The gates of the Alamo have opened. Short stops were there, but not as many as I expected. As longs don't let their salivating greed cause them to chase a falling bid to get out over 10, the shorts are on the run.
For perspective, the last time nrf traded over 10 was in early May, after earnings were announced, estimated cad was .91-.95 and the stock was about to go ex 19 cents (76 annualized). It traded at 10.00 or higher on 5/3, 6, 7, and 8. It traded ex on May 9 under 10 and has been under 10 since, until today. At the time short interest was about 26 million shares. All but a very few were way under water.
At 11/15 over 36 million short and, with a price over 10, a mathematical impossibility that more than a relative handful can be green. Shorts are now longs' best friend. Today, estimated cad is 1.03 to 1.07 and the last dividend annualizes to 84 cents. The accreted next dividend about one month from the last ex is about 7 cents. So, on a price/cad or price/dividend basis, nrf is cheaper now at 10.50 than it was in May at 10.00.
While growth slowed between 8/1 and 11/1, I think that is a fluke of the calendar since they had 1.3 billion of serious prospects at 11/1. I still think 2014 cad will be about 1.40 or higher when 75% of 1.25 will support a 94 cent 2014 payout, which is a continuation of penny per quarter.
IMO, over 10 is just the beginning for patient longs. Don't even think about selling your core position. Shorts are longs best friend. It will be drip, drip, drip.....death by a thousand cuts until some straw breaks the camel's back. IMO, NRF is still way too cheap. I'm happy to collect 94 cents next year while I wait for the market to wake up.
The previous 9.99 was on 11/18 caused b what I think was a cascade of triggered short stops which started at 9.85 or 9.86. 9.99 was met with a flood of selling, sending the price back down as fast as it went up because there was no buying pressure beyond the triggered stops. The spike on the one day chart was as thin as a needle.
Today is different. 9.99 is the shorts Alamo. They will defend it as best they can with limited people and ammo. This time, I think there are too many Mexicans pounding on the gate. This touch ain't a spike.
IMO, the Mexicans break through the gate this afternoon. We all know what happened to Davy Crockett and his men once the gate opened. Bye, bye, shorts. Buyers are pounding on the gate.
We may go over 10.00 today. For those thinking about selling flip lots, I suggest you not pre-place limits in the very low 10s.
The last spike which looked to me like a cascade of short stops ended at 9.99 when sell gates opened.
A trade at 10.00 or 10.01 may trigger another cascade of short stops. If so, the price will spike until the stops are finished or sell gates open. It may go to 10.10 or 10.15 in the blink of an eye. If it does, a sell at 10.03 is wasted. Wait for the spike to end, if the spike comes.
I can't decide whether the post-opening runup was stealth covering or a tute in somewhat of a hurry to buy.
It was not a cascade of short cover stops because the rise was too gradual; while steep, not a spike. I do think the fireside chat was a factor, as it should have been.
I think we need a click at 10.01 to trigger the next cascade of stops. I think 10.01 might spike to 10.19 and, if 10.19 does not unleash a wave of profit taking chasing the price back below 10.10, we could see a genuine squeeze develop. I hope so. It would be fun to watch.
For what it cost him, he could have used a $1,000 professional over 1,000 times. Hmmmm, once a week at $1,000 per pop (so-to-speak) for about 20 years would have left him with more money than he now has.
In response to some comments. The guy with a masters degree was in his early 40s, just beginning his peak productivity, earning and saving years. His internet "friend", a married high school dropout, about 25, with 2 kids. When the guy first told me of his problem, the first words out of my mouth were shouted: "HOW STUPID CAN YOU BE???" My next words were about how expensive that warm, wet experience was going to be.
This true story gets stranger. The #$%$ refused $25 grand to get a paid-for abortion. While she had not finished high school, she was pretty good at multiplication. $450 per week was about what she and her husband, also a drop-out, were earning. Her husband did not divorce her or kick her out of the house.
The child support for the "mistake child" was their meal ticket for 18 years (my cynical opinion).
Did the guy think it was worth it? I never saw him do it, but I think he pounded his forehead onto the desk every time he signed a check, shouting, "STUPID, STUPID, STUPID". You cannot un-ring a bell.
SCCO produces all the copper they can and sell all they produce. In addition, a very high percentage (80 to 90 if I remember correctly) is sold to regular customers under annual or longer term contracts. In short, scco does not have the capacity to serve Asarco customers.
I think a more interesting item you reported on earlier is Grupo's demand that a buyer of Asarco does not have to assume the union contract.
"As of December 2, 2013, we received and accepted subscriptions in our offering for 1.4 million shares, or $13.3 million, including 0.2 million shares, or $2.0 million, sold to an affiliate of NorthStar Realty Finance Corp., or our sponsor..."
As of 11/14 it was 8.7 million. Ball is rolling. I expect it will pick up speed a it gets bigger.
That's one thing I cannot afford.
I know a guy who "met" a lady he met online. He flew from RI to NC for the "meeting" and flew back the next day. Told his wife it was a business trip for a client meeting, which was perfectly plausible, given his job.
