 94-97)
Last Discussed: Item # 2.C. Added to BNL - Bought 5 at $14.98; 5 at $14.74; 5 at $14.4; 5 at $14.24 (9/30/23 Post) I discussed the 2023 second quarter report in that post. SEC Filed Press Release
New Average cost per share: $14.97 (52+ shares)
Dividend: Quarterly at $.285 per share ($1.14 annually), increased from $.28 effective for the next payment
BNL Dividend History | Seeking Alpha
Yield at New AC = 7.615%
Last Ex Dividend: 9/28/23
Last Earnings Report (Q/E 9/30/23): Released on 11/1/23.
SEC Filed Press Release and Supplemental (debt discussed at pages 11-16; property classifications at page 24; Top 20 Tenants at pp. 21-22)
Portfolio 99.4% leased
Properties: 800
Total weighted average lease term = 18.7 years
Total weighted average annual rent increase: 1.8% (fairly typical for a net lease REIT)
Total Initial capitalization rate: 7%
Net Income $52.145N
FFO: $75.478M
FFO per diluted share: $.39
Core FFO per share: $.38
AFFO per share: $.36, up from $.35 in the 2022 third quarter
Quarterly Dividend per share: $.285
Revenues: $109.453M, up from $103.524M in the 2022 third quarter
D. Added to GSBD - Bought 5 at $13.51- Schwab Account:
Quote: Goldman Sachs BDC Inc. (GSBD)
Cost: $67.55
Management: External
New Average cost per share: $14.95 (15 shares)
Dividend: Quarterly at $.45 per share ($1.8 annually)
Goldman Sachs BDC (GSBD) Dividend History | Seeking Alpha
Yield at AC = 12.04%
Last Ex Dividend: (owned 10 shares as of)
Net Asset Value per share history: Poor IMO
6/30/23 $14.59
3/31/23 $14.44
12/31/22 $14.61
12/31/21 $15.92
12/31/20 $16.75
12/31/19 $16.75
12/31/18 $17.65
12/31/17 $18.09
12/31/16 $18.31
12/31/15 $18.97
IPO at $20 (March 2015): Prospectus (proceeds at $19.64 before internal expenses)
Last Earnings Report (Q/E 6/30/23 ):Press Release of Goldman Sachs BDC, Inc., dated August 3, 2023 The next earnings report is scheduled to be released on 11/7.
NII per share: $.59 adjusted to $.58
Two new loans were placed on nonaccrual status.
% Percentage of Performing Loans at Floating Rates: 100%
First Lien = 89.3%
Goal: Any total return in excess of the dividends payment before any ROC adjustment to the tax cost basis.
E. Added to NYCB - Bought 10 at $9.45 (Vanguard Account):
Quote: New York Community Bancorp
Cost: $94.5
NYCB Analyst Estimates | MarketWatch
Investment Category: Regional Bank Basket Strategy
Recent Material News: FDIC announces agreement to sell Signature Bank assets; This Bank Is Buying Signature Bank Assets. Its Stock Is Soaring. | Barron's; NYCB SEC Filing
Last Discussed: Item # 1.E. Bought 10 NYCB at $8.36; 10 at $8.09; 10 at $7.85; 10 at $6.07 - Vanguard Taxable Account (3/25/23 Post)
Last Sell Discussion: Item # 2. Sold 100 NYCB in Vanguard Taxable Account at $10.87 (8/23/22 Post)
New Average cost per share this account: $8.77 (113+ shares)
Dividend: Quarterly at $.17 per share ($.68 annually)
I am reinvesting the dividend in this account. I have duplicate NYCB positions.
Yield at New AC = 7.75%
Last Ex Dividend: 11/3/23 (owned all as of)
Last Earnings Report (Q/E 9/30/23):
Comparisons are to the 2022 third quarter.
GAAP E.P.S. $.27, down from $.30
Non-GAAP E.P.S. $.36 excludes merger related expenses, up from $.31.
The 2023 second quarter had a one time "bargain purchase" gain of $141M which resulted in an unusually high GAAP E.P.S. of $.55.
This accounting gain resulted from NYCB's purchase from the FDIC of Signature Bank assets in late March 2023.
Most of the $2.142B bargain purchase gain arising from the Signature asset acquisition was recognized in the 2023 first quarter. Most of the consideration paid to the FDIC consisted of 39.03+M shares of NYCB stock, which were later sold by the FDIC. New York Community Bancorp Announces FDIC Secondary Offering of Common Shares (May 2023). The shares were acquired in the second quarter and the number was based on the appreciation in NYCB stock price after the Signature Bank asset acquisition was announced in late March.
The acquisition of Flagstar Bank last December also substantially increased the number of diluted shares outstanding:
NIM: 3.27%, up from 2.2%
Efficiency Ratio: 56.15% (excludes bargain purchase gain)
NPL Ratio: .47%, up .2%, primarily related to two office loans.
Coverage Ratio: 157.93 (allowance for credit losses to non-performing loans)
Charge off ratio: .03%
Tangible Book Value per share: $10.25, up from 8.19%
ROTE Non-GAAP = 14.01%, down from 14.81%
Yields of Assets and Liabilities:
NYCB Realized Gains to Date: $1,505.34
Largest Gain: Update For Regional Bank Basket Strategy As Of 10/19/15 - South Gent | Seeking Alpha: Item # 1 Sold 150 NYCB at $18.57 (profit snapshot = $999.66)
Second Largest Gain: Item # 7 Sold 50 NYB at $17.51 (7/28/2010 Post)(profit snapshot = $331.03)
F. Added 3 EGBN at $17.86 (Schwab Account):
Quote: Eagle Bancorp Inc. (EGBN)
Cost: $53.58
EGBN Analyst Estimates | MarketWatch
Last Discussed: Item # 3.G. Started EGBN - Bought 5 at $18.87; 1 at $17.61; 1 at $16.98 (5/13/23 Post) Those were my first ever purchases.
New Average cost per share: $18.25 (10 shares)
Dividend: Quarterly at $.45 per share ($1.8 annually)
Yield at New AC = 9.86%
Last Ex Dividend: 10/19/23
Last Earnings Report (Q/E 9/30/23):
SEC Filed Earnings Press Release
Comparisons are to the 2022 third quarter:
Net Income: $27.383M, down from $37.297M
E.P.S.: $.91, down from $1.16
NIM: 2.43%, down from 3.02% (most concerning issue IMO)
Efficiency Ratio: 48.8%, up from 40.6%
NPA Ratio: .64%, up from .09%
NPL Ratio: .89%, up from .1%
Charge off ratio: .02% (excellent so far)
ROTE: 9.61%, down from 12.67% (poor IMO)
Net Interest Income: $70.7M, down from $83.9M (concerning and consistent with decline in NIM)
Total Capital Ratio: 14.54%
Tangible Book Value per share: $37.12, up from $34.77
Discount to TBV per share at $18.25: 50.8% (huge)
Total Deposits: $8.4B, up 4.4% from the 2022 third quarter and 8.5% from the 2023 second quarter.
