A couple of ideas from this week's Barrons. First, for those fans of BAC, it has a warrant that expires a few years out for which the exercise price declines if BAC raises their dividend. Second, an article on preferreds notes that some closed end funds are trading at significant discounts (JPS was mentioned). And finally, Gannett is breaking into 2 units, one for newspapers and one for TV stations. Full disclosure, my friend's aunt is the CEO.
I am giving you a compliment, but I also have noticed from your posts that you seem a bit impatient in following various poster's or others recommendations without waiting a bit. There are so many mistakes one can make investing, but eliminating the error of chasing something that is overbought has to be one of the most critical errors to stop.
Bear, I think you mean dividend yield rather than profits. Gracie will tell you that the 18% yield is due to their portfolio of IOs and inverse IOs. I think I read that article that you refer to. You would think that IOs and inverse IOs are natural hedges that offset each other, but Gracie can educate us about them.
Sarrge, I hope you didn't chase FB just because Cramer said it was going to $100. Cramer has a history of top-ticking many stocks. With any media mention of any stock, whether it is Cramer, Barrons or any brokerage firm or talking head, it is always a good thing to wait until the near-term demand that comes from a positive mention subsides. There are probably computer programs that push a stock up based on how many times it is mentioned.
You could be right about FB making a run at $100 but first it has to hold this new level. I saw the same thing happen recently with LLY which got a boost on a patent victory and a positive mention. The stock popped to $86 and then came back to $82 and now is going back up.
I have to hand it to you though. You have mentioned many stocks that have had some great returns. I don't know at what price you may have bought them, but many have had great looking charts. I've chided you before for pumping them when they are at overbought levels and from some of your posts, it seems that the losers in your portfolio occur when you chase someone else#$%$.
Some of these articles really don't know what they are talking about, but they just write about Kinder because that's the most recognized name that they know. There was an article from one of the brokerage firms about who could do an accretive acquisition of WMB and I think only ETE could do it.
I don't think WMB is really going to put itself into play and ETE probably does not come back to them, so the question is who is next. At $58, MWE has got to be high on the list, and also GEL.
On a slightly different note, MHR said they are going to try to sell their Eureka pipeline inthe Marcellus.
Kbon, just speculating, but if ETE were to succeed in buying WMB, then I think they might consider merging WPZ into ETP at a later date, like they did with RGP. Sort of depends on what the synergies would be and the savings, if any, in financing costs. I believe with RGP they were able to lower the overall borrowing cost by merging it into ETP. ETP has been weak recently is now approaching support levels from last year. I was considering buying, but I already have ETE and the thought of adding ETP's k-1 to ETE's already complex K-1 makes me shudder. Plus I recently added some more NRZ and your GLOP on their spos. And now MWE is back on my list after their recent decline. Then I have to save room to average down in HTGC if it ever shows signs of bouncing and would like to consider adding SFL at some point.
payback, it looks from the media reports that WMB was not even talking to ETE but instead had hired their own bankers to work on how to maximize value (or cover their behinds on why they weren't even talking to ETE). Previously, when ETE reportedly offered to buy TRGP and NGLS, there was no follow up. With TRGP/NGLS now down big from where ETE first approached them, I have to wonder if they are still on the target list.
One thing is clear is that ETE is going shopping and they have shown they can get the big deals done.
As for who is too big to be buying and anti trust considerations, one factor is the debt ratings of the acquiror. If you have investment grade ratings and a stock price that has held up, you can go shopping. EPD bought Oiltanking last year and just bought PXD's Permian basin midstream unit. The other factor is to see what a particular buyer is missing in their portfolio of assets -- are they missing somethiing geographically (i.e they need exposure to a certain basin which is easier to buy instead of build) or are they missing some subsector, i.e. crude versus gas, processing vs transporting, storage vs exporting).
Curiously, TRGP got a small pop, but MWE has been declining. I don't think either can stay independent that much longer if their stocks don't start moving up.
