Economy:
U.S. productivity falls for the first time since 2015-MarketWatch; US industrial productivity labor costs Q3 2019 Productivity declined at an annual rate of .3% during the third quarter.
The ISM October 2019 PMI increased to 54.7% from 52.6% in September. The new orders component increased by 1.9 to 55.6.
China eclipsing U.S. as Europe’s go-to partner - MarketWatch
China says it has agreed with the US to cancel existing tariffs in different phases This report was responsible for both a stock surge and a rise in longer term interest rates last Thursday. The report is vague in its particulars and requires considerable speculation to fill in the blanks.
The Stock Jocks ignored Donald's comment yesterday that he had not agreed to a tariff rollback. Trump says he hasn't agreed to roll back tariffs on China; Trump says he hasn't agreed to rolling back China tariffs - POLITICO
My general reaction is that China's "concessions" are more mirages than real.
I doubt that any agreement reached on currency, for example, will impact what China's central bank would do without an agreement.
Promises to purchase U.S. agricultural products may simply restore the status quo prior to the tariff war.
Any intellectual property protections will be more smoke and mirrors that will not materially impede the theft of U.S. intellectual property.
It is certainly possible that Donald will fold and claim that the so called Phase 1 agreement is the best deal ever struck in world history.
The motivation for caving now would entirely relate to his concerns about winning reelection and the importance of the farm vote in states that he has to win.
China tariff rollback faces fierce opposition in the White House; Trump trade adviser pushes back on reports of US-China tariff deal | TheHill
More Americans say now is a bad time to buy a home (only 21% say it is a good time to buy a house)
For those who believe that the recent FED interest rate cuts are a magic elixir for the economy, notwithstanding the negative impact on household free risk savings income, you may want to consider the negative implications that will flow from the rise in longer term rates.
The ten year treasury yield closed yesterday at 1.94%, up from 1.47% on 9/4/19. Daily Treasury Yield Curve Rates
+++++
Markets and Market Commentary:
J.P. Morgan reduces gold recommendation while still pushing stocks - MarketWatch, quoting head of JPM's market strategy team as follows: “We maintain a significant and incrementally larger tilt in our model portfolio towards risky assets, based on signs of a cyclical recovery, easing geopolitical tensions, synchronized monetary easing, and defensive investor positioning across asset classes,”
The World Has Gone Mad and the System Is Broken by Ray Dalio
Stocks may be rallying to records, but the earnings outlook is darkening
J.P. Morgan reduces gold recommendation while still pushing stocks - MarketWatch, quoting head of JPM's market strategy team as follows: “We maintain a significant and incrementally larger tilt in our model portfolio towards risky assets, based on signs of a cyclical recovery, easing geopolitical tensions, synchronized monetary easing, and defensive investor positioning across asset classes,”
The World Has Gone Mad and the System Is Broken by Ray Dalio
Stocks may be rallying to records, but the earnings outlook is darkening
+++++
Trump:
Majority expect Trump to win re-election, poll finds - MarketWatch (85% of republicans, 51% of independents and 35% of Democrats: National Tracking Poll 191104)
Majority expect Trump to win re-election, poll finds - MarketWatch (85% of republicans, 51% of independents and 35% of Democrats: National Tracking Poll 191104)
New York writer E. Jean Carroll, who accused Trump of sexual assault sues him for defamation Donald invites this kind of suit by publicly calling his accusers liars rather than just denying the claim which could not form the basis of a libel suit.
Stephanie Grisham called Ms. Carroll a "fraud". Ms. Carroll could add Ms. Carroll as a defendant for that comment and possibly argue that Donald is derivatively liable for that statement as well.
These are jury questions and are not generally susceptible to dismissal prior to a trial, though one republican judge S. James Otero, will allow Donald to defame private citizens by creating a broad exemption for "rhetorical hyperbole".
Stephanie Grisham called Ms. Carroll a "fraud". Ms. Carroll could add Ms. Carroll as a defendant for that comment and possibly argue that Donald is derivatively liable for that statement as well.
These are jury questions and are not generally susceptible to dismissal prior to a trial, though one republican judge S. James Otero, will allow Donald to defame private citizens by creating a broad exemption for "rhetorical hyperbole".
