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Ship Finance International Limited Message Board

  • staggman99 staggman99 Jan 31, 2013 9:54 AM Flag

    OT: ARR AND MORE...!

    Board members...yesterday madmax (aka master_sarge4us) gave us a warning about ARR (yield about 13.4%) and the fact is, that 'he may be correct' (ARR is my worst performing holding at this time)...sarge 'does very good homework' when researching stocks and most of his picks run pretty close to the wire...

    A lot of us like ARR because of the monthly dividend payout, however there are others that also have monthly payouts and have very good Total Returns...i.e. PSEC, HIX, FCC and etc.,...

    Sarge has 'got me thinking' and now I plan to put my ARR holdings 'on probation' (probation can lead to dismissal) and if ARR shows any more weakness in the future, I plan to replace this time, I am up about 8% YTD on all of my current holdings and I don't want to 'drop the ball' on one bad performing holding (???)...! Good luck to all...! $tagg...!

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    • stagg,
      Do you, or anyone, know of a PSEC clone? I bought it three times during 2012 since I first heard about it on this board and now consider it a core holding. As an amatuer it pays to listen in on the SFL conversation so I echo the positive comments. I also bought ALDW at right about the low this month.

      I am satified being up 6.3% since YTD. The NTI offering kept me in check and poor timing on getting out of GTLS (an LNG play and recommendation of, you guessed it, Cramer). I just bought more shares of GMLP with the secondary. That's one I'm hot on and it's still close to the offering price. I've stopped trying to trade in this market which people seem to think has more upside than downside.

    • Many have mentioned ARR before, so let's review. On the fundamental side, we know that they have been slowly cutting their distribution as their spread has shrunk with declining mortgage rates. Despite the declining dividend, it still is a large yield and because it pays monthly this attracts investors. I guess the rationale is that either 1) their spread will stop shrinking and the dividend cuts will end or 2) these fundamental declines will taper off. The difficulty is knowing what the fundamental story will be as one has to wait until the earnings announcement to hear what is going on with their spreads, leverage ratio etc. Bullish investors could be right and the spread decline could stop and they could give positive guidance on the end of dividend cuts, and this may lead some new buying pushing the stock price up a few percent. On the other hand, any negative comments and the stock will get hit and those who are long will have no time to get out before the stock sells off. Unless one is working for a mREIT, it is difficult to track mREIT spreads to know whether spreads are continuing to decline and each company is different. When things go south, the rationale that you frequently hear is that these stocks are owned for income, not for growth and that the loss is just a paper loss. To me that is like saying you can withdraw from your savings and count that as income and ignore the principal loss.
      So given that no one can really predict where fundamentals are going, especially when the fundamentals in mREITs are tied to Fed policy and the direction of rates, what other indicators can help an investor? And that's where the chart may be helpful.
      We see on the chart that ARR peaked in July and again in October just as the RSI went over 70. Those peaks were slightly higher(about $7.30) than the current price, but the declines were significant.
      So, in conclusion, what we have is uncertain fundamentals at best and historical peaks around $7.30 which have been followed by large selloffs. The monthly dividend is about 8 cents. So the risk/reward of holding seems to be about 8 cents plus maybe 20 cents upside, versus losing over $1. That doesn't look like good odds to me.

      • 1 Reply to marklibera
      • Mark, I think you and Stagg are being alittle too tough on you know, I own a ton if it for monthly income in my Roth. It has regained all the losses from a month ago, and continues to be a strong performer in the REIT space. They are in somewhat better shape than others like AGNC, which will be reducing their divy, and NLY, both with little exposure in non agency debt. AAR has a better mix in its debt instruments, is less suseptable to refi's, and will perform better that these two, IMHO. They have bought back stock at the low end of their price range, and the .08 monthly divy is guaranteed for at least two more months. Don't be surprised if they raise the divy at some point this year. The only other REITS I like are TWO and NCT...I don't like REITS that can't come close to covering thie divys with income, or that do not have non agency exposure.

        I may shed some of my ARR just because its prudent as it approaches the 7.20-30 area and re-allocate elsewhere.

        Adding more GGN, TGD, PSLV.....this market is fragile and when the bond bubble bursts, silver and gold will soar!

15.55May 24 4:02 PMEDT