Economy:
Fed's Bullard says the central bank's 'credibility is on the line,' needs to 'front-load' rate hikes
U.S. wholesale prices increased by 1% last month, with the consensus at +.5%.
After the BLS reported that the annual CPI increase was 7.5% through January 2022, Goldman Sachs raised its forecast for FED FF rate increases to 7 twenty five basis point increases this year. Merrill Lynch has the same forecast.
Soaring lumber price adds nearly $19,000 to the cost of a new home
Retail sales, unadjusted for inflation, rose 3.8% last month, with the consensus at 2.1%.
++++
Earnings Reports-Owned Stocks:
For most regional banks, the primary headwind for earnings remains net interest margin compression but investors are back believing that will soon end. Profits from selling mortgage loans is generally trending down.
Abbreviations Used:
E.P.S. = Earnings Per Share
NIM = Net Interest Margin
Efficiency Ratio: non-interest expenses/revenue (lower is better)
ROA = Return on Assets
ROE = Return on Common Equity
ROTE = Return on Tangible Common Equity
NPL Ratio = Non-performing loans to total loans
NPA Ratio = Non-performing assets to total assets
Coverage Ratio = credit reserves established/non-performing loans
Charge off ratio = loan charge offs annualized to total average loans and leases
Ares Capital (ARCC) SEC Filed Press Release (NII per share = $.52 with $.04 per share in net realized gains; consensus on NII at $.491; GAAP E.P.S. of $.83 includes NII, net realized gain, and $.27 per share in net unrealized gains; net asset value per share = $18.96, up from $16.97 as of 12/31/20; weighted average yield of income investments at amortized cost = 8.7%)
Black Hills (BKH) SEC Filed Press Release (Net income of 71.2M or $1.11 per share with the consensus at $1.277; "Black Hills is reaffirming its guidance for 2022 earnings per share available for common stock to be in the range of $3.95 to $4.15" based on a list of assumptions provided in the press release)
Comcast (CMCSA) SEC Filed Press Release (Non-GAAP E.P.S. of $.77 per share with the consensus at $.734; revenues up 9.5% to $30.336B; free cash flow of $3.784B, up 122.6% from the 2020 4th quarter; for 2021, adjusted E.P.S. at $3.23 with GAAP at $3.04 and free cash flow at $17.1B; the adjustment to GAAP is for amortization of acquisition related intangible assets)
Dime Community Bancshares (DCOM) SEC Filed Press Release (GAAP Net income of $33.5M or $.83 per diluted share; Non-GAAP E.P.S. at $.84; consensus at $.862 per Fidelity-unclear whether that number is GAAP or Non-GAAP; Non-GAAP earnings exclude branch restructuring costs after the Dime Community and Bridge Bancorp merger; adjusted NIM = 3.17%, up from 3.15% in the 2020 4th quarter; efficiency ratio = 49.9%, adjusted to 48.2%; NPA ratio = .33%; Coverage ratio = 208.04%; ROA = 1.14%; ROE = 11.67%; ROTE = 14.61%; Loan to deposit ratio = 88.4%; "repurchased 850,901 shares of its common stock, which represented approximately 2% of shares outstanding at the beginning of the period, at a weighted average price of $34.44"; Tangible book value per share = $22.87)
Heritage Commerce (HTBK) SEC Filed Press Release (net income of $14M or $.23 per share, with the consensus at $.217 per Fidelity; NIM = 2.84%, down from 3.15% in the 2020 4th quarter; efficiency ratio = 54.32%; NPL Ratio = .12%; NPA Ratio = .07%; Coverage Ratio = 1,1158.11; net recovery during the quarter; ROA = .97%; ROE = 9.35%; ROTE = 13.5%; tangible book value per share = $6.91)
II-VI (IIVI) SEC Filed Press Release (Non-GAAP E.P.S. = $.92, with the consensus at $.866 per Fidelity; non-GAAP net income of $159.2M; GAAP E.P.S. at $.44; revenue = 807M; record backlog of $1.7B, up 58% Y-O-Y; GAAP includes a share based compensation expense of $18.7M, $20M of amortization of acquired intangibles, "start-up costs" of $11.3M, and $20.7M of restructuring, integration and transaction expenses that primary relate to the pending Coherent acquisition; start up costs are defined as "operating expenses incurred in the quarter were related to the start-up of new devices for new customer applications") For me the only clear cut expense elimination are non-cash amortization of acquired intangibles and expenses related to the Coherent acquisition. Eliminating share based compensation and "start up costs" to arrive at a non-GAAP number are debatable IMO.
Kimberly Clark (KMB) SEC Filed Press Release (Non-GAAP operating profit of $611M or $1.30 per share with the consensus at $1.242; the quarter was negatively impacted "by $530 million of higher input costs, driven by pulp and polymer-based materials, distribution and energy costs"; net sales of $5.0 billion increased 3 percent compared to the year-ago period, including organic sales growth of 3 percent. Full-year 2021 net sales of $19.4 billion increased 2 percent, with organic sales down 1 percent; for 2022, KMB guides to a 3% to 4% organic revenue increase and adjusted E.P.S. of $5.6 to $6.)