Estimated Uninsured Deposits: 29.6%
Noninterest bearing deposits: 25.1% of the total, down from 38.4% (problematic when other issues are already compression NIM)
Banking customers have been moving more money out of noninterest bearing deposits which will reduce NIM.
The discount to tangible book value is extraordinarily large. This may indicate significant mispricing of the stock or investor concerns about the bank's financial condition and operations.
The significant increases in the NPL and NPA ratios are concerning but not yet at troublesome levels.
The decline in NIM is probably the most significant and concerning issue. The primary causes are (1) funding costs (deposits/bank borrowings) increasing at a more rapid rate than interest income received from loans and owned securities and (2) the shift in customer deposits from noninterest bearing to interest paying accounts.
Part of NIM problem is sourced from a failure to properly adjust the duration of owned securities in 2021, leaving the bank with long duration securities that have low coupons and significant unrealized losses.
EGBN has not yet filed a 10-Q for the third quarter. The 10-Q filed for the second quarter contains information about owned securities at pages 16-20.
EGBN and most other banks have IMO an excessive concentration in mortgage backed securities whose duration increases as interest rates rise. In 2021, those securities needed to be sold when it was already obvious that inflation had already reached problematic levels but the FED had continued to suppress interest rates with ZIRP and QE.
Owning vintage MBS with low coupons have generated significant unrealized losses as interest rates spiked starting in 2022. And, when interest rates are falling, more mortgages are paid off leaving the MBS owner with funds that most likely can only be reinvested in securities with lower coupons and/or YTMs
G. Added to BMY - Bought 1 at $53.34; 1 at $51.76; 1 at $51.1; 1 at $50.52 (Schwab Account):
Quote: Bristol Myers Squibb Co.
Cost: $206.72
2022 Annual Report Summary of risk factors starts at page 23. This report contains detailed discussions of risk that I do not generally discuss including ongoing product and other litigation.
Pharmaceutical Research & Development Pipeline
Bristol Myers Squibb Strengthens and Diversifies Oncology Portfolio With Acquisition of Mirati Therapeutics (10/8/23) I discussed this pending acquisition in my 10/14/23 post.
The Stock Jocks reacted most unfavorably to the last earnings report discussed below.
Even though BMY handily beat the non-GAAP average E.P.S. estimate for the 2023 third quarter, the negative reaction was triggered by lower than expected Revlimid revenues (a hugh revenue hole), increased spending guidance through 2025, the lower than expected revenues from the recently launched launched immunology drug Sotyktu and the obstructive hypertrophic cardiomyopathy drug Camzyos (requiring more spending to promote), and the guidance of new product revenues in 2026 to just greater than $10B from the 2025 guidance of $10B-$13B in 2025.
Product Revenues:
The new product portfolio is not coming close to filling the hole created by lower revenues from generic Revlimid sales:
Some New Products: I am summarizing some products in what BMY calls its new product portfolio just to emphasize that revenues are not coming close to filling the hole created by losses in Revlimid sales.
Sotyktu: Third quarter revenues of $123M. The FDA approved Sotykt in September 2022. U.S. Food and Drug Administration Approves Sotyktu™ (deucravacitinib), Oral Treatment for Adults with Moderate-to-Severe Plaque Psoriasis Some investors were surprised that the FDA did not require a Black Box warning label. Bristol Myers Stock Jumps as U.S. Approves Psoriasis Drug - Barrons This was the drug that BMY was developing that required Celgene to sell Otezla as a condition to its acquisition by BMY.
Camzyos and BMY's MyoKardia Acquisition: BMY reported third quarter revenues of $68M. The FDA approved the first indication for Camzyos in April 2022, but required a black box warning label. U.S. Food and Drug Administration Approves Camzyos™ (mavacamten) for the Treatment of Adults With Symptomatic New York Heart Association Class II-III Obstructive Hypertrophic Cardiomyopathy (HCM) to Improve Functional Capacity and Symptoms
Camzyos was a compound acquired in BMY's $13.1B cash acquisition of MyoKardia. Bristol Myers Squibb to Acquire MyoKardia for $13.1 Billion in Cash Another compound acquired in that acquisition (MYK-224) is currently in a Phase 2 trial. Investor Presentation (9/23).pdf at page 124 It is too early to tell whether the MyoKardia acquisition will be worth the cost but revenues from Camzyos so far at least raises significant doubt.
With its 2019 Celgene acquisition, BMY acquired Revlimid, Pomalyst/Innovid, Abraxane, Inrevic and Reblozyl (both approved in 2019), Zeposia (ozanimod), and Breyanzi (lisocabtagene maraleucel; liso-cel).
Ozanimod (brand: Zeposia): $123M in 3rd quarter revenues. This drug was acquired as part of Celgene's $7.2B acquisition of Receptos in 2015. The FDA has approved Zeposia for 2 indications: U.S. Food and Drug Administration Approves Bristol Myers Squibb’s Zeposia® (ozanimod), an Oral Treatment for Adults with Moderately to Severely Active Ulcerative Colitis (5/27/21)
Zeposia and Breyanzi were still pipeline drugs when BMY completed the Celgene acquisition. (See list of Celgene's approved drugs in BMY's 2019 Annual Report at page 34)
Breyanzi: 3rd quarter revenues of $92M. U.S. FDA Approves Bristol Myers Squibb’s CAR T Cell Therapy Breyanzi® for Relapsed or Refractory Large B-cell Lymphoma After One Prior Therapy (6/24/22); Bristol Myers Squibb Receives European Commission Approval for CAR T Cell Therapy Breyanzi (lisocabtagene maraleucel) for Relapsed or Refractory Large B-cell Lymphoma After One Prior Therapy (5/3/23)
The Breyanzi drug brought BMY lawsuits that alleged that BMY owed a substantial contingent value right (CVR) payment to Celgene shareholders upon FDA approval. Bristol Myers dodges one Celgene CVR suit, but more to come (see pages 30-31 of the 10-Q);
Celgene acquired Breyanzi through its $9B acquisition of Juno Therapeutics. This was a mistake made by Celgene IMO, based on the price paid, that was further compounded by BMY's CVR payment promise. Even with this mistake, and assuming BMY is required to pay a substantial sum in the CVR litigation, the Celgene acquisition was worth the price IMO.
Existing Products - Over $1B in 3rd Quarter Revenues: BMY has had a high revenue concentration in just 3 drugs.
Revlimid: $1.429B in third quarter revenues. As previously discussed many times here, the current most serious problem is the substantial decline in revenues resulting from Revlimid losing its patent exclusivity, though still subject to some contractual revenue restraints on generic sales until 2026 or that is the date most commonly stated as the end date of those restraints. The actual contractual limits on generic sales are not publicly known but it is obvious that generic sales have already ramped up big time.
For the nine month periods ending (P/E): Revlimid revenus of
$9.493B for the P/E ending 9/30/21, 10-Q at page 8;
$7.718B for the P/E 9/30/22;
$4.647B for the P/E 9/30/23 with more declines to come
$4.846B decline in Revlimid revenues in the nine months ending on 9/30/2023 compared to the same period in 2021
This kind of hole causes the Stock Jocks to place heavy emphasis on how new product launches are fairing. And, so far, BMY is not coming close to filling the hole created by the Revlimid loss of patent exclusivity.