Well, his "meeting" produced a child......paternity proven with DNA......which resulted in $450 per week in non-deductible child support for 18 years.....421,200 in total. Meanwhile, the divorce back home cost him 55% of the marital assets, 7 years worth of 1,000 per week of deductible alimony, 8 years of $600 per week of non-deductible child support and $200,000 for one college education.
This guy was making between 250k and 300 per year. His "meeting" cost him all the money he could have been saving for retirement and then some.
When he told me at the beginning of his saga of his "problem" I told him, "This will be the most expensive (rhymes with puck) you will ever have." He could have retired wealthy. He won't.
"I got another 5,000 at 9.69 on the second selldown. Was thinking about a dinner trade........"
Out at 9.84 for 1.51% in 2 days......enough for 3 dinners out. Wife will love it.
As to daily smackdowns and rises, my advice is to ignore it or trade for pennies. On 5,000 shares 4 cents = dinner out.
199k out of 385k......51.7% short. Yesterday was about 50%. Shorts still shoveling sand to keep a lid on it.
Macro environment for reits has been a big help.
Some day, both will change. Collect your dividends while eventually passing "GO". There WILL be a press release on closing NYC deal because it opens other doors to nrf. Can tell from cc and today's presentation they are excited about this deal. We will hear about it as soon as we can.
Tylis comment was more about how happy they are with the deals closed before rates went up. You are right. Same cap rate and more expensive debt = less profit on the leverage. No mention of pending deals mentioned in cc. Yup, they may take 13% on leveraged equity instead of 14%. I'd rather have 14 than 13 but 13 is still nicely accretive. As to payout, 75% x 13% = 9.75% which is more than we are now getting.
I am convinced that Hamo simply will not do a deal which is not accretive to his units which are the equivalent of common stock. Yes, Hamo sucks excessive compensation and bonuses, but he and his family are the largest individual shareholder. I trust Hamo to take care of Hamo which takes care of me.
Yup, in the beginning depreciation exceeds principal payback. Debt financed depreciation = tax shelter. Eventually, principal payback exceeds depreciation meaning taxable income is higher than cash flow.
One way to delay the bad situation is to keep growing....keep buying new properties.
Hold the reduced basis stock until death. Then the problem goes away, but so do you.
Maybe not 100% this year........depreciation much higher than 2012 and increased preferred dividends carry out taxable income first. Unknown wildcard = how much COD income from 2009 and 2010 gets included in 2013 taxable.
In answer to audience question: Do not like stock price. Yield is higher than peers paying out 100% when nrf paying out 75%. If it doesn't change, will evaluate spinoff.
Just a lot more color than 11/1 cc. Growth still on track, especially in management fees and private equity deals.
Not a syllable in whole presentation which I consider negative. Nothing makes me even consider lightening up on a WAY overweight position. Will just wait for historical numbers to speak for themselves, quarter after quarter.
Fireside chat = moderator asks planted questions. Was a great platform for Tylis to paint a very positive picture. Got more specifics than 11/1 cc.
Private equity: Expect to collect 800 million to 1 billion in 2014 with Healthcare and Income 2....does not include nontraded reits to be launched in partnership with pending NYC company deal.
NYC company = private real estate company which owns real estate and which manages real estate funds.
300 million investment is more debt than equity, expected to close before end of year. After close will launch (with NYC company as fee sharing partner) several new products including multi billion nontraded reits.
One reason name not released yet is NYC co wants to notify its investors of NRF buying an equity piece.
Private Equity deals: Expect significant p/e business in 2014. Tutes are calling NRF to discuss selling like 2 done deals or joining in investing in NRF structured deals. Moderator asked about proposed FINRA/SEC regulations on nontraded reits. Tylis: fine with NRF......complaints about other deals = lack of disclosure. NRF discloses like a public company so actually welcomes more disclosure regs. Moderator asked what they can do about "opaqueness" of p/e cash flows. NRF: we disclose all we can in the supplemental schedules included in quarterlies and sec filings. Realizations in 2 done deals have been higher than book.
NRF broker dealer has capacity to handle 4 offerings at same time.
Manufactured housing: Low risk, stable cash flow is reason. Cheap fixed rate debt....Tylis disclosed that their approx. 4% debt is assumable in a sale. Cap rates for mfg hsg about the same but debt rate 100 basis points higher than early 2013, so very pleased with what they have and are looking for more.
Question from audience. Capacity for more leverage (vs equity offering)? A = yes, nrf has capacity for more leverage. Translation: Can grow more before issuing more equity.
Shorts still at it. 9 cents in about 4 minutes. 9.75 to 9.66. Gotta protect the price points. Try to keep the lid on.
It works short term as nrf chart watchers can see on a daily basis. Rise up to SMACK, rise up to second smack and so on.
Trade for pennies or ignore it. Next dividend = 22 cents.
Hey, it hit 18.26 last week. You cudda taken your 3% in a week if you bought on the offering. I can't predict a nutso macro market. I'll buy just about any equity reit at more than 2% below the offering price on launch day
I bought 2,000 at 17.65 on the offering and did not sell last week It goes ex 12.5 cents on 12/12, which annualizes to 8.57%, most of which is tax deferred roc. Yield is exactly 8% when price is 18.75. I'll dump this lot at 18.76 then wait for the next offering.