Giant ag cooperative CHS has released earnings for the quarter ending 5/31/2019.
Honestly the earnings were not very good–although they haven’t been stellar for quite a few quarters. The coop earned a net of $54 million on sales of $8.5 billion.
We only care about these earnings as the cooperative has 5 outstanding issues of preferred stock–all of which are unrated and which carry fairly high coupons. In spite of the marginal earnings, preferred shares are not reacting negatively–nor would we be overly concerned. Over time when the ag economy improves the general financials will improve.
The earnings release can be read here.
I have held CHSCL for about two yrs…no complaints but the price has not risen like other preferreds I own…Infact I think it has dropped some…while disappointing , I still collect a nice dividend…..Cenex provides us with heating fuel….I will continue to hold but will probably reduce my holding from 2500 shares to 1000….the farm economy bothers me…
Craig, I fully agree that the Ag economy is not healthy and the Ag cycle can be very long however I respectfully suggest a deep dive into CHS’s fundamentals before you dramatically reduce your position. All the best…
I also suggest some basic education about what you should expect from the price of a preferred stock. If you are expecting long-term appreciation, that’s not how it works.
That theory doesn’t apply to the likes of WFC-L or BAC-L or….
Those two preferreds have gone from1100 to 1380…..I’d call that capital apprecitation…..I think my basic education is just fine….thankyou
Craig, my response was obviously to Larry, not you – as it was sub-posted under his message. You’re welcome.
WFC-L and BAC-L are fundamentally different and I think you know that. They are “busted convertibles”. A totally different animal.
The CHS issues are regular preferred stocks and their price patterns are just like other regular preferred stocks. They will never going to trade for much more than they do right now. If there’s ever another market panic that takes down all regular preferreds, that could be a time to buy more – for example, at the end of last year I bought some more CHSCM at 23.95 (an effective yield of 7.04%). Now it’s back over 26 which is where it was before the market panic.
That’s all I was trying to say.
A ~7.88% gain on CHSCM is pretty good “long-term appreciation”, subject to your interpretation of “long-term”. There is also more than one way to view something as “busted” IMO. I own some stuff that’s many decades past call. Something is busted about those situations as I doubt the issuers ever intended for this to be the case when they came public with them. Hostile takeovers/mergers/etc… can always throw that wrench into most any issue making it more of a gamble that it initially was. Let the Fed cut 3/4 point like some say and watch CHS’s offerings go up another buck.
That’s not “appreciation”, that’s a market panic in preferreds which has happened exactly twice since 2012 when I started buying preferreds. The so-called “taper tantrum” of 2013, and December 2018. Yes it’s obviously a bounce in the price but it’s very abnormal for something of that magnitude to happen. You might wait a long, long time for the next event like that.
Craig talked about selling 60% of his CHS holding because “the price has not risen”. From the current level, it’s not going to rise. If “the Fed cut 3/4 point like some say and watch CHS’s offerings go up another buck”, everything else will too.
This is not the time to sell the CHS preferreds. Unless you need the principal for other purposes.
You might want to read my original comment one more time and focus in on the last part about the farm economy….that’s the rason I am cutting back….I was waiting for CHS to report and they confirmed my suspicions….everyone makes there own decision…owning 2500 shares of CHSCL was too steep for an underlying company not coming out with a sterling report….
Affinity….sorry my comment wasn’t meant for you…
Hi Craig,
No worries, mate. My comments weren’t for your posts.
I agree with you on your positions. First, I too have interracted w/Tim since wayyyy back in the YH days and appreciate all the info brought to light. Second, the AG economy does give one cause for concern, especially if the Chinese pull some stunts or try to delay a deal until the 2020 election cycle. I hold a small stake in CHSCN and am holding for now, but definitely watching the developments. Glad to have you chiming in with the group now. With your experience, I think your basic education was addressed a very long time ago. Not sure why that comment was made. Please don’t let it discourage you from hanging around here.
Take care, A4I
Craig, adding my welcome to Grid’s. We hope to have a board with members respectful of each other’s ability, experience and skills, which sometimes does not happen as entry here is unrestricted.
Tim has done an excellent job of creating this website, and I hope everyone appreciates the work he has done, and not try and use it as a platform for their own agenda.
We look forward to benefiting from your experience.
Craig, welcome to the forum! A lot of nice people here willing to share and learn. i look forward to your future posts.
My last comment on this….I got here because Tim was kind enough to link me off of Seeking Alpha….and I appreciate that….I followed him for a long time on The Yield Hunter….I only come here for information and share a comment or two about what I am doing…I really don’t think the idea here is to tell people they need basic investing education when you don’t even know who you are talking to…My first investment purchase was in 1982…I am a CPA and have had my own accounting practice for 37 yrs and counting…I’ve seen it all….am I still learning? of course but really don’t care for stuff that really doesn’t matter…if you want to argue about things go over on Seeking Alpha…and have a ball….I’m here to learn and get ideas not to put people down….I hope the rest of you are here for the same reason….have a good day…
Craig, this is not Seeking Alpha. The bickering and one-upping and other nonsense that SA is infested with, just doesn’t exist here. You can assume that anything written here, was with the best of intentions.
And with that, I’m done here.
Craig, Welcome to III. Glad to have you with us and please know you’re among friends.
Craig, III is sort of like Lake Woebegone, where even the curmudgeons are friendly. Of course I’m not a curmudgeon and am just pointing that out. Lots of timely and potentially actionable info is available here for your consideration.
Plus, we’re all above average. 😉
One of their 2 refineries was out for a $220 million maintenance “turnaround” last quarter (capitalized cost). Operating earnings from “energy” declined by approx. $29.157 million vs. same period last year while operating earnings in the “agriculture” part of CHS declined by approximately $51.08 million versus same period last year. (Ref: 10-Q P.29-30). CHS did earn enough to pay interest and preferred dividends. The refinery is back up so maybe “energy” will do a little better this quarter vs same period a year ago.
Tariffs?
No need to answer it. It is a rhetorical question for each to decide. Honestly, it was my 1st thought when I saw them raising money.
I might be way off here.
Correct, Tim
This is a long term holding, not a quarter by quarter holding.
I own 2 of the preferreds and intend to hold ( as I do most of my holdings). Note they do business in 65+ Countries and 2018 financials had to be revised due to malfeasance by an employee in their accounting dept. Can’t get rid of greed no matter where you go.
Agree Howard.
I have held CHSCP and CHSCO for quite some time now, probably 3 years or so. Must say that since the problem with the accounting, the stock price has been disappointing, I have been well underwater for some time that I no longer look at it..
But as Howard says, this is a long term hold, and my position is not very big – just 300 shares of each.
Those contemplating buying CHS should note that the company has no Common shares, just the preferred issues. So the normal “buffer” of a common dividend before preferred dividends are affected does not apply here.
Let’s hope the AG environment improves. Been in the dumpster for quite some time now.
I hold CHSCL (7.5% coupon / 27.44 share price) and CHSCM (6.75 / 26.23). Both bought grey-market at issue.
How are the prices “disappointing”? Did you buy them back when they were even higher than they are now? Or are you referring to some other stock price as being disappointing? You know that CHS has no common so I am confused by your comment.
It is true that there is no common dividend, but there is an equivalent, the patronage dividend. This is paid to coop members and is not fixed. Several quarters back, none was paid.