Merck (MRK) SEC Filed Press Release (Non-GAAP E.P.S. from continuing operations = $1.8 with the consensus at $1.526 per Fidelity; GAAP E.P.S. at $1.51; non-GAAP excludes acquisition and divestiture costs, restructuring costs, and loss from investments in equity securities; for 2021, non-GAAP E.P.S. was $6.02 with GAAP at $4.86; 4th quarter revenues = $13.5B, up 23% excluding impact of foreign currencies; Keytruda revenues = $4.577B for the quarter and $17.186B in 2021; other 4th Quarter drug revenues; GARDASIL / GARDASIL 9 at $1.528B; JANUVIA/JANUMET at $1.393B) MRK is still highly dependent on Keytruda.
NBT Bancorp (NBTB) SEC Filed Press Release (net income of $37.3M or $.86 per share with the consensus at $.853; "Net income for the year ended December 31, 2021 was $154.9 million, up 48.4% from $104.4 million for the prior year primarily due to changes in the estimated impact of the COVID-19 pandemic on expected credit losses. Diluted earnings per share for the year ended December 31, 2021 was $3.54, as compared with $2.37 for the prior year, an increase of 49.4%."; NIM = 3.08%, up 20 basis points from the 2021 3rd Q but down from 3.2% in the 2020 4th Q; NPL Ratio = .44%; Charge off ratio = .22%; Coverage Ratio = 280.96%; ROA = 1.23%; ROE = 11.89%; ROTE = 15.7%; total risk based capital ratio = 15.73%; tangible book value per share = $22.36; total cost of deposits = .08%: "Company purchased 204,637 shares of common stock during the fourth quarter of 2021 at a weighted average price of $37.29 excluding commissions. The repurchase program under which these shares were purchased expired on December 31, 2021.")
Northrim BanCorp (NRIM) SEC Filed Press Release (Net income of $8.11M or $1.31 per share with the consensus at $1.38 per Fidelity; 2021 E.P.S. at $6, up from $5.11 in 2020; "Fourth quarter 2021 profitability was fueled by core loan growth, fee and interest income from the Small Business Administration's ("SBA") Paycheck Protection Program ("PPP") loans, and an increase in the net interest margin as compared to the preceding quarter. Also benefiting fourth quarter 2021 results was a $1.08 million benefit to the provision for credit losses, reflecting the strengthening economic outlook in Alaska and improving credit quality. This compares to a $1.11 million benefit to the provision for credit losses in the preceding quarter and a $599,000 benefit to the provision for credit losses in the fourth quarter of 2020."; NIM = 3.52%, down from 3.94% in the 2020 4th quarter; efficiency ratio = 73.58% (too high); NPL Ratio = .75% ; ROA = 1.23%; ROE = 13.14%; ROTE = ; tangible book value per share = $36.88, up from $32.88 as of 12/31/20; total capital ratio = 14.79%; loan to deposit ratio =69.57%)
PennantPark Floating Rate Capital (PFLT) SEC Filed Press Release (NII per share = $.33 with the consensus at $.275 per Fidelity; quarterly dividend at $.285, paid in monthly installments; GAAP net asset value per share. = $12.7; "As of December 31, 2021, our portfolio totaled $1,179.8 million, and consisted of $1,024.8 million of first lien secured debt (including $153.1 million in PSSL), $4.4 million of second lien secured debt and $150.5 million of preferred and common equity (including $48.1 million in PSSL). Our debt portfolio consisted of 99.9% variable-rate investments. As of December 31, 2021, we had three portfolio companies on non-accrual, representing 2.9% and 2.5% of our overall portfolio on a cost and fair value basis, respectively.")
PennantPark Investment (PNNT) SEC Filed Press Release (NII per share = $.19; increased quarterly dividend to $.14 per share from $.12; GAAP net asset value per share = $10.11; "As of December 31, 2021, our portfolio totaled $1,445.4 million, which consisted of $672.7 million of first lien secured debt, $213.9 million of second lien secured debt, $118.7 million of subordinated debt (including $64.2 million in PSLF) and $440.1 million of preferred and common equity (including $41.6 million in PSLF). Our debt portfolio consisted of 93% variable-rate investments and 7% fixed-rate investments. As of December 31, 2021, we did not have any portfolio companies on non-accrual. Overall, the portfolio had net unrealized appreciation of $80.9 million as of December 31, 2021.")