Eliquis: $2.705B in third quarter revenues, up from $2.655B. Another potential issue is that the blood thinner drug Eliquis is one of the 10 drugs selected by Medicare for price negotiation.
It remains to be seen what the impact will be from the Medicare price negotiation. Improvements in utilization and formulary placement may at least partially offset revenue declines from a lower price paid by Medicare. How Medicare’s New Drug Price Negotiation Program Could Expand Access to Selected Drugs | KFF Among the 10 drugs selected for price negotiation, Eliquis by far has the largest dollar amount currently being spent by Medicare.
Opdivo: $2.275B in revenues up from $2.047B in the 2022 third quarter.
BMY Analyst Estimates | MarketWatch
Last Discussed: Item # 1.E. Added to BMY - Bought 1 at $57.67; 1 at $56.79; 1 at $56.01 (10/14/23 Post)
Last Elimination: Item # 1.A. Eliminated BMY in Fidelity Account - Sold 14 at $74.64 (2/13/23 Post)(profit snapshot = $206.75) I am buying back those 14 shares in 1 lot purchases with each purchase at the lowest price in the chain.
New Average cost per share: $58.45 (25+ shares)
Dividend: Quarterly at $.57 per share ($2.28 annually), last raised from $.54 effective for the 2023 first quarter payment.
Dividend History - Bristol Myers Squibb
Yield at New AC = 3.9%
Last Ex Dividend: 10/5/23
Last Earnings Report (Q/E 9/30/23 Post):
Comparisons are to the 2022 3rd Q:
Revenues: $10.966, down from $11.218B
GAAP E.P.S. = $.93, up from $.75
Non-GAAP E.P.S. = $2.00, up from $1.99
Consensus Non-GAAP Estimate per Schwab: $1.76
The primary adjustment to GAAP is to add back $2.256B in "Amortization of acquired intangible assets", a non-cash expense, that resulted primarily from BMY's acquisition of Celgene which owned Revlimid. Bristol-Myers Squibb Completes Acquisition of Celgene (11/20/19) As part of the approval process, Celgene had to sell Otezla, a psoriasis drug. Amgen To Acquire Otezla® For $13.4 Billion In Cash, Or Approximately $11.2 Billion Net Of Anticipated Future Cash Tax Benefits
Guidance: Adjusted GAAP diluted EPS range to $3.68-$3.83 and raising midpoint of Non-GAAP diluted EPS range, with the new range being $7.50-$7.65.
Analyst Reports (available to Schwab customers):
Morningstar (10/26/23): 4 stars with a fair value estimate of $63, lowered from $66 after the last earnings report.
S&P (10/26/23): 2 stars with a 12 month PT of $47, cut from $60.
Argus (9/20/23): Hold
I do not have access to any other analyst reports. Several analysts lowered their price targets in response to the 3rd Q. report.
Some Other Sell Discussions: Item # 2. Eliminated BMY in Vanguard Taxable Account - Sold 15+ at $77.56 (5/5/22 Post)(profit snapshot =$279.11); Item # 2.F. Pared BMY in Fidelity Taxable-Sold 1.203 at $68.8 (9/10/21 Post)(profit snapshot = $6.89); Item # 3.G. Sold 1 BMY at $67.1-Schwab Taxable (6/12/21 Post); Item # 3.B. Pared BMY in Vanguard Taxable-Sold 2 at $65.63 (5/14/21 Post )(profit snapshot = $6.63)
Two trades in 2009 and 2010 netted a $250.28 profit:
Realized BMY Gain Starting in 2009: $925.93 (no realized losses yet)
Most of the trades, including all made in ROTH IRAs account, were not discussed here and were less than 10 shares.
H. Added to MRCC - Bought 5 at $6.82 (Schwab Account):
Quote: Monroe Capital Corp. (MRCC) - Externally Managed BDC
Cost: $34.1
Working my way up slowly to 100 shares.
Last Discussed: Item # 1.K. Added to MRCC - Bought 5 at $7.05 (10/21/23 Post)
Last Substantive Discussion: Item # 1.C. Added to MRCC - Bought 5 at $7.3 (8/26/23 Post) I discussed the 2023 second quarter earnings report in that post. SEC Filed Press Release
New Average cost per share: $7.41 (40 shares)
As of 6/30/23, MRCC reported a $9.84 net asset value per share.
Dividend (regular only): Quarterly at $.25
Yield at $7.41: 13.5%, rounded up.
The third quarter earnings report is scheduled for release on 11/9.
I. Added to PSEC - Bought 10 at $5.06 (Fidelity Account):
Quote: Prospect Capital Corp. (PSEC) - Externally Managed BDC
Cost: $50.6
Last Discussed: Item # 1.H. Added to PSEC - Bought 10 at $6.04 - Fidelity Account (8/26/23 Post) I discussed the first quarter earnings report in that post. SEC Filed Press Release
Investment Category: Monthly Income Generation
Website: Prospect Capital Corporation
Annual Report for the F/Y 6/30/23 (Risk factor summary starts at page 30 and ends at page 77) In short, this is a high risk investment.
New Average cost per share: $5.23 (40 shares)
Dividend: Monthly at $.06 per share ($.72 annually)
PSEC Stock Dividend History & Date
Yield at $5.23: 13.77%
I am not reinvesting the dividend.
Dividend History: Unfavorable with several dividend cuts
Last Ex Dividend: 10/26/23 (owned 30 as of)
Net Asset value per share history:
Unfavorable IMO over its history as a public company, but showing signs of stabilization since 2017. I would make some allowances for PSEC being a public company when the Near Depression hit in 2008.
6/30/23: $9.24
3/31/23: $9.48 10-Q at page 4
12/31/22: $9.94
12/31/21: $10.01
Last Earnings Report (Q/E 6/30/23): The 3rd quarter earnings report will be released next week.
Basic Net Investment Income per share: $.23
Nonaccrual loans as a % of Total Assets: 1.1%
First Lien Debt: 56.5%
 |
| P. 176, Annual Report |
Annualized Current Yield of Performing Loans: 13.3%
Estimated Impact on Net Investment Income from Changes in Interest Rates:
 |
| P. 122 Annual Report |
I would describe this BDC as extremely complex. Even without reading the Annual Report, an investor can arrive at that conclusion by noting that the report has 311 pages.
