AY, CGBD, CTO, NOMD, OFS, SAR,WBA

Economy: 

Apartment List National Rent Report Median rents are down .8% year-over-year and has been in negative territory since the 2023 summer. This website has a chart showing the substantial percentage increases in apartment rents starting in 2021 to the 2023 summer. 

The impact of rising apartment rents on CPI goes beyond the shelter expense for apartment rents, weighted at 7.639% in CPI and extends to "owners equivalent rent" weighted at 26.713%. 

The BLS uses apartment rents to compute owners equivalent rent, a fictional expense that assumes a homeowner pays rent to live in a home that is owned. This phony expense item has been a major contributor to the reported CPI numbers and has remained elevated due to the long lag period in using more current rent numbers. Table 2. Consumer Price Index for All Urban Consumers (CPI-U): U. S. city average, by detailed expenditure category - 2024 M03 Results (Year-over-Year increase in owners equivalent rent = +5.9% even though median apartment rents are down) So owners equivalent rent is a phony expense that no homeowner actually pays that is on a heavy dose of steroids. 

China Is Buying Gold, Sending Prices to Record Highs - The New York Times

Portfolios Across the U.S. Wealth Distribution | Richmond Fed

Treasury Yield Curve - May: 

Real Treasury Yield Curve - May: 

10 TIP Breakeven Inflation Rate:  2.32%  (subtract real from nominal) 

Breakeven Inflation is the annual average CPI necessary for the TIP to breakeven with nominal treasury maturing at the same time. 

If I bought the 10 year TIP yesterday, I would need an average annual CPI rate over the next 10 years to be better than 2.32% for that purchase to be better than better the 10 year non-inflation protected treasury that has a much higher yield.

When evaluating a purchase of an IBond v. a TIP, I will compare the IBond fixed rate with the real yield of the 5 year TIP. The reason is that the IBond has to be held for five years to avoid forfeiting 3 months of interest. The fixed rate of the Ibond is the real yield, defined simply as the yield in excess of CPI. 

The CBO calculated that extending the Trump tax cuts for 10 years, which are set to expire next year, would add $4.578 trillion to the budget deficit. Budgetary Outcomes Under Alternative Assumptions About Spending and Revenues.PDF (see Table 2 at page 5, then add up the numbers in the far right column)

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Allocation Shifts Discussed in this Post: 

Treasury Bills Purchased at Auction: $15,000 in principal amount

Treasury Notes Purchased in Secondary Market: $2,ooo in principal amount. 

Corporate Bonds: $17,000 in principal amount. 

Common Stocks: -$16.18

(Consisting of $920.31 in proceeds minus $904.13 in purchases)

Realized Gains Common Stocks: +$346.02

2024 Outflow Stocks/Stock Funds: -$21,249.5

Bond King Bill Gross to Bond Funds: Drop Dead - Barron (subscription publication) and They Just Wanna Sell You a Bond Fund - Bill Gross. I have previously noted that bonds have for many years been-at best- a running in place investment. For most of the past 20 years or so, treasury and investment grade corporate securities have had negative real returns prior to making an adjustment for taxes. 

While treasury bills currently have yields in excess of the inflation rate, the after tax real return when owned in a taxable account would still be sufficiently close to zero that most investors would not meet their financials goals by owning them. 

There was a time in the late 1970s and early 1980s when the purchase of a 30 year treasury would have worked as an alternative to stocks. Yields went over 15% in 1981. Market Yield on U.S. Treasury Securities at 30-Year Constant Maturity, Quoted on an Investment Basis - St. Louis Fed 

The reason why that alternative would have worked long term, assuming the purchase of a 30 year treasury bond with a 15% coupon at auction, was that investors had mispriced the inflation risk by assuming that the high inflation numbers in the 1970s and early 1980s would continue, when in fact problematic inflation was about to end due to the Federal Reserve's monetary policies under Paul Volcker that strangled the U.S. economy by hiking the Federal Funds rate to 20% in June 2021, up from an average of 11.2% in 1979. Memories of the 1970s haunt the Fed, pushing its aggressive rate moves-NPR

So the kind of allocation captured in the snapshot below is not a currently viable option for investors that need to grow their capital at a much faster rate than inflation: 

Fidelity Account only: 

Fidelity classifies CDs and treasury bills as part of my bond allocation. Excluding those securities and focusing just on bonds, the allocation is reduced from 84.1% to 68%. The bond allocation consists of investment grade corporate bonds (almost entirely maturing within 2 years) and Tennessee municipal bonds with staggered maturities (average weighted credit rating of AA+). 

Buffett Hates Bonds Despite Rising Yields; Berkshire Holds Stocks, T-Bills - Barron's (subscription publication)

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New Delhi’s Iron Pillar has been exposed to the elements for centuries. So why hasn’t it ever shown signs of rust? The iron pillars were installed in the 13th century and show no signs of rust. Scientists started to investigate how that was possible in the early 1900s, but it was not until 2003 that they figured out how it was done. 

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Trump and His Cult: 

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

My Videos: Update on Trump's Criminal Trial - YouTube and Stormy Daniels Sideshow - YouTube

The filings in the NY criminal proceeding can be found here: Docket Watch Trump Prosecuted in New York | Lawfare  Anyone wishing to learn more about the case needs to read the Court's order denying Trump's motion to dismiss that was entered on 2/13/24. This link may work: PDF file 

Trump’s bombardment of dishonesty: Fact-checking 32 of his false claims to Time;  Fact-Checking Trump’s 2024 TIME Interviews | TIME

Fact check: Another week, another round of false Trump claims about his trial | CNN 

Trump is one of the rare persons who has what I call negative credibility. The reasonable response to any statement made by him is just to assume that the statement is false or at best misleading unless you have clear and convincing accurate information that a rare accurate statement was made by him. 