I hope Ms. Carroll adds Grisham as a defendant since her mouth needs to act with more restraint and maybe that would teach her a much needed lesson.
Poll: 62% of Trump fans say they support him no matter what I suspect that the number is significantly higher than 62%. Some people would support him no matter what but would not admit to it when asked that type of question.
++++++
Fraud and the Trump Foundation:
Trump had to admit that he used Trump Foundation money for his political purposes, to pay off business debts and to purchase a portrait of himself. Trump ordered to pay $2 million to settle Trump Foundation suit; Trump Ordered to Pay $2 Million to Charities for Misuse of Foundation - The New York Times; Donald Trump to pay $2 million to settle New York Attorney General civil lawsuit against Trump Foundation and his children
Just another Trump fraud. The Trump Foundation in New York was a sham. We have no idea how many other foundations are too. - Vox
The Clinton Foundation on the other hand is a real charity. Charity Navigator - Rating for The Clinton Foundation
There is no proof that the misused charitable donations for their personal use.
And, the Clintons received no compensation from the Clinton Foundation. Frequently Asked Questions | Clinton Foundation
The republicans have alleged from time to time that Hillary promised favors while she was Secretary of State in exchange for donations to the Clinton Foundation, but reliable proof is lacking and the allegation is more in the nature of conspiracy theory hatched by republicans.
See generally, Clinton Foundation Archives - FactCheck.org
Will the Trumpsters who have blasted the Clinton Foundation, criticize Donald for using charitable funds for his own benefit?
I have not found one republican politician who voiced a whimper of disapproval.
Based on what is known factually, as opposed to republican reality creations perpetuated in bad faith and with actual malice, the mistake made by the Clintons was allowing the Clinton Foundation to accept foreign donations while she was Secretary of State. She needed to remove the conflict argument that the republicans would inevitably make.
++
Impeachment Inquiry Transcripts Released:
Top White House official told Congress ‘there was no doubt’ Trump sought quid pro quo with Ukrainians
4 big takeaways from Fiona Hill’s and Alexander Vindman’s transcripts
Top diplomat in Ukraine directly ties Trump to quid pro quo
U.S. diplomat accuses Giuliani of 'lies' campaign against envoy to Ukraine
Impeachment inquiry: George Kent's testimony takeaways: USA Today
Impeachment transcripts released for Alexander Vindman and Fiona Hill
It is abundantly clear, except in the Alternate Reality of Trumpworld of course, that Donald put a hold on military aid to the Ukraine. This was done solely to pressure that country into launching investigations of Donald's political opponents. The scheme failed only because there was bipartisan pressure on Donald to release the aid.
Without a doubt, reasonable or otherwise, every GOP House and Senate member would vote to impeach a Democrat president for the same conduct. The howls for impeachment would be deafening and would be led by none other than Senator Lindsey Graham (R-SC).
Will there be a single republican vote to impeach Trump?
Maybe there will be a handful, capable of being counted with the fingers of one hand, when you combine the votes in both chambers.
One republican congressman who said he would actually consider the evidence was hounded into retirement. GOP congressman who was open to impeachment calls it quits
Trump has been attacking the whistleblower almost daily as a traitor and a "never" Trumpster, all of whom are "human scum" according to Demagogue Don. Yesterday, he called the whistleblower a "disgrace" to the country. Donald Trump Calls Whistleblower A ‘Disgrace,’
Jordan: Republicans Will Subpoena Whistleblower for Public Hearing
Republicans and their media apparatchiks have been circulating one name as the possible whistleblower. Eric Ciaramella: 5 Fast Facts You Need to Know | Heavy.com Donald Jr. tweeted Ciaramella as the possible whistleblower. Reading Junior's twitter feed is remarkable for the easily identifiable echo chamber of TrumpWorld's Alternate Reality.
Donald and other republicans want to punish the whistleblower for coming forward with what has proved to be, without question, accurate factual information about Donald's abuse of power.
This is to be expected from them, and the whistleblower had to know that would happen before filing his complaint. My advice to the whistleblower would be to take all precautions for their personal safety now.
Donald has already incited Trumpsters to make death threats against the public servants who have come forward, including Fiona Hill. Former Trump aide Fiona Hill says she's received death threats-Business Insider
Transcripts show Republicans’ scattershot strategy in early days of impeachment inquiry Republicans complained that the depositions were not conducted in public, but their complaint during the depositions was that information was being made public through releases of written prepared remarks.
