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11/21/2024
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US Cellular USM is selling part of its spectrum to Verizon VZ for 1B. There are supposedly 2 more USM sale deals in the shopping cart. A previous 4.4B asset sale deal was with T-Mobile TMUS. USM is controlled by Telephone and Data Systems TDS. USM and TDS are up today. USM and TDS have baby bonds and preferreds. VZ wants to buy Frontier FYBR. Lumen LUMN is getting lonely. This is supposed to be a dull sector. JMO. DYODD.
Long: telcos.
CSX Corp (CSX) down more than 6% on possible accounting issues. Have been watching this one for some time, maybe an opportunity shortly to get onboard.
Oil is down on China’s lack of specifics on its turnaround plan. Wall Street was demanding 283 billion this week-end – 282B or less just wouldn’t do. Instead, China delivered a robotaxi-like PR event: a lot of sparks but no fire.
China moves oil. Oil xChina is a binary proposition, 50 or 100. If the Middle East boils over and explodes, oil can go to 100. (Yahoo Finance pundit day 1) If it doesn’t, OPEC cheaters pump, the world is awash in oil and it drops to 50. (Bloomberg anchor day 2) “The future’s uncertain…” – The Doors
Eastern philosophers advocate the Middle Way for the uncertain life: “the path that falls between the two extremes.” Faced with falling off a cliff to 50 or slipping on the way up to an icy 100 peak with E&P, the toll road of the MLPs is the middle way for long-tern investors to travel.
Some MLPs like WMB and KMI have gone up and have sub-5 yields. Others have 6+ yields, like ENB and HESM. Plenty of choices. Shop now and avoid the rush of those fleeing the “high-yield” 4.1% MM accounts at CapitalOne, Ally and Marcus.
Traders and those who want to skip philosophy can tune into the long range weather for October 16 to 24 to see if the two swirly things on radar decide to aim for the oil rigs in the Gulf. Long: energy JMO. DYODD.
Thanks for all your posts Bear. For as little as I know, WMB, KMI and HESM are not MLPs but Midstream Energy Infrastructure. They issue 1099s. Years back WMB and KMI were MLPs and issued K-1s.
Thanks – what do you like in the sector (FWIW – I avoid K-1 issuers) or would you shop elsewhere for higher yields now that rates are dropping –
Hi Bear,
I am no expert (and far from it). In past years my best source was the “MLPs” board of “investorvillage dot com.” IV has many other boards, some on income investing, energy, utilities, CEFs, etc. Some are private and one needs to be granted access.
I currently hold the following 1099-issuing midstreams (in order of investment size): LNG, TRGP, WMB, HESM, OKE.
My aggregate investment in midstreams is a small (single digit) percentage of my portfolio.
I like that midstreams pay distributions that tend to be return of capital and because of their potential distribution growth. Part of my due diligence includes dividend history and potential growth. I don’t necessarily chase yield. I also like that there may be upside in some of them (LNG and TRGP) per some analyst reports (i.e., info posted in IV boards).
FWIW, I am also long in Energy. Azure – he is no mad man – posted his list of energy holdings not long ago. KRP’s yield is over 10%.
Again, thank you for all your posts. I appreciate them.
JMO, please DYODD
Being based in Europe, I can’t buy MLPs directly and have therefore started a position in an ETF that is based on some Morningstar MLP Composite Index (trading on the London Stock Exchange as MLPD and yielding around 8.1%). This particular ETF may not be available in the US, but similar ones should be. Would an ETF wrapper not be a possibility of avoiding K-1s?
drkell, A poster over on SA who I respect suggested this to me.
@Charles M.
That’s correct: if you own AMLP or MLPA you don’t have to file the K-1 but the fund itself does. The fund itself will pay the taxes and that impacts the value of the fund in two ways. First, if the fund pays tax that is a cash outflow that reduces the fund’s holdings. Second, the fund must accrue for taxes which weighs on NAV, which reduces the price of the shares of the fund. For instance since the fund will pay capital gains taxes when it sells units, for a $1 increase in the value of its holdings its NAV will only go up $0.68 or so when it is accruing this (and it only goes down by that much when the underlying holdings go down). And the fund is also accruing, I believe, for the ordinary income on sale too.
Both of these are near their 52 week highs. Everything is near it’s high. I worry we are reaching a peak.
Many thanks for confirming my suspicion, @Charles M.
You are right, many stocks and funds are near their 52-week highs. However, looking at the dividend history of for example MLPA, SA lists its average yield for 2022 as 7.35%, for 2023 as 7.32% and for the current year as 7.31 per cent. So, it seems distributions have risen almost as much the share price, and with yields elsewhere dropping over the same period, the MLP space may still be interesting for income investors.
Intend to review this in detail. Would love to get rid of my Disney like holdings which lose value but due to my LT gains, it is painful tax wise to sell. Would be interested in others thoughts.
https://www.bloomberg.com/news/articles/2024-10-07/tax-busting-tactic-for-the-super-rich-is-coming-to-etf-world?accessToken=eyJhbGciOiJIUzI1NiIsInR5cCI6IkpXVCJ9.eyJzb3VyY2UiOiJTdWJzY3JpYmVyR2lmdGVkQXJ0aWNsZSIsImlhdCI6MTcyODY3OTIxOCwiZXhwIjoxNzI5Mjg0MDE4LCJhcnRpY2xlSWQiOiJTS1UzRUtEV1gyUFMwMCIsImJjb25uZWN0SWQiOiJESU5NVldFNE81R1BPMDRCSFFGTUtKS0pUMUlMTklIRiJ9.KhOnSZxKxz0eeWyBMph7dgHIL2y7sAbukEvlmlpQJwg?sref=3yhq6DEX
ProPublica will write an article about this soon if they haven’t already done so.