‘Astonishing’: Analysts discuss Trump’s plans for a second term - YouTube

Trump will make demonstrably false statements that can only work on brain challenged persons. One such statement was the obviously false claim that the gag order preventing him from testifying in the ongoing NY criminal trial. Judge corrects Trump's false statement in court - YouTube 

There is no one IMO who is well known, currently living or deceased, who has told anywhere near the number of false and misleading publicly available statements as Trump, but 71% of republicans believe that Trump is telling them the truth. They are clearly suffering from Trump Derangement Syndrome. 

My Video: 71% of Republicans Believe Trump is Telling Them the Truth - YouTube Those persons are the ones suffering from Trump Derangement Syndrome and have a really bad case of it.  

Trump says Democrats are ‘running a Gestapo administration’ at Republican National Committee’s annual retreat: CNN The Washington Post apparently secured a recording made during Trump's speech. At one point Trump said that he would allow anyone donating $1M to the republican party an opportunity to speak to the audience. One man came forward and said "Donald J. Trump is the person that God has chosen." Trump escalates attacks on prosecutors, says Democrats run ‘a Gestapo administration’ - The Washington Post; The latest example of Trump’s seeming obsession with Nazism | CNN

After Jack Smith admitted that some documents contained in boxes were not in the same order as they were when the FBI seized the boxes at Mar-A-Lago, Trump had this to say: 

"Now, Deranged Jack has admitted in a filing in front of Judge Cannon to what I have been saying happened since the Illegal RAID on my home, Mar-a-Lago, in Palm Beach, Florida—That he and his team committed blatant Evidence Tampering by mishandling the very Boxes they used as a pretext to bring this Fake Case. These deeply Illegal actions by the Politicized 'Persecutors' mandate that this whole Witch Hunt be DROPPED IMMEDIATELY. END THE 'BOXES HOAXES.' MAGA2024!"

Trump added "ARREST DERANGED JACK SMITH. HE IS A CRIMINAL!"

Donald Trump Demands Jack Smith Be Arrested After Document Revelation; Prosecutors: Docs in boxes seized from Mar-a-Lago were inadvertently jumbled - POLITICO

It does not sound like Trump will keep Jack Smith employed as a special counsel when and if he wins in November. 

Chief Justice Roberts: "If it is not necessary to decide more to dispose of a case, then it is necessary not to decide more." (concurring opinion in the Dobbs decision). I doubt that he will follow that admonition in the Presidential immunity case pending now before the Supreme Court.  

Judge Juan Merchan said he won’t tolerate Trump’s cursing and headshaking during Daniels’ testimony, transcript shows The judge's comments were made during a sidebar. 

The Trump appointed federal district court judge Aileen Cannon has delayed the start of the documents case indefinitely. Ty Cobb reacts to judge indefinitely postponing Trump classified documents trial - YouTube

My Video: Judge Cannon Delays Documents Trial Indefinitely - YouTube

For several months I have noted that she was slow walking decisions on the various pretrial motions filed by Trump's attorneys. 

The end result was that the trial would likely be delayed until after the election. 

A former federal district court judge noted that most of those motions could have already been decided provided Cannon wanted to try the case before the election, starting no later than the summer. Video: Retired judge accuses judge of ‘slow walking’ Trump documents trial after postponement 

Based on Cannon refusing to act on the pending motions within a reasonable time frame and Cannon's prior orders in that case, including the one reversed by a unanimous appeals court panel consisting of 3 republican judges, as well as treating frivolous motions as if they had substance, a reasonable inference is that Cannon wants to delay the trial until after the election and thereby avoid hurting Trump's election chances in the event he is convicted of one or more felonies. That may or may not be her motive. Another explanation is just incompetence.

The Republican Justices on the Supreme Court have likely created a delay that will prevent the insurrection case from being tried before the election.  

If Trump wins, I would expect him to order his Attorney General to fire Jack Smith which can only be done "for misconduct, dereliction of duty, incapacity, conflict of interest, or for other good cause, including violation of Departmental policies."  28 CFR § 600.7 - Conduct and accountability That limitation on a special counsel's removal will likely not be observed. Good cause for firing Jack Smith does not include Trump avoiding a trial and conviction for committing felonies. 

I would anticipate that the primary qualification for the AG's appointment would be the willingness to follow that directive. 

If Smith is fired, that would result in third impeachment of Trump when and if the Democrats regain control over the House but no conviction of Trump is possible in the Senate since the republicans would never vote to convict in sufficient numbers to remove Trump from office, no matter what he does. Republican Senator, including Barry Goldwater, told Nixon that he would be convicted in the Senate if he did not resign. Why No GOP Senator Will Stand Up to Trump - POLITICO The GOP had principled senators in 1974 and almost none now. Almost all GOP House and Senate members are now servile to an authoritarian demagogue with serious mental illnesses who is incapable of being truthful.  

The AG who fired Smith would also be impeached in this scenario. 