Apparently, for reasons that are impossible for me to fathom, this kind of crystal clear hypocrisy and inconsistent positions work on millions of Americans.
Republicans echo Trump conspiracy theories in impeachment inquiry interviews -The Washington Post The post story refers to the questions posed by representatives Jim Jordan (R-Ohio), Lee Zeldin (R-NY) and Mark Meadows (R-NC), three of the most clownish republican representatives.
The deposition of Marie Yovanovitch revealed that she was concerned about her safety from remarks made by Trump. Marie Yovanovitch’s testimony, explained: Impeachment transcript released - Vox
And the State Department told her to leave Ukraine on the next plane for her own "security". In her testimony, Ambassador Yovanovitch summarized a telephone conversation with Carol Z. Perez, Director General of the Foreign Service, as follows:
Inside the Impeachment Testimony: Dry Questions and Flares of Drama ("The transcripts indicate that, despite repeated claims that they have been prevented from taking part in the impeachment inquiry, Republican members have spent many hours questioning witnesses.") The republicans use part of their time to smear the witnesses with fact free allegations.
Most Republicans on impeachment committees aren’t showing up, transcripts reveal Some of the GOP representatives who stormed the deposition room, chanting "let us in" were actually permitted to attend the depositions including one of the ringleaders Jim Jordan.
Jordan, a former wrestling coach, is among the best and brightest that the House GOP has to offer. Referee says he told Rep. Jim Jordan that Ohio State doctor performed sex act in shower
Consequently, since the hearings starting next week will be held by the House Intelligence committee, and Jordan was not a member of that committee, the GOP leaders decided that their best and brightest needed to be added as a republican member of that committee. Trump ally Jim Jordan gets a seat on committee for impeachment hearings
The republican senior member of that committee was Devin Nunes who made headlines recently suing a cow for defamation. Devin Nunes sued a fake cow. And kept suing and suing and suing... - Los Angeles Times; Devin Nunes Has Filed a Very Weird Lawsuit Against Ryan Lizza | Washingtonian (DC); Devin Nunes sues Twitter, ‘Devin Nunes’ cow’ for defamation - The Washington Post
As a constitutional matter, the only question left is whether Donald's conduct warrants impeachment and that is debatable. The fact that he abused the office of the presidency for personal political gain is not debatable.
+++
Last Week's Elections-More Signs of Ongoing Realignment in the Suburbs:
Democrats Win Control in Virginia and Claim Narrow Victory in Kentucky Governor’s Race
Election 2019 takeaways: Matt Bevin, Andy Beshear, Virginia and more: USA Today
When the republicans controlled Virginia's government, they engaged in racially based gerrymandering that solidified their control through artificial and anti-democratic means. Supreme Court hands Democrats a win in Virginia racial gerrymander case
In Trump's shadow, Republican suburban slide shows little sign of slowing - Reuters
Major geographic political realignments do occur periodically.
1960 Presidential Election Interactive Map Southern states were mostly carried by JFK, while the west coast and most of New England were carried by Nixon.
2016 Presidential Election Actual Results The South is solidly republican except for Virginia, while the west coast and most of New England voted for Hillary.
There is no longer a republican House member from New England. Susan Collins Is the Last New England Republican in Congress Ms. Collins may easily lose her bid for reelection in 2020.
++++++++
1. Canadian Reset Equity Preferred Stocks:
A. Bought 50 BAMPRS at C$14.55:
Issuer: Brookfield Asset Management Inc. Cl A (U.S.: NYSE); Brookfield Asset Management Inc. Cl A (Canada: Toronto)
Coupon: Floats at a 2.35% spread to the 3 month Canadian Treasury Bill
Prospectus Excerpt:
Recent Dividend Payments:
At a 1.5% 3 month yield, the coupon would become 3.85%. The dividend yield at a total cost of C14.55 would be 6.62%.
At a 4% 3 month month yield, the coupon would because 5.5%, raising the dividend yield to 9.45% at a TC of C$14.55 per share.
2. Small Ball Trades-All Commission Free:
I am continuing to resist the urge to sell every stock and stock mutual fund or reduce the size by at least 90%.
