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11/22/2024
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RILY – It looks like it’ll be a rough morning for RILY shares on Monday. I sure hope innocent bystander investors like me who bot FRGAP to simply capture YTC can’t possibly be sucked into this in any way because the call was contingent upon the going private deal closing…..
https://archive.ph/IAR28
SEC Probes B. Riley Deals With Client Tied to Failed Hedge Fund
Firm says it hasn’t received anything from SEC on the matter
Nomura arranged partial financing for client’s FRG buyout
By Donal Griffin and David Voreacos
January 22, 2024 at 1:22 AM UTC
US authorities are investigating B. Riley Financial Inc.’s deals with a key client who was linked to a securities fraud, and the use of his assets to help the investment bank obtain a loan from Nomura Holdings Inc., according to people familiar with the matter.
The US Securities & Exchange Commission carried out interviews in recent months about B. Riley and its relationship with Brian Kahn, the people said, requesting anonymity as details aren’t public. Kahn is an unidentified co-conspirator in a US Department of Justice criminal case prompted by the 2020 demise of the Prophecy Asset Management hedge fund, Bloomberg News previously reported.
Officials have been scrutinizing how Kahn led a buyout of a retail business called Franchise Group Inc. in a deal arranged last year by B. Riley. Nomura partly financed the transaction, with some of Kahn’s assets pledged as collateral, according to the people and documents reviewed by Bloomberg.
Concern about B. Riley’s relationship with Kahn has helped send the Los Angeles-based firm’s shares tumbling, along with losses and writedowns on some of its investments, and the stock has attracted large bets by so-called short-sellers wagering on further declines. The brewing controversy also touches on Nomura, one of B. Riley’s biggest lenders, which has been seeking to repair its own reputation for risk management after losing almost $3 billion in 2021 amid the collapse of Archegos Capital Management.
A spokesperson for the SEC declined to comment. The probe is in its early stages. Scrutiny by the agency doesn’t necessarily mean anyone has engaged in any wrongdoing or that legal action will result, and Nomura isn’t the focus of the probe.
“We have not received anything from the SEC on this matter and to the extent the SEC makes an inquiry, we would fully cooperate as we have done in the past on all regulatory inquiries,” a spokesperson for B. Riley said in an emailed statement.
Short Sellers
“We would welcome an investigation into the outrageous tactics the short sellers have pursued to destroy B. Riley, including the coordinated options trading with zero disclosure obligations,” the statement said. “The short sellers continue to harass, intimidate, and insult employees and everyone associated with B. Riley, resorting to lies and crude remarks so they can personally profit.”
A Nomura representative said the bank declined to comment.
B. Riley told shareholders on Nov. 9 in its quarterly filing with the SEC that the firm has enough cash and other sources of liquidity to meet its needs. Kahn and his attorney didn’t respond to messages.
“At no time during my former business relationship with Prophecy did I know that Prophecy or its principals were allegedly defrauding their investors, nor did I conspire in any fraud,” Kahn said in a November statement. “Like many other investors, my relationship with Prophecy was costly, including economically, and I ceased doing business with Prophecy several years ago. In no way, shape or form has this previous relationship impacted Franchise Group.”
Investigators from the SEC’s Los Angeles office have also sought information about bebe stores inc., a women’s clothing chain that B. Riley controls and that also had dealings with Kahn, one of the people said.
Representatives for bebe stores didn’t respond to a request for comment.
B. Riley, founded by Chief Executive Officer Bryant Riley, traces its roots to 1997 as a boutique stock-picking firm focused on smaller companies. It now offers a birth-to-death business model for smaller publicly traded clients, including stock and bond offerings.
Franchise Group
Kahn is a longstanding client of B. Riley’s who has been involved with multiple businesses. Last August, the bank helped him lead a management buyout of Franchise Group, or FRG, a retail company based in Delaware, Ohio.
Nomura led a $600 million lending syndicate for B. Riley to help finance Kahn’s takeover, putting in place the three-way relationship that now exists among the parties, according to loan documents reviewed by Bloomberg News. The Japanese bank committed $240 million, more than any other lender, one of the people said.
B. Riley put up about $1.5 billion of various assets as collateral for the loan, the documents show. Some $220 million included shares of FRG, while $200 million is a loan B. Riley made to Kahn that is itself secured by more FRG stock, according to the documents.
Prophecy Management
Several months after the FRG deal closed, a Kahn associate named John Hughes pleaded guilty to conspiring to defraud investors out of $294 million through Prophecy Asset Management, a now-defunct investment fund.
One of Hughes’s co-conspirators was “the CEO and president of a multibillion-dollar company that owned and managed large and diversified retail franchises,” according to the charging document prosecutors filed in New Jersey federal court. That conspirator was Kahn, according to a person familiar with the matter, Bloomberg previously reported.
The SEC also sued Hughes in a complaint that details massive trading losses by Individual 2. The agency’s depiction of Individual 2’s alleged actions matches the description of Kahn in the Hughes criminal case.
Read More: Prophecy Fund Co-Founder Pleads Guilty to $294 Million Fraud
It also aligns with a 2020 civil lawsuit filed in New York by a group of Prophecy investors who named Kahn and others as defendants. They alleged Kahn helped to swindle them out of tens of millions of dollars and used more than $100 million to amass a controlling stake for himself in FRG. Kahn has not been charged and denies any wrongdoing.
The case, filed in federal court in New York, was referred to arbitration and dismissed in 2022. It’s not clear from court records whether there was a settlement or whether Kahn paid any money.
The allegations against Kahn rippled through B. Riley’s relationship with Nomura and FRG’s credit rating. Loan documents show that at Nomura, a team of external advisers encouraged the Tokyo-based bank to write down the value of the loan to B. Riley, citing the allegations against Kahn and warning that the collateral for the debt may be tainted by fraud.
Nomura decided not to take action, citing the overall strength of the loan, according to the documents and one of the people.
However, S&P Global Ratings downgraded FRG’s credit rating,
which was already deep in junk territory, to B minus on Nov. 10, warning that its high leverage and “weak operating performance” could make its heavy debt burden unsustainable. S&P described the allegations against Kahn as an “unresolved” situation that could distract the company.
PLUG – Anyone want to weigh in: PLUG has entered into an At Market Issuance Sales Agreement with RILY for the issuance of up to $1 billion of new common shares. In the agreement – https://www.sec.gov/Archives/edgar/data/1093691/000110465924004465/tm243485-2_424b5.htm#sPOD, there is the following language in the Plan of Distribution section on p S-12: “Notwithstanding the foregoing, the aggregate amount of shares of common stock that we will direct B. Riley to sell as principal in principal transactions (inclusive of any shares sold by B. Riley in agency transactions) in any calendar week shall not exceed $30,000,000.” HOW WOULD YOU INTERPRET THIS LANGUAGE? Does it mean that no matter whether shares are marketed by RILY acting as agent OR as principal that the total maximum limit for amount of shares to be issued in any one week is limited to a maximum of $30 million worth?
That’s what I think it means but am having a “discussion” on that other site as to whether or not this limitation means the $1bil ATM marketing agreement cannot be completed any faster than 33.33 weeks time ($1 bil divided by $30 mil = 33.33 weeks or in other words approximately no earlier than the first week in September) under any circumstances.