Some Sell Discussions: Item # 2.F. Eliminated PSEC in Two Taxable Accounts - Sold 20 at $7.39; 20 at $7.4 ( Post)(profit snapshot = $95.56, contains snapshots of trades that were not discussed); Item # 1.G. Sold 5 PSEC at $8.12 (9/24/21 Post)(profit snapshot = $13.71); Item #1.P. Multiple Small Ball Purchases of PSEC-Sold 105 and Kept 42+ (2/27/21 Post)(profit snapshot = $38.88); Item # 1.N. Sold All PSEC Shares Purchased with dividends at $7.8 (4/17/21 Post)(profit snapshot = $46.97); Item # 7. Sold 100 PSEC at $10.65 -RI Account_(9/6/14 Post)(profit snapshot = $30.99); Item # 2 Sold 100 PSEC at $10.83-RI Account (6/1/12 Post)(profit snapshot = $60.47); Item # 1. Sold 100 PSEC at $11.36 - Regular IRA Account (6/19/12 Post)(profit snapshot = $39.6); Item # 2 Sold 50 PSEC at $11.5-IRA Account (1/14/11 Post (no profit snapshot); Item # 2. Sold 50 PSEC In IRA at $12.16 (3/8/2010 Post)( net profit = $68.04) Two transactions in retirement accounts netted +$128.51 and were not discussed.
Goal: Any total return before any ROC adjustment to the tax cost basis in excess of the dividends paid.
J. Restarted PEAK - Bought 10 at $15.61 (Fidelity Account):
Quote: Healthpeak Properties Inc. (PEAK)
Cost $156.1
I discussed this purchase in a 10/30/23 comment.
Properties as of 9/30/23:
CCRC = Continuing Care Retirement Communities (Learn About Continuing Care Retirement Communities)
Last Discussed: Item # 1.G. Eliminated PEAK - Sold 15 at $31.08 (3/6/2021 Post)(profit snapshot = $38.01) This was in response to another dividend cut.
Healthpeak Properties and Physicians Realty Trust to Combine in an All-Stock Merger of Equals to Create the Pre-Eminent Owner, Operator and Developer of Real Estate for Healthcare Discovery and Delivery, An Attractive and Growing Market I discussed PEAK's proposed acquisition of DOC in another 10/30/23 comment.
DOC shareholders will receive .674 PEAK share for each DOC share and a 12.09% dividend cut.
DOC and PEAK responded to this news by declining slightly last Monday but prices recovered some on Thursday.
My best guess is that DOC shareholders would be better off longer term as a standalone company. Any prediction about the future is of course guesswork. PEAK does become somewhat more attractive longer term with DOC than without IMO.
Dividend: Quarterly at $.30 per share
Healthpeak Properties, Inc. (PEAK) Stock Dividend History & Date
PEAK has a history of cutting its quarterly dividend starting in 2016 when the quarterly dividend was cut from $.5235 to $.37 per share.
Yield at $15.61 = 7.69%
Next Ex Dividend: 11/6/23
Last Earnings Report (Q/E 9/30/23):
SEC Filed Press Release and Supplemental
NAREIT Defined FFO = $252.566M or $.46 per share
Adjusted FFO: $251.647M or $.45 per share
AFFO per share: $.40, up from $.36 in the 2022 third quarter
Dividend Payout to AFFO: 75%
Reconciliation of GAAP Net Income to Adjusted FFO per share:
The main adjustment is to add back to net income the noncash depreciation expense.
Reconciliation of Adjusted FFO to AFFO per share:
The two largest reductions in adjusted FFO are to deduct non-cash revenues created by the straight line accounting convention (pretend cash is not available for distribution) and maintenance expenses called "AFFO capital expenditures" in the previous snapshot.
2023 Guidance: Adjusted FFO per share of $1.76-$1.78
No guidance is given on AFFO which is the more relevant number for dividend coverage.
K. Bought 10 F at $9.79:
Quote: Ford Motor Co. (F)
Cost: $97.9
F | Ford Motor Co. Analyst Estimates-MarketWatch
It has been a very long time since I owned Ford's common stock. The price eventually declined to a level where I am comfortable investing less than $100. I previously mentioned that I would consider starting a small ball position in the $12-$13 price range, but shelved that when it became obvious that the UAW was going to strike.
10 Year Average Annual Total Return to 11/2: -.36% ($10,000 initial followed by reinvesting the dividends ends up with $9,645.87, much worse when adjusted for inflation and taxes on the dividends)
Sourced: DRIP Returns Calculator | Dividend Channel
That number highlights that Ford's stock can not be held long term when the goal is an acceptable annual total return.
Dividend: Quarterly at $.15 per share ($.60 annually)
Ford Motor Company (F) Stock Dividend History & Date
Ford has a long history of cutting or eliminating its dividend.
Yield at $9.79 = 6.13% (regular dividend only), rounded up.
Ford paid a special dividend of $.65 per share in addition to its regular dividend earlier this year. n
Last Ex Dividend: 10/31/23 (bought the day before)
Last Earnings Report (Q/E 9/30/23): SEC Filed Press Release
E.P.S. $.30, up from a loss of $.21 in the 2022 third quarter, which highlights one of the problems for long term investors.
Adjusted free cash flow = $1.2B
Revenus: Up 11% to $44B.
Ford has the same problems as Verizon, including a large amount of debt, high labor and capital expenditures, and competition. In addition, revenues and earnings are far more cyclical for automakers than telecommunication companies like Verizon and AT&T. The UAW agreement will drive up costs and pressure profit margins. Here's what the Ford-UAW agreement could mean for the Big Three | Morningstar The average new car price in August 2023 was $48,451. Kelley Blue Book
L. Added 5 RITM - Bought 5 at $9.18 (Fidelity Account):
Quote: Rithm Capital Corp. (RITM) I classify RITM as a hybrid REIT.
Cost: $45.9
Website: Rithm | Home
New Residential is currently in a takeover fight to acquire Sculptor Capital Management (SCU) {Sculptor SEC Filings; SCU Earnings report for the Q/E 6/30/23} This appears to be more trouble than it could be worth. Rithm Capital - Investors - News
Last Discussed: Item # 2.B. Added to RITM - Bought 5 at $10.04; 5 at $9.63 (9/30/23 Post)
Last Elimination: Item # 6.E. Eliminated Duplicate Position in RITM - Sold 30 at $10.3 (8/12/23 Post) I discussed the second quarter earnings report in that post. I am slowly buying back those shares.
New Average cost per share: $10.46 (157+ shares)
Dividend: Quarterly at $.25 per share
I am reinvesting the dividend.
Rithm Capital Corp. (RITM) Stock Dividend History & Date
Yield at New AC = 9.56%
Last Ex Dividend: 9/28/23
Last Earnings Report (Q/E 9/30/23):
GAAP E.P.S. = $.40
Distributable Earnings: $280.8M or $.58 per share
Business Segment Information:
Other Recent News: Rithm Capital to Acquire Specialized Loan Servicing LLC (10/2/23)
M. Added to PFLT - Bought 3 at $9.71:
Quote: PennantPark Floating Rate Capital Ltd. (PFLT)
Cost: $29.13
Last Discussed: Item # 4.F. Added to PFLT - Bought 5 at $10.51 (6/24/23 Post)
Last Elimination: Item # 2.D. Eliminated PFLT in Fidelity Account (Duplicate Position) - Sold 15 at $10.93 (3/11/23 Post)(profit snapshot = $74.78) I am buying back those shares at less than crippled turtle speed.