I am continuing to resist the urge to sell every stock and stock mutual fund or reduce the size by at least 90%.
A. Eliminated R-Sold 15 at $50.49:
Quote: Ryder System Inc. (R)
Profit Snapshot: +$69.15
I had a negative reaction to the third quarter earnings report. That resulted in stopping the small ball purchase program. Ryder Reports Third Quarter 2019 Revenue of $2.2 Billion, Up 3%; Earnings Impacted by Change in Residual Value Estimates When I have that kind of reaction, I really do not care what anyone else thinks about it. The Stock Jocks got over it in a few days.
Earnings generated by selling used vehicles is an important part of the business so I will not ignore a major change in the profitability of that segment.
A downturn in prices for those vehicles caused Ryder to markdown their residual value.
The end result was a third quarter GAAP E.P.S. loss of $1.75.
The company also made this comment:
"While commercial rental pricing was up modestly for the quarter, demand was below our prior expectations which negatively impacted utilization in the quarter. We are executing on our plan to right-size our tractor rental fleet and expect to have it aligned with market conditions by early 2020."
"In the Supply Chain Solutions (SCS) business segment, total revenue and operating revenue (a non-GAAP measure excluding fuel and subcontracted transportation) were down 2% to $618 million and $454 million, respectively, compared with the year-earlier period. The decline in SCS total revenue and operating revenue primarily reflects previously announced lost business."
I will reconsider restarting when (1) the price is below $45 and (2) there is a substantial improvement in a subsequent earnings report. Investors reacted negatively but not as negatively as warranted IMO.
B. Eliminated BDN-Sold 101+ at $15.33:
Quote: Brandywine Realt (BDN)
Closing Price Yesterday: BDN $15.25 +$0.07 +0.46%
Company Website: Brandywine Realty Trust
B. Eliminated BDN-Sold 101+ at $15.33:
Closing Price Yesterday: BDN $15.25 +$0.07 +0.46%
Company Website: Brandywine Realty Trust
2018 Annual Report
Profit Snapshot: +$100.4
Item # 2.A. Bought 100 BDN at $14.34-Commission free trade (7/17/19 Post)
I received one quarterly dividend which was reinvested.
Category: Equity REIT Common and Preferred Stock Basket Strategy
Dividend: Quarterly at $.19 per share
Last Ex Dividend Date:
Recent Earnings Report (Q/E 9/30/19):
"FFO available to common shares and units in the third quarter of 2019 totaled $64.0 million or $0.36 per diluted share versus $63.2 million or $0.35 per diluted share in the third quarter of 2018. Our third quarter 2019 payout ratio ($0.19 common share distribution/$0.36 FFO per diluted share) was 52.8%."
While the payout ratio and stock price to FFO look favorable for a REIT, I view those numbers as misleading. The relevant number for a non-triple net lease REIT is cash available for distribution.
As an office REIT, BDN will spend every quarter a considerable amount of cash on routine maintenance and "tenant improvements".
Cash used to fund those expenditures are not available to support the dividend.
BDN's FFO Calculation:
Brandywine Realty Trust Announces Third Quarter 2019 Results, Narrows 2019 Guidance and Provides Initial 2020 Guidance
The investor has to go to BDN's 10-Q to acquire information on those expenditures. For the 9 month period ending on 9/30/19, BDN spent $53.383M on "tenant improvements". Page 17 10-Q
Another $33.905M was spent on "redevelopments" which I interpret to mean capital investments that improve the value of existing properties.
I have a number of small trades in BDN that are initiated primarily pursuant to a dividend harvest strategy.
E.G. Item # 2 Sold 100 BDN at $12.38-ROTH IRA (8/9/12 Post)-Item # 1 Bought Roth IRA: 100 BDN at $11.24 (6/27/12 Post)(one dividend payment harvested)
I will consider repurchasing BDN at or below prior $14.3 prior to the next ex dividend date.
