Saturday, November 11, 2023

ACCO, AHH, AHHPRA, BRKL, CCNEP, CODI, CTOPRA, EBMT, EMR, FIBK, GLW, HNNA, JQC, KLG, KMB, NMAI, REYN, TA:CA, TFINP, WTBA

Economy

The House Republicans do not appear to making any progress to keep the government running after 11/17, which is the expiration date of the continuing resolution whose passage temporarily kept the government open and cost McCarthy his job as Speaker. Congress has no clear plan to avoid a government shutdown in one week-NPR

Moody's cuts U.S. outlook to negative, citing deficits and political polarization

Total Household Debt Reaches $17.29 Trillion in Q3 2023; Driven by Mortgage, Credit Card, and Student Loan Balances - FEDERAL RESERVE BANK of NEW YORK

I mentioned this article in a comment. Fed likely to cut rates below 3%, making bonds attractive now, Guggenheim says-Morningstar This prediction is predicated on a recession starting during the 2024 first half. The current economic data, particularly on consumer spending, real GDP growth, job creation and wage growth, are indicative of an economic expansion rather than a recession about to occur. However, the rate cuts predicted next year in FF futures are consistent with a recession starting in the 2024 late summer or fall.  CME FedWatch Tool - CME Group

For those who have been predicting a recession for over a year now, the most important assumption supporting that prediction has been that aggregate consumer spending would decline in response to inflation. This has not occurred for several reasons: (1) wage growth has exceeded inflation over the past year; (2) substantially more discretionary income is being generated from risk free savings that can be used to fund discretionary consumer purchases; and (3) the main debt obligation, the home mortgage, has been refinanced at historically low long term rates generating more disposable income after debt service payments compared to the rates prevailing in vintage mortgages. 

The last of the major labor strikes ended on Thursday. Actors union reaches tentative deal with Hollywood and TV studios 

Ken Griffin: Inflation May Linger for Decades, Warns on Deglobalization

Treasury Yield Curve November 2023: 

The treasury bill curve is consistent with the federal funds rate remaining in a 5.25% - 5.50% range over the next 1 year, with a possible .25% cut in the 2024 summer or fall. 

10 year TIP breakeven inflation rate as of 11/10/23: 2.32% (view as a market forecast of the annual average CPI over the next ten years)

10 Year TIP breakeven inflation rate as of 12/30/22 (last business day in 2022): 2.3%

Increase in Predicted Inflation rate 12/30/22 to 11/10/23: 2 basis points

Increase in the ten year nominal yield over the same period (3.88% to 4.61%) = 73 basis points

Increase in the ten year nominal yield unexplained by a change in inflation expectations: 71 basis points.  

I have mentioned in several comments and posts that my main investment concern is the reinvestment yields for treasury bills, treasury notes, CDs and corporate bonds that mature in 2024 and 2025. 

This is a snapshot of the allocations in my Fidelity account. 


Most of the "bonds" held in this account mature in 2024, with a significant number maturing in 2025. CDs and treasury bills are included in the Fidelity bond category. 

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Allocation Shifts Discussed in this Post

Treasury Bills: $6,000 in principal amount

Corporate Bonds: $5,000 in principal amount

CDs: $4,000

U.S. Common Stocks: +$1,166.65

(consisting of $1,619.82 in purchases minus $453.17 in proceeds from selling a duplicate position)

CAD Priced Common Stock (TA:CA): +C$1,078  

Net Inflow Individual Common Stocks:  +$1,953.65  (Using a US$787 value for TA:CA)

U.S. Fixed Coupon Equity Preferred Stocks: +$343.77 (yield at 8.93%)

Leveraged CEFs: +$212.8 (yield at 11.73%)

2023 Net Outflow Common Stocks/Stock Funds: -$32,255.03

+++

Trump and His Party

RealClearPolitics - Election 2024 - 2024 Republican Presidential Nomination

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

Trump Leads Biden in Nearly Every Battleground State, New Poll Finds - The New York Times Trump leads Biden in Arizona (+5%), (Georgia (+6%), Michigan (+5%); Nevada (+10%), and Pennsylvania (+4%).  Biden's two main problems are his age and being blamed, unjustly, for the problematic inflation that started in 2021.  

Trump and allies plot revenge, Justice Department control in a second term - The Washington Post The plan calls for using the federal government to punish Trump's enemies and critics during his second term. Trump's enemies list includes John F. Kelly, William P. Barr, President Biden, former Joint Chiefs of Staff chairman Gen. Mark A. Milley, ex-Trump attorney Ty Cobb, and an assortment of FBI and other Justice Department officials. Trump is telling people in public what he intends to do. 

Trump Plots Against His Enemies - The Atlantic Tom Nichols correctly notes that a very large number of Americans would have no trouble with Trump prosecuting his critics during his second term and further undermining America's Democracy and Rule of Law.  

Opinion | Trump doesn’t just want to win. He wants revenge. - The Washington Post

Trump says he could use FBI, DOJ against his enemies in Univision interview - The Washington Post

Fact check: Trump falsely claims California had ‘blackouts all over the place this summer’ Lying all of the time about almost everything works on the intended audience who are willfully ignorant, easily manipulated with false information, and unwilling to accept accurate information when they inadvertently come into contact with it. Trump’s false or misleading claims total 30,573 over 4 year term as President  - The Washington Post

“Defendant stands alone in American history": Smith filing torches Trump claim, signals new evidence | Salon.com

I doubt that many Republicans will make an effort to look at facts that have been disclosed so far in Trump's criminal trials and then evaluate them in a nonpartisan and thoughtful manner. Instead, the charges are simply dismissed by them as politically motivated and consequently without merit, just part of some "radical left", deep state conspiracy to get Trump.  

Even if there is at least one jury verdict prior to the 2024 election where the Teflon Don is found guilty of one or more felonies, that will probably not cause IMO any material change in Donald's vote count or his nomination as the Republican candidate. 

Any jury conviction will be dismissed by Trumpsters as politically motivated and unjustified, irrespective of the evidence supporting guilt. In the Alternate Reality of TrumpWorld, where true is false and false is true, Donald is honest and trustworthy, brilliant and knowledgeable, mentally stable, has done nothing wrong, is a victim of malevolent forces, and is a good role model for children. 

Donald's voter support increased after a jury found him civilly liable for sexual assault in the Jean Carroll case. One GOP Senator, Tommy Tuberville (R-AL), said that jury verdict made him want to vote for Trump twice. Here Are the Five Sickest Reactions to the Trump Verdict | The New Republic; "That jury's a joke": GOP Trump defenders say sexual abuse verdict is "not a disqualifier" | Salon.com 

{Tuberville is holding up all promotions in the military until a change is made on abortion policies. Tuberville says he won’t relent on holds despite Israel’s war, claims he’s not hurting military readiness Needless to say, one senator from Alabama, a former football coach and player who is possibly suffering from irreparable brain injuries, should not have this kind of power}.  

CNN reporter confronts George Santos (R-NY) about his lies - YouTube

George Stephanopoulos grilled Steve Scalise (R-LA) on the 2020 election Scalise is one of the GOP's top leaders in the House and refuses even now to admit that Trump lost the 2020 election.  

Authorities investigating 'suspicious' envelopes sent to election offices in 5 states - ABC News Preliminary tests indicated the presence of fentanyl. Election officials in Fulton County Georgia were among those targeted.   

Ohio voters approve amendment to establish right to abortion in state constitution- CBS News The republicans in Ohio knew that this Amendment would likely be adopted by a majority of voters. To prevent the  majority from have the right to make a decision, the anti-democracy party sought to change the law by requiring a 60% vote in favor to approve an Amendment to the state's Constitution and to make it far more difficult for the majority to initiate a change. That effort was defeated by a majority in August. Ohio votes against Issue 1 in special election. Here's what that could mean for abortion rights (8/9/23) 

Republicans Not Backing Down On Abortion Bans Despite New Election Losses  

What the woodworker saw: Trump documents trial may put resort workers on witness stand, sources say Asa Hutchinson, the former republican governor of Arkansas, was booed by republicans when he stated that Trump would likely be convicted. Asa Hutchinson Booed After Saying Former President Trump Will Likely Be Found Guilty | C-SPAN.org 

The documents case before the Trump appointed Judge in Florida is the strongest case for a felony conviction. The grand jury subpoenaed documents marked as classified, testimony will apparently tie Trump directly to preventing compliance and requesting the deletion of video evidence which showed documents being moved, and documents marked as classified were later found in Trump's office after the FBI raid. It is a straightforward and easily understood case for a jury. Trump's best hope is a juror nullification or another legally unjustified ruling by Judge Cannon that decimates the government's case. Trump suffers setback as appeals panel rejects Cannon ruling - POLITICO

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Putin and His Imperialistic Wet Dreams

Putin's invasion of Ukraine was never about protecting the Motherland from a Ukrainian invasion, a preposterous justification. The invasion was based solely on Putin's desire to expand the Russian Orwellian Empire of Misery.  How Putin’s invasion of Ukraine connects to 19th-century Russian imperialism | University of Chicago NewsUkraine’s fight against Russian imperialism is Europe’s longest independence struggle - Atlantic CouncilPutin's New "New Imperialism" in the War Against Ukraine | Feature from King's College London

A Ukrainian missile strike on a shipyard in Crimea damages a Russian ship - ABC News The strike hit the Zaliv shipyard, located in the far eastern part of Crimea, believed by the Russians to be beyond the range of Ukrainian cruise missiles. 

Video Shows Huge Fireball as Russian Ammo Storage Blows Up Near Mariupol 

Russian tanks destroyed by HIMARS and Ukrainian mines in failed attack near Donetsk - YouTube

Russia has withdrawn from a 1990 treaty that limited conventional forces near the border between Russia and NATO countries. The Treaty had set limits on the number of tanks, helicopters, armored personnel carriers, heavy artillery and other equipment that could be placed between the Atlantic Ocean and the Ural Mountains. Russia was not abiding by its treaty commitment anyway, which is its normal response to treaty obligations. NATO responded by announcing that it was withdrawing from that treaty as well.

Ukraine says it destroyed Russian ships near Crimea-YouTubeCrimea Video Shows Ukraine Stealth Attack on Russian Landing Ships Ukraine is driving Russia's Black Sea fleet away from docking in Crimea. 

Opinion | Is the House GOP about to give Putin a pat on the back for his barbarism? - The Washington Post The answer is yes. This is a George Will column.  He is viewed as a traditional conservative. Trumpsters are not conservatives. 

Opinion | Surging GOP isolationism is a dreadful development in a dangerous time - The Washington Post This is another George Will column. 