In the ‘what the heck are you buying now Bea, you nut’ category, I started a position in Haverty Furniture, HVT (2 classes, voting is HVT/A, went w the liquid HVT) about a 5% yield on 25ish price .32/q, ‘better’ furniture store w no debt about 115mil cash on a small mkt cap, CEO owns about 5% or so, of course that is discretionary spending of ‘durable’ goods like sofas, chairs, bedding. They have tossed a $1 or $2 year end ‘extra’ div on top of the quarterlies if you look at the div hx. Not sure this year, I guess it just depends on year end sales 4th q usually the strongest.
My best friend just redid her living/dining room w more of an open Den family room feel and paint/flooring/new furniture she is so cheap it was falling apart and covered, I thought ‘what is going on with furniture’.. and remembered Haverty as the REIT OLP One Liberty is their landlord on some of their stores. They add a few stores here and there not much and are modernizing more etc. Surely a ‘risk’ but sitting pretty and depressed shares now, could? see some tax loss selling. Oh well, DYODD of course. There is some nonsense articles on it on SA to supplement your DD if interested. Both sides/buy/hold…Bea
Bea, Haverty is a pig pile favorite. Very shareholder friendly company, not the best of times lately. Picked up some post pandemic and did decent, but sold after some gains. Has been on my watch list ever since.Itching to join you as a shareholder again.
well maybe I am not so nutty! a vote of confidence from the Buffett-like portfolio of PP! take care. Actually while too small to interest Buffett, Haverty feels like something he’d own.
Bea –
You forgot to mention that HVT has the dreaded “dual class” share structure with HVT/A. I have had nasty experiences in that past with these situations, so an auto pass for me on HVT, as this structure (especially for a small cap) makes it very difficult for the business to ever be sold:
From some of those “nonsense” SA articles:
“……the bulk of Haverty’s investor base consists of holders of HVT, as they comprise around 98.2% of the total shareholder base. When it comes to dividends, HVT holders also get 105% of the dividends that are paid to holders of HVT.A. As an aside, it’s worth noting that Haverty Furniture has been paying cash dividends for 89 years on the trot now!
However, holders of HVT.A have superior voting rights of 10:1 for all matters subject to a shareholder vote, and specifically, when it comes to the election of 75% of the board of directors, they get to vote separately. Crucially, HVT.A owners always have the option of converting their stake to HVT (in proportion of 1:1) at any time.”
Very good balance sheet, but their operating results are awful right now – tough to find any retailer with comp same store sales down 16%:
“During the first six months of the 2024 fiscal year, revenue for the company came in at $362.6 million. That represents a decline of 15.9% compared to the $431 million the business reported just one year earlier. This came about in spite of the fact that the average ticket size in the firm’s stores grew from $3,250 to $3,332. That is an increase of 2.5%. The real pain for shareholders, then, came from a decline in comparable store sales in the amount of 16.2%. With average ticket size growing, this decline can only be attributable to a reduction in overall traffic.”
“This kind of space is low margin in nature. And when revenues contract, especially because of a decline in comparable store sales, margin contraction is the rule as opposed to the exception. And that is exactly what we can see here. Net income in the first half of 2024 was a paltry $6.8 million. That was well below the $24.2 million reported the same time one year earlier. All other profitability metrics followed net profits lower as well. Operating cash flow was cut by more than half, from $40.1 million to $17.5 million. If we adjust for changes in working capital, we get a drop from $37.2 million to $22.4 million. And lastly, EBITDA for the business declined from $38.3 million to $16.8 million.”
Their cash flow statement for the first 6 months of 2024 is a horror show:
$17.5M of operating cash flow
$16M of cap-ex
Free cash flow of $1.5M, from which they paid out $10M in dividends. The furniture business needs to turn around soon for HVT.
I did not fail to mention Haverty is dual class, I put HVT/A and HVT 2 classes. I guess in addition to the grammar police some people need to look into reading, although I know most use their phones these days. I do not agree with the nonsense put out there and have thus taken a position, so again DYODD. That ‘author’ like so many gives you a taste which is fine. They are all on there to collect their $65 for ea article don’t fool yourself btw.
Urstadt Biddle by the way was a dual class structure and taken out by Regency, families/insiders sell for a lot of reasons, I do not view this as a takeover candidate anyway.
Bea –
Havertys reported EPS last night. Stock down 10% today. Their numbers were beyond scary, even on Halloween. Same-store sales decline of 20.5%? I recently visited a local furniture store (not Havertys) and couldn’t believe how expensive furniture items have become. But the stock is getting cheap and not sure things could get much worse for furniture business.