Reynolds Consumer Products (REYN) SEC Filed Press Release (adjusted net income of $107M or $.51 per share on a 13% Y-O-Y revenue increase; GAAP E.P.S. at $.50; consensus at $.488 per share; for 2021, adjusted E.P.S. was at $1.59 with revenues at $3.556B, up 9%; "Company estimates 2022 cost pressures of nearly $400 million. Rates for resin and aluminum are assumed to be stable by comparison to current levels."; "Company expects 10% to 14% revenue growth for the 2022 first quarter, driven primarily by price increases."; guidance for 2022: revenue growth of 9 to 12%, adjusted E.P.S. $1.56 to $1.7 based adjusted net income of $327M to $357M)
Shell PLC (SHEL)(formerly known as Royal Dutch Shell; ADR ratio is 1 ADR = 2 ordinary shares; adjusted E.P.S. at $.83 or $1.66 per ADR with the consensus at $1.409 per Fidelity; see also Shell completes sale of its Permian business to ConocoPhillips | Shell Global; Shell announces first day of trading of single line of ordinary shares- no longer an "A" and "B" class; ordinary shares trade in London and are priced in British Pence, Shell PLC)
United Bankshares (UBSI) SEC Filed Press Release (E.P.S. of $.56 in line with consensus; net income of $73.9M compared to $.71 in the 2020 4th quarter; NIM = 2.94%, down from 3.33% in the 2020; 4th quarter; results were negatively impacted by $20.4M of acquisition related expenses; tangible book value per share = $20.59)
West Bancorporation (WTBA) SEC Filed Press Release (Net income of of $11.9M or $.71 per share with the consensus at $.75; NIM = 3%, down from 3.2% in the 2020 4th Q.; efficiency ratio = 43.2%, "efficiency ratio expresses noninterest expense as a percent of fully taxable equivalent net interest income and noninterest income, excluding specific noninterest income and expenses. Management believes the presentation of this non-GAAP measure provides supplemental useful information for proper understanding of the Company’s financial performance. It is a standard measure of comparison within the banking industry. A lower ratio is more desirable"; Texas ratio = 3.1%, Texas Ratio Definition; ROA = 1.15%; ROE = 18.54%)
+++++
Trump tax firm says documents not reliable
Trump Organization's accounting firm says 10 years of financial statements are unreliable
Nancy Mace (R-SC): Desperate attempt to get back in Trump's good graces Mace angered Don the Jerk by being slightly critical, for a Republican, of what happened on on January 6th. In retaliation, Donald issued a scathing criticism of Mace and endorsed Katie Arrington:
Donald's statement on Congresswoman Mace: "Katie Arrington is running against an absolutely terrible candidate, Congresswoman Nancy Mace, whose remarks and attitude have been devastating for her community, and not at all representative of the Republican Party to which she has been very disloyal."
Mace currently represents South Carolina's gerrymandered 1st congressional district. The Teflon Don carried that district in 2016 and in 2020.
Arrington had her security clearance at the DOD suspended due to allegations she mishandled classified documents. Katie Arrington placed on leave amid probe into suspected disclosure of classified information; Top Pentagon Cybersecurity Official Resigns - Infosecurity Magazine; Arrington settled Pentagon lawsuit, resigned from DoD before launching new Congress run | WCIV
Jim Jordan (R-OHIO): Trump Statement Suggesting Executions 'Right on Target'
Why the West’s Diplomacy With Russia Keeps Failing - The Atlantic I would agree with Anne Applebaum, the author of this article, that trying to reason with Russia's government, or negotiating a treaty with it, is a waste of time and energy. As she points out correctly, Russia has already committed multiple violations of the Budapest Memorandum of 1994 that guaranteed Ukraine's security:
Budapest Memorandum.pdf Any treaty that Russia signs is worthless as a restraint on its aggression.
In PutinWorld, Ukraine is the aggressor and Russia is merely defending itself by threatening an invasion and massing troops on the border.
Russia claims that self-defense measures, designed to deter its aggression, are offensive measures. NATO does not exist to launch an invasion of Russia, of course, but to deter Russian military aggression.
Everything is upside down in PutinWorld, just like TrumpWorld in that regard.
NATO says Russia is increasing troop count at Ukrainian border Putin may lie less than Donald, but that is hardly a compliment.
++++
1. Small Ball:
A. Eliminated MCBC-Sold 85 shares at $9.5-$9.6:
Quote: Macatawa Bank Corporation
MCBC Analyst Estimates | MarketWatch
Macatawa Bank Key Metrics-Reuters
Investment Category: Regional Bank Basket Strategy
Profit Snapshots: +$98.79
Buy Discussions: Item # 3.C. Added to MCBC-Bought 5 at $7.87; 5 at $7.74; 5 at $7.65; 5 at $7.41- Schwab Taxable (10/8/21 Post); Item # 1.K. Started MCBC-Bought 10 at $8.27, 5 at $8.07; 10 at $7.95 (9/10/21 Post)
Last Earnings Report (Q/E 12/31/21): SEC Filed Press Release
GAAP E.P.S. at $.18, down from $.21 in the 2020 4th quarter
Consensus at $.19 per Fidelity
"decline in fourth quarter 2021 earnings from prior year fourth quarter earnings primarily due to decrease in Paycheck Protection Program ("PPP") loan fees recognized"
NIM: 1.85%, down from 2.69% in the 2020 4th quarter
Efficiency Ratio = 62.39%
ROA = .85%
ROE = 9.84%
The preceding numbers are viewed as unsatisfactory.