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1. Bought 100 TA:CA at C$10.78 (C$1 IB commission):

Quote: TransAlta Corporation (TA.TO) 

TransAlta shares also trade on the NYSE. Transalta Corp. (TAC) I bought some shares of TAC in a Roth IRA account.  

This is my first purchase of the common stock. 

SEC Filled 2022 Annual Report - Management Discussion

I do own 100 shares of TA-PH.TO which reset at 3.65%% spread to the 5 year Canadian government bond in September 2022, producing a fixed coupon rate of 6.894% for 5 years thereafter. The quarterly dividend rate is now C$.43088 per share paid on a C$25 par value. Item # 1 Bought 50 TAPRH at C$16.85 and 50 at C$16.19 (7/17/2019 Post) My dividend yield is now at 10.42%

TAC Analyst Estimates | MarketWatch The estimates are in USDs. E.P.S. is anticipated to decline in 2024 compared to 2023. 

TransAlta owns a variety of generation facilities located in Canada, the U.S. and Australia. Those facilities include wind, solar, natural gas and hydroelectric generation. 

Noncash depreciation expense will be substantial and will negatively impact reported results. 

TransAlta provides a number for free cash flow and FFO per share that adjusts the reported E.P.S.  

Free cash flow per share was reported at C$2.9 for the first nine months of 2024. On that basis, the shares are cheap even if I assumed no FCF in the 4th quarter.   

Facilities - TransAlta

Projects in Development - TransAlta

When discussing my elimination of my 100 shares of TransAlta Renewables, I mentioned that TransAlta was acquiring the shares that it did not already own at a favorable price to it IMO. Item # 1. Eliminated RNW:CA - Sold 150 at C$13.01 (7/15/23 Post)(profit snapshot = C$226). My primary interest in that stock was its dividend yield and monthly dividend payments. 

The primary reason for that opinion was the TransAlta Renewables share price had been smashed down by a problem that had mostly been resolved with the share price still at depressed levels.

The problem involved having to replace the foundations at the Kent Hills wind facility which was costly. (see Kent Hills wind facility status in the earnings discussion below)

I sold out of my two TransAlta Renewables positions (CAD & USD priced shares) after 1 foundation failed at Kent Hills and the company had launched an investigation into why the wind tower had fallen over, which sounded to me like they knew that other foundations probably had similar defects. I also thought management was significantly underestimating the cost to fix the foundations which proved to be the case. Item # 1. Sold 100 RNW:CA at C$16.98 (1/13/22 Post)(profit snapshot = C$588.5); Item # 1 Eliminated TRSWF in Schwab Account-Sold 100 at US$14.94 (11/26/21 Post)(profit snapshot = US$505.31; TRSWF was the symbol for the USD priced shares that traded on the Grey Market)

I managed to generate a decent profit in TransAlta Renewables shares, possibly due more to luck and intuition than brains. (+US$581.05 and +C$1,263). 

While I was not happy with the low ball offer as a TransAlta Renewables shareholder, the acquisition is a plus for TransAlta IMO. 

Another interesting recent development is summarized in this press release. TransAlta to Acquire Heartland Generation from Energy Capital Partners for $658 million The price includes the assumption of $268M in "low-cost debt". While the press release does not specify the currency being used, I am assuming that the price is in Canadian Dollars. TransAlta claims that the deal with be "highly accretive to free cash flow and cash yield upon closing". 

Heartland "owns and operates generation assets consisting of 507MW (MW) of cogeneration, 387 MW of contracted and merchant peaking generation, 950 MW of gas-fired thermal generation, transmission capacity, and a development pipeline that includes the 400 MW Battle River Carbon Hub". The Battle Carbon Hub is an "integrated clean energy project, combining clear hydrogen, production and carbon sequestration, to create a zero-carbon baseload energy solution". The project is a retrofit of an existing station and will be able to use the existing transmission infrastructure. 

TransAlta claims that this project is the first of its kind which generally results in unexpected cost overruns when used to describe a complex project. 

TransAlta has a 4.6 GW generation pipeline, so the Battle River Carbon Hub project will bring that up to 5 GW.  

1 Gigawatt (GW) = 1,000 MW

1 GW of power generation is sufficient to provide electricity to about 870,000 homes assuming each household on average consumes 10,000 kwh annually. Gigawatt (GW) | Definition, Examples, & How Much Power It Produces

Dividend: Quarterly at C$.055 per share (C$.22 annually)

Yield at C$10.79 Total Cost: 2.04%, rounded up. 

Next Ex Dividend: 11/30/23

Last Earnings Report (Q/E 9/30/23): Released after my purchase.  

SEC Filed Press Release 


Comparisons are to 2022.

Net earnings increased to $372M, up $311M

Income per share: $1.41, up from $.23

Consensus at $.47 per Fidelity

Keeping in mind that I have zero training in accounting, the increase in reported net income was due primarily to an increase in revenue, a decrease in fuel and purchased power costs, a lower depreciation expense, and a decrease in interest expense: 


FFO per share 3 months: $1.3; down from $1.8
FFO per share 9 months: $.87, down from $1.45

Free Cash Flow per share 3 months: $4.23, up from $3.27
Free Cash Flow per share 9 months: $2.9, up from $2.38

The explanation given in the press release for the Y-O-Y quarterly decline in free cash flow was as follows:  "For the three months ended Sept. 30, 2023, FCF decreased $165 million, primarily due to lower adjusted EBITDA, higher current income tax expense, higher distributions paid to subsidiaries' non-controlling interests and higher sustaining capital expenditures."

I would place the most emphasis on FCF per share but would focus on the YTD number rather than just one quarter.  

Production: 5,678 gigawatt hours, up from 5,432 GWh

Recent Developments Described in Press Release: 

"In August 2023, the Garden Plain wind facility was commissioned adding 130 MW to our gross installed capacity. The facility is fully contracted with Pembina Pipeline Corporation and PepsiCo Canada, with a weighted average contract life of approximately 17 years." 

Commenced commissioning of Northern Goldfields Solar project which is expected to commence commercial operations in the current quarter. The Northern Goldfields Solar Project

"Advanced the Kent Hills rehabilitation program towards completion with all 50 turbines now fully reassembled. Energization activities are underway and turbines are being returned to service as commissioning activities are completed. To date, 36 turbines have been fully returned to commercial operations and the remaining turbines are expected to return to service in the fourth quarter of 2023."  

"All major equipment has been installed and construction work is largely complete. Energization and testing processes have commenced and the facility is expected to achieve full commercial operations in the fourth quarter of 2023.

"Advanced the Horizon Hill wind project in Oklahoma with all major equipment now delivered to site. Turbine erection activities are complete with all 34 turbines fully assembled. Construction of the transmission interconnection is underway and commercial operations are expected in the first quarter of 2024"

"Advanced the White Rock East and West projects with all equipment deliveries complete and tower assembly well underway. Currently, 34 out of 51 turbines have been assembled and the construction of the transmission interconnection is in progress. Commercial operations are expected in the first quarter of 2024."

Goal: 8% or more annual total return 

2. Small Ball Common Stock Buys

A. Bought 5 FIBK at $24.13; 5 at $23.7

Quote: First Interstate Bancsystem (FIBK) 

Cost: $239.14

FIBK is a bank holding company with 305 branches located in 14 states: Arizona, Colorado, Idaho, Iowa, Kansas, Minnesota, Missouri, Montana, Nebraska, North Dakota, Oregon, South Dakota, Washington, and Wyoming.  The headquarters is in Billings, Montana.  Give the geographic area served, the operating bank will have a higher than normal agricultural loans as a percent of the total.  

52 week price range: $20.81-$46.32

The largest recent acquisition was Great Western Bancorp. First Interstate BancSystem, Inc. Completes Merger with Great Western Bancorp, Inc. (2/1/22) Great Western formerly traded under the GWB symbol. Its last earnings report was for the Q/E 12/31/21, SEC Filed Press Release (net income of $58.7M). GWB's operating bank, Great Western Bank, had as of 12/31/21 "more than 170 branches in nine states: Arizona, Colorado, Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota and South Dakota."  After completion of this acquisition, the Great West Bank branches were rebranded as "First Interstate Bank branches".  

FIBK SEC Filings 

10-Q for the Q/E 9/30/23 

2022 Annual Report 

I saw this stock in my monitor list, which reflected a low TTM P/E and a dividend yield over 7%. 

I had no idea why the stock was in that list, but looked over at the symbol list to the right and there it was. 

I last traded this stock in 2013 and had just not removed it from my monitor list. Item # 2.C. Sold 51+ FIBK at $19.33 (3/25/13 Post)(profit snapshot $175.18)-Item #1. Bought 50 FIBK at $15.64 (5/10/2010 Post) I have not owned the stock since that elimination on 3/15/13.  

Investment Category: Regional Bank Basket Strategy

Regional bank stocks are in a long term bear market of an unknowable duration. 

Average cost per share: $23.91 (10 shares)

Dividend: Quarterly at $.47 per share ($1.88 annually), last raised from $.41 effective for the 2022 third quarter payment. 

FIBK Stock Dividend History & Date

Yield at $23.91 AC: 7.86%

Last Ex Dividend: 11/3/23 (owned 5 as of)

Last Earnings Report (Q/E 9/30/23): 

SEC Filed Press Release and Investor Presentation 

Comparisons are to the 2022 third quarter except where indicated to the contrary.  

E.P.S. $.70, down from $.80, but up from $.65 in the 2023 second quarter. 

NIM (FTE): 3.07%, down from 3.71% (unfavorable but understandable)

Efficiency Ratio: 61.48% (too high IMO), up from 58.37%

Charge off Ratio: .02% (excellent)

NPA Ratio: .31%

NPL Ratio: .45%

ROTE: 15.04%, down from 16.93%

Tangible Book Value per share: $17.82, up from $17.01

Major Negative: "Net interest income decreased $4.7 million, or 2.2%, to $213.7 million, during the third quarter of 2023, compared to net interest income of $218.4 million during the second quarter of 2023 and decreased $53.1 million, or 19.9%, during the third quarter of 2023 from the third quarter of 2022, primarily due to an increase in interest expense as a result of a higher levels and costs of interest-bearing liabilities" (emphasis added)

The question when looking at this report is whether the negative aspects are already baked into the stock price. There is no way to answer that question with certainty but arguably that is the case or almost so, which assumes no further material deterioration in key metrics including NIM, NPLs, and net interest income.

Investment Securities as of 9/30/23: I am not aware of any bank that materially adjusted duration in 2021 when inflation was running hot but long duration securities could still be sold either at a small profit or loss.