New Average cost per share: $9.44 (110+ shares)
Dividend: Monthly at $.1025 per share ($1.23 annually)
PennantPark Floating Rate Capital (PFLT) Stock Dividend History & Date
Yield at New AC = 13.03%
Last Ex Dividend: 10/16/23
Net asset value per share history:
6/30/23: $10.96
12/31/22: $11.30
9/30/22: $11.62
12/31/21: $12.70
3/31/21: $12.71 Press Release 2021 1st Q Earnings
3/31/20: $12.20 10-Q at page 5
12/31/19: $12.95
9/30/19: $12.97
6/30/19: $13.07
3/21/19: $13.24
12/31/18 $13.66
9/30/18 $13.82
6/30/18: $13.82
9/30/17: $14.10
9/30/16: $14.06
9/30/15: $13.95
9/30/14: $14.40
9/30/13: $14.10
9/30/12: $13.98
PFLT Realized Gains to Date: $210.05
Other Sell Discussions: Item # 7.E. Sold Highest Cost 20 PFLT Shares Purchased with Dividends at $14.07 - Schwab Taxable Account (4/28/22 Post)(profit snapshot = $46.13); Item # 3. Sold 102 PFLT in Schwab Taxable Account at $13.26 -Highest Cost Lots (7/30/21 Post)(profit snapshot = $30.92); Item # 2.A. Eliminated PFLT in Fidelity Account-Sold 81+ at $12.01 (12/14/19 Post)($29.66)
5 Year Annual Average Total Return to 11/2/23: 6.75%
Sourced: DRIP Returns Calculator | Dividend Channel
The 6.75% total return (dividends reinvested) indicates that the dividends lost some of their value through reinvestment.
Goal: Any total return before ROC adjustments to the tax cost basis in excess of the dividends.
N. Added to STT - Bought 1 at $64.06; 1 at $63 (Fidelity Account):
Quote: State Street Corp. (STT)
Cost: $127.06
STT is involved in several business lines including asset management and providing administrative services for other asset managers.
STT Analyst Estimates | MarketWatch
Last Discussed: Item # 2.F. Started STT - Bought 1 at $68.29; 1 at $66.52 (7/22/23 Post) I do not believe that I owned STT prior to those two purchases. I discussed the 2023 second quarter earnings report in that post. SEC Filed Press Release
New Average cost per share: $65.47 (4 shares)
Dividend: Quarterly at $.69 per share ($2.76 annually), last raised from $.63 effective for the 2023 4th quarter payment.
State Street Corporation (STT) Stock Dividend History & Date
Yield at New AC: 4.22%, rounded up.
Last Ex Dividend: 9/29/23
Last Earnings Report (Q/E 9/30/23):
E.P.S. = $1.25, down from $2.17 in the 2022 third quarter
Part of the decline was attributable to taking a $294M loss ($.68 per share) on respositing its portfolio to increase net interest income. I am assuming without checking that involved selling low coupon, longer duration bonds at a loss.
10-Q for the Q/E 9/30/23: Investment Securities
 |
| P. 28 |
Net unrealized losses as of 9/30/23 = $8.306B, see page 63.
Net Interest Income 3rd Q: $624M, down from $660M
O. Added to O - Bought 1 at $48.9; 1 at $46.79; 2 at $45.54:
Quote: Realty Income Corp. (O)
Cost: $186.77
Investment Category: Equity REIT Common and Preferred Stock Basket Strategy
The stock initially declined in response to this announcement: Realty Income to Acquire Spirit Realty Capital in $9.3 Billion Transaction (10/30/23) This is an all stock deal. Realty anticipates a 2.5% accretive to AFFO which assumes $50M in annualized general and administrative expense synergies.
Website: Homepage | Realty Income
Last Discussed: Item # 2.I. Added to O - Bought 1 at $51.16; 1 at $50.78; 1 at $50.22; 2 at $50; 1 at $49.74 (9/30/23 Post)
Last Substantive Discussion: Item # 2.D. Added to O - Bought 3 at $58.97; 1 at $58.63; 2 at $58.08; 2 at $56.9 (8/19/23 Post) I discussed the 2023 second quarter report in that post.
SEC Filed Press Release and Supplemental.
New Average cost per share: $53.45 (30 shares)
Dividend: Monthly at $.256 ($3.072 annually)
Realty Income Corporation (O) Stock Dividend History & Date
Yield at New AC = 5.75%, rounded up.
Last Ex Dividend: 10/31/23
SU Bond Ownership: 4 bonds (A3/A-)
4.6% Maturing on 2/6/24 (2), Bond Page | FINRA.org
3% Maturing on 1/15/27 (2), Bond Page | FINRA.org
Realty Income Realized Gains to Date: $1,579.50 in one trade. Item # 1. Eliminated Realty Income (O)- Sold 100 at $52.37 -Seeking Alpha (profit snapshot = $1,579.5)
P. Started ACCO - Bought 20 at $5.06:
Quote: ACCO Brands Corp. (ACCO)
Cost: $101.2
ACCO manufactures and distributes office supplies. In the U.S. its most widely known products are Mead papers and Swingline staplers. Brands | ACCO Brands
ACCO Analyst Estimates | MarketWatch (As of 11/1/23, the average 2023 E.P.S. estimate was $1.10 and $1.32 for 2024. Three analysts contributed to those estimates. Using the 2024 estimate, the P/E at $5.06 is about 3.83)
10-Q for the Q/E 9/30/23 (debt discussed starting at page 11; of the $892.2M in long term debt, $575M is in a 4.25% SU that matures in 2029, but the remaining debt appears to be at floating rates that are not fixed via swap agreements)
This is my first purchase.
Investment Categories: Lottery Ticket Basket/Bond Substitute
Results since the start of the pandemic have been adversely impacted by lower demand resulting from the work-from-home trend and input cost inflation.
Dividend: Quarterly at $.075 per share ($.30 annually)
ACCO Brands Corporation (ACCO) Stock Dividend History & Date
Yield at $5.06 = 5.93%
Next Ex Dividend: 11/14/23
Last Earnings Report (Q/E 9/30/23): Released after my purchase.
E.P.S. $.15
Adjusted E.P.S. = $.24
Non-GAAP Consensus: $.23 per Schwab
Revenues: $448M, consensus per FactSet at $476.36M
"Net sales declined 7.7 percent to $448.0 million from $485.6 million in 2022. Comparable sales fell 9.9 percent, as favorable foreign exchange increased sales by $10.5 million, or 2.2 percent. Both reported and comparable sales declines reflect softer demand due to a weaker macroeconomic environment which has also led to lower global technology spending, and the stabilization of return to office trends."
GAAP to Non-GAAP Reconciliation:
The largest adjustment is to add back a $10.8M non-cash amortization expense.