The full content of the relevant paragraph reads:
“From and after the date hereof, we [PLUG] will have the right, but not the obligation, from time to time at our sole discretion over the 18-month period beginning on the date hereof, to direct B. Riley Securities on any trading day to act on a principal basis and purchase up to $10,000,000 of shares of our common stock as set forth in the sales agreement, by timely delivering a written notice to B. Riley Securities in accordance with the sales agreement; provided, however, only one principal sale may be requested per day, and in no event on consecutive calendar days, unless otherwise agreed to by B. Riley Securities. Notwithstanding the foregoing, the aggregate amount of shares of common stock that we will direct B. Riley to sell as principal in principal transactions (inclusive of any shares sold by B. Riley in agency transactions) in any calendar week shall not exceed $30,000,000.”
I’m awaiting feedback from PLUG Investor Relations but have yet to hear back. It seems pretty clear to me to be a strict weekly limit but the other side argues that this program will be completed by March 31, the end of the 1st quarter… I just don’t think that’s possible based on this language let alone whether or not Mr Market ability to absorb $1 bil worth of new PLUG common shares in that rapid a period. If I’m wrong it wouldn’t be the first time but what would you think is correct?
PLUG is a struggling green energy company trying to avoid chapter 11. It pays zero dividends, has no preferred shares or publicly traded notes and ~15% of the common shares are sold short. I don’t see why income investors here would be interested in PLUG, but on Tuesday the company is giving a webcast presentation.
Plug Power Inc. (NASDAQ: PLUG), a global leader in comprehensive hydrogen solutions for the green hydrogen economy, today announced the access details for its January 23, 2024 business update conference call. During the conference call, Andy Marsh, the Company’s Chief Executive Officer, and Paul Middleton, the Company’s Chief Financial Officer, will provide a business update and answer questions.
Join the call:
Date: Tuesday January 23, 2024
Time: 8:30 am ET
Toll-free:877-407-9221 / +1 201-689-8597
Thanks CW – I had missed that notification….. I’ll listen in….. I hope I was in no way implying there was an opportunity here for III’ers with PLUG… This actually came up in a RILY article and the author was trying to point out how they going to rake in millions in fees to the tune of $30 -50 mil quickly from this PLUG ATM and I just don’t see it…… This is all academic anyway as I don’t own RILY or any of its notes or preferreds anymore, not since 2022, and wouldn’t be comfortable owning any of them now either, even if they appear to be set up for a potentially massive short squeeze. I just think the author is misinformed on the short term potential impact on RILY from this deal, not only because of this issuing limitation but on the ability of the market to absorb so many new shares. Even the short term impact for RILY is only a minor cog in what they need to happen for them, so again, this is an academic exercise.
I read with interest the discussion about KRP last week, then went and looked at the November 10-Q:
– oil/gas rev down 16%
– op income down 16%
– LTD up 33%
– op cash down 11%
None of that looks great to me. What am I missing?
Bur, last dividend was .51 using 15% less I am estimating next one will be around .43 +/- Still not a bad yield
DFS – Discover Financial – “It’s a sign that higher interest rates are impacting consumers and households.”
https://archive.ph/JjIao#selection-93.0-321.33 [Barrons]
Discover Stock Tumbles After Earnings. Bad Debt Is a Problem.
By
Callum Keown
Jan. 18, 2024 5:26 am ET
Discover Financial set aside more money to cover bad loans.
Discover Financial Services stock tumbled 10% in premarket trading Thursday after the company missed earnings estimates and set aside more money to cover bad loans.
Discover said its provision for credit losses was $1.9 billion in the fourth quarter, an increase of $1 billion from the previous year. The increase included a $305 million higher reserve build and a $717 million increase in net-charge offs—debt that a lender deems unlikely to be repaid.
The lender’s net-charge off rate rose to 4.11% from 2.13% in the same period last year.
It’s a sign that higher interest rates are impacting consumers and households.
“A combination of factors more than offset the revenue upside, including a higher provision for loan losses, marketing expenses, other expenses and employee costs,” Seaport Research analyst Bill Ryan said in a research note. He has a Buy rating on the stock and target price of $128 but said his estimates were under review.
Discover reported earnings of $1.54 a share on revenue of $4.2 billion in the fourth quarter. Analysts were expecting profit of $2.49 a share on revenue of $4.1 billion, according to a FactSet survey of estimates.
The company is exploring the sale of its student-loan business, and said in November that it will stop accepting new loan applications from Feb.1.
The stock, which is 6.7% up over the past year through Wednesday’s close, was down 10.1% ahead of the open of trading Thursday. Fellow credit-card companies traded mixed. Visa declined 0.4%, while Mastercard was up 0.5%.
2wr–I saw this and thought the same thing–consumers are slowly getting squeezed.
Sinclair Broadcasting Group (SBGI) jumped up almost 18% today on news that Amazon has reached a deal with Diamond Sports Group which Sinclair had been in a legal tussle with. Good news for regional sports television and good news for SBGI shareholders. I sold 25% of my position on the news to maintain balance in the portfolio. If there’s a short squeeze going into Friday’s option expiration I’ll probably sell another 25% or so. Proceeds are going into short term t-bills until something better comes along.
XOM , or other energy issues, with the Mid East problem moving higher ( recent DIRECT Iran strikes on nearbys ) and Oil currently in low $70’s …. could Issues like XOM (Wed am arnd $97.50 ish and 3.90% Divi rate) prove defensive .
For those here looking for oil/gas cash flow income, you may want to do some deep due diligence on (KRP) Kimbell Royalty Partners, LP. Kimbell’s equity/stock is on a nice dip, has outstanding cash flow, is 100% domestic production (no Red Sea or Strait of Hormuz), with a whopping 17 million gross acres with more than 127,000 wells, is a 1099 reporter NO K1, conservative business/management with a history of excellence, 71+% of last years distribution income was NOT taxed etc etc etc.
FULL DISCLOSURE: I am extremely long (KRP) for many years (and bought more this AM) and have generally reinvested the vast majority of my dividends. I am friends with some of the management people and Board of Directors; this may influence my decision to own such a large position in this energy equity.
I urge each of you to NOT rely on someone behind an iPad (like me) that may or may not have your best interests in mind and do your OWN diligence before committing one cent to any investment https://kimbellrp.com/
The only thing that hurts more than paying an income tax is not having to pay an income tax. I am Azure
thanx AB, I believe Charles follows it as do I and I have owned KRP in the last year, the wild trader I have become. I have it on hotlist.
I have been building Whitecap as disclosed in Trapping Value’s SA article (in my Roth no w/holding on the Canadian divs w FIDO.) Bea
shhh Bea,
I didn’t know AB held this honest.
No K1, as a trust they are one of the few who add to their acreage. Most trusts are stuck with original acreage and declining assets. Increase their line of credit with a consortium of banks in Sept. probably on the hunt for a purchase. If they were smart, they should start accumulating mid stream assets.
Disclosure, I hold in 3 accounts.
AB – do you have any insight as to how their tax reporting/ROC works? I know they issue a 1099 (not K-1), but they say 55% is tax free reduction in basis (ROC?).
I am curious how the ROC is handled (esp when you sell).
Does it get swept up into the 1099Div?
Example (rounded for simplicity):
I buy 100 shares @ $15
Hold for two years, receive about $360 in payments, of which about $200 is ROC.
Each year, I get a 1099div for the $180 (and presumably some statement that $100 is not taxable?)
Sell the shares At $15.
So, brokerage sees a zero profit transaction.
What goes on final 1099div? does it show “recapture” (or similar) for the $200 ROC?
Apologies for the technical question – I haven’t owned a 1099 reporting MLP before and I am having a hard time conceptualizing how the tax treatment works.
From my experience (but not this particular equity), nothing goes in 1099 for ROC, it just reduces your share cost accordingly. No tax implication until you sell the shares and broker reports (a larger) gain in 1099B. In your example, share cost would be less than $15, which your brokerage reduces and keeps track as reported to them.