“The consumer remains cautious on making big-ticket postponeable purchases and the lack of housing turnover has additionally dampened demand. We believe our strategies on store growth, merchandising, and marketing geared towards our target customer are key to Havertys’ long term success. Our strong balance sheet and financial strength enable us to execute on these strategies in the current economic environment.”
https://ir.havertys.com/news/havertys-reports-operating-results-for-third-quarter-2024/ff992a56-351c-4b83-850b-5e836f3d200e/
The Big 3 US tissue paper manufacturers control about 70% of the market. Among paper products, tissue ranks 4th, far less than container board but faster growing. Within tissue products, toilet tissue has a 51% share; facial tissue, 15%; and paper towels, 18%. Tissue is the largest non-food category at retailers. Costco’s most popular item is Kirkland toilet tissue. People who buy tissue spend twice what non-tissue buyers do on a shopping trip. (Now you know why supermarkets have twice as many paper products on sale as anything else. ) Controversies: sustainability, recycling. Buzzwords: luxury, soft, bamboo. (Info pulled from trade sites and forest sustainability reports dated 2024 and 2021-2. Information not verified so DYODD. )
Tissue paper is the new gold. When there is a crisis, everyone wants it. Is it investable? The Big 3:
Kimberly Clark KMB
Brands: Kleenex, Scott, Viva
KMB Pulp Suppliers:
International Paper IP
Georgia Pacific – private
Paper Excellence (CA) – private
Procter & Gamble PG
Brands: Charmin, Bounty, Puffs
PG Pulp Suppliers:
International Paper IP
Georgia Pacific private
Rayonier RYN
Georgia Pacific (private)
Brands: Northern, Angel Soft, Brawny
Pulp Supplier: self
Ranked by dividend yield
IP – 3.9%
RYN – 3.6%
KMB – 3.5%
PG – 2.4%
CLW – 0
Ranked by annualized return, 2019-2024 YTD, divvies reinvested
SPY – 17.4%
SCHD + Cash 60-40 blend – 10.5%
Tissue (5: 2Mfg; 2Pulp; 1PL) – 8.7%
Disclosure: Long 2 rolls of Scott. JMO. DYODD
A follow-up to the prior post: Wondering why big timber names like Potlatch-Deltec PCH and Weyerhauser WY did not appear as pulp producers? Potlatch spun off its pulp and consumer products businesses into a public company called Clearwater Paper CLW in 2008. Weyerhauser sold its pulp operations to International Paper IP in 2016. Were these smart decisions? Apparently so.
Ranked by annualized return, 2019-2024 YTD, divvies reinvested
Wood xPulp (PCH + WY 50-50 blend) – 12.3%
SCHD + Cash 60-40 blend – 10.5%
Tissue (5: 2Mfg; 2Pulp; 1PL) – 8.7%
Ranked by dividend yields
PCH – 4.13%
WY – 2.84%
JMO. DYODD.
That is an interesting study and f/u by you BearNJ, thanx.
I do have tree exposure in Acadian Timber Corp of Canada, ADN TSX, ACAZF us otc; pays C.29/q for about a current yield of 6.42%; in the RothIRA, no CA w/holding tax 15%. I probably mentioned it before in CA stocks tab; Maine/New Brunswick forests w early adoption of carbon capture credit sales boosting cash flow, looking into unused land for solar fields.
Chairman owns 45% of shares and drips his divs 100% ea quarter thus the cash flow is strong w some dilution of course w him getting shares for his divs. An oldie but goodie for me in the ‘tree’ discussion world, usually trades between US11 and 13/share. A tough space but this little Brookfield spinoff co is a niche player that flies under the radar in most discussions vs the big boys, WY, Potlatch etc. Bea
Thanks for the mention of the Canadian company. WY is currently my LT timber hold. Would consider adding PCH if interest rates drop enough to kick home building back into high gear. WY is a variable divvy payer so they share in good times.
Sticking with the bigger outfits now – Owned a small pure timber co, now forgotten, which I sold before its takeover, it had a problem with some sort of JV. Yield hogged on pulpy Rayonier Advanced Materials mandatory convertible, the common they gave me took my gains away.
JMO. DYODD
Bear don’t forget to factor in seasonal demand. We are approaching winter. Watch for 4th and 1st qtr reports. For a better entry point.
Duke. I have a nice gain. Evaluating now for possible sale. Former senior manager once told me coal ash is the hidden liability for Duke. Recent articles have pointed out that Duke sold coal ash to developers and others to use as soil. Now cancer rates higher in those areas.
Add to this the tragic flooding caused by Helene. Asheville still has no water. Interstate collapsed, etc. My concern is the contamination caused by the soil erosion.
This is purely speculative on my part.
Thanks, wasn’t aware of any residual legal liabilities for coal ash. Seems a lot of utilities could have the same issue. Interestingly, coal-fired AEP offers the bull case for coal ash. https://www.aep.com/b2b/coalproducts/coalash
(FWIW, we have a local “cancer alley” street. Many blamed the high-voltage power lines. During the post WW-2 housing boom, home developers bought soil from a local factory for clean fill. It took years to discover and clean up the radioactive thorium in that soil. )
I’m not too eager to sell the electric utes. They are the new darlings of the AI power consumption era and falling rates will be a tailwind. I would probably add DUK, PEG or D which are on my watch list. I’ll do a post on my fav clean energy stock when I get a chance. JMO. DYODD
Utility news round-up
— Top 5 Hurricane Helene impacted states ranked by total number of power outages. Power companies within each state ranked by outages in that state. Duke and Southern were hard hit. Both must rebuild parts of their grid system.
South Carolina – Duke, Dominion
Georgia – Southern
North Carolina – Duke
Florida – n/a
Virginia – American Electric Power
— found a news report that Verizon had a large outage yesterday. Dutifully reported as a bad service problem for which VZ dutifully apologized. Not reported: T and TMUS had outages at the same time. A pure coincidence?
— CNP, an earlier storm victim, is replacing wooden poles with stronger fiberglass / composite ones. About 70,000 poles typically get replaced after a major hurricane. I couldn’t find a Generac for utility poles except possibly Koppers.