NPL Ratio = .01%
NPA Ratio = .08%
Charge off Ratio = .04%
Coverage Ratio = 17,270.65% (the highest that I have seen) This is the allowance already set aside for credit losses as a percentage of non-performing loans.
The NPL, NPA, and Charge Off Ratios are excellent and indicate a conservatively managed bank.
Tangible Book Value per share = $7.41
B. Added to Falling Knife SEM-Bought 5 at $22.1:
Quote: Select Medical Holdings Corp.
Last Substantive Discussion: Item # 1.H. Added to SEM- Bought 5 at $28.16, 5 at $23.62; 5 at $22.75 (1/27/22 Post)
As discussed in that recent post, the price decline accelerated after SEM warned that cost pressures would result in lower than expected 4th quarter earnings. SEC Filing
Maybe those pressures will continue for many years to come, pressuring earnings to the downside until the end of days, which appears to be the current Stock Jock consensus based on the less than 10 times P/E multiple, or those cost pressures, largely related to the pandemic's surge, are temporary and will soon abate. I can not predict the future but my gut informs me that the former future assumption is neither realistic nor rational.
SEM has not yet reported 4th quarter earnings and is scheduled to do so on 2/24. The current E.P.S. consensus for that quarter is for $.31 and at $2.91 for 2021. SEM Analyst Estimates-MarketWatch
Last Earnings Report (Q/E 9/30/21): SEC Filed Press Release
C. Eliminated FFNW 3 Accounts - Sold 27+ shares at $16.6:
Quote: First Financial Northwest Inc. (FFNW)
Investment category: Regional Bank Basket Strategy
Profit Snapshots: +$196.73
Last Discussed: Item # 1.B. Bought 10 FFNW at $9.55; 5 at $9.05-Schwab Taxable Account (10/3/2020 Post)
Dividend: Quarterly at $.11, last raised from $.10 effective for the 2021 first quarter payment.
Last Ex Dividend: 12/2/21 (owned as of)
Last Earnings Report (Q/E 12/31/21): SEC Filed Press Release
E.P.S. at $.29, down from $.34 in the prior quarter, and up from $.28 in the 2020 4th Q. This trend was viewed as potentially troubling and was the primary rationale for selling the stock along with the poor efficiency, ROA and ROE ratio numbers.
Consensus at $.333 per Fidelity
"The Company recorded a $600,000 provision for loan losses in the quarter ended December 31, 2021 . . . The provision for loan losses in the quarter ended December 31, 2021, was due primarily to the growth in loans receivable . . . Credit downgrades on two relationships, both relating to commercial real estate loans secured by office buildings in King County that are either experiencing or are expected to have increased vacancies, also contributed to the fluctuation in the provision. Uncertainties about the timing to fill the current and expected vacancies resulted in the downgrades for both relationships."
NIM = 3.4%, up from 3.29% in the 2020 4th Q.
Efficiency Ratio = 68.62%
NPL Ratio: Zero
Charge Offs: Zero
Coverage Ratio = 15,057%
D. Eliminated Remaining NVO Position-Sold 4 at $105.12:
Quotes:
USD ADR: Novo Nordisk A/S ADR
Ordinary Shares Priced in DKK: Novo Nordisk A/S Series B (Denmark: OMX)
ADR Ratio: 1 for 1
DKK / USD Currency Chart. Danish Krone to US Dollar Rates
NVO Analyst Estimates | MarketWatch
Profit Snapshot: +$141.69
Current Position: None.
Last Earnings Report (Q/E 12/31/21): SEC Filed Press Release
I was not impressed given the already high P/E multiple compared to other major drug company stocks.
USD equivalent: $4.76 per Fidelity
Consensus USD E.P.S. $4.71 per Fidelity
The enthusiasm for the shares has been generated by NVO's weight loss drug Wegovy (semaglutide). FDA Approves New Drug Treatment for Chronic Weight Management, First Since 2014 | FDA NVO was not ready to meet demand for this drug after its launch and supply is now constrained by a manufacturing issue on the syringes. Novo Nordisk's weight loss drug Wegovy to run short amid contract manufacturer hiccup
I do not like the fact that NVO lumps Wegovy revenues with its older weight loss drug Saxenda. This is unique to this company when reporting important drug revenues.
2021 Drug Revenues:
The company is highly dependent on its diabetes and insulin drugs, where there is a lot of competition.
Last sell discussion: Item # 3.E. Eliminated NVO in Schwab Account-Sold 4 at $91.23 (8/20/21 Post)(profit snapshot = $76.48)
Dividends are paid semi-annually. I do not view the dividend as a material consideration for owning the stock. Novo Nordisk A/S Common Stock (NVO) Dividend History | Nasdaq
E. Eliminated FFIC in 1 Account-Sold 5 at $23.4:
Quote: Flushing Financial Corp. (FFIC)
FFIC Analyst Estimates | MarketWatch
Investment Category: Regional Bank Basket Strategy
Profit Snapshot: +$58.91
Last Buy Discussion: Item # 1.F. Restarted FFIC-Bought 10 at $12.25; 2 at $10.7; 5 at $10.6; 3 at $10.3; 10 at $10.2 (10/3/2020)
Dividend: Quarterly at $.21 per share, last raised from $.20 effective for the 2018 4th quarter payment.