How Republicans Echo Antisemitic Tropes Despite Declaring Support for Israel - The New York Times  

+++

Putin and His Orwellian State: 

Losses ∙ Russia ∙ WarSpotting — documented material losses in Russo-Ukrainian war

Putin’s fuel problem: How Ukraine is sapping Russia’s diesel and gasoline – POLITICO

Russian oil depot blitzed by Ukrainian drones in another blow to Putin on eve of Victory Day parade - YouTube

Macron's threats of Nato troops in Ukraine could become a reality if Putin's forces push west - YouTube

Rare tank-on-tank battle in Ukraine as 58th Brigade thwart attacks on Urozhaine - YouTube

Bill Browder: Stop Western banks funding Russia’s war machine | DW Business - YouTube

Putin forges a Russian society built on regressive, militarized values - Washington Post

Anne Applebaum believes that authoritarians are winning the propaganda war. Russia and China Are Winning the Propaganda War - The Atlantic I would say that authoritarians in the U.S. have a small lead over those interested in preserving America's democracy. Democracy is an historical aberration and fragile.  

++++

1. Small Ball Buys: 

A. Added 5 NOMD at $18.18; 10 at $17.94: 

Quote: Nomad Foods Ltd.  (NOMD)

Cost $270.3

NOMD Analyst Estimates | MarketWatch

NOMD SEC Filings (foreign company forms)

SEC Filed 2023 Annual Report 

Nomad is Europe's leading frozen food company, see page 32 Annual Report. 

Website: Home | Nomad Foods

Last Discussed: Item # 1.D. Added to NOMD - Bought 10 at $17.45 (2/9/24 Post) 

New Average cost per share:  $19.54  (75 shares)

Dividend: Quarterly at $.15

Payment of a dividend started in the 2024 first quarter.  

Yield at $19.79 AC: 3.07%

Last Ex Dividend: 5/8/24 (owned all as of)

Earnings Report for the Q/E 12/31/23): 

SEC Filed Press Release 

E.P.S. €.15

Adjusted E.P.S. of €.32

Adjustments: 

Adjustments for 2023: 

2023 Adjusted E.P.S. at €1.61 vs. €1.13 reported.

The exceptional items include an impairment charge, integration costs for acquisitions and business transformation programs. 

2024 Guidance: "For the full year 2024, the Company expects organic net revenue growth of 3%-4%, driven by positive volume/mix, adjusted EBITDA growth of 4%-6%, and adjusted EPS of €1.75-€1.80, implying growth of 9-12%. Based on USD/EUR exchange rate as of February 17th, this translates into 2024 adjusted EPS of $1.89-$1.95. The Company expects full year cash flow conversion in the range of 90% to 95%."

Earnings Report for the Q/E 3/31/24: Released after my purchase. 

SEC Filed Press Release and  Condensed Financial Statements 

Revenue: €784M, up 1%

Organic Revenue Growth: +.3% "driven by favorable price/mix of 2.5%. Quarterly volume declines moderated to -2.2%, a marked improvement from -8.0% in 4Q23". With the surge in inflation starting in 2021, packaged food companies raised prices to recoup input cost increases and those price increases negatively impacted volume. 

Revenue by Country: 

Reported E.P.S.: €.21 

Adjusted E.P.S.: €.37, down from €.46 

The explanation for the decline was a "balance sheet inventory revaluation due to lower inflation" and an increase in operating expenses.

Reported to Adjusted Reconciliation: 

The "exceptional items" are set out in another document as noted in a footnote: 

 Reaffirmed 2024 guidance: Adjusted E.P.S. of €1.75-€1.8, "implying growth of 9-12%". Based on EUR/USD exchange rate as of 5/1/24, that range translates into 2024 adjusted E.P.S. of US$1.87-$1.93. 

B. Added 5 CTO at $17.13 - Schwab Account: 

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

Cost: $85.65

CTO SEC Filings

10-Q for the Q/E 3/31/24 

CTO provides management services to Alpine Income Property Trust Inc. (PINE) and owns 15.7% of PINE's equity. 

Management Fees and Dividends Paid by PINE-1st Q:  

Business Segments as of 3/31/24: 

Page 9, 10-Q

The commercial loan segment consisted of the following: 

The $15.4M Sabil Pavilion mortgage note was paid off in April by the borrower. 

The commercial loans are described at pages 14-16 of the 10-Q.

Owned Properties: 20 with 3.895M square feet, occupancy at 92.6% 

Details of owned properties at pages 24-25 SEC Filed Supplemental (the top ten tenants are listed at page 31)  

Subservice Interest and Mitigation Credits Segments

As noted in the previous snapshot, CTO eliminated its remaining interests in subsurface rights for $5M, resulting in a gain of about $4.5M. 

Last Discussed: Item # 1.K. Added to CTO - Bought 1 at $16.49 (3/1/2024 Post)(discussed the 2023 4th quarter report in that post,  SEC Filed Press Release); Item # 1.A. Added to CTO - Bought 15 at $17.2; 5 at $17.1 (12/16/23 Post)

Investment Category: Equity REIT Common and Preferred Stock Basket Strategy

Stock Split: 3 for 1 in 2022. CTO Realty Growth Announces Three-For-One Stock Split

New Average cost per share: $17.66 (120+ shares)

Dividend: Quarterly at $.38 per share ($1.52 annually)

Yield at New AC of $17.66 = 8.6%

Last Earnings Report (Q/E 3/31/24): 

SEC Filed Earnings Press Release; SEC Filed Investor Presentation for the Q/E 3/31/24; SEC Filed Supplemental for the Q/E 3/31/24 

Total Revenues: $28.127M

Diluted GAAP E.P.S. = $.20 (includes $9.163M gain on dispositions of assets which included a $4.6M gain from selling a mixed-use property in Santa Fe, N.M.)

FFO per share: $.41

Core FFO per share: $.48

AFFO per share: $.52

Reconciliation of Net Income to AFFO: 

In the net income to FFO calculation, non-cash depreciation expense is added and the gain on asset disposition is deducted. 