Adjusted Free Cash Flow: $63.2M
2023 Guidance: Sales down 6% to 7%; adjusted E.P.S. $1.03 - $1.07; free cash flow of at least $110M
Goal: A total annualized return of 2%+ in excess of the dividend payments (2% = $.102 realized annual appreciation in the share price)
2. Small Ball Purchases U.S. Equity Preferred Floating Rate Stocks That Pay the Greater of a Minimum Rate or A Spread to SOFR:
Investment Category: Advantages and Disadvantages of Equity Preferred Floating Rate Securities
A. Started METPRA Again - Bought 5 at $22.56 (Schwab Account):
Coupon: Greater of 4% or 1% above the 3 month Libor Rate
Par Value: $25
Dividend: Quarterly, non-cumulative and qualified
Optional Call: At par value plus accrued and unpaid dividends-anytime now at issuer's option
Stopper Clause: Yes
A. Added to GLQ - Bought 5 at $5.2:
Quote: Clough Global Equity Fund Overview - Leveraged Balanced CEF that sells some stocks short.
Cost: $26
SEC Filing - Holdings as of 7/31/23
New Average Cost per share: $7.05 (82+ shares)
Dividend: Monthly at $.0599 per share ($.7188 annually)
GLQ Dividend History | Seeking Alpha
ROC Supported.
I am reinvesting the dividend
Yield at New AC: 10.2%
Next Ex Dividend: 11/16/23
Last Discussed: Item # 2.C. Added to GLQ - Bought 5 at $5.35 (10/14/23 Post)
Data Date of 10/26/23 Purchase:
Closing Net Asset Value per share: $6.37
Closing Market Price: $5.18
Discount: -18.68%
Average 3 Year Discount: -7.3%
Sourced: GLQ - CEF Connect
B. Added to ADX - Bought 5 at $16:
Quote: Adams Diversified Equity Fund Inc. (ADX)
Cost: $80
Last Discussed: Item # 1.A. Added to ADX - Bought 5 at $16.89; 5 at $16.62 (10/21/23 Post)
Last Elimination: Item # 2.A. Eliminated Duplicate Position in ADX - Sold 20 at $17.65 - Fidelity Account (9/9/23 Post)
SEC Filed Semiannual Report for the Period Ending 6/30/23
New Average cost per share: $15.75 (45+ shares)
Sponsor's Website: Adams Funds
Data Date of 10/27/23 Purchase:
Closing Net Asset Value per share: $18.75
Closing Market Price: $15.85
Discount: -15.47%
Average 3 Year Discount: -14.55%
Sourced: ADX - CEF Connect
ADX- Morningstar (rated at 3 stars)
Adams Diversified Equity Fund (ADX) Portfolio | Morningstar (lists top 25 holdings)
ADX Realized Gains 2008 to Date: $3,239.71
Largest Gain: Eliminated ADX - Sold 467+ Shares Update On Closed End Fund Basket Strategy As Of 7/28/15 - South Gent | Seeking Alpha (profit snapshot = $1,923.24)
C. Added to RMT - Bought 5 at $7.69:
Quote: RMT | Royce Micro-Cap Trust Inc. Overview - A Stock CEF
Cost: $38.45
Last Discussed: Item # 2.G. Added 5 RMT at $8.24 (5/27/23 Post)(contains snapshot of largest annual gain to date)
Last Elimination: Item # 2.A. Eliminated RMT in Vanguard Taxable Account - Sold 10 at $10.36 (2/10/22 Post)(profit snapshot = $44.26)
Sponsor's website: Royce Micro-Cap Trust (RMT)
SEC Filed Semiannual Shareholder Report for the period ending 6/30/23 (RMT list of holdings starts at page 24; slightly leveraged at $22M with a weighted average interest rate during the six month period at 5.94%, see page 36 for more information; unrealized gains at $101.9+M).
New Average Cost per share: $7.88 (42+ shares)
Dividends: Quarterly at a variable rate: RMT Dividend History-Seeking Alpha
Last 4 Dividends: $.8 per share
Yield at AC Using annual $.80 rate: 10.15%
Last Ex Dividend: 9/8/23
Data Date of 10/30/23 Trade:
Closing Net Asset Value per share: $8.89
Closing Market Price: $7.72
Discount: -13.16%
Average 3 Year Discount: -11.84%
Sourced: RMT- CEF Connect (Click "Pricing Information" Tab)
RMT Realized Gains to Date: $2,661.8
Largest Annual Gain: $2,269.01 on 759+ shares sold in 2014
4. Corporate Bonds:
A. Bought 2 Carlisle 3.5% SU Maturing on 12/1/24 at a Total Cost of 97.271:
%203.5%25%2012:1:24%20.png)
Issuer: Carlisle Cos. (CSL)
CSL Analyst Estimates | MarketWatch
SEC Filed Earnings Press Release for the Q/E 9/30/23
New Finra Page: Bond Page | FINRA.org
Bond Prospectus ($400M in principal amount)
Credit Ratings: Baa2/BBB
YTM at Total Cost: 6.132%
Current Yield at TC = 3.6%
Optional Redemption: Make whole optional redemption prior to 10/1/24. Optional redemption on or after 10/1/24 to maturity date at par + unpaid interest.
B. Bought 2 Discover Financial Services 3.95% SU Maturing on 11/6/24 at a Total Cost of 97.373:
%203.95%25%2011:6:24%20.png)
DFS Analyst Estimates | MarketWatch
DFS SEC Filed Earnings Press Release for the Q/E 9/30/23
New Finra Page: Bond Page | FINRA.org
Credit Ratings: Baa2/BBB-
YTM at Total Cost: 6.687%
Current Yield at TC = 4.0566%
I now own 4 bonds.
5. Treasury Bill Purchases:
A. Bought 2 Treasury Bills at the 10/30/23 Auction:
%202:1:24%20.png){kind=small}
91 Day Bill
Matures on 2/1/24
Interest: $26.92
Investment Rate: 5.488%
B. Bought 1 Treasury Bill at 10/31/23 Auction:
%2010:31:24%20.png)
52 Week T Bill
Matures on 10/31/24
Interest = $51.92
Investment Rate: 5.433%
C. Bought 2 Treasury Bills at the 11/1/23 Auction:
%203:5:24%20.png){kind=small}
Matures on 3/5/24
Interest: $35.3
Investment Rate: 5.527%
7. Exchange Traded Baby Bonds:
A. Added to ELC - Bought 5 at $20.03 (Schwab Account):
Quote: Entergy Louisiana LLC First Mortgage Bonds 4.875% Series due 2066
The pricing of this potentially long term bond improved last week as long term treasury rates declined some. I have positions in 3 taxable accounts and two RI accounts. Until I hit 100 ELC shares in my Schwab taxable account, I will not be buying more shares in the other two taxable accounts. Currently, the largest ELC position is in my Fidelity taxable at 45 shares with an average cost per share of $21.6.
Issuer: Wholly owned operating subsidiary of the utility holding company Entergy Corp. (ETR)
ETR Earnings Press Release for the Q/E 9/30/23
Last Discussed: Item # 5.A. Added to ELC in Fidelity Account -Bought 5 at $21.46 (9/2/23 Post)
Investment Category: Exchange Traded Baby Bonds
Description: Prospectus
Par Value: $25
Interest Payments: Quarterly
Security: First Mortgage on substantially all assets
Call protection has expired.
Maturity: 9/1/2066 unless called earlier at issuer's option.