— Another storm system could form and move into the Gulf within a week. Right now it is just an X on the weather map. Accuweather: “… steering breezes would tend to guide any feature that forms toward the United States.” JMO. DYODD.
Another shout out to posters! I bought Kinetic after reading here. It has done nothing but rise. Consider selling. However with all the M&A in the space I am going to hold (for a while). I would never have a long term hold without a too big to fail market cap.
Also while I know a few have posted AI (Nvidia) will implode. I remain steadfast. I did take LT gains and invest in a OZ real estate deal. (Not Nvidia gains but Disney). I have watched that dog of a stock do nothing for years. I still hold too much.
Wanda, Is this the one your talking about? I followed KNTK for a while but forgot about it. Don’t think it is a MLP which is good. I respect Elliot Miller and the comments he posts over on SA.
Previous post speculated on political season ad spending for media firms. Sold Sinclair for a nice profit. Last earnings call mngmt spoke as to the high level of ads. When Kamala entered the race, I speculated the Ds would pour money into her candidacy. Bought bonds from Scripps. HY and distressed but counted on politicos doing what politicos do. Sold Scripps bond today with nice gain.
Stormy weather:
Possible Losers
SO DUK
Reinsurers
Cat bonds
Initial Insurance industry disaster model predictions suggest $10-15 billion of losses of which ~5 billion is insured, modest by industry standards. A tilt east could increase losses for reinsurers and retail insurers like Citizens. The inactive hurricane season is now active with another hurricane teeing up far away.
Possible Winners
HD LOW GNRC
GNRC is a popular trade when big power outage reports come in. Generac specializes in back-up power generators. JMO. DYODD.
Bear, RZC ? sounds like it could be topping and dropping with the season. Not a big fan right now of longer dated investments.
Haven’t looked at that one. Long term focus, don’t trade reinsurers on storm news. Individual company exposure is hard for an outsider like me to guess before a storm. (E.g., an insurer not writing any Florida insurance can surprise report big Florida losses. “Well, we are out of Florida but we lost x millions on our remaining policies.”)
Up and downs make good entry points for long term investors. A bad year with devastating losses and deep stock sell-offs makes a good time to buy. The industry prices up risk. JMO. DYODD.
One of the most interesting filings I have read recently. Malone is going off the board and Maffei signed a call agreement. I don’t believe John has ever had one of his companies go BK. But I am not aware of him agreeing to a settlement that requires him to leave a board where he is majority owner.
https://ir.stockpr.com/qurateretail/sec-filings-email/content/0001104659-24-102843/tm2424615d2_8k.htm
Wanda, your into banks, what do you think of PNFP ?
Charles, I have a long history with it. More than you would care to read. Rob McCabe began this bank and I invested. Rob is step brother in law to the Haslam’s. (Former owner of Pilot and current owners of Cleveland Brown, partial: Milwaukee Bucks, soccer teams, Nashville Predators, etc.). Pinnacle is a well oiled and well connected bank. Expanding outside of Tn with success. Hired and hiring superstars from Truist which has lost lots of key managers. They have commercial RE, but TN doesn’t truly have distressed re. I am up 65% with great divs investing in south eastern banks over the last year. Hate paying taxes and don’t foresee any regional issues here; therefore will hold. You can read the financials. I like news on the ground especially with banking.
Thanks Wanda, that’s enough. The name of the team Predators says a lot. Wonder how the fight with Birkshire is going. I bought the PNFPP with a 7% YTC ( yield on cost)
Also what you say about Truist is interesting.
Here is a shopping list of electric utilities that I found interesting. Jefferies brokerage compared them using 5 criteria (generation, balance sheet, rates, regulation, and wildfires. ) The utilities mentioned seem to be what I call “consumer facing.” This is a “list only” of the utility stocks mentioned in the report as either “haves” or “have nots.” I split them into “Buys/Picks” and “Holds/Not Recommended”:
Buys/Picks
1 PPL Corp. (PPL)
2 Exelon (EXC)
3 Duke Energy (DUK)
4 Evergy (EVRG)
5 Ameren (AEE)
6 OGE Energy (OGE)
7 Pinnacle West (PNW)
Holds/Not Recommended
1 Portland General Electric (POR)
2 Idacorp (IDA)
3 American Electric Power (AEP)
The categorizations reflect recommendations in the Jefferies report which highlights disparities within the electric utility sector. I digested it from articles on the internet not the original report, so caveat emptor.
Note: Jefferies publishes many utility reports such as on AI beneficiaries like CEG and renewables. Even with that in mind, surprises for me in this report were: PPL included and a top pick. SO and D omitted.
Utes have had a good run this year on rate cut expectations and AI euphoria. There is currently a debate as to whether they are fairly valued or whether there is more room to run. There is a huge storm on the distant horizon about who will bear the huge costs of powering data centers. So DYODD. JMO.
Bear: Thanks for this. I have an outsized position in DUK, including its common and BB. I have been adding to Connecticut Light and Power pfd positions. I have been reluctant about the Ameren pfds because of their BBB- rating. The info from Jefferies bolsters confidence in the AEE pfds.
Bear, FYI–5 of the Buys on the list (EXC, DUK, AEE, OGE, and PNW) are significant holdings in the Reaves UTG fund, and individually they pay dividends in the range of 3.5% to 4.0%.
UTG is one of my significant holdings. DYODD.
Thanks, Larry. I will take a closer look at UTG. My first impression was positive.