10-Q at 15 

The average rate on owned taxable securities ($9.3293B) was 2.93% for the nine months ending 9/31/23, up from 1.5% for the nine months ending 9/30/22. 10-Q, a page 55 So at least the yield is improving but is still unsatisfactory IMO. Total interest bearing liabilities rose to 1.81% from .23% during those periods. (p. 54) 

For the 3 months ending 9/30/23, the average yield on taxable investments was 2.95%, up from 2.43% in the 2022 third quarter (p. 54). Interest bearing liabilities had an average rate of 2.09%, up from .4%. 

It is possible that the worst part of the NIM compression is in the rear view mirror, provided proceeds from maturing owned securities can be reinvested into higher yielding ones, which is the case now for vintage MBS and treasuries bought prior to this year, and the cost of funds at least stabilizes near present levels or starts to drift down. 

Deposit Information (page 64):

Noninterest bearing deposits as a percentage of the total: 27%

Uninsured Deposits: 33.2%  

I did not see a number for deposits from governments, which generally exceed FDIC insurance limits, but are either partially or entirely secured with owned securities.  

B. Added to BRKL - Bought 5 at $8.23 (Fidelity Account)

Quote: Brookline Bancorp (BKRL) 

Cost: $41.15

BRKL is a bank holding company that provides banking services through its wholly owned subsidiaries Brookline Bank, Bank Rhode Island and PSCB Bank. Branches are located in Massachusetts, Rhode Island, and the Lower Hudson Valley of New York State. 

BRKL is headquartered in Boston. 

Cost: $41.15

52 week high/low: $7-$15.5

BRKL SEC Filings

Brookline Bancorp, Inc.-Corporate Profile

Last DiscussedItem # 4.E. Pared BRKL - Sold 5 at $11.04 - Highest Cost lot (7/29/23 Post)(discussed 2023 second quarter report, SEC Filed Press Release ) I have now bought back that 5 share lot

Last Buy DiscussionItem #2.C. Added 4 BRKL at $7.79 - Fidelity Account (5/20/23 Post)

Investment Category: Regional Bank Basket Strategy

New Average cost per share: $8.77 (30+ shares)

Dividend: Quarterly at $.135 per share ($.54 annually), last raised from $.125 per share effective for the 2022 second quarter payment. 

BRKL Dividend History | Seeking Alpha

I am reinvesting the dividend. 

Yield at New AC = 6.1574%

Last Ex Dividend: 11/9/23 (owned all as of)

Last Earnings Report (Q/E 9/30/23): 

SEC Filed Earnings Press Release  

Supplemental (see map at page 11 for banking locations)

Comparisons are to the 2022 third quarter unless indicated otherwise. 

E.P.S. $.26, down from $.39, and up from $.25 in the 2023 second quarter.

NIM 3.18%, down from 3.8%

Efficiency Ratio: 64.39%, up 52.38% (up is bad here)

Charge off ratio: .47% up from net recovery of  .01%

"The increase was primarily driven by $10.2 million in net charge-offs on two commercial loans, the majority of which was previously reserved for." 

NPA Ratio: .46%, up from .21%

NPL Ratio: .51%, up from .24%

ROTC: 10.09%, down from 14.72%

Tangible Book Value per share: $10.02, down from $10.43

All of the foregoing financial metrics are going the wrong way. The most concerning IMO is the significant decline in NIM which will reduce E.P.S. 

Notwithstanding the decline in tangible book value per share to $10.02, that is still above my $8.77 average cost per share. 

Net Interest Income before provision for credit losses: $84.07M, up from $78.026M which is a positive but down from $86.037M in the second quarter.    

C. Bought 20 HNNA at $6.6- Schwab Account

Quote: Hennessy Advisors Inc. (HNNA) 

Cost: $66  

This is my first purchase. 

There are no analyst estimates. 

Market Cap at $6.6:  $49+M

HNNA SEC Filings 

Website: Hennessy Advisors The CEO is Neil Hennessey, who has the major stock stake, held indirectly through a trust. NASDAQ | SEC Filing I calculated a 27.3% ownership stake. 

Investment Categories: Bond Substitute/Lottery Ticket Basket

Information excerpted from the 2022 fiscal year annual report, period ending 9/30/22: Form 10-K

List of Managed Mutual Funds and Fee Percentages

There was significant shrinkage in AUM during fiscal 2022 which resulted in lower fee income:  


AUM 9/30/21: $4.065+B

AUM 9/30/22: $2.895+B 

2021 and 2022 Fiscal Year Data: 

I do not anticipate much appreciation in the stock price unless the company is acquired by another asset manager. A $.50 realized increase in the stock price (7.58%) plus at least 4 dividend payments will be viewed as a victory. 

Dividend: Quarterly at $.1375 per share ($.55 annually), last raised from $.11 effective for the 2019 third quarter. 

HNNA Dividend History | Nasdaq

Yield at $6.6 = 8.33%

Last Ex Dividend: 11/10/23 (owned as of)

Last Earnings Report (Fiscal Quarter Ending 6/30/23): This is for the third fiscal quarter. 

SEC Filed Press Release 

E.P.S. $.15, down from $.17 in the 2022 fiscal third quarter. 

AUM: $2.964+B, down from $3.115+B

D. Bought 5 ORKLY at $6.99- Fidelity Account

Quotes: 

USD ADR: Orkla ASA ADR (ORKLY)

Ordinary Shares in NOKs: Orkla ASA (Norway: Oslo) 

ADR Ratio: 1 for 1

Norwegian Krone to US Dollar Exchange Rate Chart | Xe

Cost: $34.95

I drew a 1 year chart comparing the respective price gains of the NOK priced ordinary shares to the USD priced ADR. 

The ADR was up 6.12% while the ordinary shares had gained 16.47% through 11/7/23. 

That tells me that NOK has declined in value against the USD during that 1 year period. 

If the ADR had gained more, this would mean that the NOK had increased in value against the USD. This link of the comparison chart may not work properly: ORK | Orkla ASA Advanced Charts | MarketWatch 

Website: Orkla.com

Orkla is primarily a food, personal care (broadly defined) and snack company but has interests in other businesses including a 42.6% in Jotun, a global manufacturer of paints and coatings, Pierre Robert Group (clothing); Hydro Power, and Orkla Real Estate.  

Other portfolio divisions include:  

Orkla Foods Europe – Orkla.com

Orkla Confectionery & Snacks – Orkla.com

Orkla Health – Orkla.com

Orkla Home and Personal Care – Orkla.com

Orkla Food Ingredients – Orkla.com

Orkla announced on 10/26/23 that it has sold a 40% interest in Okla Food Ingredients. Orkla announces OFI partnership with Rhône The deal prices the enterprise value of Orkla Ingredients at $15.5B NOKs or about US$1.38B and a net equity value of 6.5B NOK. The share price closed at 81.16 NOK on 10/25 and at 74.78 on 10/26 

The European Pizza Company – Orkla.com

Orkla to become an industrial investment company (10/27/22)(12 independent portfolio companies)

Last DiscussedItem #2.C. Added to ORKLY - Bought 30 at $8.54 (4/7/22 Post) 

New Average cost per share: $8.2 (175 shares)

Dividends: Paid Annually in Norwegian Krone and converted to USDs for owners of ORKLY. A special dividend has sometimes been paid out of profits realized from selling a business which was last the case in 2017. 

Last Ex Dividend: 4/14/23

Foreign Dividend Tax: A U.S. citizen is entitled to no more than a 15% withholding tax by a tax treaty, but a broker is required to claim that treaty right at the source. Otherwise, Norway will withhold 25%. Fidelity did not make that claim for the last dividend payment and consequently a 25% tax was withheld.  

The $3.3 fee is paid to the ADR custodian out of the dividend and is based on the number of shares owned. 

Recovery of that foreign tax, in whole or in part, is through claiming a foreign tax credit.  Claiming Foreign Taxes: Credit or Deduction? | Charles Schwab

Last Earnings Report (Q/E 9/30/23): Q3 2023 Report.pdf

Data in Norwegian Krone (NOKs)

E.P.S. 1.56, up 1.50

Adjusted E.P.S. 1.61, up from 1.58

1.61 NOKs would currently convert into about US$.14.   

8 of the 12 portfolio companies showed underlying profit growth. 

Adjusted E.P.S. 9 months: 4.49 or about US$.4.  

If I add US$.14 for the 2023 4th quarter to the nine month number, a US$.54 per share would translate into a 12.94 P/E.  

Operating Revenues by Business Segment: 

Sell Discussions: I have eliminated my duplicate position formerly held in my Schwab and Vanguard Accounts. That broker will charge a commission for U.S. pink sheet traded foreign ADRs ($6.95 is my recollection without checking again), which is not yet the case for Fidelity. Vanguard will no longer allow new buy orders. Item # 2.D. Eliminated ORKLY in Vanguard Account- Sold 10 at $9.53 and Eliminated in Schwab Account -Sold 10 at $9.53 -Consolidating Position in Fidelity Account (12/22/21 Post)(profit snapshots  = $10.37); Item # 1- Sold 100 ORKLY at $10.33 (5/23/21 Post)Item # 1.A. Eliminated ORKLY in Schwab Account-Sold 120 at $9.47 and Item # 1.B. Sold 10 of 110 in Fidelity Account at $9.47 (8/15/20 Post)(profit snapshots = $65.61; also contains snapshots of 2017 round-trips with a total realized gain of $65.45); Item # 4.B. Sold 100 ORKLY at $10.1 (1/5/20 Post)(profit snapshot = $4.97); Sold 100 ORKLY-Update On Portfolio Positioning And Management -South Gent | Seeking Alpha August 2015 (profit snapshot =$51.08); Item # 4 Sold  100 ORKLY at $9 (9/6/14 Post)(profit snapshot = $122.48)- Item # 2 Bought 100 ORKLY at $7.61 (1/13/14 Post)

The main problem with Orkla is that it started an acquisition spree several years ago, possibly paying too much to acquire businesses but certainly adding substantially to its debt load that now has to be refinanced at much higher interest rates. Most of the businesses were acquired just in time for the input cost inflation spiral which squeezed margins. 