ROC works the same as for any other C corp. The 1099-DIV breaks down the dividend and non-dividend (ROC) parts of the distribution. The brokerage adjusts your basis down using the ROC part each year. Your 1099-B for the year of sale shows the adjusted basis ($11 in your example).
I bought some this week after the BoA downgrade and Keybank price target cut. Seems like the selling is overdone, but who knows?
RMH, lot of moving parts on this stock. Remember, payout is based on last quarter earnings, which oil averaged above 70 last 3 months (approx $72.00 on the futures market?) down from 3rd qtr. when oil was above 80 on the futures mkt. third qtr payout was .51 a share so going to be lower for the last 3 months. That is why I assume BoA and Key bank have lowered the upper end of the target price. Now this isn’t actually what they get per barrel. They collect price at the well head. I just use futures pricing as a rough gauge. There are other adjustments that go into estimating the stock price.
Hard to say what the market for oil will look like in the spring. But this is one of the times where backward looking at the market can help you judge pricing in the future.
I may add or sell this holding at any point in the future. DYODD
Thanks Charles. At the current price, I figure even 40 cents per quarter would be an 11% distribution rate. And it just seems like the market is ignoring further potential issues in the Middle East and the impact to oil prices. But I’m no expert for sure, so will keep an eye on the situation.
Well don’t forget the preferred has to be paid also. Alpo the P.E. company got involved in Aug.
https://www.whitecase.com/news/press-release/white-case-advises-kimbell-royalty-partners-us400-million-issuance-preferred
Which preferred are you referring to?
Red dog they did a private placement of the preferred. I don’t understand it completely. The company could hold it, they just did a purchase (merger) to get another company’s property or their leases and paid them in stock. The company that they borrowed from could be paid in preferred stock. Most of the time in these cases the preferred doesn’t get traded on the open market.
I’ve owned it for a few years, The best thing I like about it is that it issues a 1099 instead of a K-1. Easier to deal with a decent return.
Blue
You might want to look at DMLP which has had very strong returns. Natgas is an important part of revenue and should prices decline, then it could be hurt but in terms of payouts and total return, it has done well. Merely a suggestion for your consideration. SC
Thank you for your suggestion sc4, I was long DMLP many years ago, but may have sold the MLP because they have a K1. I promised my team of accountants that I would NEVER buy another security with a K1 unless I sat on the board of directors 😘
The best deal for a US citizen is to move to Puerto Rico and take advantage of their 20 year tax package
AB
Yours suggestion noted but so far my accountant has not complained about the K-ls and the income and appreciation on dmlp has been good so for now I’ll stick with it. As for PR, sounds nice but I’m more likely to spend more time in Taiwan. Other than the summer heat and property prices, an attractive place to live for seniors. In all events all the best for the new year sc
SAR – down 8% today on earnings miss and concerns about overall debt levels when including SBA debt…… I own small amounts of SAT and SAJ.
Thanks 2WR’s I have to check but I think I own SAJ in one account. Where did you read this?
https://seekingalpha.com/news/4053625-saratoga-investment-non-gaap-nii-of-101-misses-by-003-total-investment-income-of-3634m-beats-by-048m
Help 2WR, I tried doing an internet search, but it came up empty. Do you know what the abbreviation NREM means in regards to bonds?
What is it you’re looking for, Charles? Here’s the quarterly report from SAR – https://ir.saratogainvestmentcorp.com/news-releases/news-release-details/saratoga-investment-corp-announces-fiscal-third-quarter-2024
And where are you seeing NREM in context? Best I can tell it stands for “non-rapid eye movement,” so no I don’t know what it means referring to bonds.. ha
This is on Fido’s bond page. You know how they show sold dealer to dealer, customer buy or sale or third party market (sp) ? it’s an seems to be an abbreviation for where the sale occurred?
NREM {If you look under “Trade Attributes]
No remuneration (NREM) – For corporate and agency bond transactions reported to the FINRA Trade Reporting and Compliance Engine (TRACE), this indicator identifies that a commission or mark-up/mark-down was not assessed on that trade. A firm may report a transaction to TRACE with this indicator either because the firm does not charge or does not know the amount of the commission or mark-up/mark-down at the time of TRACE reporting. For example, some firms may assess a charge that is not transaction-based, such as in the case of a “fee-based account” or “wrap fee” arrangement where remuneration is based upon assets under management (and individual commissions or mark-ups/mark-downs are not charged).
2WR I knew you had the answer !
I’m afraid I don’t fall in that one category where my assets under management are impressive enough to get special treatment. But it doesn’t hurt to ask.
BankAmerica looks like another casualty of the LIBOR crisis. BoA substituted a new short index when it looked like Libor was being phased out; That index is now being phased out, So BoA is taking a 1.6 billion “non-cash” charge.
Bank of America to take $1.6 billion noncash charge as it transitions away from BSBY index for lending
https://www.marketwatch.com/story/bank-of-america-to-take-1-6-billion-noncash-charge-as-it-transitions-away-from-bsby-index-for-lending-bb8e858b?mod=mw_latestnews
JMO. DYODD.
Someone is dumping KRP today. Double the volume. Unless they know something I don’t since oil has been pretty steady the last couple months the payout should be close to the last one. This does not have a K-1 even though it’s a partnership
35 days to the next ex dividend date. Hard to say what the market does in that time.
Quite the adjustment to ALL at Morgan Stanley – Allstate is of interest in general here maybe more for ALL-B than the common but interesting none the less – Allstate (NYSE:ALL) Raised to Overweight at Morgan Stanley
Raised price target to $171 from $117… Now that’s accurate guidance for you, isn’t it…….
https://www.marketbeat.com/instant-alerts/nyse-all-upgrade-2024-01-04/
The upgrade of ALL does not appear to have affected ALL-B at all. Up by only $0.02 at this time, I hold a very small number of shares still underwater by about 15 cents
I didn’t mean to imply that I thought the upgrade would make a material difference in the price of ALL-B – it shouldn’t…. But it’s always nice to know an analyst thinks the underlying company is stronger, not weaker, than it’s perceived….. Then again, I suppose it could be argued, the stronger ALL, the company, is the more likely a call of ALL-B could be so who knows…
The money manager discussion here circa 11/10/23 prompted this question.
I’ve managed my investments for 40+ years. A few years ago I met with half a dozen or so “money managers” in my area and other than one, they left an awful lot to be desired. The ‘one’ had a good head on his shoulders but he was young and lacked experience. So as far as I was was concerned, that direction was a dead end.
I opened a Trust about 30 years ago with my lawyer (long term relationship) as my Successor Trustee. Unfortunately, he is 80+, has phased out his practice, and he has lost a step. I don’t think much of the other lawyers in the practice and my lawyer doesn’t have any suggestions beyond that. Since I’m long retired, I no longer have any contacts. My family isn’t doesn’t have the financial IQ necessary to manage the trust’s finances so I’m contemplating using the trust department of a local bank.
I’ve looked at the fees for a few locally. But beyond that, I haven’t a clue. I’d appreciate it if anyone who has gone this route can provide any information as to what to look for and how to go about this. I need to know a lot more in order to make an informed decision. Thanks.
One suggestion – you might ask your attorney if he knows a local professional fiduciary.
Depending on the state you are in, they are the folks courts often appoint to step in and administer a trust when the trustees are not competent. I know a couple in my area and they are great guys. I would trust them more than any bank’s trust dept. my experience with trust dept.s is that they are only marginally competent (usually inexperienced people who are following a script without any thought) and very expensive.
One other thought – you can separate administering the trust from managing the finances. You can find a fiduciary wealth manager to handle the money (might be easier) and someone else to administer the trust.