C. Eliminated SNR-Sold 398+ Shares at $8.05:
Quote: New Senior Investment Group Inc. (SNR)
Website: New Senior Investment Group
Last Earnings Report: New Senior Announces Third Quarter 2019 Results
SEC Filings
Closing Price Yesterday: SNR $7.52 -$0.09 -1.18%
Profit Snapshot: +$256.55
I explained the rational for this elimination in an earlier comment. The shares popped after this announcement: New Senior Announces Strategic Transaction to Sell Assisted Living/Memory Care Portfolio
Category: Gateway Post: Equity REIT Common and Preferred Stock Basket Strategy
Sell Discussions: Item # 2 Pared SNR-Sold 139 Shares at $8.28 (4/16/18 Post)(profit snapshot = $154.44)
Item # 4.A. Sold 100 SNR at $10.44 (8/7/17 Post)
Item # 6 Sold 100 SNR at $11.76 and Item # 7 Sold 50 SNR at $11.85: Update For Equity REIT Basket Strategy As Of 7/28/16 - South Gent | Seeking Alpha
South Gent's Comment Blog # 2 (noting a 50 share sell transaction at $12.3 on 9/16/16 in a Vanguard Roth IRA)
Realized Gains to Date: $879.17 ($622.62 in prior trades)
I would characterize SNR as a high risk REIT.
SNR 5 Year Chart
5 Year Annual Average Total Return = -7.59%
Sourced from DRIP Returns Calculator (through Friday's close)
I also mention SNR in Item # 3 below.
3. Dumpster Diving-Lottery Ticket Basket Strategy:
A. Bought 50 NEWM at $7.6:
Quote: New Media Investment Group Inc. (NEWM)
SEC Filings
Website: New Media Investment Group
Corporate Profile – New Media Investment Group
Closing Price Yesterday: NEWM $7.54 -$0.08 -1.05%
This particular dumpster dive may end up capturing a mouthful of garbage.
NEWM Info (Day of purchase-11/7/19)
New Media is in the process of acquiring Gannett. The deal terms provide that each Gannett share will be exchange for $6.25 in cash and .5427 of a NEWM share. SEC Filed Press Release Announcing the Merger
GCI - Gannett Co Inc Profile | Reuters
NEWM- New Media Investment Group Inc Profile | Reuters
SEC Filed Transcript of 8/5/19 Call to Discuss Merger
As part of the deal NEWM is getting rid of its external manager for a price:
SEC Filed Press Release
The external manager is Fortress Investment Group who I hold in low regard.
{New Senior Investment (SNR) was another company managed by Fortress. While the benefits to Fortress are clear, including the outrageous amount paid to buy out its contract, the benefit of its management to SNR shareholders was IMO impossible to find. New Senior Announces Definitive Documentation for Internalization}
I view that termination to be a positive.
When that acquisition is completed, the NEWM anticipates that dividend will be cut from the current quarterly rate of $.38 per share to $.19 or $.76 per share annually.
The dividend yield shown in the preceding snapshot likely reflects the last dividend paid by New Media at the $.38 per share quarterly rate.
Dividend Yield: Assuming the new penny rate works out to $.76 per share annually, the yield at at a total cost of $7.6 would be 10%.
The one year 45+% decline is certainly flashing a red warning light visible throughout the known universe. The Stock Jocks are not confident in the predictions made my NEWM about will happen after the merger is completed.
NEWM shareholders have been punished greatly for the decision to acquire Gannett. Empire building in the newspaper business is not the path to riches.
Chart: Widow Maker
The question is whether the current price reflects too much pessimism about the future. I am betting a small amount that the selling is overdone but I have low confidence in that opinion. There is certainly nothing in the chart that provides comfort that the worst is over.
It would be a plus for NEWM IMO if its shareholders vote down the merger proposal at the 11/14/19 meeting, even though there are some future benefits from the acquisition involving Gannett's non-newspaper businesses and the move to digital newspapers and advertising as cost saving measures. Key New Media holder (MNG Enterprises) to support Gannett deal-Seeking Alpha MNG owned 8.5% of NEWM as of 10/31/19.
Last Earnings Reports for Gannett and New Media:
New Media Announces Third Quarter 2019 Results, summarized at New Media ad drop dings Q3 revenue- Seeking Alpha; CEO Mike Reed on Q3 2019 Results - Earnings Call Transcript | Seeking Alpha
Gannett Reports Third Quarter 2019 Results summarized at Gannett EPS beats by $0.06, misses on revenue-Seeking Alpha
Both companies are growing digital subscribers.