Its been a month since I started a small position in Toyota Motors and have since added to it twice. They still have not announced an ex date for the semi-annual dividend, which is due this month. I have a modest (4%) gain so far most of which was garnered on the bump TM got from the 50 basis point rate cut. This is a longer term hold so I’m gonna wait and see how big a drop there is after the upcoming ex-div date before adding more shares. If rate cutting is good for auto loans then Toyota should be a beneficiary. Long TM
Citadel, I bought BMY anytime it dropped below 40 this past summer. Wish I had bought more. News on the radio coming home last night said 60% of American households can’t afford new cars and trucks. China is making 9 million new cars which is 6 million more than is sold in the country so the rest are exported worldwide threatening other auto makers. Credit defaults and repo’s are up. Visa took another write down and not sure about banks that make car loans. Ally and Ellington financial?
J – Jacobs Solutions – Anyone follow this one???? They are going to execute a spin-off at the end of Sept which will give shareholders a share of a new publicly traded company called Amentum which will trade under AMTM. Anyone have an opinion on either company post spin-off? I’ve owned J for years but don’t know if there’s a way to play this other than holding thru spin-off, I also worry about how/if Schwab will do a good job of tracking tax basis on both post spin-off
https://www.jacobs.com/newsroom/press-release/jacobs-solutions-announces-record-date-and-distribution-date-spin-its
Jacobs Solutions Announces Record Date and Distribution Date for the Spin-Off of Its Critical Mission Solutions and Cyber & Intelligence Government Services Businesses
WR, I am glad you posted. I had forgotten about this. Love arbitrage opportunities. I am up big on my Capri. Need to decide if I am going to hold or sale. I will look at Jacobs. They have a presence in Oak Ridge and local management is good.
Isn’t “Amentum” the name of the metal in Wolverine (the character in the film, not the stock)?
No opinion on the stock.
I don’t see the arb opportunity TNT references
@losingtrader, Wolverine’s skeleton is adamantium (‘adamant’, get it?)
How reliable are S&P, Moody’s? Both just upgraded Carvana. Meanwhile Carvana management has taken advantage of the price jump and sold. Insider transaction in the last quarter was $31,253,030.85
This is the second time management has sold at height of market price. Unbelievable.
Wanda, these days with the work from home that has a different meaning. I regularly have seen articles that are written by someone I bet is out of country like Indonesia judging by the person’s name. With AI as a spell checker the English is really good. I bet the pay has to be less than what a person here would make. The point is a lot of these financial analysts don’t really know the economy here yet they are writing about it. I wouldn’t be surprised S&P has analysts in India pouring over 10-k’s giving ratings. Hopefully no one takes this wrong, I am just being cynical about those ratings we see.
Perfect example I looked at a company today that it’s bonds are rated BB yet it is calling a bond early and it issued a new 6.25% bond due in 2034 for 500 million.
Charles, My son wrote an AI program for me. It analyzes 10-ks and also notifies me of insider selling. I am using it frequently. The summaries are great.
I have no doubt the rating agencies are doing same. I suspect analyst slap their name on it after a cursory review.
Wanda did you see the article yesterday about the young executive working at Ernest & Young in India died? Attributed to those 80 and 100 hour work weeks.
It was just a wild asp guess on my part that accounting firms and rating agency’s are using people in India since everyone else is.
There isn’t a BDC tab here, so using this tab to note purchases of 1/2 positions in BDCs GBDC at $14.5 and MSDL at $19.78. Prices are lower recently due to projected lowering of interest rates and recession fears.
Gumfighter–I will add a BDC tab in the next 12 hours.
I like GBDC and continue to buy. Nice when the brothers are also doing so. I invested in one of their offerings. We shall see how it goes.
Bought some LNC. Divvie over 6%. Book value is $40, but excluding AOCI it’s $66. So their bond portfolio is way underwater. The drop in rates will decrease the AOCI loss and increase book. Hope I said that correctly.
I have at 8% yield based on purchase price. I like it and add slowly. And, yes you have it correct.
Tsakos TEN – raised div 50%, 90¢ semi-annual = 7.46% at 24.14
Not too shabby. Prefereds are pricey.
Tossing this in here since this is technically an equity, but it’s constructed more like an income generating security. Anyway, it’s the B class of Ramaco Resources (METCB). Trading <$10 right now. I bought some today for an income oriented account. My estimates for this and next year are .97c and $1.21 respectively. I don't think this is going to run away anywhere, so you have time to do work on the name if you're interested in that kind of yield. I'll try to check back if you have any questions. I've also shared some articles on this and the class A security (METC) on SA if you're interested. All the best. -NCSI
NCSI, are you concerned about the possibility of forced exchange into METC? Thx
TBH I think they need to start considering doing something. The purpose of the B was to increase total company valuation which clearly it has failed to do so far. If you go back to the initial S-1’s being released about the B stock, you’ll notice it was suggested to carry about twice the level of dividend it is paying now. It is my understanding that it was the board that decided to reduce the payment fee structure of the class B on the infrastructure volume side. So this could go a few different ways. Does the board admit they screwed up and reset the payment level higher for the B’s from here? There’s plenty of FCF to do that particularly with 20% of the class A’s float. Or do they do what you suggest and merge the two? I suspect that’s less of a risk near term. They just spent real money setting up this structure. To abandon it so quickly is not in most human’s nature. The other option is they leave everything as is, and hope over time the B’s improve thanks to whatever reason like the REE business actually happens and they increase the B dividend thanks to that stream of cashflows. Admittedly, the longer it languishes as an after thought, the greater the risk of them waving the flag and collapsing the two. There is a way management could do so at the expense of the B shareholders depending on how the two classes were trading at the time and how I interpret the S-1 (I’m not a lawyer), but I doubt they would actively seek to disadvantage the B’s TBH. Remember, these were distributed to all shareholders including themselves. I don’t think they would actively seek to hurt their own, and large shareholders that are close to the company like Yorktown, by taking advantage of a market pricing to convert, but it certainly is always something to have back in our minds when assessing the risk/reward. Hope that helps. –NCSI
Thx, NCSI. I have HCC for equity met as I think they have the most upside but I like the royalty aspect of the B’s here. Hopefully, you are right that the risk of getting screwed by a bad conversion is low. Cheers.
