It is amazing that some investors (not sure who) buy real junk based purely on a current yield of a preferred stock–do these folks ever even look at the income statement and balance sheet of the company they are investing in?
Today I noted a new prospectus come though for LuxUrban Hotels (LUXH) which has a $25/share preferred stock outstanding (LUXHP)–which is now trading at $14.12/share. Really?
The new prospectus today is for the sale of more common shares–which they have been shoveling out the door as quickly as possible–I assume to try to keep from having to liquidate. Common shares are trading at 15.99 CENTS (it closed at 18.5 cents) falling a couple cents after market close.
LuxUrban has committed to long term leases on hotels (on a triple net basis) and then turns around and operates them–I guess they believe they can do better than the previous operator. The company has amended their certificate of incorporation to allow for issuing up to 200 million common shares and 20 million preferred shares. This is essentially a doubling of authorized shares. When you are selling at 15 cents it takes millions of shares to generate a little cash.
The company has announced they will be paying the monthly preferred dividend on July 31–but one has to wonder how long this will go on–they have only $900,000 cash on hand.
This company is headed for Chapter 11–it is just a question of when they through in the towel. And while the writing is on the wall someone is willing to pay $14/share for the preferreds–who?
I only invest in Investment-grade companies with almost no exceptions. Do you know who I would make an exception for? 10,000 shares of Rite-Aid (RADCQ) at $0.02 a share for a total of $200.
I do not know whether they can emerge from bankruptcy, but this is a penny stock with real customers and assets. Looks like they still have 1,700 stores.
What stops me? The Expert Market. If they emerge, someone is going to make lots of money. It is lousy that we can no longer take a risk to invest in a company emerging from bankruptcy.
I was looking at my only common stock holding CVS and seeing how their competitors are doing (Walgreens primarily) and had thought Rite-aid was out of business. I like CVS as the survivor of the big 3 retail drugstore chains. Done well with it. Going to hold it.
Steve, In my area Walgreens stores have small footprints and merchandise is tightly packed. Both CVS and Rite-aid have large floor space that is poorly used so a lot of that S/F is not generating revenue but they are still paying for it. Their newer stores are smaller and more compact so I think a lot of these stores need to be closed. Walk through these stores and look closely at the stock on the shelves. A lot of the offerings are seasonal or household. The same stuff that Walmart and Target offer. Also look to see if the shelves are well filled or does it look like merchandise has been spread out to fill the shelves. In my town of about 10,000 people we have a Safeway Pharmacy, Rite-aid and CVS.
Within about 5 miles we have a Walmart and again 2 pharmacies in grocery stores. Finally, look at the price of the merchandise and consider the profit loss from shrink.
If you look at a Trefis stock anaysis. about 1/3 of CVS is their OTC retail segment. Another 33% is prescription drug segment (stores + Caremark drug plans sold to employers). Another 33% is health insurance segment (Aetna plans including Medicare Advantage). CVS is much more diversified than their competitors. None of the margins are great and they will all be under stress. Walgreens is trying by putting Labcorp into some locations but that is just getting some rental income (better than nothing). They made a horrible mistake merging with Boots Alluance which did not diversify their overall business.
I could be wrong about CVS and Walgreens naturally.
I remember as a kid buying a Thrifty ice cream cone for 5 cents ? and a double for 10 cents I was saddened when Thrifty was bought out but glad they kept the ice cream bar. Per Wiki the ice cream was a loss leader to get people in the store to shop around. Once it became Rite-aid the price went up and kept going up and finally the overworked cashiers didn’t have to rush over to fill orders as there are less people in the store willing to pay the inflated prices.
How about CTDD for +/-$10.25?
QWest debt is rated speculative / junk. QWest is owned by Lumen. Lumen restructured its debts in March of 2024 and as a result QWest’s debt was pushed farther down the food chain. IMHO, CTDD is best viewed as a speculative common stock that pays a high fixed dividend and not a debt obligation. (Or viewed as a pass-fail college course. ) My guess is that you are good for a year here while Lumen works on its turnaround. JMO. DYODD.
QWest has stand alone financials on the Lumen site.
https://ir.lumen.com/financials/sec-filings/default.aspx
If u you want to speculate FCELB (13,4% yield) is much better
Looks like a perfect new addition to the HDO portfolio.
HDO Motto: The more it heads to zero, the more I buy!
yes the refrain ‘we are getting our income’..but who cares about our capital, right? I have actually seen people comment/bemoan their losses..and the reply is ‘we are getting our income’.. oh my. I follow mostly by the tickers in my ‘portfolios’ so their stuff pops up once in a while… and another annoying thing they do over there is tag irrelevant tickers on articles.. oh well. Have gotten better and better at filtering out the chaff that pops in my feed there.
I make an effort to avoid any mention of them, but HDO does pop up once in a while in my reading.
Makes me very nervous when they even mention something I own. Usually have to go check how the company I own is actually doing, if they are talking about it.
We are collecting great income together!
I looked at LuxUrban a while back as a speculative add. It looks impressive on paper – it’s got a good business model, asset light I’d say – and it operates in strong hotel markets like New York City. Potential upside leverage from a recovering market.
I have learned from experience with newer – smaller, – lesser known – companies that it is best to ignore first appearances, impressive business plans etc and google around in the local trade press for background data and track records. Then drill down on the leads you find. You might find articles reporting a trail of litigation and complaints of unpaid bills of predecessor companies. Will the leopard change its spots? I don’t want to pay an admission to the zoo to find out anymore.
There are some companies I won’t invest in because I don’t trust management’s prior track record. IMHO, its hard for an outsider to detect outright fraud and avoid getting burned (although the message board commenters and subscription pundits have perfect 20-20 hindsight), but surprisingly with many companies if you look close you can see the smoke of a distant fire. JMO. DYODD.
I guess the key to the whole business model is how cheaply you can get a NNN hotel for? I would not get into the business unless it was rock bottom they came crawling to me cheap and even then I offered half what they were asking.
I will assume they skipped the step above and now look what happened.