Last Ex Dividend: 12/9/21
Last Earnings Report (Q/E 12/31/21): SEC Filing
E.P.S. at $.58
"Core" E.P.S. at $.67
Consensus at $.678 per Fidelity
Fidelity has the E.P.S. number as a 10 cent miss:
NIM = 3.29%, up from 3.08% in the 2020 4th quarter
NPA Ratio = .23%
NPL Ratio = .19%
Coverage Ratio = 248.66
Charge offs at zero
Tangible book value per share = $21.61
Sell Discussions:
Item # 1.E. Pared FFIC in Schwab Account- Sold 5 at $24.21 (4/9/21 Post)(profit snapshot = $63.93).
Item # 1.H. Eliminated FFIC in Vanguard Taxable Account -Sold 10 at $18.85 (2/6/21 Post)
Item # 4 Sold 50 FFIC at $13.53 (10/31/11 Post)
Remaining Positions: I still own 10 shares in my Schwab account with a $10.99 average cost per share. I also own 13+ shares in my Fidelity account with an average cost of $10.24.
Prices as of 2/11/22 Close at $23.33
Fidelity Account Position:
Schwab Account Position:
FFIC Realized Gains to Date: $542.9
F. Started INTC as a Placeholder-Bought 2 at $48.85:
Quote: Intel Corp. (INTC)
I eliminated my Intel position in 2018: Item # 1 Sold 60 INTC at $52.29 (3/29/18 Post); Item 1 Sold 50 INTC at $50.51 (3/22/18 Post)
Profit = $3,990.42
Current Position: 2 shares
My rationale for reconsidering Intel was explained in a 2/1/22 comment. Intel is planning a series of massive foundry builds over the next several years. That may work out, provided more companies want to source chip manufacturing domestically. How Intel plans to be top chipmaker again, beating TSMC and Samsung Something needs to happen that rejuvenates earnings growth.
The delay in its 7-nm process to 2023 and its previous problems with the 10-nm process has allowed its competitors to gain traction. And its inability to gain a position in the smartphone is a major negative as well. The summer Intel fell behind - The Verge; How Intel Lost the Mobile Market, Part 2: The Rise and Neglect of Atom - ExtremeTech
The preceding criticisms are just a broad brush summary of my concerns.
Dividend: Quarterly at $.365 per share ($1.46 annually), last raised from $.3475 effective for the 2022 first quarter payment.
Yield at $48.85 = 2.99%
Last Ex Dividend: 2/4/22Last Earnings Report (Q/E 12/31/21): SEC Filed Press Release
2021 non-GAAP E.P.S. at $5.47, up from $5.1 in 2020.
2022 First Quarter Outlook:
Analyst Reports (available to Schwab customers):
Morningstar (1/31/22): 4 stars with a FV of $65
S & P (1/27/22): 3 stars with a 12 month PT of $50
Argus (1/27/22): Buy with a $76 PT
Credit Suisse (1/26/22): Outperform with a 12 month PT of $70
G. Added 10 GRX at $12.71-Schwab Taxable:
Quote: Gabelli Healthcare & Wellness Trust Overview - A Stock CEF that owns healthcare, beverage and food related stocks.
Last Discussed: Item # 2.C. Bought 10 GRX at $12.68 (5/8/21 Post)
SEC Filed Semi-Annual Report (period ending 6/30/21)
SEC Filing - Portfolio as of 9/30/21
Sponsor: GAMCO
Average Cost per share: $12.69 (20 shares)
After my first 10 share purchase, there was a $.36 per share "special" distribution and 3 regular quarterly dividends of $.15 per share or $.81 per share. Gabelli Healthcare & WellnessRx Trust Announces Total Distributions for 2021 of $0.96 Per Common Share
Yield at AC (regular dividend only): 4.73%
Data Date of 1/31/22 Trade:
Closing Net Asset Value Per Share: $14.27
Closing Market Price: $12.77
Discount = -10.51%
Sourced: GRX - CEF Connect
Top 10 Holdings as of 12/31/21:
Of the top ten holdings, only Nestle and Kikkoman are food companies. Kikkoman is a Japanese food company. Kikkoman Global Website
Gabelli Health & Wellness (GRX) Quote | Morningstar (rated at 3 stars)
H. Bought $50 FB at $239.90; $50 at $237.23; $50 at $232.75; $50 at $230.7; $50 at $224.9; $40 at $221.23; $50 at $218.18; $50 at $215.49:
Average Cost per share = $227.24 (1.7+ shares)
Business Summary:
FB Analyst Estimates | MarketWatch (As of 2/15/22, the consensus E.P.S. for 2022 was at $12.56 and at $14.84 in 2023)
3 Year Financial Summary:
 |
| Page 64, 2021 SEC Filed Annual Report |
1 Year Chart as of 2/16/22: Bear Market Trend starting in September 2021
The stock is still searching for a bottom IMO as Big Mo investors continue to dump the stock.