Interest Payments: Quarterly
Trades Flat (whoever owns the security on the ex interest date receives the entire quarterly interest payment, even if bought the day before that date)
Average cost per share this account: $20.43 (15 shares)
Yield at AC = 5.97%, rounded up.
Next Ex Interest Date: 11/29/23
Credit Ratings: A2/A
8. CDs - FDIC Insured (Schwab Account): I am starting to have slightly more concerns that short term rates (1 month to 3 years) may start to trend down during the 2024 second half. So I am buying more fixed coupon securities with 2025 maturities.
A. Bought 2 Wells Fargo 5.5% CDs Maturing on 5/5/25:
%205:7:25%20MI%20.png){kind=small}
I discussed in my last post buying 2 WFC 5.5% CDs that mature on 4/30/25 Item # 6.A.).
B. Bought 2 Wells Fargo 5.4% CDs Maturing on 11/7/25:
%205.4%25%2011:7:25%20.png){kind=small}
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.
I just corrected an error made in my 8/19/23 post involving the terms of a Transalta reset equity preferred stock, TAPRH:
ReplyDeletehttps://tennesseeindependent.blogspot.com/2023/08/cag-cmcsa-eprt-gbdc-gmre-khc-nnn-o-ofs.html
I started that this one reset at a spread to the 3 month Canadian T Bill, and then linked my prior purchase discussion which clearly showed that the reset was at a 3.65% spread to 5 year Canadian government bond. The last reset occurred in September 2022. The new coupon for 5 years is 6.894% paid on a C$25 par value. At my total cost per share, the yield is now at 10.4%. That error was caused by aged brain malfunctioning.
I caught the error in the TAPRH description when writing up my first purchase of Transalta common shares on the Toronto exchange, using my CADs.
Website
https://transalta.com/
The shares also trade on the NYSE stock exchange under the TAC symbol.
https://www.marketwatch.com/investing/stock/tac?mod=search_symbol
I previously discussed eliminating my position in Transalta Renewables (RNW:CA). TAC offered to acquire the RNW:CA shares that it did not own (39.1%) at what I called an unfair price to RNW:CA shareholders.
1. Eliminated RNW:CA - Sold 150 at C$13.01:
https://tennesseeindependent.blogspot.com/2023/07/aod-asbprf-bbdc-cag-colb-ctopra-rnwca.html
Good for TAC IMO, but bad for RNW:CA shareholders, so I sold rather than receiving TAC shares + cash when the acquisition was completed which happened last month.
https://www.nasdaq.com/press-release/transalta-corporation-announces-closing-of-the-acquisition-of-transalta-renewables
TAC owns gas, hydroelectric, solar, and wind generation facilities. Noncash depreciation expense will reduce reported earnings, similar to REITs in that regard. I focus more on free cash flow per share and FFO per share. FCF per share was C$1.05 in the second quarter with FFO at C$1.48. Reported earnings per share was $.23.
I'm not sure I share enthusiasm for end to rate hikes as an exciting positive when it's based on more unemployment. i.e. slowdown and possible recession.
ReplyDeleteIt's been a disappointing week since I didn't buy in before the weekend, and missed the chase. My accounts are up 15k across them. Sold KRE & MTB while down, oops. 2 & 1 shares, I'll live.
Been helping my dad move into independent living, without secure internet, and impossible to concentrate. Also the big exciting week of Ameritrade moving to Schwab. I think I got everything useful downloaded that's not transferring. Schwab's transfer help line was surprisingly helpful. Their wait time message is useful info about the market, such as points from Powell's speech.
There's already been a ground invasion and other countries involved. But done quietly so that media didn't make it a big announcement. Some calls for a ceasefire, but Hamas is still firing at Tel Aviv and holding hostages. When someone is raping you, you don't ask pretty please be pleasant neighbors. You call the police.
My consumer view of Fedex was reinforced. Running out of a critical med, and it was major effort to get it delivered. Both the sender and FedEx regs and communications made me wish for USPS or UPS many times. I did find a grocery store with a good dairy-free ice cream on the way home (from picking up at distribution center), so that made it much better.
Some interesting finds and buys I noticed during the week as rates kept changing.
Land: My view is that a recession within 18 months would be more likely with continued FED rate hikes. So the consensus opinion that the Fed may be done reduces the risk that it will cause a recession.
DeleteUnemployment at 3.9% is nothing to worry about. Wage growth is slowing some but is running at a higher rate than CPI. Starting in 1970s, wage growth rising faster than inflation has been more of an exception lasting for short periods only.
For example, the current minimum wage is about 40% lower than the minimum wage in 1970.
https://www.statista.com/statistics/1065466/real-nominal-value-minimum-wage-us/
So in inflation adjusted terms, workers in the aggregate are better off now than in most prior periods when stocks did well.
Another important difference is that the largest debt for most households has been refinanced long term at historically low rates and those households are now able to higher yield on risk free savings than the mortgage coupon.
My most important investment concern is the same as it has been for a year or so now. What will be the reinvestment rates in 2024 and 2025 when my currently owned treasuries, CDs and corporate bonds mature? The issue is a significant one given the amounts that I have tied up in those soon to mature securities. I don't see short rates going back to near zero, but a cut of 50 basis points in the FF rate during the second of 2024 is a distinct possibility and much more when and if a recession has develops.
" recession within 18 months would be more likely with continued FED rate hikes. So the consensus opinion that the Fed may be done reduces the risk that it will cause a recession. "
DeleteOh, that's the connection.
Also the positives described, that are keeping consumers viable.
The ten year treasury yield rose 10 basis points today after falling 10 basis points last Friday. I would not attempt a rational explanation. The ten year treasury yield is back at 4.67% where it closed last Thursday. That is still down significantly from the October high.
ReplyDeleteThe 10 year TIP breakeven inflation rate closed at 2.42% today up from 2.39% last Friday.
I noticed an article that Guggenheim expects the FED to cut the FF rate below 3%.
https://www.morningstar.com/news/marketwatch/20231106804/fed-likely-to-cut-rates-below-3-making-bonds-attractive-now-guggenheim-says
Eventually the FED will cut again and may go back below 3%. A recession would likely provoke that kind of response, which Guggenheim views as likely in the 2024 first half. There is nothing in the economic data yet that supports that prediction IMO but conditions can change over the next several months.
Depending on the severity of the next recession, and its impact on inflation, the FED may possibly go back to ZIRP and QE again.
Prospect Capital Corp. (PSEC)
ReplyDelete$5.94 +0.66 +12.59%
Last Updated: Nov 9, 2023 at 10:55 a.m. EST
https://www.marketwatch.com/investing/stock/psec?mod=search_symbol
I discussed buying 10 shares at $5.06 in Item #1.I. above.
Based on the stabilization of net asset value per share numbers mostly in the $9 to $9.5 range, and recent increases in NII ($9.32 as of 6/30/17), I previously removed PSEC from my "Deservedly Hated BDC" category to "I Just Don't Like It" category.
Today's move was in response to the earnings report released yesterday after the close.
https://www.sec.gov/Archives/edgar/data/1287032/000128703223000356/a2023-09x30xpsecearningsre.htm
Net Asset Value per share: $9.25, up from $9.24 as of 6/30/23.