In the third quarter, Gannett's digital revenue hit 38% of the total, with digital only subscriptions rising 27% Y-O-Y to 607,000. The total digital advertising and marketing services revenues were $183.6M or 53% of the total digital advertising and market revenue.
Gannett's operating revenue declined by 7.8% Y-O-Y, which is the problem in a nutshell.
There will be cost cutting including major staff reduction after the merger is completed shortly after the shareholder vote on 11/14.
The trend toward digital newspapers will be a difficult one since there is a trade off between advertising and subscription dollars. Currently, Gannett's main publication, USA Today, is not behind a paywall. USA TODAY If a subscription was required, advertising revenue would go down. The digital subscription is $9.99 per month for an exact digital replica delivered to the subscribers inbox and $4.99 per month for ad-free browsing. I read some articles and may go with the ad-free plan since the ads are annoying.
Gannett does provide advertising solutions for local businesses under its "ReachLocal" segment that could possibly provide a foundation for more profitable future endeavors. The services provided by ReachLocal are described in this excerpt from the 2018 Annual Report:
Page 7
So far, however, the results are uninspiring for this business segment.
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 sell 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 family members.
Profit Snapshot: +$100.4
Item # 2.A. Bought 100 BDN at $14.34-Commission free trade (7/17/19 Post)
I received one quarterly dividend which was reinvested.
Category: Equity REIT Common and Preferred Stock Basket Strategy
Dividend: Quarterly at $.19 per share
Last Ex Dividend Date:
Recent Earnings Report (Q/E 9/30/19):
"FFO available to common shares and units in the third quarter of 2019 totaled $64.0 million or $0.36 per diluted share versus $63.2 million or $0.35 per diluted share in the third quarter of 2018. Our third quarter 2019 payout ratio ($0.19 common share distribution/$0.36 FFO per diluted share) was 52.8%."
While the payout ratio and stock price to FFO look favorable for a REIT, I view those numbers as misleading. The relevant number for a non-triple net lease REIT is cash available for distribution.
As an office REIT, BDN will spend every quarter a considerable amount of cash on routine maintenance and "tenant improvements".
Cash used to fund those expenditures are not available to support the dividend.
BDN's FFO Calculation:
Brandywine Realty Trust Announces Third Quarter 2019 Results, Narrows 2019 Guidance and Provides Initial 2020 Guidance
The investor has to go to BDN's 10-Q to acquire information on those expenditures. For the 9 month period ending on 9/30/19, BDN spent $53.383M on "tenant improvements". Page 17 10-Q
Another $33.905M was spent on "redevelopments" which I interpret to mean capital investments that improve the value of existing properties.
E.G. Item # 2 Sold 100 BDN at $12.38-ROTH IRA (8/9/12 Post)-Item # 1 Bought Roth IRA: 100 BDN at $11.24 (6/27/12 Post)(one dividend payment harvested)
I will consider repurchasing BDN at or below prior $14.3 prior to the next ex dividend date.
C. Eliminated SNR-Sold 398+ Shares at $8.05:
Quote: New Senior Investment Group Inc. (SNR)
Website: New Senior Investment Group
Last Earnings Report: New Senior Announces Third Quarter 2019 Results
SEC Filings
Closing Price Yesterday: SNR $7.52 -$0.09 -1.18%
Profit Snapshot: +$256.55
I explained the rational for this elimination in an earlier comment. The shares popped after this announcement: New Senior Announces Strategic Transaction to Sell Assisted Living/Memory Care Portfolio
Category: Gateway Post: Equity REIT Common and Preferred Stock Basket Strategy
Sell Discussions: Item # 2 Pared SNR-Sold 139 Shares at $8.28 (4/16/18 Post)(profit snapshot = $154.44)
Item # 4.A. Sold 100 SNR at $10.44 (8/7/17 Post)
Item # 6 Sold 100 SNR at $11.76 and Item # 7 Sold 50 SNR at $11.85: Update For Equity REIT Basket Strategy As Of 7/28/16 - South Gent | Seeking Alpha
South Gent's Comment Blog # 2 (noting a 50 share sell transaction at $12.3 on 9/16/16 in a Vanguard Roth IRA)
I would characterize SNR as a high risk REIT.