An unrealized depreciation on investment securities is added back. The PINE stock owned by CTO declined in value during the quarter, closing at $15.28 down from $16.91. Alpine Income Property Trust, Inc. (PINE) Stock Historical Prices & Data - Yahoo Finance

The non-cash revenue created by the straight line accounting convention is subtracted from core FFO to arrive at AFFO. 

Guides 2024 AFFO to $1.74 to $1.82, up from the prior guidance of $1.7 to $1.78.

During the quarter, the REIT repurchased 40,726 shares for $.7M (weighted average cost per share at $18.28)  

During the quarter, CTO invested $71M in two retail property acquisitions totalling 319,066 leasable square feet for a weighted average going in cash capital rate of 8%. 

Most of the debt is priced at spreads to SOFR but the coupons were turned into fixed rates with swap agreements (see pages 7-8 of the SEC Filed Press Release and pages 25-29 of the 10-Q filing.) 

CTO Equity Preferred Stock: I also own the $25 par value equity preferred stock, CTO-PA, that has a 6.375% coupon. My AC per share is $18.89. {Last Discussed: Item #2.C. Added to CTOPRA - Bought 3 at $17.77 (11/11/23 Post); Item # 1.A. Bought 5 CTOPRA at $18.5; 2 at $17.8 (9/30/23 Post)} 

The company has been raising capital by selling more CTO.PRA, either through an ATM program or in a public offering. During the first quarter, CTO sold 124,857 common shares under its ATM program at a weighted average price of $17.05. 

Subsequent to the quarter's end, CTO sold in a public offering 1,718,417 CTO.PRA shares which includes the greenshoe allocation. Prospectus The shares were sold at $20 with the net proceeds to CTO at $19.37 before its internal offering expenses. In its first quarter earnings release, CTO stated that its net was at $33.1M from this public offering.  

Since the preferred share owner has no equity interest in the business, the common shareholders do not suffer dilution in their ownership interests through additional preferred stock sales. 

However, the preferred shareholders have a superior claim to cash and the dividends paid on preferred stock are not available to support the common share dividend. The total preferred share dividend amount will consequently be deducted from net income in the FFO calculation. 

C. Added to SAR - Bought 10 at $23.25; 10 at $22.95: 

Quote: Saratoga Investment Corp. - Externally Managed BDC

Cost $462

SEC Filings

SEC Filed Annual Report for the F/Y ending 2/29/24 (Risk factor summary starts at page 28 and ends at page 63)

Net Asset Value per share data: 

Page 65 Annual Report

Investment Portfolio Overview: Floating Rate at 99.5%/First Lien at 85.7%

Sourced: Pages 81-82 of Annual Report

A BDC first lien loan is not like a first mortgage lien on an electric utilities assets where the value of those assets likely exceeds the mortgage. A BDC first lien loan will generally attach to assets that have substantially less value than the amount of the borrowers outstanding debt. An example is SAR's first lien loan to Pepper Palace that had a cost of $33.14+M and was valued at $2.4+M as of 2/29/24. 

Page F-16, Annual Report

And, in many cases, the value of those assets that secure a first lien loan is close to zero when the business fails. 

On 5/8/24, Oppenheimer downgraded its price target to $23 from $24, and lowered its rating to market perform from outperform, due to what the analyst viewed as credit stress issues. I do not have access to that report and am merely repeating a brief headline. All BDCs experience credit stress issues, which just goes with the inherent risks of their loans. The risk will become elevated in a recession but exists even during a robust economy. Another credit risk issue that is applicable to all BDCs with mostly floating rate loans is that the current interest rates on those loans, priced at spreads to short term rates, creates business risks for the borrowers compared to what was being paid prior to 2022. BDCs are just risky investments and that needs to be accepted before buying them. I keep my monetary exposures at insignificant levels and then attempt to reduce risk through trading. 

Last Discussed: Item # 1.B. Added to SAR - Bought 5at $24; 5 at $23.5 (10/14/23 Post) 

New Average cost per share: $24.25 (50 shares)

Snapshot Intraday on 5/8/24 after last 10 share add

Dividend: Quarterly at $.73 per share ($2.92 annually), last raised from $.72 effective for the 2024 first quarter payment. 

SAR Dividend History | Nasdaq

Yield at AC with $2.92 Annual per share: 12.04%

Last Ex Dividend: 3/12/24

Last Earnings Report (F/Q ending 2/29/24): 

SEC Filed Earnings Press Release 

Net Investment Income per share: $.94 

Quarterly Dividend per share: $.73 

Net Asset Value per share: $27.12, down from $29.33 as of 2/28/23

"On April 15, 2024, the Company’s Netreo investment entered into a definitive agreement to be acquired by BMC, a global leader in software solutions for the Autonomous Digital Enterprise. The transaction closed on May 1, 2024, and the Company received full repayment of its first lien term loan, including accrued interest, and partial equity proceeds at closing, with additional potential amounts held in escrow for future distributions subject to certain conditions."

"On February 15, 2024, Saratoga Investment announced that its Board of Directors declared a quarterly dividend of $0.73 per share for the fiscal quarter ended February 29, 2024, paid on March 28, 2024, to all stockholders of record at the close of business on March 13, 2024. This is Saratoga Investment’s sixteenth quarterly dividend increase in a row. The Company previously declared in fiscal 2024 a quarterly dividend of $0.72 per share for the quarter ended November 30, 2023, $0.71 per share for the quarter ended August 31, 2023 and $0.70 per share for the quarter ended May 31, 2023. During fiscal year 2023, the Company declared a quarterly dividend of $0.69 per share for the quarter ended February 28, 2023, $0.68 per share for the quarter ended November 30, 2022, $0.54 per share for the quarter ended August, 31, 2022 and $0.53 per share for the quarter ended May 31, 2022." 