Net investment income per share was reported at $.25 comfortably exceeding the $.18 quarterly dividend per share paid in monthly installments of $.06.
NII per share was $.22 in the Q/E 9/30/22.
The excess over NII per share may at some point in the future be distributed in whole or in part as a special dividend. I do not see PSEC altering its regular monthly dividend.
As with other BDCs, PSEC is benefiting from an increase in short term rates, as its floating rate loans, whose coupons are at spreads to SOFR, are generating more income. That will change when the FED starts to cut the FF rate which I do not anticipate prior to the 2024 second half.
You're going out on a limb and anticipating when rate cuts won't start before. :)
ReplyDeleteThe recent talk of higher for longer, and better to do overkill, definitely implies longer.
Land: The treasury bill yield curve implies that the FF rate will remain where it is now, with a possibility of a .25% cut in the second half.
DeleteThe 1 month to 6 month bills closed yesterday in a range between 5.46% to 4.54%, with the FF range currently at 5.25% to 5.5%. The 1 year bill has a slightly lower yield, suggesting no more than a .25% cut in the 2024 second half.
The CME FedWatch Tool currently has the probability that the FF will be higher than the current range by year end 2024 at .1%.
https://www.cmegroup.com/markets/interest-rates/cme-fedwatch-tool.html
The more probable than not scenario is for a cut of 1.25% to 4.25-4.5%. To cut that much would require a recession or deflation concerns caused by inflation surging below 2%.
I don't see a 1.25% cut being priced into the 6 months to 1 year treasury bill yields. My more probable than not scenario, assuming no recession starting prior to 12/31/24, is a .25% cut between June-October 2024.
Personally, I would like to see short rates go up, or at least remain the same, until I can rollover the proceeds from my 2024 maturities. The reinvestment yields in 2024-2025 are my most important concern at the moment.
PSEC is now up 14.68% to $6.06 which indicates that a ray of sunshine can work wonders when darkness is presumed forever.
I also gambled on 1 PSEC SU bond awhile back, a 3.706% SU that matures on 1/22/2026, bought at a total cost of 90.885:
Item # 5.E.
https://tennesseeindependent.blogspot.com/2023/08/cag-cmcsa-eprt-gbdc-gmre-khc-nnn-o-ofs.html
BDC bonds are risky. All or almost all of the net income is being paid out to the common shareholders, with little or no cushion for the bond owners. And, the BDCs make risky loans. For PSEC bonds, the company sells bonds through initial bond offerings through Fidelity and possibly other brokers priced at par value, but the yields are generally below where similar bonds can be bought in the secondary market.
Thanks! That helps explain. So it's not estimated from an impression, but from the market's overall opinion.
DeletePowell in my opinion said nothing earthshaking or new but his remarks nonetheless had a negative impact on the markets today.
ReplyDeletehttps://www.cnbc.com/2023/11/09/powell-says-fed-is-not-confident-it-has-done-enough-to-bring-inflation-down.html
The market only accelerated its losses after Powell's remarks and was already down in response to what some called a "poor" and disappointing 30 year treasury auction, which is just a fantasy opinion when looking at where the 30 year was trading earlier this week.
The coupon for the 30 year auctioned today was 4.75%. With the OID, the yield was 4.769%.
Starting on 11/1/23, the closing yields for the 30 year treasury were 4.96%, 4.82%, 4.77%, 4.84%, 4.75%, 4.64% and 4.77% today. If I did not know there was a 30 year auction today, I would simply conclude that the yield was moving within a tight range without anything explaining the movement other than normal market gyrations for such a long dated bond. If I was to draw any conclusion, it would be that the yields were in a slight though uneven downtrend starting from the 5.11% close on 10/19/23.
It was time technically for the market to pull back a little bit from the rally. I was wondering what would trigger it. So Powell seems to be an excuse. Because what he said was nothing different than what he's been saying.
ReplyDeleteI'm kicking myself that I didn't convert the 401k at the bottom here. The extra pullback and savings from it wouldn't make up for all the opportunity for this gain to be tax-free after converting. I'm just getting it over with.
That last sentence was supposed to say....
ReplyDeleteAnother reason to do the convert, is to just get it over with.
Land: The best time for me to convert was in October 2008- early 2009 which is when I did it. The catastrophic decline in the S&P was close to 50%.
ReplyDeleteAnother reason for doing it then was that I was already in low tax bracket having no earned income as a retiree and investment income was going to go way down.
For those missing that opportunity, March 2020 was another good period since stocks had been smashed in price.
I started to convert in October 2008 with at least two conversions that month. I selected the securities held in my regular IRA that has been hit the hardest by the onset of the Near Depression. Then I continued using that selection criteria for several more conversions until I finished moving all securities from the regular IRA to the Roth. I used two tax years, 2008 and 2009, which probably reduced the tax hit and some securities did not hit their lows until early 2009. The S&P 500 bottomed at an intraday low of 666.79 on 3/6/2009 (about where it was in March 1996). My file on this subject is about a 1/2 inch thick with paper since I opportunistically selected which security to move and that resulted in multiple conversions. The reason for doing it then and in that manner was to lower the tax bill. The income number is based on the value when converted.
Based on that experience, and assuming brokers still allow individual securities to be selected, it is possible to start out slow, spread it over 2 or more tax years, and to move securities that had been hammered the most and possibly with the best recovery potential in the Roth after conversion.
All of the securities that I converted recovered their pre-November 2007 value by the 2009 summer within the Roth IRA.
You have mentioned that you have certain income limits for medicine.
I would add that I was in compliance with the ROTH IRA withdrawal rules when I did my conversions. Those include the 5 year rule and I was over 59 1/2.
Deletehttps://www.nerdwallet.com/article/investing/roth-ira-5-year-rule
Another reason for converting was I did not want to do the required withdrawals from a regular IRA. I wanted the ROTH to continue growing without being diminished by RMDs. I view the ROTH IRA to be the last source of funds that would be tapped to pay expenses, and I do not expect those funds to ever be used. But if I have to, the more that is in those RI accounts the better.
That was a very good approach! Because I want to do it in one year (medically), I want to be sure to have time in one year.
DeleteA recession would make that timing obvious.
My funds are in 3 index mutual funds and a bond fund.
47% small/mid cap YTD 6%
44% interest income fund YTD 2.38%
4% mid cap YTD 2.6%
4% large cap YTD 16.6%
Quite a contrast there.
In other years that bond fund strongly outperforms Vang's VMRXX.
The mid cap was a new choice for me. Not a very good one as it turns out.
If I lose $5k in taxes by converting somewhat high vs lower it might be worth it to have later gains be tax free. (At 32% rate the conversion is taxed by going all in one year, a $10k higher total, is about $5 in more taxes including state. Rate it's taxes was calculated as tax paid without converting vs tax paid with converting.)
I have published a new post:
ReplyDeletehttps://tennesseeindependent.blogspot.com/2023/11/acco-ahh-ahhpra-brkl-ccnep-codi-ctopra.html