Who oversees the professional fiduciary if I’m non compos mentis? What prevents them from churning the accounts or selecting high commissions securities?
What’s the difference between administering the trust and managing the finances? I’m not sure what administration is involved unless I’m on a tube or dead. On a tube is more of a concern because if dead, the estate gets distributed.
Is there a difference between a fiduciary wealth manager and your aforementioned court appointed type of appointee. Or are they one and the same.
Thanks for the feedback.
It all comes down to ‘you have to trust somebody.’
Here’s what I did:
1. Found a 1st rate estate law firm to set up the trust.
2. Follow-on trustees cannot disburse funds. A professional bonded firm will do that and ensure the expenditures are proper, i.e., they won’t be paying for any world cruises for whoever the trustee is at any given time.
3. Firm in #1 oversees what follow-on trustees do and can replace them if needed.
4. First two follow-on trustees (they’re also follow-on beneficiaries) can buy & sell securities, but I have left specific instructions and have pared down assets to those that should pay forever and that are difficult to sell or that have huge negative tax consequences if sold.
5. I am the last original beneficiary and nobody gets anything until I’m gone.
6. I have to trust that my precautions and incentives are in order.
7. It’s a very big deal, the culmination of your life. Good luck.
JMO
Camroc, thank you for your post. There really are 6 components of an estate plan:
Will/Trust
Durable Power of Attorney
Beneficiary Designation(s)
Letter of Intent
Healthcare Power of Attorney
Guardianship Designations (if you have minor children)
Also, one of the most important discussions is to make sure your estate goes ONLY through to bloodline (a separate form here in Florida). This means that if you leave your estate to your child/children and if/when their spouse divorces them no money from your estate will go to the non-bloodline spouse.
When I was in law school, one of my favorite professors use to say that the estate area of the law was the most litigious and destroyed more relationships than anything else we would encounter.
Wishing you all the very best, A
Yes, all that. Best to use specialist pros so that everything meets the often arcane requirements of whatever state you’re living in. Texas, in my case.
Ours was set up in 2017 and so far it’s all worked out smoothly as planned.
It’s never too early to get your affairs in order. Otherwise, terrible things and irreparable family splits can occur. I’ve seen it happen more than once to people dear to me. Very sad. I wouldn’t wish it on anyone. So best of luck to all.
JMO
Ken Fisher, opportunistic about 2024, had an interesting article about 2024. Large growth stocks doing well in 2024 and value stock doing well later in the year. Google “Ken Fisher NY Post”.
One quote: “Our economy? Moderate growth will help finish inflation’s normalization (increased supply from growth is anti-inflationary, not inflationary as economists imagine) and helps growth stocks relative to value, like in 2023. But later year rate cuts likely usher in value stock leadership.
Value stocks thrive from the accelerating bank lending that rate cuts render. They need bank lending to fund expansion initiatives. That comes as rate cuts steepen the so-called “yield curve.” Banks borrow short-term to fund the longer-term loans that let mundane firms grow. ”
Happy New Year if it happens and no black swans.
Should have said “optimistic about 2024” not “opportunistic about 2024”.
Bot some NWN 12/29, NG/water ute; they have been a steady accumulator of little water systems to go w mostly Portland OR ng supplier, also a renewable natural gas project etc. https://s23.q4cdn.com/611156738/files/doc_presentations/2023/Jun/06/june-2023-ir-presentation_final.pdf
Like some other recent buys for me this 5% div (grown 67yrs but really by only a penny or so a yr) diversifies some from some ‘safe’ cash. The market is growing about 1.1% yr for new residential ng adds but the ‘exciting’ part is the water build, which diversifies revenue and water co’s traditionally command higher p/e’s. Smallish so outside chance could be bought out by a bigger ute but not a reason to own. Enbridge of course just bot a huge portfolio from Dominion in utes; No debt refi in ’24 and only 30mil due in ’25. Utes under pressure of course w rates up but if ZIRP is over and ‘normalcy’ returns they will also be able to ask for higher ROE’s in rate requests. May be able to juice div returns w out of the money options, although they are thinly traded. DYODD Bea
Bea, is that really you from SA ? Eileen
yes E, it is B..lol. Been following Tim’s sites forever, now where he runs III, which is a great place to chat with respect and no politics w people who know a lot about income ideas.
Not sure the NWN yield is enough for you -but this is a top quality company- and with well over 50% in cash now I am happy to lock in a 5% yield on it for a starter position and may add. If we see CD/short term Treasuries trend down into the low 4’s this year, some of the better utes
should do well.
( I am also going to wade into CHSCL a popular pfd here )..Happy New Year, Eileen, bests to you. Bea
Bea, good pick with NWN. Picked up some of that in late November along with BKH & UGI. Held both of those for a long time but sold them last New Years timeframe. Glad to be able to pick them back up. Utilities, in my opinion, solid way to go with all the CD redeems hitting the market throughout 2024.
Pig, the Black Hills has a bond paying 4.93% 092113AM1 but your not getting the growth in price like the common.
Thanks Charles, will add that CUSIP to my research list.
ED, you have to follow Bea on SA.When she gets in a saucey mood, her anecdotes can be hilarious, though they may fly over some smaller cranial readers though.
Bea, you have any 2024 yield projections? You seem to be accepting lower now.
A second welcome to III, Eileen. Good to see you here…. You’ll find a whole different atmosphere over here and I think you’ll enjoy it..
2WR want to pay you and Grid a compliment. They announced on the radio yesterday that money managers have been attempting to use Chat AI to read SEC financials.
The response was AI isn’t replacing a human just yet. After scanning thousands of reports ChatGPT wasn’t able to respond to the simplest questions asked about the filings correctly, or made up answers or was silent and wouldn’t respond. This is not stopping financial companies like GS who are working on their own AI programs. Just think, if its hard to read them now and interpret them think about when AI will be writing them.
Thanks, Charles… as an aside, I DJ for a small private music group where I put together songs centered around an eclectic theme I make up…. In my first post of ’24 I am figuring on mentioning how ChatGPT and AI might possibly be taking over my job this year, but before it does, I’ll be invoking the use of an older technology for my first theme of the new year – I’ll be using UDARL technology, aka, Unmitigated Dumb Ass Random Luck to feature the first few songs my MP3 player plays for me in 2024 when it’s set on random play . That should be an eclectic enough theme…… Sometimes I can’t help but think that invoking UDARL technology more frequently in my investment choices this year might very well aid in my portfolio’s overall performance as well….
Gridboo, Bea is seeing ‘slightly’ lower rates in 2024, modeling on 4% ish short term.. Eileen tolerates me..she won’t put up with nonsense either!
Seeking Alpha is not Eli Hoffman’s SA, it is a cesspool and I play Rid-X in the septic tank on occasion..as do you, 2WR and others.. boredom mostly fueled occasionally by caffeine waiting for poor old mom to get up or need me, my only concern in this world. If Avi Gilburt doesnt get me banned.. wave man..lol. 20yrs of financial social media maybe my NY resolution should be alt/control/delete/avoid. They pushed all the good writers to ‘services’ and then just whacked the heck out of their comp..nutz.
Piggy, yes I see value in utes, might go w SR on a swoon, NWN is my first foray into the space other than BUI the cef w a basis of 19. I think Eileen is in or was looking at UGI.. thanx for ideas forgot about Black Hills BKH another good one. When you look at the charts there are a lot of ‘double bottom’ formations in ute names. Put those on watchlist, thanx again, appreciated! B
Bea, yes, I kept poking end of world fear monger Avi trying to peddle to sub sites for even more moolah about all my CDs are in extreme peril. He finally gave up. But reset assured every time I get my CD interest payments I am going to poke him.
