Bought 50 FMER at 16.96/Bought 30 BRKL at LT at 9.06/Bought 50 TRK at 14.65/Sold 100 CWHN at 21.39/Sold 50 ING Hybrid IDG at 24.63/Sold 100 of the Bond CEF GBAB at 18.84

The U.S. Department of Health released a study that uninsured Americans failed to pay up to 49 billion in hospital bills every year.  USATODAY.com  Those costs contribute to higher insurance premiums, thereby contributing to more Americans electing to go without insurance.  

Johnson & Johnson (own) was added to the Goldman Sachs' conviction buy list.  TheStreet

Intel (own) raised its quarterly dividend by 16%, the second increase in six months. The new quarterly rate is 21 cents per share. The earlier raise was a 15% increase back in November 2010.    SEC Filed Press Release  I started to re-initiate purchases of Intel shortly after Lehman's failure (see snapshot at Item # 4 Snapshot of Intel Purchases with Cash Flow). Those purchases were then made under the Large Cap Valuation Strategy.  They would qualify under the Common Stock Dividend Growth Strategy with the recent growth in the dividend. As shown in the snapshot, my average total cost per share is $16.59 for the long term shares.  The increased dividend gives me an annualized yield of 5% at a total cost of $16.59.

Several TCs that I own went ex interest yesterday for their semi-annual payments, including JZV, DHM and JZJ.  After a few recent sales of JZV, I am content to just hold the 100 shares held in a taxable account with 50 of those shares bought below $10.  I am trying to cut down on my charitable contributions to our destitute Uncle Sam in 2011, so I am reluctant to sell positions with large capital gains, though I may change my mind in 2012 on that point.

I lost a chunk of my JZJ shares, and all of my JZE shares, to redemptions by the call warrant owners. (JZE was bought at $12.5 and redeemed at $25 plus accrued interest):

JZE Full Call and JZJ Partial Call 2010=$1809.44 Realized Gain Plus Interest on $2740.56 Investment

Both of those TCs contained the same senior AT & T bond.   I am surprised that the warrant owner has not yet fully redeemed JZJ shares.  For now, I am content to hold what I own, with an average cost per share of  , but would not purchase any anywhere near current price levels.

JZJ Remaining Shares After 2010 Partial Call by Warrant Owner

1. Bought 50  FirstMerit Corporation (FMER) at 16.86 Last Friday (Regional Bank Stocks' Basket Strateagy)(see Disclaimer): FMER appears to me to be a well run regional bank operating in northeast Ohio and in the metropolitan Chicago area.  The original focus was in Ohio, but the Near Depression gave this well capitalized bank the opportunity to extend its reach into the Chicago area via two FDIC assisted acquisitions and the Chicago branches of First Bank. This extension of FMER's geographic service territory is discussed at page 2 of FMER's 2010 Annual Report: Form 10-K

FirstMerit did participate in TARP. FORM 8-K The bank bought back the government's preferred stock in April 2009. (page 7 2009 Annual Report Form10-k). Many banks took the government's low cost money, just a 5% dividend rate for the first five years,  until the government started to demand a say on pay. Then, the bank officers decided quickly that they no longer wanted the low cost money.

The 2010 year-end capital ratios can be found at page 47 of that report.

For the 1st quarter of 2011, the bank reported net income of 27.6 million or 25 cents per share.  SEC Filed Press Release As of 3/31, the tangible common equity ratio was 7.5%; the efficiency ratio was just okay at 64.46% (below 60% would be preferable); the allowance for loan losses to NPLs was 138.67%; and the net interest margin was at 4%.  A more detailed  Form 10-Q has been filed for the quarter. The capital ratios can be found at page 71 of that report. 

The dividend yield is okay. However, FMER did reduce the annual dividend from a $1.14 in 2008 to 76 in 2009 and then cut the dividend again in 2010 to 64 cents per share annually.  While that is understandable, and certainly better than FMER's main competitors in Ohio (e.g. KEY), it is still viewed unfavorably here at HQ which is one reason this bank is a late edition to the basket. I decided to give more weight to its entry into the Chicago metropolitan area than to the dividend cuts which is the main reason for initiating a small position at this time. 