Acquisitions completed starting on 4/30/21: 

Orkla acquires Nordic confectionery business (12/20/22)

Orkla acquires Hungarian sandwich producer (12/16/22)

Orkla invests in US ice cream ingredients and announces intention to seek a partner to further accelerate growth of its ingredients business (10/3/22)

Orkla acquires leading Polish pizza chain (9/15/22)

Orkla acquires Hadecoup (Ice Cream Ingredients) in Belgium (4/4/22)

Orkla Health acquires Healthspan (2/23/22)(dietary supplements in the U.K)

Orkla acquires Vesterålen Marine Olje (residual materials from white  fish)

Acquisition of two new pizza chains in Germany (10/7/21)

Orkla acquires Hans Kaspar in Switzerland (7/13/21)(confectionary and ice cream ingredients)

Orkla acquires New York Pizza (8/4/21)(pizza chain in the Netherlands)

Orkla’s acquisition of NutraQ completed (6/15/21)(subscription based health and wellness products in Nordic countries)

Orkla’s acquisition of Icelands leading chocolate company completed  

Orkla acquires UK companies Cake Décor and For All Baking

Total Interest Bearing Liabilities (In Millions of NOKs)

9/30/23: 19,940

12/31/22: 17,188

12/31/21:  12,758

12/31/20: 6,380

It remains to be seen whether this growth by debt financed acquisitions will work long term. The share price is depressed and does not take into account IMO the possibility that these acquisitions will prove worthwhile long term.   

ORKLY Realized Gains to Date = $335.49

E. Added to GLW - Bought 2 at $27.62; 1 at $27.47; 2 at $27; 1 at $25.63 - Schwab Account

Quote: Corning Inc.  (GLW)

Cost: $162.34

The last 1 share purchase was made on 10/24/23 after the stock declined in response to the third quarter earnings report released that day. 

GLW Analyst Estimates | MarketWatch

GLW SEC Filings

GLW Profile: Reuters

Website: Corning | Materials Science Technology and Innovation

Last DiscussedItem 3 1.F. Added to GLW - Bought 1 at $30.11, 1 at $29.79; 1 at $29.54; 1 at $28.7; 2 at at $27.98 (10/14/23 Post) I discussed the 2023 second quarter report in that post. SEC Filed Press Release

Average Cost per share: $29.24 (19 shares)

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

Corning-Dividends

Yield at New AC = 3.83%

Next Ex Dividend: 11/16/23  

Last Earnings Report (Q/E 9/30/23)

SEC Filed Earnings Press Release 

Comparisons are to the 2022 third quarter except where indicated otherwise. 

GAAP Revenues: $3.173B, down from $3.488B 

"Core" Revenues: $3.459B (adjusts GAAP for constant currency), down from $3.665B

Diluted GAAP E.P.S. = $.19, down from $.24

Non-GAAP E.P.S. = $.45, down from $.51 

Non-GAAP Consensus at $.47 per Schwab

GAAP to Non-GAAP Reconciliation: 


Among the business segments, optical communications, which is the largest in terms of sales, reported a 50% decline Y-O-Y in net income to $91M, with net sales falling to $918M from $1.317B, due to lower orders from telecommunication companies, particularly Verizon and AT&T who are working through excess inventories built up during the pandemic.   

There is not much, if anything, to like about the foregoing data.

Free Cash Flow: $466M, up from $255M, and up from $310M in the 2023 second quarter. This was the main positive. 

Prices increases in display technologies, discussed in an earlier post, did produce a Y-O-Y 42% increase in net sales and a 81% increase in net income to $242M. 

Other Business Segments: 


The Environmental segment will be negatively impacted in the 4th quarter by the UAW strikes. Environmental Technologies and Emission Control Products | Corning

Advanced Optics | Advanced Optical Materials, Components, and Technology Solutions | Corning

Gorilla Glass | Damage and Scratch Resistant Device Glass Protection | Corning Gorilla Glass

Display Glass Technology | Thin-Film Transistor (TFT) Liquid Display Glass Substrate Technology | Corning

Life Sciences Products | Corning

Corning Optical Communications | Fiber Optic Connectivity Solutions | Corning

Pharmaceutical Glass Technologies | Pharmaceutical Packaging Technology | Corning

4th Q. Guidance : Non-GAAP E.P.S. of $.37 to $.42 with the consensus then at $.51

Analyst Reports Available to Schwab Customers

Morningstar (10/24/23): 4 stars with a fair value estimate of $35, reduced from $39 in response to the third quarter report and management guidance for the 4th quarter. The analyst expects soft results in optimal communications segment for the current quarter and the first quarter of 2024. 

S&P (10/24/23): 4 stars with a 12 month PT of $31, lowered from $40 in response to the 3rd quarter report and 4th quarter guidance. 

Argus (10/24/23): Buy with a $40 PT reduced from $54.

The downgrades in price targets in response to the third quarter report and 4th quarter guidance was uniform among analysts. 

I would just note that the value of a company as a going concern is not based on such a myopic, time limited view. 

A 12 month PT of $40+ needed to be adjusted down to reflect the softness in the third quarter report, particularly in optical communications, likely to persist for 2 more quarters as predicted by analysts. 

A $40 price may be achievable by the 2024 4th quarter with overall revenue growth trends starting in the 2024 second quarter and increasing in the third quarter. I view the odds of that happening as less than 50/50.  

Recovery in the earnings and the stock will be highly dependent on when telecommunication carriers to more normal optical order levels. 

GLW Realized Gains: $1,296.38 (snapshots at Item # 1.A.)

Largest GainItem # 3.B. Sold 103+ GLW at $26.45 (2/7/17 Post)(profit snapshot $568.02) That lot was sold on 1/31/2017. 

Lowest Price PaidItem # 1 Bought 50 GLW at $11.98 (9/5/12 Post)

F. Added to ACCO - Bought 10 at $4.95; 20 at $4.78 - Schwab Account 

Quote: ACCO Brands Corp. (ACCO)

Cost: $145.04

SEC Filings

ACCO Analyst Estimates | MarketWatch

New Average Cost per share: $4.92 (50 shares)

Dividend: Quarterly at $.075 per share ($.30 annually)

Yield at AC6.0976%

Next Ex Dividend: 11/14/23

I discussed this company in my last post and have nothing further to add here. Item # 1.P. Started ACCO - Bought 20 at $5.06 (11/4/23 Post) I discussed the third quarter earnings report in that post. SEC Filed Press Release

G. Added to AHH - Bought 1 at $9.91; 5 at $10.26- Schwab Account

Quote:  Armada Hoffler Properties Inc. (AHH) - Internally Managed REIT

Cost: $61.19

AHH SEC Filings

Website: Armada Hoffler 

10-Q for the Q/E 9/30/23 (Debt discussed starting at page 18, swaps turn a significant part of the variable rate debt into fixed rates, see Supplemental at pages 12-13, but many of the interest rate caps and swaps expire between November 2023 through September 2024) 

I do not like the heavy use of variable rate debt and short term swaps to cap the variable rates. 

A number of REITs used this approach which worked, compared to relying more on higher cost and longer term fixed rate senior unsecured debt, when short term rates were near zero. I view the failure to sell long term SU debt in 2021, when it was obvious that the FED would have to substantially increase the FF rate, to be a failure to properly manage interest rate risk.  

"The Company operates its business in five reportable segments: (i) retail real estate, (ii) office real estate, (iii) multifamily real estate, (iv) general contracting and real estate services, and (v) real estate financing".

Revenue and expenses by business segment:   

10-Q at page 9

Recent News (May 2023): Acquisition of the Interlock, "311,000 square foot Class A commercial mixed-use asset in West Midtown Atlanta anchored by Georgia Tech". Part of the consideration was the redemption of an $86M AHH loan and consequently is no longer a loan receivable. Armada Hoffler Finalizes the $215 Million Acquisition of The Interlock in Atlanta’s West MidtownArmada Hoffler Announces Major Acquisition of Class A Mixed-Use Asset, The Interlock 

Loan Receivables (page 14, 10-Q) : 


See, also, page 18 of the Supplemental 

Website: Armada Hoffler

Last DiscussedItem # 2.E. Added to AHH -  Bought 5 at $10.84; 5 at  $10.21 (9/30/23 Post) I discussed the second quarter report in that post. SEC Filed Press Release and Supplemental

I discuss adding to AHH's preferred stock in Item # 2.B. below. 

New average cost per share

Dividend: Quarterly at $.195 per share ($.78 annually)

Yield at New AC

Last Ex Dividend: 9/26/23 (owned 15 shares as of) 

Last Earnings Report (Q/E 9/30/23): 

SEC Filed Press Release and Supplemental 

Normalized FFO per share: $.31

AFFO per share: $.25 (quarterly dividend currently well covered by cash available for distribution)

Net income to AFFO Computations: 

The AFFO number is what I view as equivalent to funds available for distribution. Cash used to pay for maintenance expenses and tenant improvements is not available for distribution and is consequently deducted from FFO as shown in the preceding snapshot.   

Occupancy Real Estate Portfolio: 

Development Projects: See page 17 of the Supplemental 

H. Added to REYN - Bought 5 at $25.7 - Fidelity Account: 

Quote: Reynolds Consumer Products Inc. (REYN)

Cost: $128.5

"With a presence in 95% of households across the United States, Reynolds Consumer Products manufactures and sells products that people use in their homes across three broad categories: cooking, waste and storage, and disposable tableware."

Brands include Reynolds Wrap, Presto branded products, and Hefty trash bags/tableware. Brands | Reynolds Consumer Products

REYN Analyst Estimates | MarketWatch

REYN SEC Filings 

10-Q for the Q/E 9/30/23 (Debt is discussed starting at page 26. REYN borrows using credit facilities, which results in variable rate debt priced at spreads to SOFR. "The aggregate notional amount of our interest rate swaps still in effect as of September 30, 2023 was $1,150 million, and the SOFR is fixed at an annual rate of 0.40% to 3.40% (for an annual effective interest rate of 2.15% to 5.15%, including margin). These interest rate swaps hedge a portion of the interest rate exposure resulting from our Term Loan Facility for periods ranging from two to three years." (page 26, 10-Q) This is a potential problem provided short term rates remain high when the swap agreements expire and less of one if short term rates are trending down when those swaps expire.  

Last Discussed:. Item # 4.F. Eliminated Duplicate REYN in Schwab Taxable Account - Sold 20+ at $32.55 (12/6/22 Post)(profit snapshot = $94.96). I am slowly buying back those shares in my Fidelity Account. I also eliminated the duplicate position in my Vanguard account: 

New Average Cost per share: $28.13 (40+ shares)

Dividend: Quarterly at $.23 per share ($.92 annually), last raised from $.22 effective for the 2021 first quarter payment. 

REYN Stock Dividend History & Date

Yield at New AC : 3.27%

Next Ex Dividend: 11/15/23

Last Earnings Release (Q/E 9/30/23): Released after my purchase and before the market opened on 11/8/23. 

SEC Filed Press Release 

Non-GAAP E.P.S. $.37, up from $.24 in the 2022 third quarter. 

Consensus at $.367 per Fidelity 

Revenues: $935M with the consensus at $932.4M, down 3% from the 2022 third quarter. 

2023 Outlook: Adjusted E.P.S. $1.37 - $1.41 

REYN "expects full-year net revenues to be approximately 2% lower than prior year net revenues of $3,817 million, consisting of 2% higher pricing and 4% lower volume."