I see the short end dropping too. But I am a bit concerned the long end has front run a lot of it, so I in past day or so dialed back a lot of the quick captured gains.
Grid, Eileen is part of the hole in the wall gang over there on SA. Very knowledgeable on Preferred stocks. Don’t think she has Bea’s walk on the wild side when it comes to things like gold stocks but she does get into mreit’s.
When I see ED’s comments on an article tells me I’m on the right track.
Grid and Bea no one has a crystal ball on future rates. I would like to see them right where they are now, but I agree with the discussions on this board that I could see them higher later next year. Also the talk about the drop in price of bonds. Example, I was looking at the FSK’s bonds going from about 8% yield in Oct. to 6-1/2% now. The FED hasn’t even cut rates yet but rates are going down. I guess because buyers of debt are willing to pay more to lock in what they think are great returns at 6-1/2% on higher risk investments?
I understand ED’s recent comment she was still hoping to get 8% on a buy.
I’m still feeling I should be getting better deals than what I am seeing now.
Cleaning Up the SPAC Mess after Consensual Hallucination: Bankruptcies, Imploded Stocks, and Lawsuits. Lots of Cleanup Left to Do…
https://wolfstreet.com/2023/12/27/cleaning-up-the-spac-mess-after-consensual-hallucination-bankruptcies-imploded-stocks-and-lawsuits-lots-of-cleanup-left-to-do/
AB – Thanks for the article…. With SPACs having earned such a bad reputation one wonders when you come across people like Phil Goldstein of Bulldog Investors (SPE and PCF), Boaz Weinstein of Saba Capital Management (BRW and CEFS), and CrossingBridge Funds which runs The CrossingBridge Pre-Merger SPAC ETF (SPC) who not only go out of their way to get involved in SPACs but in some cases are seeking shareholder approval to even increase their involvement…. But what they are doing is taking advantage of the pre-market arb opportunity to generate stable income using SPAC vehicles prior to the SPAC finding a target company.. In fact there’s one idiot, oops! I mean author, on that other site who has written 5 separate articles about PCF and their use of SPACs who has never bothered to figure out why they use them
I think CrossingBridge has a good writeup on their strategy for SPC – you’re not going to hit any homeruns buying SPC, but so far it’s been a decent parking place for cash – https://www.crossingbridgefunds.com/spac-etf. NOTE that SPC just went x-div for a 71 cent dividend. to be paid on Friday.
“SPACs provide shareholder-friendly features that present an arbitrage opportunity for SPAC common stock shareholders. Given that SPAC shareholders have a full redemption right to their pro rata share of the collateral trust account that is typically invested in U.S. government securities, the downside risks of pre-merger SPACs are significantly limited while also presenting the shareholders with potential equity upside.
The strategy focuses on purchasing shares of common stock and units of SPACs that are trading at or below their pro rata share of the collateral trust account (i.e. trading at par value or at a discount), with the intent of disposing of the shares prior to, or at the time of, a business combination. We look at ourselves at ‘renters’ of SPACs, not owners. In other words, we aim to capture the fixed income nature of pre-merger SPACs, along with the equity upside that they present, but we have no interest in being an equity investor post-business combination, which presents a much different risk/return profile akin to a traditional equity investment.”
2WR, the “idiot” you reference just has such a poor track record and I’m just unsure as to why he keeps pushing this CEF. A look at closed end fund PCF: 1 year total return (in an incredible bull market for practically EVER investment) is a “whopping”: +2.69% 😱, 3 year average total return just +2.31% and 5 year average total return +2.66! The only one really making money on this horrible investment is the PCF management team (who should be replaced with more competent people). Also, over 50%+ of the PCF portfolio of investments are unrated.
Bernard Baruch said, “I have found that failure is a far better teacher than success.” Well, the management team and the “idiot” you have referenced should have doctorates in failure by now 🙃
I do own PCF and it has been a disappointment overall relatively speaking. However, what I think I have found is it has been more of a proxy for interest rates in general than I had bargained for. If it continues as a rate proxy, then perhaps future performance may improve, however I am certainly not recommending it but am also too stubborn to sell as of yet.
If nothing else, this exercise does bring up how it does not seem to always be as straight forward easy to measure performance as I would think. As it stands right now. the value of my PCF shares is practically dead on equal to what it was at year end 2022 (it’s actually slightly higher because I did reinvest for the first 2 months of the year). I do not reinvest dividends and PCF’s managed distribution sets the dividend to be 10% of year-end NAV (not share price) which is what I have received monthly and still have Dec’s dividend yet to go. So if my asset value has remained essentiallly flat over the 12 months and I have taken out 10% in received cash over the course of the year, how can my one year return only be 2.69%? Actually with share price being dramatically discounted to NAV, actual div/share exceeds 10% for the year so I should have total return over 10% shouldn’t I? And in fact, my tracking software says I’m up over 12% for the year. Am I being naive?
2WR, click “All” in the top left area and then scroll down toward the bottom for total return https://www.cefconnect.com/fund/PCF
PCF’s return has been 😱💩😱
AB – I’m surprised you would rely in cefconnect for data…… I’ve found them to be frequently incorrect or out of date on data they post so I do not consider them reliable… For example, they’re still showing the Putnam Fund people as the managers of PCF and they haven’t been managing PCF since early 2019. I use them anyway, but only as a starting point that requires external verification if I want to feel confident with their data… That’s not to say they’re wrong on PCF specifically, but I do know the amount of cash in dividends I have received from the fund this year in and the present day value of my holdings and it just does not jibe with what’s being shown…. Still, as mentioned, I agree there’s nothing to write home about regarding PCF’s performance overall and not recommending. I’ll spend a little more time trying to figure out why the disparities – maybe I’m just not viewing what I know correctly.
Just taking a closer look, I seem to be +9.787% (maybe slightly less) on PCF ytd figured this way:
My year-end ’22 share price was 6.50. It is now $6.40. I backed out the value of the shares purchased with Jan and Feb DRIP and added it back as cash dividend received instead so as to equate the number of shares I had then to the number I have now. Then multiplying the cash received monthly for 12 months, I come up with the total cash received then divided that by my end of year ’22 share price amount after deducting the share price decline of approx 1.5% as of today. So that equated to a dividend received equivalent to 9.787% on my year end ’22 valuation. This will be a slight overstatement since the dollar amount received monthly is based on the slightly higher number of shares actually owned vs 12/31/22, but there’s no way that overstatement could be the cause of the difference in actual performance I think I had vs what cefconnect is saying. Interesting….. Maybe the difference has to do with my ignoring the amount of dividend attributable to ROC?
AB – Now I’m even more confused… clicking “All” now in the top left area and then scrolling down toward the bottom looking for total return, I’m seeing numbers that pretty much compare with what I was saying.. It says Total Return on NAV (12 months thru 12/27) = +7.68%, There’s no Total Return based on share price, but given it’s traded at a substantial discount of better than 10% to NAV all year, I think my estimate of 9.78% total return has got to be pretty close, yes? Still not great but no 2.68% either….. And the ironic thing about performance is that based on the continuing large discount to NAV, PCF should be a candidate for activism by the likes of the activists who manage it!