2. Sold 100 Bond CEF GBAB at 18.84 Last Friday (see Disclaimer):  I am continuing to pare my longer term bond fund holdings, and I am done for now with the sells of the CEF GBAB and the perpetual ING hybrid IDG last Friday.   GBAB was a recent purchase at $18.2

3. Sold 50 IDG at 24.63 Last Friday (see Disclaimer):  I hopefully will not buy another ING hybrid until I can receive a current yield greater than 8%.   I had some success trading the ING hybrids during the Near Depression period, when they could have been purchased with yields over 20% on a routine basis, and sometimes closer to a 60% annualized yield. ING Hybrids: Links in one Post

For example, I mentioned buying ISF at $4.6 (February 2009). At that price the yield was over 34%.  But that was not the low price. A few days after my purchase the price hit $2.6 and all of the ING hybrids traded on U.S. exchanges have $25 par values. With a 6.375% coupon on a $25 par value, the current annualized yield for a purchaser at a total cost of $2.6 would be over 61%.  In retrospect, I doubt that the college professors who have sold many of their snake oil "efficient market" theories could justify that kind of price based on a rational assessment of all available information. 

I received one quarterly dividend for my latest foray into IDG and a small profit.  I just do not want to continue playing the European hybrids when they are trading near, or even over their par values. 

4. Sold 100 CWHN at 21.39 Last Friday (see Disclaimer):  I have bought and sold this exchange traded senior bond, issued by Commonwealth REIT  (CWH), on several occasions.  While I am currently comfortable with the credit risk, and the intermediate maturity, I am not enthusiastic about the yield or the appreciation potential above my sales price last Friday.  This bond has a 7.5% coupon on a $20 par value and matures on 11/15/2019 www.sec.gov.  It is callable by the company after 11/15/2014.  CWH was able recently to sell another senior bond, traded in the bond market, with a 5.875% coupon and a 2020 maturity.   www.sec.gov That bond is now selling at a premium to its par value. FINRA 

Interest payments on CWHN are made quarterly.

I bought the shares sold last Friday in two 50 share lots: Added 50 of CWHN at 20.65  Bought: 50 CWHN @ 21

Commonwealth REIT was formerly known as HRPT Properties.  The symbol for this bond was then HRPN, and I bought and sold it back then: Bought 100 HRPN at 19.32 (January 2010 Post) Sold 100 CWHN at 21.22 in Roth  (September 2010) Added 100 HRPN AT 19.15 (January 2010 Post)  Sold 100 CWHN at $20.57 (August 2010).

I will buy this security back at a price slightly above its $20 par value or below.  Instead, I will use the profits and trading CWHN, plus its interest payments,  to buy more of CWH's common shares.  I currently own 100 shares of CWH. The dividend yield on the stock is higher than on the bond.  The annual common stock dividend is currently $2 per share.   CWH 

CWH reported FFO per diluted share of 86 cents for the first quarter.  Rental income for the quarter was reported at  214.362 million. Total assets was shown on the balance sheet at 6.689 billion dollars.   As of 3/31/11, 87.5% of CWH's total square footage was leased, down from 88.6% at the end of March 2010. CWH also filed  the SEC Form 10-Q for the first quarter which goes into more detail than the press release announcing earnings.  As of 3/31. the REIT owned 271 suburban office buildings, 39 Central Business District office buildings, and 180 industrial and other properties. (page 12)

5. Bought 50 Speedway Motorsports (TRK) at 14.65 Last Friday (See Disclaimer):  I recently sold 100 shares of Speedway Motorsports  at $16.08. My most extensive discussion of this company was made when I purchased 50 shares of TRK and International Speedway on the same day. Bought:  50 TRK @ 15.77, 50 ISCA @ 23 I later averaged down on TRK by buying 50 shares  @ 14.55.

The dividend yield is okay at my purchase price last Friday. The current annual rate is 40 cents per share, or around 2.73% at a total cost of $14.65.