D. Added 5 WBA at $17.24: 

Quote: Walgreens Boots Alliance Inc. (WBA)

Cost: $86.18

WBA Analyst Estimates | MarketWatch

WBA SEC Filings

WBA F/Y 2023 Annual Report

Investment Strategy: Possibly Masochistic Contrarian Value

New Average cost per share: $18.72 (20 shares)

Dividend: Quarterly at $.25 per share, slashed from $.48 effective for the 2024 first quarter payment. As previously discussed, a slash was warranted and needed to happen much earlier IMO. 

WBA Dividend History | Nasdaq

Yield at $18.72: 5.34%

Next Ex Dividend: 5/20/24

Last Discussed: Item # 1.E. Added to WBA - Bought 5 at $17.75 (4/19/24 Post) I have nothing further to add here. I discussed the last earnings report (F/Q ending 2/28/24)in that post. SEC Filed Press Release

2. Small Ball Sells: 

A. Eliminated Duplicate Position in OFS (Schwab Account) - Sold 59+ at $9.56: 

Quote: OFS Capital Corp - Externally Managed BDC

Proceeds: $567.6

I have soured on this BDC.  

This was in response to the first quarter earnings report that I discuss below. The two primary reasons are the increase in nonperforming loans and the continued decline in valuation marks for a major OFS equity investment in a private company that represented 42.5% of net assets as of 3/31.24. 

OFS SEC Filings

Website: OFS Capital Corporation | Business Development Company

2023 SEC Filed Annual Report (Summary of risk factors starts at page 28 and ends at page 63; summary of investments starts at page 105; a loan with a (6) beside the name is on nonaccrual status)

Last Discussed: Item # 1.D. Pared Duplicate Position in OFS - Sold 22 at $10.04(4/5/24 Post)(profit snapshot = $13.7; I discussed 2023 4th quarter report in that post, SEC Filed Press Release); Item # 3.G. Pared OFS in Schwab Account - Sold 10 at $12.02 (1/26/24 Post)(profit snapshot = $21.59) I discussed several problematic investments in that post which have caused me to reduce my dollar exposure to OFS. A new nonperforming loan was placed on nonaccrual status in the 2024 first quarter. 

Profit Snapshot: +$284.64

Dividend: Quarterly at $.36 per share ($1.36 annually), last raised from $.33 effective for the 2023 third quarter payment. 

OFS Stock Dividend History & Date

Last Ex Dividend: 3/15/24 (owned all as of)

Net Asset Value Per Share History: 

3/31/24:    $11.08

12/31/23:  $12.09

9/30/23:   $12.74

6/30/23:   $12.94

12/31/22:  $13.47

6/30/22:   $14.57 10/Q for the Q/E 6/30/22 at page 3 

03/31/21:  $11.96 10-Q at page 3 

12/21/20:  $11.85 10-K at page 69 

6/30/20:   $10.10
3/31/20:    $  9.71
12/31/19:   $12.46
9/30/19:    $12.74  
6/30/19:    $12.95   Page 2 10-Q
3/31/19      $13.04   10-Q
12/31/18    $13.10
6/30/18     $13.70
03/31/18   $13.67
12/31/17    $14.12
12/31/16    $14.82
12/31/15    $14.76
12/31/14    $14.24
12/31/13    $14.54

IPO Offering Price at $15 (November 2012) with proceeds after the underwriters' discount at $13.05 Final Prospectus Supplement

Last Earnings Report (Q/E 3/31/24): 

SEC Filed Press Release 

NII per share: $.42

"For the quarter ended March 31, 2024, total investment income increased to $14.2 million from $13.5 million in the prior quarter, primarily due to an increase in dividend income of $2.4 million, partially offset by a decrease in interest income of $1.5 million."

The $2.4M increase in dividend income was described as "non-recurring dividends from our equity investments in TRS Services, LLC and Pfanstiehl Holdings, Inc. of $1.9 million and $0.5 million, respectively." OFS 10-Q at page 48 During the quarter, OFS exited its position in TRS Services for gross proceeds of $3.9M, recognizing $1.9M of accumulated preferred stock dividends and a realized gain of $1.4M. (p. 55) 

If I deducted $2.4 from the net investment income of $5.596M (p.4), the result is $3.196M or $.2385 per share, down from the reported $.42 that included the $2.4M increase in nonrecurring dividend payments.  

OFS is not covering its dividend with just interest income received on its loans. 

"Net loss on investments of $1.09 per common share for the quarter ended March 31, 2024, primarily comprised of net unrealized depreciation of $1.15 per common share."

Weighted average yield performing loans: 13%

Weighted average yield-all loans: 11.6% 

A new loan (SSJA Bariatric Management) was placed on nonaccrual status in the first quarter: 

Amortized Cost at $13.462M, Marked to $8.846M

10-Q at page 12 The value mark was at $12.853M as of 12/31/23 when the loan was still performing. 

Prior to the release of the 2024 first quarter report, I was already responding negatively to the increase in nonaccrual loans before this latest one which is significant given its size in relation to the OFS market capitalization.    

