If you follow the Dividend Investor from Morningstar you know that after having supported CSE vociferously for many months; yesterday Josh Peters notified subscribers that he *had sold* the porfolio's stake in CSE.
However, at the bottom of the email in the disclosure section I notice that he has retained his own personal shares in the company. I'm certainly not selling, this seems like a dumb place to sell, I wonder if that portfolio call was dictated by others at Morningstar?
CSE has a huge rediscount portfolio in FL, and NV. Why would you invest in a firm with land loans and lot loans in FL (huge concentration) as well as condo conversions in a multi-billion CRE portfolio in reserve status with limited take out and no personal guarantees.
I am not sure what you are talking about. Can you reference your source of information? \
Rediscount as I understand it is loaning money to other financial institutions. CSE is very dilligent in monitoring these institutions and their ability to pay and quickly (some would say over aggressively) acts to not lose money at the first sign of trouble.
With regards to commercial finance lending on condo conversions, CSE pulled back from lending on those in 2006 and has experienced their typically low default rates on these loans.
TONE has pre-occupied and tied up mgmt's time for months now. The argument that TONE represented some panacea to lower cost of funds has been completely debunked now.
CSE owning a bank subject to all the banking regulations to my way of thinking means greater administrative costs that offset any lower cost of funds argument.
Banks are going to be probing reits very closely come time for their debt to be refinanced. I don't care what CSE's funding sources are they are in for one hell of a bank analysis that will likely see their banks wanting to pull back on lending.
Another simple fact is CSE's best use of money today would be to buy in (self liquidate) their own shares.
A large majority of the subscribers of the Dividend Investor Newsletter are retirement age. Josh Peters is not and perhaps he has a longer time frame and risk factor. I'm a subscriber and retired . I appreciate him pointing out risks in the portfolio. I still hold CSE but will watch it closer.
I agree with previous poster. CSE is not a windows and orphans stock. Nor are the other BDCs. Josh went a tad overboard and wasn't taking care of his audience. On the other hand, I would like to see what he would come up with for the "high yield/medium risk" investor. CSE fits the profile, which is why I own a lot of it.