52 Week High at $384.33 on 9/1/21Dividends: None and none expected
Last Earnings Report (Q/E 12/31/21):
4th Q. GAAP E.P.S. = $3.67, down from $3.88 in the 2020 4th Q.
Consensus at $3.84
2021 GAAP E.P.S. = $13.77 includes $2.406B in share based compensation expense. I applaud FB for refusing to provide a non-GAAP E.P.S. number.
2021 Free cash flow = $38.439B
4th Q. Free cash flow = $12.562B, up from $9.222B in the 2020 4th quarter.
4th Q Revenues up 20% Y-O-Y to $33.7B, a rapid deceleration from 35% growth in the 2021 3rd quarter and 33% growth in the 2020 4th Q.
Expects "first quarter 2022 total revenue to be in the range of $27-29 billion, which represents 3-11% year-over-year growth."
This report summarizes FB's problems that led to the major price slide depicted in the chart above.
I summarized those problems in a recent comment. Those issues include a negative Y-O-Y GAAP E.P.S. number, a miss on the consensus 2021 4th quarter E.P.S. estimate, a deceleration in revenue growth caused in part by Apple's tracking privacy change, competition from TikTok and other emerging platforms, and the very large loss numbers in its Reality Labs business that are rapidly accelerating with the ultimate results being unknowable now.
Analyst Reports (available to Schwab customers):
Morningstar (2/8/22); 5 stars with a $400 FV
Argus (2/3/22): Hold
S & P (2/3/22): 3 stars with a 12 month PT of $294 down from $347 prior to the 4th quarter report
Credit Suisse (2/3/22): Outperform with a $336 12 month PT, adjusted down from $430 prior to the 4th quarter report.
A number of brokerage firms reduced their price targets in response to this report. Examples include the following: Goldman Sachs PT to $335 from $445; UBS from $400 to $280; Morgan Stanley from $395 to $360; Bernstein from $400 to $350; Loop Capital from $380 to $250; and RBC Capital from $400 to $315. I do not have access to those analyst reports.
I. Added to ARI-Bought 5 at $12.98; 5 at $12.59:
Quote: Apollo Commercial Real Estate Finance Inc.- a Mortgage REIT that owns commercial mortgages.
"Apollo Commercial Real Estate Finance, Inc. (NYSE: ARI) is a real estate investment trust that primarily originates, acquires, invests in and manages performing commercial first mortgage loans, subordinate financings and other commercial real estate-related debt investments. The Company is externally managed and advised by ACREFI Management, LLC, a Delaware limited liability company and an indirect subsidiary of Apollo Global Management, Inc., a high-growth, global alternative asset manager with approximately $481 billion of assets under management at September 30, 2021."
Buy Discussions: Item # 1.L. Bought 5 ARI at $13.45 (12/31/21 Post); Item # 2.C. Bought 10 ARI at $15.04, 5 at $14.43, 5 at $14.15, 10 at $13.7 (12/10/21 Post I am just averaging down in either 5 or 10 share lots.
Average cost per share this account: $13.90 (45 shares)
Dividend: Quarterly at $.35 per share ($1.4 annually)
Yield at AC = 10.07%
Last Ex Dividend: 12/31/21
Last Earnings Report (Q/E 12/31/21): SEC Filed Press Release
"For the fourth quarter of 2021, net income available to common stockholders per diluted share of common stock was $0.23 and Distributable Earnings (a non-GAAP financial measure defined below) and Distributable Earnings prior to realized losses and impairments on real estate owned and investments were $0.32 per share of common stock." (emphasis added)
Table sourced from SEC Filed Investor Presentation for 2021 4th Q. at page 18.
For 2021, the company provided two distributable income per share numbers. The higher number was $1.48, sufficient to cover the dividend payments, but excludes realized losses and impairments on real estate owned, investments and interest rate swaps. Including those realized and unrealized losses, the distributable income per share number was at $1.33, compared to the annual dividend of $1.4 per share.
J. Added to CULP-Bought 5 at $8.61; 5 at $8.4:
CULP Analyst Estimates | MarketWatch
10-Q for the F/Q ending 10/31/21
2021 Fiscal Year Annual Report (period ending 5/2/21)
Buy Discussion: Item # 1.G. Started CULP-Bought 20 at $9.65; 5 at $9.23 (1/27/22 Post) I discussed the last fiscal quarter earnings report in that post.
Average cost per share: $9.26 (35 shares)
Dividend: Quarterly at $.115 per share raised 5% from $.11 per share effective for the 2022 first quarter payment. This is year will be the 9th straight year of dividend increases.
CULP Dividend History | Nasdaq
Yield at AC = 4.97%, rounded up.