Loans on nonaccrual as of 3/31/24: 

Page 54, 10-Q

Company Assessment of Credit Risks: 

Pfanstiehl Equity Investment:  

In the 2024 first quarter, OFS marked down its equity investment in this private company to $63.077M. 10-Q at page 15 The percentage of net assets was then at 42.5%.

As previously discussed, the most significant investment is a 400 share equity investment in the private company Pfanstiehl, valued at $70.927M as of 12/31/23. 

That equity investment was valued at $77.105M as of 9/30/23, page 16, with an amortized cost of $217,000. 

Looking at the 2019 OFS Annual Report, I noted that the 400 common shares was valued at $4.755M as of 12/31/2019. OFS then had outstanding a 10.5% subordinated loan of $3.768M outstanding. That loan matured in 2021 leaving OFS with just the equity position. (p. 96, 10-K) Frequently equity positions will be acquired by a BDC as part of a loan transaction. 

Most Recent Buy Discussions: Item # 3.F. Bought 40 OFS with an Average Cost Per share of $4.18 (11/7/20 Post); Item # 2.L. Added 5 OFS at $3.97-Fidelity Taxable (11/28/20 Post); Item # 1.K. Added 3 OFS at $4.5 -Fidelity Taxable (8/8/20 Post); Item # 3.E. Added 5 OFS at $9.66; 5 at $9.2; 5 at $8.7; 5 at $6; 5 at $5.65; 2 at $3.7; 10 at $3.79 (4/11/20 Post)

B. Pared OFS Position in Fidelity Account - Sold 9+ at $9.55: 

See Item # 2.A. Above. 

Proceeds: $89.53

Profit Snapshot: $51.33 (5/7/24 sale only)

I sold the remaining shares purchased with dividends back in 2020:

There was no ROC adjustment to the original tax cost basis. 

New Average cost per share:  $3.77 (49 shares)

Snapshot Intraday after pare on 5/7/24

Quarterly dividend: Quarterly at $.34 per share. 

Distribution History - OFS Capital Corporation

If there is not a major improvement in net investment income per share based on recurring interest payments, I am expecting a dividend slash. The only way to avoid it without that improvement is to sell common shares in the private equity investment discussed above in Item # 2.A. The 2024 first quarter dividend was more than covered but that was due to non-recurring dividend income originating mostly from an investment that was sold in the first quarter. 

Yield at $3.77 AC = 36.07%

There have been no ROC adjustments to the tax cost basis as mentioned above, meaning simply that the dividends have been covered by net investment income so far since my purchases. The yield is consequently based on my total cost paid when purchasing the shares. 

Some Other Sell Discussions: Item # 3.D. Pared OFS in my Fidelity Account - Sold 8+ at $11.81 (1/20/24 Post)(profit snapshot - $60.72); Item # 1.B. Pared OFS in Schwab Account - Sold  20 at $11.51 (12/30/23 Post)(profit snapshot = $17.65); Item # 6.C. Pared OFS in Schwab Account - Sold 20 at $10.86 (9/30/23 Post)(profit snapshot = $28.94); Item # 3.A. Eliminated OFS in Vanguard Account - Sold 20 at $10.2 and Item # 3.B.  Pared OFS in my Fidelity Account-Sold 10 at $10.15 (8/19/23 Post)(profit snapshots = $182.5)(Item #3.B. also contains snapshots of prior realized gains); Item # 3.D. Pared OFS in Fidelity Account - Sold 13.82 Shares at $11.32 (8/16/22 Post); Item # 4.B. Pared OFS in Fidelity Account - Sold 15.427 at $12.49 (6/15/22 Post)(profit snapshot = $60.07; contains snapshots of realized gains prior to 2022); Item # 4.D. Pared OFS in Fidelity Account - Sold 29+ at $13.06 (4/21/22 Post)(profit snapshot = $69.88); Item # 1.H. Pared OFS in Fidelity Account Sold 35 at $10.07- Highest Cost Lots That Could be Sold Profitably (7/22/21 Post)(profit snapshot = $12.44);; Item # 2.M. Pared OFS in Vanguard Taxable-Sold 20 at $7.2 (12/25/20 Post)(profit snapshot = $56.8); Item # 3.B. Sold 10 OFS at $12.04 (11/30/19 Post)(profit snapshot = $7.04); Item # 4.B. Sold 60 shares at $12 (11/13/19 Post)(profit snapshot = $13.11); Item # 3.A. Sold Highest Cost OFS Lots in Schwab Account - 50 shares at $12.27 and 50 at $12.47 (5/5/19 Post)(profit snapshots = $69.55)    

OFS Realized Gains to Date: $1,116.18

Goal: Any total return in excess of the dividends. 

C. Pared AY - Sold 5 shares at $21.05: 

Quote: Atlantica Sustainable Infrastructure PLC (AY) 

Proceeds: $105.25

AY  Analyst Estimates | MarketWatch

AY owns renewable energy generation facilities. As of 12/31/23, AY owned or had an interest in 45 facilities  "with 2,171 MW of aggregate renewable energy installed generation capacity (of which approximately 73% is solar), 343 MW of efficient natural gas-fired power generation capacity, 55 MWt of district heating capacity, 1,229 miles of electric transmission lines and 17.5 M ft per day of water desalination." SEC Filed 2023 Annual Report at page 49. 

Website: Atlantica- Sustainable Infrastructure

AY SEC Filings (foreign company forms)

Corporate Presentation Nov-2023.pdf

Last Discussed: Item # 1.G. Added to AY - Bought 5 at $17.49; 5 at $16.9 (4/19/24 Post); Item # 1.E. Added to AY - Bought 5 at $18.25; 5 at $17.9 (3/1/24 Post)(discussed 2023 4th Q report in that post, SEC Filed Earnings Release) 

This transaction is part of a routine risk mitigation strategy, where I average down in small lots and then profitably sell my highest cost lot when the price rebounds. 