NCSI…… To me the play with Ramaco Resources is their 9% note METCL. I bought a position in this back in July 2021 and have ridden that nice 9% divy ever since. The note matures in July 2026. The downside to investing in METCL is currently it is slightly over $26. Ramaco also has a clause in the prospectus that allows them to call it at any time now.
Barron’s has a positive article on nuclear power. America needs 200 new nuclear power plants for the AI boom. Will take time. None are being built. Southern Co SO had massive cost overruns (20-B) and a lot of delays (8 years) finishing America’s two newest reactors. Barron’s touts Duke Power DUK as a top choice, because Something Might Happen. Got to love Barron’s.
Non-regulated electric producers like Vistra VST and Constellation CEG are recent darlings. (I have an Ozempic / AI feeling when I look at CEG and VST: good companies, good products, tiny dividend but am I late to the party? ) Uranium producer Cameco CCJ is a popular favorite.
https://www.marketwatch.com/articles/ai-evs-nuclear-energy-electricity-a4198583?mod=mw_latestnews
My spin: Conventional utilities have more appeal to me in the short term. Their divvies will look even better once interest rates drop. Other than CEG, reconditioning a mothballed nuke, it’s gonna be a long wait on nuclear.
Remember the tortoise vs hare fable? Utilities outperformed the Mag 7 laden S&P 500 YTD. Southern Company and Novo Nordisk had a photo finish
NVDA – Up 112% YTD
VST – Up 97% YTD
CEG – Up 50% YTD
NVO – Up 28% YTD
SO – Up 27% YTD
DUK – Up 20% YTD
XLU – Up 21% YTD
SPY – Up 15% YTD
CCJ – Down 12% YTD
JMO. DYODD
Thanks BearNJ! It also seems to me that nuclear power is underappreciated and has been underinvested for a long time.
I have been long CCJ and SRUUF, the “Sprott Physical Uranium Trust” which basically just holds physical uranium. The latter is a PFIC, so should be held in a retirement account unless you want to subject yourself to the misery of Form 8621, which among other things makes it impossible to file taxes using TurboTax. That said, I am surprised by the fact that the Sprott fund is down 30% from its highs earlier this year. Maybe the smart money sees a bear case that I don’t.
Mike, I just entered Sprott. I like the case for it. Nuclear power will no doubt be a good investment. I doubt any larger power plants will be the future. Rather, it will be the smaller units which are now operating in China and Russia.
Bill Gates was working with China until COVID. Now he has put 1 B $ into TerraPower which broke ground in WY.
As I reside near a DOE Lab in Oak Ridge, I can tell you DOE nationwide is promoting and funding the technology.
The only technology I know that is an alternative will be hydrogen. Exxon just received an investment from the Gulf Sovereign funds for its facility in TX.
Finally, the London conference last week “WNA” was well attended and financial analyst left confident.
Given those power projections, I don’t see how there will be huge jump in AI — unless local plants will switch your home needs to AI ! Time to build will be limiting unless they are all the newer small units ( like on Nuclear subs) –or the one mentioned here – with US & Gates’s backing.
Crude has taken a pretty big dump, now under 70. (Yoo-hoo, DOE, please refill the SPR.) I think 68, then ?
Another ? is HAL, which has dropped a lot recently. Last 29.48, CY 2.3%. I’d love to be clever enough to buy in the bargain basement. (What’s a bargain basement, ask the young’uns?)
idk about ‘bargain basement’ but I have joined Pig Pile in BP and will build (my choice doing my own due diligence, do yours as always) which is the hated name of energy. For all the hate their painful turn in various ways may have been prescient too. Patience on that one. This old kid also added to CA midstream/storage name Gibson Energy GBNXF in the Roth where no tax is w/held their TX storage is doing well on top of their other mostly Canadian stuff, payout ratio is low and a div raise in 2025 is probable, nice 7.5% yield now. Not your average names for sure. Also building GTLS Chart Industries as noted here and on SA, a Long Player name forever, they are an industrial but w energy focus. again DYODD Bea
FWIW I’ve got 56-61 marked as likely support for DLTR. Not buying.
CNFR and CNFRZ
I just happened to notice that either Larry, Curley or Mo, whichever Petcoff brother was CEO “resigned” today and was replaced internally by a non Petcoff. It must be a wonderful feeling to be a current CEO and have your stock go up 75% due to your “resignation.” Ha… CNFRZ is also up 9% on the day…… They also raised something like $51 mil by selling off parts of the company which will reduce revenues further….. Don’t know why I still have this company on newsfeeds….. been out for years thankfully
Food for thought — Hershey’s, supposedly a safe-haven stock, dropped from 208 to 180 then recovered to 193. Two headwinds.