2WR, no idea just where you are looking but “total return” (toward the bottom of the page look at the bar chart for price) 1 year is +2.69%, 3 year average +2.31%, 5 year +2.66% that is the total return as of 11/30; they only calculate the graph at the end of each month 🙃 BTW, I AM an activist (not to be disclosed here), but this is certainly not a candidate and I doubt anyone will care about this fund; there are just too many other interesting and lucrative targets out in investment land (not being rude just honest) that is a true activist. Smile, A
I’m looking under Distributions (highlighted in color), then to the right of the second set of Data down called Distribution History. There is the Key Information Regarding Distributions sector. HOWEVER, I do now see where we’re talking about different measures as your area says the same as what I was pointing out regarding 1 year total returns on share price. I was focusing on 1 year total return on NAV and that percentage is also confirmed in your area. To be honest, I still don’t understand how there can be that much lower difference when based on share price vs NAV price but I guess that’s on me…
My only point about PCF being an activist target was not really that they are such a great target, but that it seemingly has all the characteristics in place such as a persistent fat discount to NAV, that its manager, Bulldog Investors, goes after as targets of their own activist strategy.
No rudeness perceived.. We’re also in agreement that this has not been an investment to write home about.
2WR, NAV is what gives the daily share price in open end funds (mutual funds), but in closed end funds NAV is not as important because these funds trade at premiums or discounts. If you look at (CEF) closed end fund FXBY this has a whopping -45.81% discount to NAV https://www.cefconnect.com/fund/FXBY?view=fund
It’s really why I said I doubt any activist would be interested in tackling PCF; there are just too many others to be interested in if one was inclined to go after management of a CEF.
Lastly, if you look at just matured CEF symbol IHIT, this was a complete disaster. A bond fund that lost money for their investors in each market, a promise of a maturity date to liquidate much higher than was originally given/promised with incompetent management and I’m surprised the securities attorneys haven’t tried forming a class even after maturity to recover losses.
Sorry again for being so winded my friend.
Be well and happy New Year to you and your family. I’m leaving today to ski in Telluride, Colorado and hope to comeback in one piece after the New Year 🇺🇸
I did experience the IHIT disaster…… I thought I understood why it happened to some degree and that was because they were estimating maturities to match up with their term target date on a lot of the mortgage backed securities in the portfolio based on expected prepayments as they were expected to occur in ZIRP and did not adjust the portfolio accordingly when rates rose dramatically. However, beside that, the managers intentionally hid the facts on top of that and were fired because of their deceit. But that didn’t save the shareholders from disaster… that was evident when NAV dropped precipitously near the end when they were supposedly already 95% in cash. I agree with you – there sure seemed to be reasons for a class action due to purposeful deceit.
Have a great trip in the rarified air of Telluride and Happy New Year…… I don’t think I could breathe up there! Colorado Springs is about my limit.
The PCF situation doesn’t seem that complicated to me:
12/30/22 close $6.50
12/28/23 close $6.41
2023 distributions $0.7248
2023 YTD gain = (6.41-6.50+0.7248)/6.50 = 9.77%
Or you can just look at stockcharts.com which says 10.27% YTD, pretty close:
https://stockcharts.com/freecharts/perf.php?pcf
I think closed end funds are a different and more complex animal. It is not as simple as saying Nav is not as important. I believe when analyzing CEFs, ALL the metrics are important. Otherwise, it will be like flying a plane and having the pilot tell the copilot to not pay attention to the instruments on the right side of the cockpit. If a cef has a great payout %, price goes up, big discount to NAV, but a continually eroding nav? There is nothing like owning an investment where the managers are happy, and the destruction of capital for investors. There is a lot of fear in CEFs because of that. In the end if you are not looking at all the metrics for CEFs, you might get caught with your pants down, but at least you are still holding your prize belt in your hands.
There was a nice period recently (late 2021 I want to say?) when there was a flood of supply of pre-merger SPACs and you could find YTMs–or maybe the better way to say it would be “yield till redemption”–over 8.00%, which was very strong at that point in the cycle.
Since then a ton of SPACs hit their deadlines, supply is way, way down, and yields are too. Hardly seems worth the effort anymore.
“we aim to capture the fixed income nature of pre-merger SPACs, along with the equity upside that they present, but we have no interest in being an equity investor post-business combination,”
To put in layman’s terms:
Would not invest in SPAC under a fund like structure but the private equity people loved the idea due to the following.
In pre-SPAC phase when you accumulate units a bonus warrant (long term options contract) is tossed off. If no acquisition, ho-hum burn warrants in the fire while receiving original capital back. If a combination is announced we dump our shares into the excited new IPO crowd keeping the warrants.
As the second holders continue the pump to find their exit liquidity we finally unload all our warrants. The warrants are the nuclear juice for the original holder where all the return takes place.
In my mad max bucket for common stocks. My loss on these cigarette butts could be your gain. All financial names and plan on holding out for another year.
OTCPK:WTBFB W.T.B. Financial Corp
Family owned bank. ~6B deposits they should up list. Use them as a perpetual 3% CD.
OTCQX:BNCC BNCCORP
Activists firmly in control of the board. Clean up job nearly complete. Next catalyst is for regulators to sign off on capital control to start return of capital to investors.
NasdaqGS:PROV (Provident Financial Holdings Inc)
Valued at 65% of tangible book value. Down 14% on the year which I suspect is due to tax loss harvesters. Deposit base cost of 0.65% even if I am off on this account they should be taken out by a competitor on these metrics alone.
NasdaqCM:RBKB (Rhinebeck Bancorp Inc)
Stated tangible book value setting aside the MHC is $9.41. A fools would perform a take out offer at $13.00. @18% 1yr arb is worth the wait.
Every year I dump my looser and re-invest hoping to turn a tidy profit. On January 2nd here are my selections.
American Water Works (AWK)
Public water utility which has suffered a large market pull back this year.
Backed by a 50-year contract to provide water and wastewater utility services at 18 military installations.
Amphenol (APH)
Makes electronic and fiber-optic connectors.
Federal Agricultural Mortgage (AGM)
No introductions needed chartered by Congress in 1988. 11 times 2024 estimated earnings. I am the Grinch that stole Christmas.
McGrath RentCorp (MGRC)
rents relocatable modular buildings, portable storage containers. imagine a construction site in the middle of nowhere or expansion classroom for the local school. A REIT in sheep’s clothing.
Rollins (ROL)
Got bugs.
micahc, Interesting. I have been looking, but was trying to stick to common stock that are at least paying a 3% dividend so I can get a combination of growth and yield.
No equity paying 3%+ dividend has snapped heads back in 12 months time.
I was just turned onto AGM earlier this year. Looking at them now is like looking at Amazon for me. It’s hard to buy at all time highs, but there never seems to be a low point.
Top 3 non-REIT dividend stocks to invest right now
https://newsblare.com/investing/stock-to-buy/top-non-reit-dividend-stocks-to-invest-right-now/
Just one persons opinion, please do your own deep due diligence, these are just ideas and smile
Ab I can’t find your post on here you did for gold stocks. Could you re-post. I was holding 3 in one account but bailed on 1 when it hit break even. The other 2 I am still underwater on.
As for this link, I already own EIX preferred. I looked at CLX the last couple years and decided against it for reasons that brand names are under pressure with inflation and consumers willing to switch to generics because of prices.
Was a loyal follower of Purina cat litter, loved the 35# reusable plastic pails but TGT clumping cat litter is 2/3rd the cost!
Hi Charles, thank you for your post reply. I hope this helps you from Myrmikan https://www.myrmikan.com/pub/Myrmikan_Research_2023_12_15.pdf
Have a great and memorable weekend ⭐️
Thanks Ab
Sadly, selling my stake in US Steel (X). Nothing but smiles owning this, perhaps I’m giving up a few bucks for a higher sale offer, but feel like 6X bagger is a good time to exit. Another Covid purchase and much beloved part of the pig pile portfolio.