K. Bought 2 BOTZ at $28.13:
Quote: Global X Robotics & Artificial Intelligence ETF Overview
Sponsor's Website: Robotics & Artificial Intelligence ETF
Expense Ratio = .68%
Number of Holdings = 38
Last Round-Trip: Item # 1.J. Sold 5 BOTZ at $39.02 (10/22/21 Post)- Item # 1.B. Bought 5 BOTZ at $24.12(8/1/2020 Post)
Dividends: Semi-annually and effectively meaningless
Top 10 Holdings as of 2/10/22:
I do not own any of those stocks, nor do I have a position in any other stock owned by this fund.
L. Added to FCVSX-Bought $50 at $33.43:
Quote: FCVSX | Fidelity Convertible Securities Fund Overview
Sponsor: FCVSX - Fidelity ® Convertible Securities Fund | Fidelity Investments
Expense Ratio: .67%
Fidelity® Convertible Securities (FCVSX) Quote | Morningstar (currently rated 4 stars).
With only a few exceptions, I have avoided buying convertible securities since they take too much time to analyse, and the yields are not enticing for the most part. On a few occasions, I have bought a busted convertible, with that determination made at the time of purchase. For those convertibles, the conversion feature is not priced into the security IMO, and the current yield was otherwise attractive at the price paid. A past example is the convertible preferred stock EPRPRC which I no longer own but traded successfully, realizing a total gain of $656.54. Item # 4.B. (7/3/20 Post); conversion feature price adjustment discussed at Item # 2.A. Bought 10 EPRPRC at $16.55 (3/14/20 Post) and see latest price adjustment at Summary-of-Series-C-Preferred-Shares.pdf. That security is still IMO a busted convertible but much less so than in 2020 when I last discussed it. EPR Properties Common Stock Quote
M. Added to AFIN-Bought 3 at $8.1:
Quote: Necessity Retail REIT Inc. (RTL)
Subsequent to this purchase, AFIN changed its name to Necessary Retail REIT and the symbol changed to RTL. Closes on First Tranche of $1.3B Open-Air Shopping Center Acquisition, Changes Name and Symbol The first tranche consists 44 open-air shopping centers for $547M. RTL claims the acquisitions, when fully completed this quarter, will be accretive to AFFO and will have a 7.9% cash capitalization rate. Cash capitalization rate is the "rate of return on a real estate investment property based on the expected, annualized cash rental income during the first year of ownership that the property will generate under its existing lease or leases."
Pro forma metrics of acquisitions:
SEC Filed Press Release Announcing the Acquisitions:"The acquisition is expected to be funded through a combination, to be determined at closing, of cash, including the anticipated $261 million of proceeds from the sale of its Sanofi office asset, borrowings under the Company’s credit facility, property level debt the Company will seek to assume and $53 million of equity issuance to the sellers. The acquisition is expected to result in a near term increase in leverage and AFIN plans to resume its previously announced and successful deleveraging initiative and expects to return to leverage levels consistent with recent quarters over time. Upon closing, the Company will be the preeminent REIT focused on Necessity-Based retail with a best-in-class portfolio that will comprise over 1,000 properties, 29 million square feet and $382 million in annualized straight-line rent."
In short, most of the funds will come from borrowings under the credit facility.
In my symbol list to the right, I now have my discussions linked under the symbol RTL-AFIN, including "AFIN" as a reminder of this REIT's prior history.
Management: External
Investment category: Equity REIT Common and Preferred Stock Basket Strategy
Average cost per share this account: $8.26 (115+ shares)
Dividend: Quarterly at $.2125 ($.85 annually)
I am currently reinvesting the dividend.
Yield at AC = 10.29%
Last Ex Dividend: 1/12/22
Last Substantive Discussion: Item # 2.L. Added 30 AFIN at $8.21 (11/5/21 Post) The recent major acquisition make my prior discussions obsolete. I will not be paying much attention the the 2021 4th quarter and the 2022 first quarter reports for that reason. The next relevant report will be for the 2022 second quarter, provided all of the announced acquisitions close in the 2022 first quarter.
N. Added to RCII-Bought 1 $41.21; 1 at $40.7; 1 at $40.2; 1 at $39.2:
Quote: Rent-A-Center Inc. (RCII)
RCII Analyst Estimates | MarketWatch
Investor Overview - Rent-A-Center
Website: Rent to Own Furniture, Appliances, Electronics, and Computers
This stock has been under pressure since it missed by 2 cents the consensus E.P.S. estimate for the 2021 third quarter. 2021 Third Quarter Earnings Press Release; Rent-A-Center Inc (RCII) Q3 2021 Earnings Call Transcript | The Motley Fool The reason for the miss was an increase in customer defaults which the company blamed on the "expiration of government programs related to COVID-19 and the supply chain disruptions." The Stock Jocks are assuming that problem will persist IMO, based on the current price and P/E multiple. So there is a surprise possibility. RCII had beaten the consensus E.P.S. forecasts by $.20 and $.28 in the 2021 first and second quarters respectively according to Fidelity.