Other Sell Discussions: Item # 4.F. Pared REYN in Fidelity Taxable Account - Sold  3+ at $30.91 (11/22/22 Post)(profit snapshot = $6.01); Item # 6.E. Pared REYN in Schwab Taxable Account - Sold 2 at $31.28 (11/15/22 Post)(profi snapshot = $4.67); Item # 3. Sold 5 at $31.5 in Schwab Taxable (6/4/21 Post)(profit snapshot = $7.75) 

REYN Realized Gains to Date: $113.39, underwhelming to be sure. 

I. Restarted KMB - Bought 1 at $120.69; 1 at $119.4 - Fidelity Account


Quote: Kimberly-Clark Corp.

Cost $240.09 

Investment Category: Dividend Growth

KMB Analyst Estimates | MarketWatch (Average E.P.S. estimate for 2024 is currently at $7.09 and $7.48 for 2025). 

SEC Filings

Kimberly-Clark – Our Brands

Investors | Kimberly-Clark Corporation

Last EliminationItem # 3.A. Eliminated Remaining KMB in Fidelity Account - Sold 5+ at $137.87 (1/3/23 Post)(profit snapshot = $66.85) I mentioned in that post that I would restart a position when the price fell below 18 times the next year's E.P.S. average estimate. That estimate is now at $7.09. Multiplying 18 times $7.09 I arrive at a maximum price of $127.62. 

Average cost per share:$120.04

Dividend: Quarterly at $1.18 per share ($4.72 annually), last raised from $1.16 effective for the 2023 first quarter payment. 

Dividend/Split History | Kimberly-Clark Corporation

Yield at $120.04 = 3.93%

Last Ex Dividend: 9/7/23

Last Earnings Report (Q/E 9/30/23):

SEC Filed Press Release 

Comparisons are to the 2022 third quarter. 

Diluted E.P.S. $1.73, up from $1.38

Non-GAAP E.P.S. $1.74, up from $1.40

9 month non-GAAP E.P.S. = $5.06

For the 9 month period, a $1.36 non-cash impairment of intangible assets was added back to the GAAP results. 

Revenues: $5.132B, up from $5.053B

"organic sales up 5 percent, driven by a 5 percent increase in price from ongoing revenue growth management programs and a 1 percent favorable product mix, offset by a 1 percent decrease in volume."  The relatively small decline in volume in response to a 5% increase in price is encouraging.  

Gross Margin: Up 530 basis points to 35.8, higher than the 35% posted in 2019. 

Operating Margin: Up 201 basis points to 15.1%, which is still below pre-pandemic levels. 

Net Debt: $7.58B, down from $8.48B

Guidance: 

Analyst Reports (available to Schwab Customers):

Morningstar (10/24/23): 4 stars with a fair value estimate of $136 and a narrow moat. 

Argus (10/30/23): Hold, looking for a better entry point. Views the stock as a long term buy. Raised 2024 adjusted E.P.S. to $7 from $6.7.

S&P (10/24/23): 3 stars with a 12 month PT of $129 (18 times analyst's 2024 E.P.S. estimate of $7.16), cut from $134. 

The analysts who have a hold or sell recommendations are concerned that consumer demand will be pressured by a variety of factors that will require more promotional spending and expect continued pressure on operating margins through rising input costs. The end result is a lower than the average 2024 E.P.S. forecast. I tend to discount those factors when looking at products like toilet paper, incontinence pads, Kleenex and diapers. KMB did have a massive surge in demand resulting from the pandemic that resulted in temporary elevated earnings, followed by destocking (consumers bought enough toilet paper to last a year or so), and more normal retailer inventory levels now.  

Purchase Restriction: 1 share lots with each purchases required to be at the lowest price in the chain, increasing to 2 share lots at below $110 and 5 share lots at below $100. 

Maximum Position: 25 shares.  

Other Recent Sell DiscussionsItem # 3.D. Sold 1 KMB in Fidelity Account at $136.97 (12/13/22 Post)(profit snapshot = $5.97); Item # 3.D. Eliminated KMB in Vanguard Taxable Account - Sold 3 at $138.44 and Eliminated KMB in Schwab Account - Sold 3+ at $136.55(12/20/22 Post)(profit snapshots = $64.21)

J. Restarted EMR - Bought 1 at $84.37- Schwab Account

Quote: Emerson Electric Co.  (EMR) 

Emerson Investor Information

EMR SEC Filings

EMR Analyst Estimates | MarketWatch

EMR SEC Filings 

Last DiscussedItem #6.B. Eliminated EMR -Sold 2 at $96.77 (8/12/23 Post)(profit snapshot = $33.14) I discussed the second quarter earnings report in that post. SEC Filed Press Release I viewed the stock as overvalued at $96.77, as stated in that post. The stock did not decline sufficiently after my initial purchase to meet my price objective for additional 1 share purchases beyond the 2 that were sold.  

On the day of my purchase, EMR closed at $84.94, down $6.8 or 7.41%. This was in response to the 3rd quarter earnings report. I viewed the decline as an opportunity to start up my small ball buying program in this stock again. Purchases will be in 1 share lots with each lot purchased at least $2 below the prior purchase.  

Dividend: Quarterly at $.525 per share ($2.1 annually), last raised from $.52 effective for the 2023 4th quarter payment. Dividend History | Emerson US

While EMR is a Dividend Aristocrat, dividend growth has slowed to a crawl. 

Recent Annual Dividend History

Yield at $84.37: 2.489% This is too low for me, which will severely limit my monetary exposure. At the current growth rate, it would take about 20 years or so for the dividend to even double. 

Next Ex Dividend: 11/16/23

Last Earnings Report (Q/E 9/30/23): This report was for the 4th quarter in the 2023 fiscal year. 

SEC Filed Press Release 

Fiscal 4th Q. GAAP E.P.S. = $1.22, up from $.82

Fiscal 4th Q. Non-GAAP E.P.S. $1.29, up from $1.07

Consensus non-GAAP at $1.31

F/Y 2023 Actual: Non-GAAP E.P.S. of $4.44

F/Y 2024 Outlook: Non-GAAP E.P.S. $5.15 - $5.35

4th Fiscal Quarter Revenues: $4.09B, up 5%

2023 Fiscal Year Revenues: $15.165B, up 10$ from $13.804B in F/Y 2022. 

Free Cash Flow Fiscal 4th Q. = $838M, up from $713M 

Guidance F/Y 2024 (ends 9/30/24): 

K. Started KLG - Bought 10 at $10.22 - Schwab Account:

Quote: WK Kellogg Co. (KLG) 

Cost: $102.2

KLG Analyst Estimates | MarketWatch

KLG SEC Filings 

Investment Category: Bond Substitute

Kellogg recently split into two companies. The separation became effective on 10/2/23. Kellogg Board Approves Separation into Two Companies, Kellanova and WK Kellogg 

The W.K. Kellogg has Kellogg's cereal business, far from attractive, while Kellanova (K) has the snack and other "growth" businesses. I discussed buying 2 shares of Kellanova in a comment. Kellanova kept the "K" stock symbol. 

I am just glad that I sold my Kellogg (K) shares before the company split into two companies. Item # 3.A. Sold 9+ K at $69.25; 13 at $70.58 (6/28/22 Post)(profit snapshots = $238.22). As discussed there, the initial plan was to split into 3 companies with the plant based food segment (Morningstar) being the third company. Some sense was thereafter acquired by the Board and Morningstar is now part of Kellanova. (Total realized gains in pre-split Kellogg 2019-2022 = $989.92)

Discussed at Why WK Kellogg Stock Plunged 32% Last Month | The Motley Fool and Kellogg’s Battered Stock Offers Cheap Play on the Cereal Business. It Could Yield 6%. - Barrons (10/19/23)

Dividend: Quarterly at $.16 per share ($.64 annually)

Yield at $10.22 = 6.26%

Next Ex Dividend: 11/30/23

Last Earnings Report (Q/E 9/30/23): This report was released after my purchase. 

SEC Filed Press Release 

E.P.S. = $.49 

Consensus at $.26 per Schwab

Sales down 1.9% to $692M from $705M

The consensus revenue estimate was $666.3M

Volume in Tonnage: -13.4%

Price/Mix: +11.5%

As with other packaged food companies, the increase in prices in response to input cost inflation caused a decline in volume. 

A questions are whether the price increases can be maintained when input costs decline and whether consumers will start to buy more after getting use to the previous increases in price. 

L. Bought Back 10 EBMT at $11.86 - Schwab Account

Quote: Eagle Bancorp Montana Inc.

Cost: $118.55

"Eagle Bancorp Montana, Inc. is a bank holding company headquartered in Helena, Montana, and is the holding company of Opportunity Bank of Montana, a community bank established in 1922 that serves consumers and small businesses in Montana through 31 banking offices."

The operating bank is called "Opportunity Bank". Opportunity Bank  Locations 

52 week range: $11.40-$19.13

Market Cap at $11.86 = $94+M

EBMT SEC Filings

2022 Annual Report (28 of the bank locations are owned, page 20)

Last EliminationItem # 1.J. Eliminated EBMT-Sold 10 at $20.65 (12/12/20)(profit snapshot = $47.54) 

When looking through the WSJ page on dividend announcements and ex dividend dates, I noticed that EBMT was listed as having a dividend yield in excess of 4%. My memory retrieval system unexpectedly managed to retrieve information about the yield when I last sold EBMT, which indicated that the price had probably been cut close to 40% since I sold at $20.65. After confirming that had in fact happened, I looked at the recent financials and decided to restart a position. 

Dividend: Quarterly at $.14

Yield at $11.86: 4.72%

Ex Dividend: 11/9/23 (owned as of)

Last Earnings Report (Q/E 9/30/23): 

SEC Filed Press Release 

Comparisons are to the 2022 third quarter except where indicated otherwise. 

As with other regional bank third quarter earnings reports, this one has a mixture of good (green), bad (red) and okay (blue).  Just expressing opinions here. 

E.P.S. $.34, down from $.40, but up from $.26 in the 2023 second quarter

NIM 3.41%, down from 4.18% (understandable)

"Funding costs for the third quarter increased to 2.37% compared to 2.06% in the second quarter of 2023 and 0.47% in the third quarter of 2022. Average yields on interest earning assets for the third quarter increased to 5.27% from 5.06% in the second quarter of 2023 and 4.52% in the third quarter a year ago. For the first nine months of 2023, the NIM was 3.57% compared to 4.00% for the first nine months of 2022."