I now have a lower cost basis for 50 shares than I did for the previous 100 shares, which is an important consideration under LB's myriad trading rule.  I also made a small profit on the first quick trade (+$68.11), plus one dividend payment.  

I view Speedway as a contrarian value play. My reasons for buying a few shares at $15.77 last year remain the same. The recession, high unemployment and gas prices have had a profound impact on the typical customer for motorsports. It is not surprising that both the dominant owners of race car tracks in the U.S., TRK and ISCA, have suffered under those conditions.

When those conditions improve, hopefully sooner rather than later, I would anticipate better earnings. The current depressed TRK price has the bad news from the past two years baked into the share price.  But the share price also seems to predict with close to virtual certainty a continuation of those adverse conditions for many years to come.  If that is a correct assessment, it would not take much of a surprise to send the shares back over $20 per share.  A five year high was hit at $40.36 per share on 5//31/2007. TRK Stock Charts.

The shares have fallen over a buck since the release of its first quarter earnings report before the market opened on 5/4 which seemed like an overreaction to me. Form 10-Q  The company reported non-GAAP earnings of 8 cents for the first quarter and reaffirmed full year guidance of $.9 to $1.2 per diluted share from continuing operations. SEC Filed Press Release  The consensus estimate, made by 4 analysts, is for a $1.05 in 2011 and $1.17 in 2012.

For this stock to hit $20 within the next 18 months, TRK will need to do better than $1.17 for 2012, more like $1.30 in 2012, with economic conditions improving during the course of 2012 so that investors would be raising their estimates for 2013. If the $20 target is hit in one year with the 4 dividends, then the total return would be about 39% at a total cost of $14.65.  

6. Bought 30 Brookline Bancorp (BRKL) at 9.06 Last Friday (LOTTERY TICKET strategy)(See Disclaimer):  I may upgrade this position to the Regional Bank Strategy basket, provided Brookline successfully integrates its recently announced acquisition of Bancorp Rhode Island (BARI). A successful integration would make BRKL an potential acquisition target for a larger bank desiring to expand into MASS and RI.  Both BRKL and BARI were on my monitor list for possible purchase under the Regional Bank Basket strategy.  Unfortunately, I did not own Bancorp Rhode Island which jumped from a close of $30.71 on 4/19, with a share volume of 600 shares, to $44 the next day on 469,700 shares.   BARI Historical Prices  

I was not surprised by the decline in BRKL shares after the merger announcement, as the shares fell from $9.98 to $8.93 or about $10.5. The reason is that this appears to be a full priced offer.  BARI shareholders will receive either $48.25 in cash or 4.866 shares, or a combination of the two.  SEC Filed Merger Agreement   BRKL maintains that the deal with be 25% accretive by 2012 (see statement  sec.gov), but the market has its doubts given the current share price action.   I have no basis to dispute that number or to affirm it.  

The merger does makes some sense to me since the banks are similar and their service territories are near each other geographically.   Brookline Bank has 26 branches in Massachusetts and BARI has 17 in Rhode Island. 

Brookline reported net income of 7.267 million for the 1st quarter or 12 cents per share, up from 11 cents in the first quarter of 2010.  As of 3/31, the net interest margin was 3.74%; non-accrual loans as a percentage of total loans were at .38% which is excellent; NPAs to total assets were at .35%; and tangible book value per share was at $7.54.  The capital ratios shown in the 2010 Annual Report at page F-49 are good too.    www.sec.gov  The bank did not participate in TARP, see page 10. 

Bancorp Rhode Island reported net income for the first quarter of 2.307 million dollars or 49 cents per diluted shares. 10-Q As of 3/31, the tangible common equity ratio was 7.4%; the tangible book value per share was  $25.15;  NPAs as a percentage of total assets were at 1.09%; the efficiency ratio was high at 71.11%; the net interest margin was at 3.58%; and the capital ratios shown at page 44 were okay.  No government preferred stock is shown on the balance sheet as of 3/31/2011.  The bank did participate in TARP:  www.sec.gov  The bank repurchased the government's preferred stock in August 2009. (page 3 2009 Annual Report Form 10-K)

United Refining/C/Sold 100 of the 200 APF at 16.65/BOUGHT 50 CUZPRA at 24.6/Sold 50 BAB and Bought 100 of the Bond CEF GBAB at 18.2

I received an email from my broker that United Refining was calling the 2013 senior bond that I own.  Bought 1 United Refining 10.5% Senior Bond Maturing 11/15/2012 at 96.3 The notice did not have a call date. Another brokerage firm gave the date as 4/8/2011. So, assuming that occurs, I will make a few bucks on the redemption plus several months of interest. To fund the redemption of the 2012 bond, United recently issued a secured 2018 bond in a private placement.