SNR 5 Year Chart
5 Year Annual Average Total Return = -7.59%
Sourced from DRIP Returns Calculator (through Friday's close)
I also mention SNR in Item # 3 below.
3. Dumpster Diving-Lottery Ticket Basket Strategy:
A. Bought 50 NEWM at $7.6:
Quote: New Media Investment Group Inc. (NEWM)
SEC Filings
Website: New Media Investment Group
Corporate Profile – New Media Investment Group
Closing Price Yesterday: NEWM $7.54 -$0.08 -1.05%
This particular dumpster dive may end up capturing a mouthful of garbage.
NEWM Info (Day of purchase-11/7/19)
New Media is in the process of acquiring Gannett. The deal terms provide that each Gannett share will be exchange for $6.25 in cash and .5427 of a NEWM share. SEC Filed Press Release Announcing the Merger
GCI - Gannett Co Inc Profile | Reuters
NEWM- New Media Investment Group Inc Profile | Reuters
SEC Filed Transcript of 8/5/19 Call to Discuss Merger
As part of the deal NEWM is getting rid of its external manager for a price:
The external manager is Fortress Investment Group who I hold in low regard.
{New Senior Investment (SNR) was another company managed by Fortress. While the benefits to Fortress are clear, including the outrageous amount paid to buy out its contract, the benefit of its management to SNR shareholders was IMO impossible to find. New Senior Announces Definitive Documentation for Internalization}
I view that termination to be a positive.
When that acquisition is completed, the NEWM anticipates that dividend will be cut from the current quarterly rate of $.38 per share to $.19 or $.76 per share annually.
The dividend yield shown in the preceding snapshot likely reflects the last dividend paid by New Media at the $.38 per share quarterly rate.
Dividend Yield: Assuming the new penny rate works out to $.76 per share annually, the yield at at a total cost of $7.6 would be 10%.
The one year 45+% decline is certainly flashing a red warning light visible throughout the known universe. The Stock Jocks are not confident in the predictions made my NEWM about will happen after the merger is completed.
NEWM shareholders have been punished greatly for the decision to acquire Gannett. Empire building in the newspaper business is not the path to riches.
Chart: Widow Maker
The question is whether the current price reflects too much pessimism about the future. I am betting a small amount that the selling is overdone but I have low confidence in that opinion. There is certainly nothing in the chart that provides comfort that the worst is over.
It would be a plus for NEWM IMO if its shareholders vote down the merger proposal at the 11/14/19 meeting, even though there are some future benefits from the acquisition involving Gannett's non-newspaper businesses and the move to digital newspapers and advertising as cost saving measures. Key New Media holder (MNG Enterprises) to support Gannett deal-Seeking Alpha MNG owned 8.5% of NEWM as of 10/31/19.
Last Earnings Reports for Gannett and New Media:
New Media Announces Third Quarter 2019 Results, summarized at New Media ad drop dings Q3 revenue- Seeking Alpha; CEO Mike Reed on Q3 2019 Results - Earnings Call Transcript | Seeking Alpha
Gannett Reports Third Quarter 2019 Results summarized at Gannett EPS beats by $0.06, misses on revenue-Seeking Alpha
Both companies are growing digital subscribers.
In the third quarter, Gannett's digital revenue hit 38% of the total, with digital only subscriptions rising 27% Y-O-Y to 607,000. The total digital advertising and marketing services revenues were $183.6M or 53% of the total digital advertising and market revenue.
Gannett's operating revenue declined by 7.8% Y-O-Y, which is the problem in a nutshell.
There will be cost cutting including major staff reduction after the merger is completed shortly after the shareholder vote on 11/14.
The trend toward digital newspapers will be a difficult one since there is a trade off between advertising and subscription dollars. Currently, Gannett's main publication, USA Today, is not behind a paywall. USA TODAY If a subscription was required, advertising revenue would go down. The digital subscription is $9.99 per month for an exact digital replica delivered to the subscribers inbox and $4.99 per month for ad-free browsing. I read some articles and may go with the ad-free plan since the ads are annoying.
Gannett does provide advertising solutions for local businesses under its "ReachLocal" segment that could possibly provide a foundation for more profitable future endeavors. The services provided by ReachLocal are described in this excerpt from the 2018 Annual Report:
So far, however, the results are uninspiring for this business segment.
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 sell 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 family members.