Net Interest Income: $15.587M, down from $17.887M

Non-interest Income: $6M, down from $7.4M (Understandably negative. The largest component is profits realized from selling originated mortgages)

Non-interest Expense (excludes acquisition costs): $17.875M, down from $20.561M (favorable as to the direction but still too high in relation to income)

Efficiency Ratio: 80.89%, up from 79.94% (both viewed as bad)

NPL Ratio: .53%, up from .34% (okay as to total but moving in the wrong direction) 

NPA Ratio: .38% 

Coverage Ratio:  209.34% (Allowance for loan losses already set aside as a percentage of nonperforming loans. Better to have the number over 100% when initiating a position IMO)

Charge offs: $108,000 (total loans at $1.475+B)

Page 16, 10-Q

The charge off of $122,000 was netted with a recovery of $14,000. The net amount was charged-off to the existing allowance for credit losses which reduced that total from $15.560M to $15.452M. The bank then added $778,000 to the provision to account for its forecast for future economic conditions (called the Current Expected Credit Losses or CECL, page 10, 10-Q.)

ROA: .51%

ROE: 6.63%

Tangible Book Value per share: $14.55

Discount to TBV per share at $11.86: 18.49%

Dividend Yield at $11.86: 4.72%

Noninterest bearing checking deposits: 27%

Uninsured Deposits: 17%

Total loans: Up 12.5%, provided no material increase in NPLs therefrom.

Investment Securities: 10-Q for the Q/E 9/30/23 at page 14 



The net unrealized loss as a percentage of amortized cost was 12.02% as of 9/30/23. This is unsatisfactory given the interest rate risk warning provided by accelerating inflation in 2021 and the ability to lower duration then without incurring any or low realized losses. 

The percentage is fairly typical among regional banks. 

I am not aware of any who took steps to meaningfully shorten duration before the FED ended QE and ZIRP in early 2022. CPI had reason to an 8.5% annual rate by March 2022:



The Fed abandoned ZIRP in March 2022 by raising the FF rate .25% to a .25%-.5% range. Federal Reserve issues FOMC statement (3/16/22)

K. Restarted SPLN - Bought 5 at $20.72 - Schwab Account: 

History this Account: 

Quote: SpartanNash Co. (SPTN)

Cost: $103.6

At the time of my purchase, the stock was down 11.3% from the 11/7/23 close in response to the earnings report discussed below. The company reported a non-GAAP E.P.S. of $.54 with the consensus at $.59. 

"SpartanNash operates two complementary business segments – food wholesale and grocery retail. Its global supply chain network serves wholesale customers that include independent and chain grocers, national retail brands, e-commerce platforms, and U.S. military commissaries and exchanges. The Company distributes products for every aisle in the grocery store, from fresh produce to household goods to its OwnBrands . . . On the retail side, SpartanNash operates 144 brick-and-mortar grocery stores, primarily under the banners of Family Fare, Martin’s Super Markets and D&W Fresh Market, in addition to dozens of pharmacies and fuel centers."

Last EliminationItem # 2.F. Eliminated SPLN - Sold 15+ at $29.01 in my Fidelity Account; 20 at $31.05 in my Vanguard Account; 10 at $30.64 in my Schwab Account (3/24/22 Post)(profit snapshots = $421.49, which is my total realized gain to date as well since I had no prior sales in taxable accounts. I eliminated my SPLN positions in my RI accounts at the same time as noted in that post)  

Dividend: Quarterly at $.215 per share ($.86 annually), last raised from $.21 effective for the 2023 first quarter payment.  

SPTN Dividend History | Nasdaq

Yield at $20.72 = 4.15%

Last Ex Dividend: 9/14/23

Last Earnings Report (F/Q Ending 10/7/23): This is the third fiscal quarter. 

SEC Filed Press Release 

GAAP Diluted E.P.S. = $.32, up from $.26

GAAP Net Earnings: $11.127M

Weighted Average Diluted Shares: 34.253M, down from 36.145M. 

Non-GAAP E.P.S. = $.54 with the consensus at $.59, down from $.55 

Adjusted Earnings: $18.763M

GAAP to Non-GAAP Reconciliation: 


40 Week Non-GAAP E.P.S. $1.83, down from $2.05

Guides F/Y 2023 non-GAAP E.P.S. to $2.20-$2.28 from $2.20 to $2.35.  

Guides 2023 F/Y revenues to $9.65B to $9.85B from $9.65B to $9.95B with the FactSet Consensus at $9.85 prior to the revised guidance.  

Interest Expense: $9.3M up $2.3M driven by higher rates on a credit facilities which are the company's sole source for borrowing.  So this item hurt the year-over-year comparison. 

The question which can not be answered with certainty is whether short term rates will continue to move higher or are at or near their peak with the next major move being down. My best guess is that short term rates, used as the base rates in credit facilities, are more likely to go down appreciably than up significantly which expresses some future optimism about inflation. A significant down movement in short term rates will probably require an ongoing recession or concerns about deflation when and if CPI plunges below 2%. I am currently expecting no more than a .25% cut in the FF rate next year from the current 5.25%-5.5% range, and that implies no recession and inflation moderating to 2%. 

Long term debt and finance lease liabilities: $534.804M 

While the earnings report was not a positive one, the 11%+ decline in the stock price seemed unwarranted to me, so I used the downdraft to restart a small ball position.

Buying Restriction: 5 share lots with each subsequent purchase required to be at the lowest price in the chain. 

L. Added 5 CODI at $18.54 - Schwab Account

Quote: Compass Diversified Holdings (CODI)

Cost: $92.7 

This company resembles a fund that buys private companies, hopefully improving operations thereafter and will then consider selling the business at a profit. 

The companies are in a wide variety of industries: 

10-Q at pages 19-20  

The description in the trade snapshot, which has CODI as a limited partnership, is incorrect. CODI used to be a LP but changed to an association taxable as a corporation in 2021. Compass Diversified - Tax Information - Tax Reporting Information Prior to September 1, 2021SEC Filed Press Release (Effective 9/1/2021, CODI "will be treated as a corporation for U.S. federal income tax purposes."

CODI SEC Filings

News Since My Last Discussion: This was worth at least a 5 share add.  Compass Diversified Announces Sale of Marucci Sports for $572 Million CODI expects to realize a gain of between $225M to $245M. Proceeds will be used to pay down debt and for other corporate purposes. CODI bought Marucci Sports in 2020 for $200M and then invested about $70M on bolt on acquisitions. Marussi sells baseball bats under the Marucci and Victus brands. (Discussed at Compass Is Selling Bat-Maker Marucci to Fox Factory. The Deal Looks Like a Home Run. - Barrons)

Last DiscussedItem # 1.H. Bought 10 CODI at $18.45; 5 at $18.22 (10/14/23 Post) In that post, I discussed another business that was sold earlier this year, Advanced Circuits, that netted a pre-tax gain of $100M to $110M with the proceeds used to pay off the revolver credit line. Compass Diversified Completes Sale of Advanced Circuits (2/15/23)

Average cost per share: $18.41 (20 shares)

Dividend: Quarterly at $.25 per share

Yield at New AC = 5.43%

Last Ex Dividend: 10/18/23 (owned 15 as of)

Last Earnings Report (Q/E 9/30/23): 

SEC Filed Press Release and 10-Q 

Q3 2023 Earnings Call Transcript-Insider Monkey (During the call, management mentioned that minority shareholders in Marucci will receive about $72M of the $572M in proceeds. After taxes and other items, CODI expects net proceeds of  around $400M. 

GAAP E.P.S.:  Net Loss of $.35 from continuing operations caused primarily by noncash expenses: $26.658M amortization; $32.568M impairment (page 23, 10-Q); and $3.174 stock compensation. 

Adjusted earnings = $40.996M  

Non-GAAP E.P.S. = $.57

Non-GAAP Consensus per Schwab: $.42

Reconciliation: 

The impairment charge was related to the subsidiary Velocity Outdoor. 

Adjusted EBITDA: The largest gain came from Lugano, a high end diamond  designer, manufacturer and marketer. Compass Diversified Announces Acquisition of Lugano (9/7/21)

Debt (page 28, 10-Q): The credit facility is high cost compared to the SU notes outstanding. CODI will be using the proceeds from the Marucci sale to pay down the credit facility borrowings. 

Equity Preferred Stock: I own CODI-PA that has a 7.25% coupon paid on a $25 par value. 

Last DiscussedItem # 6.A. Added to CODIPRA - Bought 4 at $21.88  (10/7/23 Post) I somehow ended up with positions in 3 taxable accounts, but have no current recollection of how that happened. The largest position is 25 shares held in my Fidelity account with an average cost per share of $22.63 (yield = 8%). I will keep that position and sell the others when and if the price goes over $24.50 

2. Small Ball Preferred Stock Buys

A. Added to CCNEP - Bought 5 at $20


Cost: $100

Issuer: CNB Financial Corp. (CCNE) - A Bank Holding Company

CCNE Analyst Estimates | MarketWatch

SEC Filings

I have eliminated my common stock positions and will focus instead on this preferred stock that has a higher yield (Realized Gains CCNE to date = $1,190.91 with no current position).   

Last DiscussedItem # 3.A. Added 5 CCNEP at $21.84; 5 at $21.61 (7/29/23 Post)Item # 2.B. Restarted CCNEP - Bought 5 at $22.2; 5 at $20.75; 5 at $18.75; 5 at $18.4 (5/13/23 Post)

DescriptionBank Holding Company Equity Preferred Stock, senior only to common stock in the capital structure. 

Par Value: $25

Coupon: 7.125%

Maturity: None, Potentially Perpetual 

Issuer Optional Call: On or after 9/1/25 at par value + accrued and unpaid dividends. 

Stopper Clause: Standard

Dividends: Paid quarterly, qualified and non-cumulative.

Once the preferred share dividend is legally eliminated under the Stopper Clause, non-cumulative means that there is no legal obligation to ever pay the dividends that were lawfully eliminated. They are just gone. The legal obligation to pay future dividends is usually triggered by the resumption of a cash common stock dividend but that only applies to the preferred dividends that would be owed after that resumption.  

Average cost per share: $20.51 (35 shares)

Yield at New AC: 8.68%

(.07125% coupon x. $25 par value = $1.78125 annual dividend per share  ÷ $20.51 total cost per share = 8.6848%)

Next Ex Dividend:  11/16/23

Last Sell DiscussionItem # 5.A. Eliminated CCNEP - Sold 10 at $26  (1/16/23 Post)(profit snapshot = $7.08) 

B. Added to AHHPRA - Bought 5 at $19.59

Quote: AHH-PA

Cost: $97.95

Issuer: Armada Hoffler Properties Inc. (AHH) - An Equity REIT

I have a small ball position in the common stock, see Item # 1.G. above.     