Awwwwwww, I feel for you, pig… It’s always a tough day when you have to lock in 6x your investment…. lol… I only got involved with X 2 months ago when, in a better to be lucky than smart move, I bot a US Steel 6.875% bond due 3/31/29 as a back door way to possibly play the X biding war game from a less risky viewpoint… It’s of course done well with the overall decrease in interest rates in the interim and apparently still does not reflect any possible impact which could come depending on who, if anybody, ends up buying X… The game’s over now because these are trading above par, but there is a convoluted change of control provision that could get to over 103 but it’s dependent on the credit quality of the acquirer. Essentially, the junkier the buyer, the better shot the call gets tripped off…. Trading now at 101-ish, it’s no longer anything other than callable B1/BB- bond in my eyes.. CUSIP 912909AU2
2WR,
I do, I think, remember you mentioning that Bond.
Kicking myself on the X sale a bit, should have done it last week as I want to take the proceeds and buy income with it. Better last week than this, oh well.
Debating on buying PFE here. I still think there’s some room to fall into the first quarter of next year, but I don’t know what that bottom is. This feels like the regional bank sector from a few months ago. I tend to not buy my healthcare companies outside of an ETF because I don’t like/enjoy/understand trying to figure out the pipeline thing and who has what going for them.
Pfizer feels too big to fail. They’re at 10 year lows which is also not something I want to see, but I have a very long horizon to hold this if necessary. Despite them raising the dividend today I don’t have full faith it doesn’t get cut. I still think I start a very small position today so it’s on my radar and I’m paying closer attention to it.
Have you looked at net cash flow? I believe the current dividend costs them nearly $10B annually. If that divi gets cut, stock is heading much lower.
But definitely at least a flip candidate for early January dog rally when the biggest losers of the previous year always get pops.
Lukky–there was an article about Pfizer today in the Wall Street Journal.
Here’s a free link:
https://www.wsj.com/health/pharma/pfizer-drug-company-cost-cutting-2da7524d?st=9b1sss6rpo4c1e2&reflink=desktopwebshare_permalink
Sure looks to me that PFE is a candidate for:
“Never try to catch a falling knife.”
That’s my biggest fear. I really don’t enjoy flipping or trading in and out of stocks. If I’m purchasing it’s usually to hold for a year or more. I will probably end up just staying on the side line with BME and BMEZ. I’ll be monitoring them though.
OXY
This past summer Buffet bought a ton of OXY at his favorite price point $56s-$58s and his stake was in the 25% range. The stock then rallied for months into the $60s.
Now this past week, stock pulled back to $58s and Buffet bought another ten million shares. Might be worth checking out as he really seems to support the bid in this range historically.
Must be Groundhog Day, the movie where the same day happens all over again. Another run at Macys. Another big oil company drilling on Wall Street. Another Paramount rumor. Another WFC story
Just caught a headline that Wells Fargo WFC , along with some other banks, is caught up in another lending scandal. ( “Wells Fargo was snared in an industry-wide probe into mortgage bankers’ use of loan discounts last year, CNBC has learned.”) I did have to read the dateline to be sure it wasn’t an old WFC story. There are so many.
Wells is among the largest home mortgage lenders, although – surprise, the biggest lenders these days are non-banks. In January Wells announced it was cutting back on lending, , restricting loans to bank clients and undeserved communities. (I can see a class action lawsuit coming down the road on this policy.)
WFC common had the obligatory 10% one-month pop. It is up 9% on the year. Wells yields ~3%. Analyst sentiment is a hold, but leans strongly to bullish. Wells appears on the too big to fail lists. TBTF gives the Big Banks a competitive advantage over the regionals. They can scoop up cheap deposits,. Large corporate depositors have no worries of being over FDIC limits because of TBTFs almost-GSE stattus. I heard somebody pitch Chase as the only bank to buy in 2024 because any of proposed regulatory tightening will impact the smaller banks., raising their costs and driving more customers to the TBTFs. There is a logic to this.
Wells common is not on my shopping list. I do look at the preferreds from time to time, JMO. DYODD.,
Hedge fund sharks are circling Macy’s with a bid of $21 a share. In case you forgot Macy’s is an unpopular stock in an unpopular sector, retail. With a $5.8 billion price tag on a company that generated $1.2 billion of profit, the price seems too low, given Macy’s valuable real estate portfolio.
The real estate alone is conservatively estimated at $6 to $8 billion, more than the market cap of the company. Macy’s and its real estate have attracted PE interest before. Starboard Value estimated the real estate at $21 billion in 2021. (“Our extensive research indicates that: Macy’s real estate is worth approximately $21 billion, and possibly far more. “) Starboard thought Macy”s was worth 3x the latest PE bid. https://www.valuewalk.com/starboard-value-macys-inc-m/
We’ll see how this one plays out. PE reportedly controls a large chunk of Macy’s shares so we’ll see if they succeed in squeezing out the small shareholders with a low-ball bid. Some may remember how all that “worthless” Sears and K-Mart real estate suddenly went up in value after it changed hands,
The story is in the WSJ. Long M. JMO. DYODD.
GBLI – Global Indemnity. Off 15% as they had previously announced they were looking at a possible combination/merger with other companies and today they said they ended that search. Here are some relevant stats:
– Share price: $28.75 (12/7 close)
– Book value: ~$46
– Dividend: ~3.4%
– Business: Specialty commercial
– History: Up and down, mostly down. They’ve had a lot of trouble with some lines which they’ve exited.
– Organization: LLC – Can’t remember but you may get a K-1.
– My take: It’s a value play and if they can have a “normal” year of claims they would make a lot of money. Also, they’ve been able to keep the duration short in the investment portfolio and are now deploying to a bit longer term and higher yielding bonds.
Yes you get a K-1 from them, Looking to get back in where I was before a little lower than here.
As a deviation from my Preferred holding, I picked up some shares of Closed End Fund DNP which is sitting at a multi year low at $8.62. The fund is mostly a portfolio of utility stocks and has paid a steady dividend of 0.065 cents/share since 1987. I’ve read speculative comments on other sites that the share price drop may be due to year end tax selling, out of favor utility stocks, and that the dividend may be tough to cover down the road. To my eyes, it has made it though a lot of up and down markets unscathed over the past 35+ years and was a gamble I was willing to pick up. Time will tell.
Looking quickly it looks similar to UTG which has also never cut its dividend and focuses on utilities… I big difference however is that to date it looks as though 52% of DNP’s dividends for the year have come from return of capital…. NONE of UTGs divvy is from ROC, but a lot of it comes from a seemingly never-ending amount of long term cap gains…. you’d think they’d have to run out eventually……..
UTG is one of my core holdings. It uses leverage (approximately 20%) and is down about 12% from it’s 52 week high. But, I expect the price to slowly rise with interest rate drops. Current price looks to be an attractive entry level. Agree with 2whiteroses about the dividends.
Tobacco stocks are down today on the news that British American Tobacco BTI is writing down the value of some of its US brands by $31B. BTI has the biggest drop so far today, off about 9%. Altria Group MO, Philip Morris International PM and Imperial are also trading down. This is either A Great Buying Opportunity or Another Cause For Concern. BTI apparently does have other US brands not yet written down.
Tobacco stocks, always controversial, are popular with income investors because of their high yield, from ~6% to ~9%. Bears and bears wonder if the companies can raise prices faster than consumption drops. Vaping is a recent concern.