When I sold this lot, I was aware of unusual price and volume activity in AY that started in mid-April 2024 when the closing prices ranged from $17.15 to $17.61. The close on 4/22 was $18.51 with volume of 2.594+M shares. The price jumped the next day to $19.91 with volume accelerating to 5.244+M shares. The price continued thereafter to trend higher with the volume being much higher than the historical average prior to April. Atlantica Sustainable Infrastructure plc (AY) Stock Historical Prices & Data I discussed this activity in a comment published on 5/3/24.  

All of that suggested the possibility that AY was in play and some investors had non-public information on the acquisition discussions. 

As I have noted, AY was a potential acquisition target since Algonquin Power & Utilities Corp. (AQN) owns 42+% of the stock and had previously announced that it was interested in selling its renewable energy generation facilities. It was not much of a leap to assume that selling the AY stock would be part of that exit strategy. And, AY announced last February that it was engaged in a strategic review process to maximize shareholder value. 

Bloomberg reported on 5/2/24 that a private firm known as Energy Capital Partners was in advanced talks to acquire AY. I pared the position on 5/1 before I was aware of this development and that was just in furtherance of my normal risk mitigation measures.  

Profit Snapshot: $5.25

Old AC per share: $18.63

New AC per share: $18.45 (40 shares)

Dividend: Quarterly at $.445 per share ($1.78 annually)

AY Dividend History | Nasdaq

Yield at $18.45 AC = 9.648%

Last Ex Dividend: 3/11/24 (owned 35 as of)

Last Earnings Report (Q/E 3/31/24): 

SEC Filed Earnings Presentation 

AY reports in USDs

Revenues: $242.9M

Cash Available for Distribution: $50.9M

CAD per share: $.44, down from $.53 in the 2023 first quarter

Renewable Generation: 2,203MW

National Gas Generation: 398MW

There is some hydro generation. 

Transmission lines: 1,229 miles.   

D. Pared Duplicate Position in CGBD - Sold 9 at $17.57 (Schwab Account):  

Quote: Carlyle Secured Lending Inc. (CGBD) - Externally Managed BDC 

Proceeds: 158.13

I sold my highest cost lot purchased on 9/18/18 at $17.04. There was no ROC adjustments to the tax cost basis.  

Last Discussed: Item # 2.C. Pared CGBD in Fidelity Account - Sold 7+ at $17.41 (3/15/24 Post)(profit snapshot = $37.81); Item # 3.H. Eliminated CGBD in Vanguard Taxable Account - Sold 10 at $15.1 (2/5/23 Post)(profit snapshot = $65.6);Item # 2.E. Pared CBGD in Fidelity Taxable Account - Sold 25+ at $14.46 (3/24/22 Post)(profit snapshot = $31.09) 

Profit Snapshot: +$4.8

Old Average Cost per share: $12.35

New Average cost per share: $11.66 (61+ shares)

Snapshot Intraday on 5/8/24 after pare  

Excluding shares purchased with dividends, my small ball buys ranged from $4.75 on 3/23/20 to the $17.04 buy in 2018. I quit reinvesting the dividend in this account effective with the January 2021 payment. 

Dividend: Quarterly at $.40 (regular only)

CGBD Stock Dividend History & Date

This BDC has paid several special dividends including $.07 per share in the first quarter and $.28 in 2023. 

Dividend Yield:  13.72%  (using regular dividend only)

Adding the last 4 quarterly special dividend payments of $.28 per share, the yield would be 16.12% at the $11.22 average cost per share. 

Last Ex Dividend: 3/27/24 (regular and special; owned all as of)

Net Asset Value per share history: 

3/31/23:   $17.07

12/31/23:  $16.99 

12/31/22:  $16.91

9/30/22 :  $17.16

12/31/21:  $16.91

12/31/20: $15.39

12/31/19:  $16.56 

12/31/18:  $18.12  

6/30/17:   $18.01

The Initial Public Offering was in June 2017. The public offering price was $18.75. The external advisor paid 50% of the $.56 per share underwriters' discount. Prospectus 

CGBD's offering expenses were then estimated at $1.8M or approximately $.20 per share. 

After those net expense items, the net proceeds to the BDC were about $18.27 per share. 

Last Earnings Report (Q/E 3/31/24): 

SEC Filed Earnings Press Release and SEC Filed EArnings Presentation 

Net Investment Income per share: $.54

Weighted average yield of 12.5%

Nonaccrual loans at .2% of the total portfolio based on amortized cost and fair value (1 loan)

Number of portfolio companies: 135

Floating rate loans at 100%

First Lien Loans at 70.9%

Company assessment of credit quality: 

3. Corporate Bonds:  $17,000 in principal amount

I cut off the discussion with bonds bought on or before 5/3/24. The corporate bonds bought on 5/6/24 and thereafter will be discussed in my next post.  

A. Bought 2 Bank of America 4% SU Maturing on 1/22/25 at a Total Cost of 98.867: 

Issuer:  Bank of America Corp. (BAC) 

BAC Analyst Estimates | MarketWatch

BAC SEC Filings 

10-Q for the Q/E 3/31/24 

SEC Filed Earnings Press Release for the Q/E 3/31/24 

Finra Page: Bond Page | FINRA.org

Credit Ratings: A3/BBB+

YTM at Total Cost: 5.613%

Current Yield at TC = 4.046%

B. Bought 2 Sherwin Williams 3.45% SU Maturing on 8/1/25 at a Total Cost of 97.354: 

Issuer: Sherwin-Williams Co.  (SHW) 

SHW Analyst Estimates | MarketWatch

SHW SEC Filings 

SHW SEC Filed Earnings Press Release for the Q/E 3/31/24 

10-Q for the Q/E 3/31/24 

SHW SEC Filed 2023 Annual Report Debt is listed at page 63.