— Cocoa in short supply, problems in major producing countries. Cocoa prices are up 166% since last year, although down from their all time highs levels. Reports are cocoa prices could stay high into 2026. Sugar has come down off its 2023 highs, but is well above 2017-2022 levels.
HSY has a diverse snack line with a lot of loyal customers. I don’t see HSY’s proposed ~7% price increase damaging its sales, although it may squeeze margins. (Large Hershey milk chocolate bars go for 2.50 to 3.50 at the local supermarket.) HSY has diversified into salty snacks by purchasing Pirate Brands from B&G Foods BGS in 2018. HSY pays a 2.8% well covered dividend, which it often increases. Increases averaged 10%/year over 10 year. Speculation is that increases will moderate until cocoa settles down.
(B&G Foods BGS cleared $225 million selling Pirate Brands to HSY. BGS has done poorly, under-performing acquisitions and debt. Unlike HSY, I’d call BGS speculative. BGS yields about 9%. It has a new 8% 2028 note. I leave BGS to the yield hoggers and traders.)
— Ozempic threat: 9% of adults consume 34% of all candy. This scares the snack makers. Rival Nestle is introducing a new line of Ozempic-friendly meals, Vital Pursuits, priced at $4.99. HSY may not have that flexibility. Conagra CAG, a Nestle competitor and frozen food seller, is also upgrading its product line. CAG has a lot of new products going into the stores, so SGA may pressure profit margins. CAG is a generally a steady eddie. It got a mention from Barrons in July.
Watching HSY. Avoiding BGS. Holding CAG for the 4.5% divvy and slo-mo turnaround. JMO. DYODD.
Hershey HSY
B&G Foods BGS
Nestle NSGRY/NSGRF
Conagra CAG
Eli Lilly LLY
Novo Nordisk NVO
Disclosure: I ate a Mint Kit-Kat as part of my research. Sugar is the main ingredient. I examined, then returned to the shelf, a giant size Hershey Milk Chocolate Bar. Sugar is the main ingredient in the main ingredient, chocolate. Given the Giant’s odd two decimal point 7.56 weight-in-ounces, I can see shrinkflation in the Giant bar’s future.
Cocoa prices could be out of control until 2026: Here’s why
https://finance.yahoo.com/video/cocoa-prices-could-control-until-153112804.html
Conagra Took a GLP-1 Hit. Why Its Stock Is Worth a Look.
https://www.barrons.com/articles/glp1-conagra-stock-price-earnings-5cf6a8e8
Bear, another one on food is CPB and how a play on a popular brand name and margin sometimes doesn’t work out. I had been looking at this company as I still buy their soup but only when it’s on sale. They recently paid 2.7 B to buy Sovros Brands which includes Rao’s brand sauces. Bad timing I think. I have started to notice competition in the sauces aisle has started to heat up. Several brands lately have run special sales leaving Rao’s as the clear high priced leader. There is no room left to raise prices to maintain margin. With consumers feeling pinched I wonder how sales are doing? I for one, passed on both the Rao’s sauces and CPB
Rao’s is my Number 1 impulse purchase. Campbell’s looks like a good stock, thank you for mentioning. My food stock allocation is small and filled up. Too many wacky things can go wrong from ingredient inflation to delivery driver shortages (DG had a local milk shortage) to odd stuff like the can shortages at CAG.
I avoid Campbells for irrational reasons – the favorite soups of my childhood – now that I read labels no way I touch their products. Reminds me of AT&T and Verizon trying to be the Cool Kids on the Block with legacy lead-clad copper wire in their back pocket.
Rao’s frozen products are excellent, but they run from 6.99 to 7.99 a serving locally. Too high. Last night I made store brand Angel Hair pasta, Extra Virgin olive oil and shaved real cheese blend Parmesan, Romano, Asiago. Maybe $1.25, $1.50 tops, much less sodium and fat than Rao’s and quicker to prepare. At full price, I am in the price resistance zone.
I keep an eye out at my local discount store for Buitonl fresh fettuccine pasta and then we make dinner by adding shrimp and creme sauce with cheese and fresh basil. What got me on the sauce is when the wife isn’t around to make the creme sauce from scratch, I have been buying store bought.
Here’s one for you Bear
https://www.youtube.com/watch?v=AwWU9Nq6IvM
we do Newman’s Own Marinara now, of course Mom used to make from scratch, old Italian recipe from my Dad’s relatives, I take one jar of the sauce, add 1/2 jar of water in a blender, healthy add of McCormick basil or fresh if my garden cooperates, tsp of Beef Bullion and some parsley, the Newmans has big chunks of tomato’s in it we dont like that, sometimes cook some ground meat to make Bolognaise, get about 4 cups or enough for 3 meals out of it. Its about $4 a jar, yes the sauces are all on sale must be a price war even the Newman’s which doesnt usually go on sale.
Not in any staples stocks now they all still seem like too much debt and I notice sales and prices going down. Loaded up on Maxwell House French Roast which our market had on sale for 5.99/can (plastic can you call it a can??lol) and our fave Nestle DiGiorno’s Pepperoni Pizza was 2/$10 it had been 8.29 during the pandemic. I am seeing some prices come down, so maybe? margins will be squeezed in these staples co’s. I always look at Kraft Heinz stock and then look away. Bea
I started positions on each HSY and CPB not too long ago. I see them as good value plays with yield and stability from where I sit (the chair that has no qualifications to make recommendations).
The GLP-1 impact will be interesting to see across the landscape of US grocery aisles, mini marts and fast food chains.