Citigroup announced a 1 for 10 stock split and a 1 cent quarterly dividend on the post split shares. SEC Filed Press Release I do not own this stock and have no plans to buy a single share.  The Masters of Disaster at Citigroup just about destroyed this bank by their reckless and incredibly stupid actions before the Near Depression in 2008 and would have done so without the massive intervention and support of the federal government.  Some of those reckless and idiotic decisions are discussed in tombs written about the causes of the Near Depression.  One of the earliest articles was published in 2008 by the NYT. It would be impossible for any sensible person to read the articles in that series and have any confidence in the titans of finance.

I do own $8,000 (principal amount) of senior notes issued by Citigroup Funding, and guaranteed by Citigroup, that mature in 2014 except for IFO which matures on 12/3/2012.  All of those notes are subject to the credit risk of the issuer and guarantor, and fall under the generic classification of principal protected notes whose interest payments are tied to a performance of an index. (e.g. Bought 100 MKN at 9.85 Bought 100 MTY at 10.49 Bought 100 IFO at $9.35 Bought 100 MOU at $10.12) 

  

1. SOLD 100 of the 200 of the Stock CEF APF at 16.65 Last Monday (see Disclaimer): This stock CEF, the Morgan Stanley Asia-Pacific Fund, was bought in two 100 share lots.  The first 100 share lot has just turned into a long term capital gain so I decided to sell it.   Bought 100 CEF APF at 15.08 (3/20/2010 POST).  The fund had a net asset value per share of $18.17 at last Friday's close and was then selling at -10.62%  discount to its net asset value based on a closing price that day of $16.24.   

This is a link to APF's 2010 Annual Report filed with the SEC. As of 12/31/2010, the fund had over 40% of its assets invested in Japan.  This might give the fund allure to those investors who believe that recent events present a buying opportunity in Japanese equities.  Possibly, this may be the case, but I do not buy into that thesis.  Since 1989, the Nikkei index has been in a massive secular bear market. NIKKEI 225 Index Chart -1984 to Present A buy and hold investor would be bleeding red ink.  At most, Japanese equities have presented a trading opportunity from time to time.  I am simply not currently inclined to believe that this market will have any lasting counter-trend move from the recent sell-off.  Many disagree with me on this point and argue for investing in Japan now.  {e.g. Cover Story in this week's Barrons: Buy Japanese Stocks - Barrons.com (subscription publication)}.  Buffett seems to agree with that thesis:   Reuters  Buffett was quoted to say that he would not sell Japanese stocks if he owned them, which is not the same as saying that he planned to buy some. 

For someone willing to buy and hold for up to a decade, the Nikkei may present a buying opportunity between now and a year from now. I still prefer to play Asia with funds that invest in the region excluding Japan. Bought Matthews Asian Growth and Income (MACSX) (9/14/2009 Post).  I have also owned for several years, antedating the Near Depression, the Matthews Pacific Tiger (MAPTX) mutual fund. In November 2010, I exchanged all of my shares in Matthews India into Matthews Asian Growth and Income: Added to MACSX This is a link to the Morningstar pages on  MACSX and MAPTX.  

2. Pared Trade: Sold 50 of the ETF BAB at $25.4 and Bought 100 of the Bond CEF GBAB at $18.20 Last Monday (see Disclaimer):  Both of these funds invest in taxable municipal bonds issued under the Build America Bond program. The BAB shares were sold near break even with the dividend received to date. 