AHH SEC Filings

AHH SEC Filed Earnings Press Release for the Q/E 9/30/23 

Last DiscussedItem # 4.H. Bought 10 AHHPRA at $20.3 (11/29/22 Post) 

Investment Category: Advantages and Disadvantages of Equity REIT Cumulative Equity Preferred Stocks, a subcategory of the Equity REIT Common and Preferred Stock Basket Strategy

Description: Equity Preferred Stock, senior only to common stock in the capital structure

Prospectus (public offering price of $25 in June 2019)

Coupon: 6.75% paid on a $25 par value.  

Dividends: Paid quarterly and cumulative 

Yield at $20.3: 8.31%

Next Ex Dividend Date: 12/30/22

Stopper Clause: Yes, standard (see page S-17 Prospectus)

Maturity Date: None, potentially perpetual 

Issuer Optional Call Date: At par value + accrued and unpaid dividends on or after 6/18/24 

Average cost per share: $20.07  (15 shares)

Yield at AC = 8.41%

(.0675% coupon x. $25 par value = $1.6875 annual dividend per share ÷ $20.07 total cost per share = 8.4081%)

Last Ex Dividend: 9/29/23 (owned 10 as of)

C. Added to CTOPRA - Bought 3 at $17.77

Quote: CTO-PA

Cost: $53.32

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

I own the common shares. 

CTO SEC Filings

CTO Q3 2023 Earnings Press Release

Last Discussed: Item # 1.A. Bought 5 CTOPRA at $18.5; 2 at $17.8 (9/30/23 Post) 

Description: Equity Preferred Stock, senior only to common stock in the capital structure. 

Prospectus

Par Value: $25

Coupon: 6.375%

Dividend: Paid quarterly, cumulative and non-qualified. 

Stopper Clause: Standard

Optional Call: On or after 7/6/26

Maturity: None, potentially perpetual

Average cost per share: $18.89 (25 shares)

Yield at New AC = 8.44%

(.06375% coupon x $25 par value = $1.59375 annual dividend per share ÷ $18.89 total cost per share = 8.4397%)

Last Ex Dividend: 9/13/23 (owned 15 shares as of)

D. Added to TFINP - Bought 5 at $18.5

Quote: Triumph Financial Inc. 7.125% Preferred Stock (TFINP)

Cost:  $92.5 

Issuer: Triumph Financial Inc.  (TFIN)

TFIN SEC Filings

SEC Filed Earnings Press Release for the Q/E 9/30/23 

10-Q for the Q/E 9/30/23 

Description: Equity Preferred Stock

Prospectus

Par Value: $25

Coupon: 7.125%

Dividend: Paid quarterly and non-cumulative. 

Maturity: None, potentially perpetual 

Issuer Optional Call: At par value + accrued and unpaid dividends on or after 6/30/25

Average cost per share: $19.36 (22 shares)

Yield at AC = 9.2%

(.07125% x. $25 par value = $1.78125 annual dividend per share ÷ $19.36 total cost per share = 9.2007%)

Last Ex Dividend: 9/14/23 (owned 10 shares as of, bought that lot at $20) 

3. Corporate Bonds: $5,000 in principal amount 

A. Bought 2 Healthtrust of America 3.875% SU Maturing on 5/1/25 at a Total Cost of 95.389

Issuer: Healthcare Realty Trust Inc. (HR) 

HR acquired Healthtrust of America (HTA) in a reverse merger with HTA being the surviving company. HTA then change its name and symbol to Healthcare Realty (HR).  

HR SEC Filings 

HR SEC Filed Earnings Press Release for the Q/E 9/30/23 (quarterly dividend payment exceeds FAD by $19.723M, see page 6), and needs to be cut. 

New FINRA Page: Bond Page | FINRA.org

Credit Ratings: Baa2/BBB

YTM at Total Cost: 7.2%

Current Yield at TC = 4.06%

10-Q for the Q/E 9/30/23 (debt and interest rate hedges are discussed at pages 19-20; the 2025 note is the next SU that matures with the principal amount at $249.391M)

B. Bought 2 Timken 3.875% SU Maturing on 9/1/2024 at a Total Cost of 98.255

Issuer: Timken Co. (TKR) 

TKR | Timken Co. Analyst Estimates | MarketWatch

TKR SEC Filings 

TKR SEC Filed Earnings Press Release for the Q/E 9/30/23 (net income of $87.9M)

New Finra Page: Bond Page | FINRA.org

Prospectus 

Credit Ratings: Baa2/BBB-

YTM at Total Cost: 6.089

Current Yield at TC = 3.944%

I now own 6 bonds.  

TKR Last Bond Offering (March 2022):  Prospectus for $350M 4.125% SU maturing in 2032

C. Bought 1 US Bancorp 3.6% SU Maturing on 9/11/24 at a Total Cost of 97.944

Issuer: U.S. Bancorp  (USB) 

I have a small ball position in the common stock. 

USB SEC Filings 

SEC Filed Earnings Press Release for the Q/E 9/30/23 (net income of $1.736B)

USB Analyst Estimates | MarketWatch

New Finra Page: Bond Page | FINRA.org

Credit Ratings: A3/A-

YTM at Total Cost: 6.08%

Current Yield at TC = 3.67%

I now own 2 bonds. 

4. Treasury Bill Purchases: $6,000 in principal amount. 

The flatlining of treasury bill yields is consistent IMO with the FED remaining on hold, possibly cutting the FF rate by .25% in the 2024 second half.  

A. Bought 3 Treasury Bills at the 11/6/23 Auction

91 Day Bill:

Matures on 2/8/24

Interest = $40.08

Investment Rate:  5.446%

B. Bought 3 Treasury Bills at the 11/8/23 Auction

119 Day Bill: 

Matures on 3/12/24 

Interest: $52.41

Investment Rate: 5.469%

5. CDs - FDIC Insured: $4,000

A. Bought 2 Institution for Savings 5.45% CDs Maturing on 11/20/24

Interest paid monthly. 

B. Bought 2 Flagstar 5.45% CDs Maturing on 2/14/25

Interest Paid semiannually. 

6. Small Ball CEF Purchases

A. Bought 10 NMAI at $11.2

Quote: Nuveen Multi-Asset Income Fund Overview - A Leveraged Balanced CEF

Cost: $112 

This is my first purchase. 

Sponsor's website: Nuveen Multi-Asset Income Fund 

Effective Leverage: 31.54% as of 9/30/23

Annualized Leverage Cost, based on September: 5.62%

Number of Holdings: 1,342

NMAI SEC Filings 

Nuveen Multi-Asset Income Fund - SEC Filed Shareholder Semiannual Report for the period ending 6/30/23. As discussed at page 5, the fund uses leverage.  

Dividend: Quarterly at $.30 per share, reduced from $.35 effective for the 2023 first quarter dividend.  

Yield at $11.2 = 10.71%

Data Date of 11/3/23 Purchase

Closing Net Asset Value per share: $12.95

Closing Market Price: $11.21

Discount: -14.52

Sourced: NMAI - CEF Connect 

Nuveen Multi-Asset Income (NMAI) Portfolio | Morningstar (unrated, this page lists the top 25 holdings)

B. Added to JQC - Bought 10 at $5.08; 10 at $5

Quote: Nuveen Credit Strategies Income Fund Overview 

Cost $50.8

Last DiscussedItem # 1.F. Added to JQC - Bought 20 at $5.07 (8/12/23 Post)Item # 2.A. Added to JQC - Bought 10 at $4.94 (6/17/2023 Post)

JQC SEC Filings

Sponsor's website: JQC - Nuveen Credit Strategies Income Fund

Number of Holdings: 426 as of 9/30/23

Effective Maturity: 4.4 years as of 9/30/23

Effective Leverage: 38.41%  as of 9/30/23

Annualized Leveraged Cost, based on September: 6.44%

The senior loans will be mostly at spreads to short term rates and be rated in junk territory or unrated.  

The securities are consequently high risk but the number of holdings and diversification among industry groups reduces the overall risk in the portfolio.

SEC Filed Semiannual Report for the period ending 7/21/23: Nuveen Credit Strategies Income Fund

This is a snapshot from 1 page of that report that shows the kind of securities owned by this fund: 

Some Abbreviations Used in the Report:

Dividend: Monthly, changes a lot, currently at $.054 per share ($.648 at $.054 per month) The monthly dividend has recently been moving up, $.0475 per effective for the October 2023 payment, which suggests that the amount of interest received from owned variable rate loans exceeds the increase in variable borrowing costs. In addition, the last 5 payments have not been supported by ROC. 

I change my dividend payment option to reinvestment effective for the next monthly payment. 

New Average cost per share: $5.11 (140 shares)

Yield at AC Using $.648 annual per share rate (will fluctuate up and down as noted above) = 12.68%

Data Date of 11/3/23 Purchase

Closing Net Asset Value per share: $5.81

Closing Market Price: $5.1

Discount: -12.22%

Average 3 Year Discount: -10.02%

Data Date of 11/10/23 Purchase

Closing Net Asset Value Per Share: $5.81

Closing Market Price: $5.01

Discount: -13.77%

Sourced: JQC  - CEF Connect 

JQC-Morningstar (currently rated 2 stars)

Similar unleveraged ETFs are SPDR Blackstone Senior Loan ETF (SRLN) and Invesco Senior Loan ETF (BKLN). I have a small ball position in SRLN. 

7. Small Ball Sell

A. Eliminated Duplicate Position in WTBA - Sold 25+ at $17.72 - Fidelity Account

Quote: West Bancorp Inc. (WTBA)

Proceeds: $453.17

Investment Category: Regional Bank Basket Strategy

WTBA Analyst Estimates | MarketWatch

WTBA SEC Filings

Profit Snapshot: +$49.83

Last DiscussedItem # 1.H. Added To WTBA - Bought 5 at $15.79 - Schwab Account (10/21/23 Post) I mentioned in that post that I would sell the duplicate position at over $17. I discussed the second quarter earnings report in that post. SEC Filed Earnings Press Release The third quarter report had not yet been released yet. 

Dividend: Quarterly at $.25 per share, last raised from $.24 effective for the 2022 first quarter payment. 

WTBA Dividend History | Nasdaq

Last Ex Dividend: 11/7/23

Last Earnings Report (Q/E 9/30/23): 

Comparisons are to the 2022 third quarter except where indicated otherwise. 

SEC Filed Earnings Press Release and SEC Filed Slide Presentation 

I have a negative opinion about this report.  