Finra Page: Bond Page | FINRA.org

Credit Ratings: Baa2/BBB

YTM at Total Cost: 5.677%

Current yield at TC = 3.54%

C. Bought 2 Healthpeak 4% SU Maturing on 6/1/25 at a Total Cost of 98.287 (IB Account): 

Issuer: Healthpeak Properties Inc. (DOC) Healthpeak recently completed its acquisition of Physicians Realty and changed its stock symbol from PEAK to DOC. 

SEC Filings 

SEC Filed Earnings Press Release for the Q/E 3/31/24 

I have a small ball position in the common stock. 

Finra Page: Bond Page | FINRA.org

Credit Ratings: Baa1/BBB+ 

YTM at Total Cost: 5.657%

Current Yield at TC = 4.07%

I own 4 Healthpeak bonds that mature on 2/1/25. 

D. Bought 2 Broadcom 3.125% SU Maturing on 1/15/25 at a Total Cost of 98.25:

Issuer: Broadcom Inc. (AVGO) 

AVGO Analyst Estimates | MarketWatch

AVGO SEC Filings 

SEC Filed Earnings Press Release for the F/Q ending 2/4/24 

Finra Page: Bond Page | FINRA.org

Credit Ratings: Baa2/BBB

YTM at Total Cost: 5.703%

Current Yield at TC = 3.181%

E. Bought 2 Marathon Petroleum 4.7% SU Maturing on 5/1/25 at a Total Cost of  99.109 - IB Account: 

Issuer: Marathon Petroleum Corp. (MPC) 

MPC Analyst Estimates | MarketWatch

MPC SEC Filings 

MPC SEC Filed Earnings Press Release for the Q/E 3/31/24 

FINRA Page: Bond Page | FINRA.org

Credit Ratings: Baa2/BBB

YTM at Total Cost: 5.64%

Current Yield at TC = 4.74%

I have 4 Marathon Petroleum bonds that will mature on 9/1/24. 

F. Bought 2 Phillips 66, 3.605% SU Maturing on 2/15/25 at a Total Cost of 98.488:

Issuer: Phillips 66 (PSX) 

PSX Analyst Estimates | MarketWatch

PSX SEC Filings 

SEC Filed Earnings Press Release for the Q/E 3/31/24 

Finra Page: Bond Page | FINRA.org

Credit Ratings: A3/BBB+

YTM at Total Cost: 5.618%

Current Yield at TC = 3.66%

G. Bought 1 Bank of America 5.6% SU Maturing on 11/6/25: 

Credit Ratings: A3/BBB+

Interest paid quarterly. 

Bought at par value under Fidelity's Corporate Notes Offerings.   

H. Bought 2 Verisk Analytics 4% SU Maturing on 6/15/25 at a Total Cost of 98.344: 

Issuer: Verisk Analytics (VRSK) 

VRSK Analyst Estimates | MarketWatch

VRSK SEC Filings 

10-Q for the Q/E 3/31/24 Debt is listed at page 16. The 2025 bond is the next one to mature. Cash and cash was reported at $352.4M as of 3/31/24. Net income for the quarter was reported at $219.6M. 

Finra Page: Bond Page | FINRA.org

Credit Ratings: Baa2/BBB

YTM at Total Cost: 5.57%

Current Yield at TC = 4.067%

I. Bought 2 Aptiv PLC 2.396% SU Maturing on 2/18/25 at a Total Cost of 97.587: 

Issuer: Aptiv PLC  (APTV) 

APTV Analyst Estimates | MarketWatch

SEC Filings 

SEC Filed Earnings Press Release for the Q/E 3/31/24 (net income of $214M)

10-Q for the Q/E 3/31/24 (debt is listed at page 16)

Finra Page: Bond Page | FINRA.org

Credit Ratings: Baa2/BBB  

Prospectus (2/2022)

YTM at Total Cost: 5.604%

Current Yield at TC: 2.455%  

This is one way to shift interest income tax recognition out of 2024 into 2025. While I will receive about 3 months interest this year, which is after the deduction for accrued interest paid to the seller, the only full 6 month interest payment will be received next year along with the "profit" of $48.26. The profit realized at maturitny is generally taxed as interest rather than a capital gain.    

4. Treasury Bills Purchased at Auction: 

A. Bought 10 Treasury Bills at the 5/6/24 Auction (Schwab and Fidelity Accounts): 

182 Day Bills

Mature on 11/7/24

Interest: $260.62

Investment Rate: 5.366% 

B. Bought 5 Treasury Bills at the 5/8/24 Auction: 

119 Day Bill 

Mature on 9/10/24

Interest: $86.61

Investment Rate: 5.406%

5. Treasury Notes Purchased in the Secondary Market: 

A. Bought 1 Treasury 4.25% Note Maturing on 5/31/25 at a Total Cost of a 98.9842: 

YTM at 5.224%

I now own 2. I will buy some treasury notes in the secondary market as fillers in my bond ladder.  

B. Bought 1 Treasury 4.625% Note Maturing on 6/30/25 a Total Cost of  99.3652: 

YTM:  5.188%. 

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.