BTI YTD down 29%
PM YTD down 10.5%
MO YTD down 9.5%
IMBBY YTD down 6%
Disclosure: Small long position in tobacco. JMO. DYODD
Bear… I gave up earlier this year and sold my positions in BTI and MO. At this point, I just lost conviction that they’d be able to offset volume declines indefinitely with price hikes. I do still hold, and have added to, PM as they’ve been focusing on smokeless product and they have been vocal about a smokeless future. Lower yield, higher valuation, but I think there’s less chance they go away.
Something to read before you replay the “Bank Run” scene from the Jimmy Stewart’s Christmas classic, ” Its a Wonderful Life:” The FDIC’s November 29 Press Release. It brings the news that unrealized losses on securities held by the banks went up 22% Q2Q. Yup, up 22%, (A lot of low coupon paper out there. )
There is text, but no alarming chart, in the Press Release, only a happy chart showing that bank income is doing nicely, thank you, down only 3.4%. (The bad news chart is buried deep in the FDIC’s lengthy banking report as Chart Number 7. To keep you on your software toes, the “chart” downloads as an Excel spreadsheet. I don’t think I could find it again. )
Presumably the recent drop in rates and the Fed’s widely predicted 2024 rate cuts will help pull the banks out of the hole.
“Unrealized losses on securities totaled $683.9 billion in the third quarter, up $125.5 billion (22.5 percent) from the prior quarter. Unrealized losses on held-to-maturity securities totaled $390.5 billion in the third quarter, while unrealized losses on available-for-sale securities totaled $293.5 billion.” – FDIC, Press Release, 11/29/23
“Old man Potter will pay 50 cents on the dollar for every share you’ve got.”
“Better to get half than nothin’.” – Depositors, “Its a Wonderful Life,” 1946
“Old Jay Powell will pay 100 cents for every 50 of 30-yr 1.5% Treasuries you’ve got.”
“Better to get double than half ” – Bankers, Bank Term Funding Program, 2023
Disclosure: longer than I’d like to be in banks. JMO. DYODD,
I bought Ford (F). It felt right.
…..but it was wrong, lol
I am holding some of their baby bonds (F-D), just to get some diversity. Bought most about a month ago (about $2-3 less than current). still yielding over 7%.
I spent 20+ years as a automotive executive. There are so many variables impacting profitability that I know enough to not touch any of the automotive OEM stocks.
Ford is #3 in the list of stocks that have made my family the most money, behind only Apple and Microsoft. It’s all on when you buy.
Yes. Duration is the key. So much effort into short term trades. Yet, the simple advice to buy good companies at a fair price and hold, makes multi-millions.
The only “new” stock of significance that I own has been NVIDIA. Bought that in 2015. The others were purchased 1999-2003.
These holdings are now in family legacy trust accounts, ensuring their security.
I think one of the most important keys to investing is learning about deferred gratification. Once again, grateful to live in this country.
Somewhat related I guess, this article tells me that sometimes it’s better to be lucky than smart but, never-the-less, as you have suggested, you have to be in it to win it: https://www.benzinga.com/general/23/12/36051788/wall-street-banker-pays-2-million-sight-unseen-for-coal-mine-then-discovers-its-filled-with-37-billi
This is the guy from RAMACO Resources [METC}
https://nypost.com/2023/11/09/business/a-2m-coal-mine-in-wyoming-could-be-worth-37b/
Wall Street Banker Pays $2 Million Sight Unseen For Coal Mine Then Discovers It’s Filled With $37 Billion Worth Of Rare Earth Elements
He outbid me by $10.
Damn the luck.
Short news item in Market Watch about Pacific Premier Banc PPBI “repositioning” its balance sheet by selling off ~$1.3 billion of low yielding securities, (coupons ~1.3%) at a loss of about ~$180 million. Sale is out of its marked for sale portfolio. Intent is to redeploy assets.
So was this an odd time for PPBI to sell since interest rates have been dropping recently? Maybe not. It’s not a TBTF. Perhaps PPBI thinks Fed won’t renew its BTFP support program, which values underwater assets at par for borrowing purposes. The Bank Term Funding / protection program for the other banks is set to expire in March 2024. While the BTFP program seems to have prevented some bank runs there are reports of banks and insurers gaming the Federal back-up programs by arbitraging the low rates. Its not clear what the public sentiment will be if more exposes hit the news. It can be very lonely out there if the Fed’s not around.
“The tables are empty
The dance floor’s deserted”
— Frank Sinatra, Learnin the Blues
No position in PPBI. Generally long banks. Just my opinion. DYODD.
Note: Market Watch just changed the tone of its story by deleting mention of the low coupon rate from its story and added a mention of increased income. Accentuate the positive – Bing Crosby
Bear, I know of another bank that is in the process of selling off mortgages and securities that they plan to take a loss on for the 4th qtr. 800 mil worth they expect to close end of Dec. They also borrowed from the feds and need to pay back by March. I like seeing a bank being pro active and getting ahead of the curve. Bodes well and I am holding.
Bear, I know of another bank that is in the process of selling off mortgages and securities that they plan to take a loss on for the 4th qtr. and net 800 mil worth from the sale they expect to close end of Dec. They also borrowed from the feds and need to pay back by March. I like seeing a bank being pro active and getting ahead of the curve. Bodes well and I am holding.
There is some chatter that US Cellular is attracting some interest from the big 3 telcos. USM is controlled by Telephone and Data Systems. TDS and USM common both pretty much doubled when the “shop around” news first came out in August.
TDS has two preferred issues outstanding, -U ans -V, both beaten up and both with healthy double digit QDI yields, around~11%. Pros: since apparently only USM, the sub, not TDS, the parent, is up for sale, go dark is not an issue at this point and the TDS preferreds may get a boost if TDS gets an influx of cash. Cons there may be no deal, TDS is a lackluster performer and there is family control. Disclosure: holding but not adding here. Just my opinion. DYODD
I agree and am looking into it now. The common jump I missed. But this reinforces the pref’s IMHO to almost a safe investment. But there is complex wording in the backside of these. I’m hoping someone can figure it out here. But I’m guessing these move back to almost par if something transacts.
I dont quite know what to think here. Are they selling the entire entity or just towers and such in pieces? And if they do sell USM, what is really left of the company? A scrawny landline and cable outfit?
Moodys stated if they sold USM and returned the cash to shareholders it would be big credit downgrade. That wouldnt benefit the preferreds. Or would they use the money to pay down debt and spend heavily into their remaining tiny entity? That wouldnt help much either. In todays world 6% capital off preferreds is cheap. With the bulk of their entire revenue and EBITA generated from USM, what is left of the company if they jettisoned entire business?
Interesting situation to see how it goes.
Dan Loeb just disclosed his purchase of TDS and T Mobile. Berkshire’s Todd bought Sirius. Both are arbitrage plays as far as I can tell.
I am evaluating Tapestry and Capri for arbitrage. Entered into Capri when SEC inquiry (expected) and earnings released.
Happy I added to NVIDIA and MSFT. I buy monthly.
I assume you mean these two guys have bot or added to positions on these names, right? There’s nothing on the table for Loeb to buy either one of the two companies or BRK to buy SPNT, is there? I don’t see anything, but then again, I’ve spent the day outside for the most part……
2WR, Yes. That is what I meant. Sorry for confusion. Loeb I think owns majority of float available however most of the company still owned by family. I can only suspect he will want the company sold for profit. Berkshire bought Sirius for the arbitrage between the two securities issued.
I am increasing my exposure to Capri for arbitrage.
I saw this. Just before I bought more of the TDS-V. I feel pretty safe with these and expect good ROI. Might be adding more, not sure why others are not piling in?
One cannot know all that might be going on behind the scenes but for what is visible my reason would be: Ba3/B
At 11%+ it does have a smokin’ yield on it. Good luck with the position.