I will discuss the 4th quarter earnings report after its release, which is currently scheduled on 2/23/22. The consensus E.P.S. estimate is currently at $1.61.
Last Sell Discussion: Item # 1.O. Sold 2 RCII at $63.6 (4/1/2021 Post)(profit snapshot = $32.63) The 52 week was at $67.76, hit intraday on 8/25/21.
Last Buy Discussion: Item # 1.B. Started RCII-Bought 2 at $47.33; 3 at $46.5; 2 at $44; 1 at $43.5; 2 at $43; 2 at $42.5 (2/20/21 Post)
Average Cost per share: $43.09 (14 shares)
Dividend: Quarterly at $.34 per share ($1.36 annually), raised from $.31 effective for the 2022 first quarter payment which went ex dividend on 12/15/21.
Yield at AC = 3.16%, rounded up
Last Ex Dividend: 12/15/21
O. Added to SAIC-Bought $30 at $81.25; $30 at $79.85 :
Quote: Science Applications International Corp.
Science Applications International Corp Profile | Reuters
Science Applications International Corp Key Developments | Reuters
Science Applications International Corp Key Metrics | Reuters
Website: SAIC
SAIC Analyst Estimates | MarketWatch
Buy Discussions: Item # 2.E. Added 1 SAIC at $84.3 (8/27/21 Post); Item # 1.C. Added to SAIC-Bought 1 at $87.5 (7/15/21 Post); Item # 3.C. Bought 1 SAIC at $88.17 (5/14/21 Post)
Average cost per share = $85.11 (4+ shares)
Dividend: Quarterly at $.37 per share ($1.48 annually), last raised from $.31 effective for the 2019 second quarter payment.
SAIC - Stock Information - Dividend History
Last Ex Dividend: 1/13/22
Yield at AC = 1.73%, rounded down.
Last Earnings Report (F/Q ending 10/29/21): SEC Filing This report was for the third fiscal quarter.
GAAP E.P.S. = $1.22; adjusted to $1.85 per share with the consensus at $1.502;
Revenues up 4% to $1.898B;
Free cash flow = $124M;
Guides 2022 Fiscal year adjusted E.P.S. to $6.75- $6.95, up from $6.5-6.7;
Guides 2022 FY free cash flow to $450-$470M;
"Net bookings for the quarter were approximately $1.4 billion, which reflects a book-to-bill ratio of 0.7 and a trailing twelve months book-to-bill ratio of 1.1. SAIC’s estimated backlog at the end of the quarter was approximately $24 billion. Of the total backlog amount, approximately $3.4 billion was funded."
Purchase restriction: Each subsequent purchase has to be at the lowest price in the chain with a 10 share maximum limit.
P. Eliminated TUP in Fidelity Account-Bought and Sold 25 Shares at Various Prices:
Quote: Tupperware Brands Corp.
The last 10 share lot was sold at $19.61:
Investment Category: Lottery Ticket Basket
TUP Analyst Estimates | MarketWatch
Profit Snapshot: $71.63
I recently discussed buying two five share lots in my Schwab account and still own those shares. Item # 1.M. Added 5 TUP at $13.9 (2/3/22 Post); Item # 1.L. Bought 5 TUP at $14.53 (1/20/22 Post) I will likely continue averaging down only in 5 share lots, so the next purchase, if any, will have to be below $13.9.
Q. Duke Realty Bond Redemption:
The operating entity for the Duke Realty Corp. (DRE), an industrial REIT, redeemed its 3.75% SU note that would have matured on 12/1/24:
To exercise that optional redemption right, the company had to make a 6.7% premium payment to par value.
Profit Snapshot = +$78.19 (1 bond)
It is just difficult for me to get use to a BBB+ rated credit issuer willing to pay a 6.7% premium price to rid itself of such a historically low yielding bond that has less than 3 years to maturity.
DRE Earnings Report for the Q/E 12/31/21
R. Pared KPTI - Sold 5 at $11.60:
Quote: Karyopharm Therapeutics Inc. (KPTI)
Investor Relations | Karyopharm Therapeutics - Corporate Profile
Drug Pipeline-Karyopharm’s pipeline of investigational medicines
Xpovio (selinexor) FDA Approval History - Drugs.com
Investment Category: Lottery Ticket Basket
Profit Snapshot: +$31.56
I discussed recent developments in a comment published on 2/15/22.
This pare reduced my position to 20 shares with a AC per share
Last Discussed: Item # 1.J. Restarted KPTI in Schwab Account-Bought 20 at $5.31 and Sold 10 out 15 in Fidelity account at $7.94 (11/11/21 Post)(profit snapshot = $22.59- 10 shares). I still own the shares purchased in my Schwab Account. That post contains snapshots of prior round-trip trades and links to prior discussions.
Average Cost Remaining KPTI Position: $5.31 (20 shares)
KPTI Realized Gains to Date = $370.28
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.