Did anyone see the NVO earnings a few weeks ago? It seemed to me like they were unfairly punished for rebates. I watched a few interviews with the CEO and despite competition, they can’t keep up with demand and are increasing capacity rapidly. I’d be interested to hear other people’s take on them.
Maybe one of them can buy AMNF for about $15/share.
Fingers crossed.
took a small starter position (buy that is, 2WR! lol) in BP thanx PP for idea a few days ago seems unduly depressed and massively hated which fits what I look at dumpster diver that I am but I am ok w it. Will build on that to maybe 2%. DYODD
Unrelated and a ‘sandbox’ thing.. but someone ‘borrowed’ my CHS-M for short sale????? very odd for something like that to be shorted..surprised me when I clicked into Fidelity this afternoon, wasn’t there this AM. I am guessing some complex strategy div capture type thing? who knows. very odd. Oh well that is the market anymore. FIDO will make all the money and I will get a few bucks for a future cat food purchase I guess. lol. Bea
Hello Bea – Is that the securities lending thingy you are talking about with CHS-M?
yes rocky and voner, I have ‘allowed’ FIDO to loan my stocks for shorties in return for ‘payment’ to date it is minimal, I did it mostly to get a feel for short sellers–well the payments amounts again are minimal. VERY odd to have all these shorties in a good pfd stock like CHS-M! oh well. I might shut this off, it now makes me nervous!! lol. Crazy Bea.
Thanks, Bea. I’ve always wondered if doing that was worth the risk…of something happening. I think I’ll stick to not lending for now.
my CHSCM at Fideltiy is loaned out also.
Doller General (DG)
Ouch if you own that one.
Odds and ends
— CRE troubles continue. Scott Kelly of Aetos Real Estate on Bloomberg says a European bank has put a billion $ CRE portfolio up for sale with “more (European) bank sales to come,” Why? “European regulators ordered them to sell that junk.” US regulators? Extend and pretend — holding off action to avoid creating a banking crisis in an election year. There will be regulatory pressure to sell in 2025. Kelly doesn’t see a banking crisis, rather “a slow burn” of distressed real estate sales since CRE is spread among regionals and community banks.
— Best takeaway. Kelly surprised me by saying only 10 to 15 per cent of NY CRE is considered Class A, the gold standard. Listening to the REIT conference calls, I would have guessed 85% is Class A and its all in REIT portfolios. Kelly feels NY REITs are in a better position than the big family businesses, less leverage. While the family businesses are sound, he dropped a teaser suggesting that one unnamed over built and over leveraged company might be in trouble. FWIW, In spite of the weak market, VNO and SLG are up 50-60% YTD.
— Dollar General DG is down a bit. Buy the dippers are out in force on TOWS. With the weakness in DG’s budget demographic, I would not be surprised to see some store closings. DG seems to be a staple in a lot of REIT portfolios.
— Big Lots teeters. BIG’s stores seem be FS so I haven’t looked for a REIT impact. BIG is proof that doing a $400 million buyback at $40 instead of paying down debt does not “create shareholder value”, no matter what the experts say. BIG is off 38% today, trading around 0.60.
— The Houston Chronicle has a well written Dead Mall article proving you can lose money in the Sunbelt. The West Oak Mall had issues other than closing of the anchors. It was after all bought when it was a distressed property. The timing was poor. After it was purchased, the owner doubled down by purchasing an anchor site, just before the pandemic changed shopping preferences. Then a new mall opened nearby and another nearby was renovated. “Zombie West Oaks Mall in west Houston gasping its last breaths of retail life”
— Marathon approved the Conoco deal.
Long energy and regionals, though looking for the exit. JMO. DYODD.
Good work Bear, thanks for sharing.
We go into a recession energy demand will go down. Pipeline companies would be mostly ok as they have fixed contracts. Unless customer goes chapter 11
With you there on banks, but you sell a good one just because it’s a bank there goes the income. Trouble is finding out if a bank is in trouble.
— My banks are now back to breakeven, so I was gonna sell. The divvies are nice. If I sell I’d have to replace the income. So I am holding through the rate cuts. 5-6% divvies likely to look very good vs a 4% CD. I don’t see another bank run coming – everybody who wanted to run, already ran.
— I like pipeline companies. Hess Midstream HESM has a 7.4% divvy and a complicated backstory. DYODD. Customer bankruptcy doesn’t worry me. Anybody who picks up the assets will needs to ship it out to market. JMO.
Hard to argue with SPY
As an experiment on May 28 using Schwab slices I bought $5 each of 20 S&P 500 stocks with dividend reinvestment. 19 stocks had very long-term histories of outperformance. One was speculative: MRNA. 16 stocks are in the Nasdaq 100. I’m comparing performance to five reference etfs. I added a new line “19 slices” so I can see the status w/o Moderna.
after: 4 weeks 8 weeks 12 weeks
SPY 2.6% 2.7% 6.3%
QQQ 4.6% 0.8% 4.7%
IBIT (6.2%) (0.5%) (6.9%)
TLT 3.2% 2.5% 8.8%
PFFA 0.9% 2.9% 6.0%
slices 3.7% 0.8% 5.5%
19 slices 2.1% 8.4%
Here’s a surprise after 12 weeks: the 19 slices are outperforming both index etfs. PFFA has done well.
Among the slices
Best:
AVGO +22.4%
ISRG +20.9%
AAPL +18.2%
LLY +18.2%
Worst:
MRNA -49.1%
AMD -7.5%
GOOGL -6%
NVDA reports on Wed.