BAB is a non-leveraged ETF that has a lower expense ratio than the leveraged CEF GBAB.  Both pay monthly dividends.  There is close to a 2% yield advantage in favor of GBAB, mostly due to GBAB selling at a discount to its net asset value and its use of leverage.  BAB has a "modified duration" for its bonds at 10.3 years.  Build America Bond Portfolio | BAB   The weighted average duration for the bonds owned by GBAB was 9.81 years as of 1/31/2011.  So while I pick up some interest rate risk with GBAB's leverage, it has somewhat less interest rate risk than BAB due to its shorter duration.   The leverage for GBAB was at 16.44% as of 2/28:  Fund Overview - CEF GBAB 

While GBAB is primarily weighted in BABs at 86.1% of the portfolio, the fund does own some senior bank loans, corporate bonds and ABS securities. The portfolio quality was 83.7% in either Aa or A rated bonds. All of those figures are as of 1/31/2011: GBAB - Guggenheim Build America Bonds Managed Duration Trust

I suspected that the discount to net asset value was expanding for GBAB when I bought the shares on Monday.  The closing share price last Friday was $18.45, and GBAB closed on 3/18/2011 with a net asset value of $19.65.  The trading in BABs on Monday indicated a negligible change in prices but GBAB had fallen 1.4% in value when I placed my order to buy 100 at $18.2.  The net asset value declined two cents on Monday to $19.63 and GBAB closed at $18.29 that day, creating a discount of -6.83, up from the -6.11 discount as of last Friday's close. The discount to Monday's NAV at my purchase price of $18.20 was -7.28%.

With the decline in price, I also picked up a greater yield. Based on the current monthly payout of 11.7 cents, the yield at a total cost of $18.20 is about 7.7%. 

I also own a CEF that invests in BABs that is sponsored by Nuveen.     

GBAB was ex dividend for its monthly distribution earlier this month.  The current monthly distribution rate is $.117 per share. GBAB Distributions

GBAB closed at $18.14 in trading yesterday, down 15 cents and traded as low as $17.92 on much higher than normal volume.  The net asset value as of Tuesday's close (3/22/2011) was $19.65, unchanged from last Friday's close.  Due to the decline in the market price, the discount to net asset value has expanded from -6.11 on Friday to -7.68 as of Tuesday's close. WSJ.com

3. Bought 50 CUZPRA at 24.6 on Monday (see Disclaimer):  CUZPRA is a cumulative equity preferred stock issued by the REIT Cousins Properties (common: CUZ).  This security has a 7.75%  coupon on a $25 par value. Dividends are current.  The dividend can be deferred provided no dividend is paid to the owners of the common stock.  CUZPRA is a typical REIT equity preferred stock.  REIT CUMULATIVE PREFERRED LINKS IN ONE POST/Advantages & disadvantages

At the current price, I do not believe there is much upside potential and there is always downside risk with this type of security.  I view fixed coupon equity preferred stocks to have more in common with bonds, without the protections and priority, than equity.   During recessions, investors will likely hyper ventilate about credit risk, both real and imagined, and drive the prices of equity preferred stocks down.  I picked up a number of REIT preferred stocks at bargain basement prices during the Dark Period, including one that pays me now 75% per year based on my cost. 

Buying these securities at or near their par value are in no way bargains. I would hope to sell CUZPRA for a $1 or greater profit on the shares after collecting a few dividends. That security is one very small cog in my most basic strategy, which is the generation of cash flow from income producing securities. That stream of income, being generated by around 400 securities, is used to buy more income generating securities, creating a compounding effect over time.  

Cousins has another preferred stock, CUZPRB.  I view it as functionally equivalent to CUZPRA, so I bought the one with the higher yield on Monday.  I have traded both of them for profits in the past.  My lowest purchase of CUZPRA, the one bought on Monday, was at $12.08 in April 2009. 

This is a link to the prospectus:   www.sec.gov  Dividends are paid quarterly on 2/15, 5/15. 8/15 and 11/15. 

This is a link to the Reuters.com profile page on Cousins and to its  Key Developments page.

CUZPRA closed at $24.62 in light trading yesterday.