stagg, be careful on WMC. The divy is a bit of a gimmic. The cash portion is 80 cents which is down from last quarter (so much for the assertion that it held up better than the other mreits). Most will elect to take cash which will mean that the pro rata will kick in and everyone will get stock. The stock may rise as shorts cover, but the book value is going to decline after the ex-date by the amount of the divy.
I don't think it's that clever especially if unsuspecting stockholders end up getting gamed by the ex-date action. Everyone is going to elect cash so the max payout will be 80 cents. When it drops after ex-date and stops are hit leading to more selling, those who get stock will panic sell. Shorts may cover, but more will take their place at higher levels knowing the price will drop more after the ex-date.
jk, you have a lot of recommendations. is your trading based on technicals or fundamentals? CLR and BBG look to be in downward channels and rallying to the upper bound of those channels.
Well OZM finally had a pullback. The RSI finally broke below 70 and the stock sold off. They don't seem to pay their next divy until Feb so this may not have a year-end dividend run like so many other stocks. I can't say when it will turn up again or how long it will go sideways. Might want to check the 8, 10 and 20 day moving averages to see which level holds.
AI and WMC are perceived as different which is why AI has done better. WMC is perceived as owning agencies which will decline if rates increase. AI owns nonagencies and credit sensitive assets which can do better in a rising interest rate environment. The question is how will the market treat them if and when we get a taper. AI appears to stil be in an upward trend, but sits right on the lower band. WMC is just moving sideways. I still have some WMC but am looking for an exit on any rally.
Gambler, those who like the mREITS make the following case: 1) the dividends, while declining, are still high, so even though you lose principal, you may still get a good return and 2) the economy will eventually weaken again especially when the unaffordable health care act kicks in and when unemployment benefits are cut back. Also, any rise in interest rates is going to choke housing. When that happens, the Fed will be back to printing more. I don't disagree with these assumptions but the timing could be much later in the year. Meanwhile, the sector is out of favor.
The bigger lesson in this is that when the tide turns for a sector, it doesn't matter what the " value" proposition is (in the case of mREITS the proponents argue that the dividends are still large). When the momentum changes, you can drown trying to swim against the tide.
80 cents, possibly rally even if there's a taper, but runs right into resistance and drifts downward. The mREITS are out of favor so all rallies will be sold.
I think we might get a slight taper of about $10 billion with language that their future actions are dependent on whatever economic statistics are concerning them at this moment. I think the market will rally on the news because it means one uncertainty is removed. Not sure how the mREITS and other interest sensitive stocks may react. We could see a selloff followed by a rally, or a rally into resistance levels followed by a slow drift down. There's been a lot of news about dividend hikes and buybacks in the so-called "low yielding" stocks that Stagg hates. Boeing raised theirs 50% and 3M raised theirs 35%. I think that theme will continue in 2014.
pv, I once owned DNP a long time ago. The point is why buy something at a premium if you could buy something similar at a discount. I would think that if utilities react badly when the Fed eventually tapers (whenever that may be) that a fund selling at a premium would get hit harder. If you like utilities, you could just buy the top holdings in this fund and not worry about the premium/discount issue. You could even sell covered calls for added income. If one insists on buying a fund that sells at a premium to NAV, one thing is to research to see what the average premium has been for that fund and not pay more than that.
I would be careful with that DNP. It is a closed end fund that sells for a premium of $1 over its net asset value. There are probably several other funds that sell at discounts to their NAV.
RSI over 70. Has been that way for a couple of weeks. This one has held up better than most stocks that go over RSI 70 with just a little sideways to up action before the latest jump. I think the BDCs and other income vehicles are attracting money away from mREITs, MLPs and maybe even muni bond and junk bond funds. I like it but I just won't chase stocks over RSI 70
Sarge, I told you a few weeks ago that HTGC was due for a selloff or the very least some sideways action once it went over RSI 70. You can pull up chart after chart and probably 95% of the time, a stock will go down or sideways within a couple of days or weeks of going over RSI 70. Gambler's OZM has been holding up well over RSI 70 for several weeks now, but it too will have its day of sideways or down action.
Once we get through the Fed meeting, it will be interesting to see if the BDCs attract more interest.
And you need to look also at the recapture that you will get hit with from the sale. You might end up with both a capital loss and an ordinary gain. Most MLPs like EVEP have a calculator on their K-1 website where you can plug in the number of shares that you want to sell and it spits out the capital gain or loss and the ordinary income. Your capital losses offset your capital gains first and then any net capital loss up to $3k can offset ordinary income.
Also don't forget about the suspended loss carryovers from earlier years. If you use TurboTax, it keeps track of them automatically, but you can only apply them when you sell your full position.
jk, what are you, a subscriber to the Fallen Angels stock of the month club? I remember EZ Chip from several years ago. It looks like it had a good 3 year run (2010, 11, 12 and part of 13 -- see my note to Stagg on the 3D companies), but now looks like various head and shoulders patterns. the stock appears cheap and has lots of cash with no debt.
Gambler, just looking at the chart I could see a drop to 15000 on the Dow and the market would still be within its upward channel that began in 2013. If you go back to the beginning of 2012, the market could fall all the way to 13500 and still be in the upward channel.
In case the Dow isn't the best chart to look at, I looked at the NYSE composite. On the 1 year, it looks like it could fall to about 9750 or about 2.5-3% and still be in the uptrend. On the 2 year, it looks like 9200-9250 or about 7% more down. I think all of these corrections would be healthy for the market.
Of course, so many stocks have already started rolling over that if you have anything that has not rolled over yet, chances are that it will soon roll over. Many of the stocks mentioned on this board have declined since October. Your OZM is the only one that has hit RSI over 70 and not declined yet.
An announcement of a share buyback plan is far different from an actual buyback. They tried this back in Dec 2012. How many shares did they actually buy back? This is a common ploy when an mREIT's stock trades below book value. Announce a buyback to try to put a floor under the falling stock price, and it can work temporarily, but after they buy some stock, the price returns to a discount. Why? Because they have no asset growth or dividend growth to support a price above NAV. If they can't grow book value and increase dividends by being in the right assets (the ones that increase in value in this environment), then they should liquidate the whole thing and end this misery.
Lower. Really, how could it be factual advice if it is trying to predict the future? That would be an opinion not a fact. That being said, the chart direction looks to be in a downward trend. The fundamentals are declining spread and a lower dividend. Most of the mREIT sector is retracing ahead of the Fed meeting. If we ever got a taper announcement, I think the mREITs could bounce, but as long as that is overhanging, they seem weak.