E.P.S. $.35, down from $.70 (awful)

NIM: 1.91%, down from 2.78% (awful)

Efficiency ratio: 60.83%, up from 43.16% (Up is bad)

NPA Ratio: .01% (excellent)

Deposit Trend (unfavorable): 

"Net interest income for the third quarter of 2023 was $16.6 million, compared to $23.0 million for the third quarter of 2022. In 2022 and year-to-date in 2023, the rising cost of deposits and borrowed funds and the change in mix of funding increased interest expense faster than the increase in interest income from loan repricing and loan originations."

Investment Securities: 10-Q at page 13 


The unrealized loss as a percent of amortized cost was 20.72% as of 9/30/23 indicated that the coupons are low. The bank owns mostly long duration securities including a heavy emphasis on mortgage backed securities whose duration increases as interest rates rise which increases the unrealized loss for low coupon MBS. 

Remaining Position: 20+ shares with an average cost per share of $16.28. I will consider averaging down with 5 share purchases when and if the price falls below $15.  

WTBA Realized Gains to Date$1,362.96

Largest GainItem # 3.A. Sold 100 WTBA at $23.12 (4/29/17 Post)(profit snapshot = +$1,146.24)

Other Sell DiscussionsItem 1.K. Eliminated WTBA in Vanguard Account-Sold 5 at $21.4 and 20 at $21.2 (2/6/21 Post)(profit snapshots = $116.92); Item # 2.F. Pared WTBA-Sold .313 at $27.42 (5/28/21 Post)(eliminated fractional shares bought with two dividends, turned off dividend reinvestment)

DisclaimerI 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.      

14 comments:

  1. I wonder if Moody's downgrade will effect the market on Monday? That's a clear layout on the recession factors. Helpful!

    It looks like the expansion to war with Iran directly is off the table. That's a plus for the market.



    ReplyDelete
    Replies
    1. Land: Moody's still has the U.S. government rated at Aaa, the highest rating, but reduced its outlook from stable to negative. It will not take much now for Moody's to downgrade the debt rating 1 notch. A shutdown would do it in about 7 days will have that result.

      S&P downgraded one notch in 2011 in response to a shutdown.

      Fitch recently downgraded 1 notch.

      In the coming years, I expect more downgrades.

      Eventually, there will be failed treasury auctions, defined generally as an inability to sell enough debt to retire all of the maturing debt and to fund current deficits.

      The Fed will then have no choice but to monetize the debt through creating money to buy what can not be sold. Otherwise there would be a default. That will be a very bad day when it comes and it will. This is probably more than 10 years down the road, maybe close to 15-20, but it is inevitable.

      I do not see the market reacting to a change in outlook, though some temporary pouting may occur.

      Delete
    2. When that comes, where's the place to put funds (for safety from this)?

      Delete
    3. Land: If I am compos mentis when this event can reasonably be projected to occur within five years, I will have better guesses than I do now.

      The potential repercussions will define potential investments allocations, which include a depression with no way out through massive new government spending, the USD losing its status as a reserve currency, massive corporate and individual credit defaults, a massive stock market crash, and problematic inflation, or some combination of those events.

      The most important sign that this will occur within five years is the bid-to-cover ratio on U.S. treasury auctions, particularly the 20 and 30 year bonds. When that number moves closer to 1, then the time is probably near. Another bid-to-cover ratio would be the ten year treasury, which is currently fine near 2.5 times, but sinking below 1.5 when there is no U.S. recession and yields are attractive compared to other similarly rated foreign country debt would be a signal as well.

      The U.S. government had less than a $1T deficit in 1981, a total since the nation started to borrow money, but the deficits are now running over $1 trillion per year. The rise in interest rates will soon bring the annual borrowing costs to $1+T per year. Neither political tribe will do anything to avert this calamity but both will find their own way to accelerate when it will occur.

      The most obvious way for an individual to survive financially, when this occurs, is to have no debt, particularly mortgage debt on the home.

      Other options might include Swiss government bonds or other assets priced in Swiss Francs including the currency, gold bullion, some other foreign country debt, some municipal bond debt (e.g. my county in Tennessee, Williamson, has an AAA rating on its GO issuances) and possibly U.S. treasury debt, for awhile at least, notwithstanding the failed treasury auctions, provided the debt is still denominated in USDs.

      +++

      I forgot to mention Transalta's annual free cash flow ("FCF") per share numbers for 2020, 2021, 2022 that can be found in the 2022 annual report. I added a link to the 2022 SEC filed annual report in my post.

      2020 C$1.27
      2021 C$2.16
      2022 C$3.55

      2022 Annual Report at page 5
      https://www.sec.gov/Archives/edgar/data/1144800/000114480023000007/a20221231tacex132mda.htm

      Note that the reported earnings attributable to common shareholders are negative in 2020 and 2021 and only C$.01 in 2022. The issue is whether the appropriate number for valuation purposes is not the reported profits but the free cash flow per share. I personally would use FCF. Why? At the current share price, the entire company could be bought with the purchase cost paid out of free cash flow in less than five years.

      Delete
    4. That adds weight to the idea of using stops on stocks. So that if there's a sudden huge pull down, you've got a shot at selling out.

      If this were to transpire, I would expect investor mentality to stay optimistic and expect the world as usual. So there would be that similar pattern of a spike down, followed by a spike back up and a chance to get out, similar to the unstable Vix trigger, before the final crash.

      In other words if any of those indicators are showing up or close to showing up, it would be important to pay attention to the opportunity to sell on the spike after the initial large pullback. That would remain true an important not to waver, even if it took a couple of years to finish cracking.

      Then once having sold, you'd have to look around to figure out what options for cash look stable. Considering that the US dollar may not be optimal.

      Land would increase in value. Because it's concrete.

      I generally avoid using gold and metals as safety nets. But that too would become a safety net. As my niece deftly pointed out when she was a kid, alcohol would be a better investment than gold in a crisis. People like their alcohol when they're upset.

      I will have to keep this in mind and pay attention. Maybe the politicians will put their act together, and this will be averted. I am like usual, forever the optimist.

      Delete
  2. "Inflation was flat in October from the prior month, core CPI hits two-year low"

    https://www.cnbc.com/2023/11/14/cpi-inflation-report-october-2023.html

    CPI month-to-month = Zero
    Core CPI month-to-month .2%

    Annual CPI 3.2%
    Annual Core CPI 4%
    https://www.bls.gov/news.release/cpi.nr0.htm

    Annual "owners equivalent rent": +6.8% weighted at 25.686% in CPI.
    https://www.bls.gov/news.release/cpi.t02.htm


    This is a fictional expense. Homeowners do not pay rent to live in their homes.

    Currently, the Bond Ghouls see zero chance that the FED will increase the FF rate in December.

    https://www.cmegroup.com/markets/interest-rates/cme-fedwatch-tool.html

    The ten year treasury yield is currently down 19 basis points to 4.445%
    https://www.marketwatch.com/investing/bond/tmubmusd10y?countrycode=bx&mod=home-page

    The S&P 500 is currently up 1.32% in pre-opening trading.

    ReplyDelete
  3. Even I understand why the market is shooting up today. And bonds are down.

    Looks like inflation is cooling.

    But It's cooling while wages, employment, and customer spending are still strong.

    Seems to greatly increase evidence of a soft landing.

    The only worry that seems to be in the way are the politics of forming a government budget.

    ReplyDelete
    Replies
    1. Land: The core problem in the U.S. economy has been inflation. For the Stock Jocks to form a consensus opinion that problematic inflation is in the rear view mirror, inflation can still be high but the trend indicates that the problem is going away. A profound example was the start of a long term bull market in stocks in August 1982 when inflation was still hot but coming down.

      Today will be my best up day in over a year, due only in part to my stock allocation. The bond allocation will have the highest dollar contribution to the overall portfolio's increase.

      The events today feed into my primary investment concern which is the yields on treasury bills, CDs. and bonds that mature in 2024 and 2025.

      So far, my only response today was to buy 2 WFC 5.5% CDs that mature on 5/21/25 that pay monthly interest.

      I was too slow in retrospect in adding to may stock allocation.

      More will be known about a possible shutdown after the House votes today on Speaker Johnson's proposal. The Democrats so far have not said what they will do, but I suspect that many will go along even though they do not like the bifurcated approach.

      Delete
  4. SPDR S&P Regional Banking ETF (KRE)
    $44.72 +$3.28 (+7.93%)
    As of 10:56 AM EST.

    I would attribute the outperformance in this sector to less concern about unrealized losses in the banks owned securities. Many banks failed to adjust the duration of their portfolios in 2021 when it was obvious that interest rates would have to move much higher due to problematic inflation, yet yields were still low due to the abnormal ZIRP and QE monetary policies.

    Part of that total failure in interest rate risk management was loading up on low coupon mortgage backed securities whose durations started to increase in 2022 through 2023, until the recent decline in longer term rates.

    Possibly the worst example comes from Bank of America who had an unrealized loss on its owned investment securities, held for investment only, of $131B as of 9/30/23.

    The yield on Schwab's investment portfolio, loaded with MBS, was only about 2% as of 9/30/23. The size of Schwab's bond portfolio was then at $285B.

    If I used a 4% average yield rather than 2%, the difference in annual income on $285B would be about $5.7B.

    ReplyDelete
  5. When I sold my 2-3 KRE, I should have been buying.

    Depends if recession is off the table. If it's on then KRE's dependency on commerical real estate loans may bring down values.

    ReplyDelete
    Replies
    1. Land: The recent decline in intermediate and longer term interest rates will significantly reduce the unrealized losses in bank owned securities, but the long duration ones still can not be replaced with higher yielding ones without incurring significant losses. Net interest margin (NIM) is going to remain under pressure, and NIM is the primary source of earnings for most banks.

      The size of the unrealized losses is less of a concern at the moment, but is still relevant.

      Another concern is commercial loans going bad. This concern exists primarily in office property loans and would exist even without a recession occurring. A recession would just make it worse. The primary sources of this concern are the volume of loans coming due, the work-from-home trend, a declining willingness to lend when loans come due, and a much higher rates when a refinancing is possible that places some property owners in more risk of a default.

      Overall, the concerns have not translated into a significant increase in charge offs but have resulted in higher loan loss reserves for potential losses.

      Regional bank stocks are still in a long term bear market of unknowable duration.

      I am in a net add posture in this sector, but buying in distressed sectors is normal for me . There is already a lot of bad news baked into the stock prices. TTM P/Es are generally in the single digits with dividend yields over 5% and frequently over 7%.

      Delete
  6. IWM is down 2% today. So a different story than the other indices.

    But it's all higher highers for what was doing only lower lower.

    ReplyDelete
  7. I have published a new post:

    https://tennesseeindependent.blogspot.com/2023/11/acco-aod-ava-axprica-bwbbp-bxcl-cet.html

    ReplyDelete