Stagg, your theory may work, but it is highly dependent on which high-yield stocks that one owns during that period when the market declines. There can be many reasons that cause market declines. Sometimes it is due to economic reasons, in which stocks that are dependent on strong economic conditions can falter. We have seen the carnage in the energy sector, including the high yielding MLPs whose high yields were dependent in part on higher energy prices. We know the energy stocks that have been forced to cut or eliminate their dividends and what that did to their stock prices and their income flow to investors. So far mREITs have held up, but we know if the wrong combination of interest rate rises occurs, mREITs could experience shrinking book values AND shrinking spreads which could decimate their stock prices and dividend payments.
It is often useful to look at the market's history in an attempt to discern what may happen to it next. The difficulty in looking to the past to estimate the future is that there are so many different variables that distinguish each period. So DH says that there have been times when stocks have done well during rising interest rates, but when was the last time in the market's history when rates rose from a level of 0%? The history of the market is incredibly long and most of us were either not alive or not investing during all of the different periods. Similarly, in past periods, we didn't have many of the catalysts that we now have. No ETFs, no high frequency trading, no algorithms, no computer trading, few emerging markets, no hedge funds etc.
Similarly, just trying to compare "market fundamentals" may not prove accurate. What is the real p/e average of the market or the real rate of corporate earnings? There have been numerous articles about how so many GAAP earnings misstate a company's real earnings because of so-called "one-time" charges. We saw in the last crisis how banks' book values were fake because of the accounting principles that allow them to mark to model.
DH is correct that the market has smaller leadership with fewer stock leading and divergence with sectors like the transports declining. Even the economic stats are mixed at best. The models used to state various economic stats like inflation have been revised so many times that they may not truly capture what is really happening. The Fed doesn't even use the CPI number to view inflation.
Recently there have been numerous articles about how the worlds central banks' policies for zero interest rates is actually inhibiting growth because the low rates keep zombie companies alive and keep the system from cleaning out the bad debt.
Growth spurt? I'm reminded of Jim Mora and his famous rant on the Colts making the playoffs.
I doubt that lasts too long and could be part of the runup that occurs prior to the announcement of an spo. I sold today based on the spo risk. It's been some time since the last spo and they are overdue. With mortgage rates backing up a bit, this is an opportune time for them to buy more product to take advantage of the wider spreads that resulted because of this foolish talk by the Fed that they are going to raise rates.
No, the correct answer is that most of your Total Return on these types of stocks is from the dividend and not from capital gains (unless you are trading the runups that typically occur between dividend announcements). In the case of mREITs, they are going to be valued in the market between .90 and 1.25 times their book value. Obviously, the book value fluctuates and the valuation range of .9 to 1.25 times can vary depending on how the market views the sector. But because mREITs pay out most of their cashflow in dividends to meet the REIT requirements, their book values really can't increase aside from movements in interest rates and the market's valuation range. They are like owning a bond, albeit a supercharged heavily leveraged bond.
I think it just illustrates the point I made in my WMC post about some of these recent SPOs going sideways. Similarly, although SFL didn't do an spo, the trading action in that stock is exhibiting the same type of sideways to down pattern. I think so many of us are so eager to put money to work in stocks that pop on good or improving news, that we are not being patient and letting the stock come back in to a better buying range.
I sold today. The stock is up 19 cents on the ex-date and that seems unusual to me. Call me crazy, but it is Thursday and this type of action in the past has preceded an spo announcement. I know I have been saying that for a long time, but one of these days I am going to be right.
If they announce an spo, I will buy back in, but I won't pull the trigger on the day of the spo as recent spo's in other names have taken a bit to be digested. In the past, stocks doing an spo have bounced almost as soon as they have begun trading. I ended up buying GLOP at 23.10 and it later traded down to 22.80.
I still like WMC even though they trimmed their divy 3 cents, but I think they are overdue for an spo and since I got the divy, there's no point taking on that risk.
Sarge, I see the spinoff is trading on a when issued basis. Will have to read up on it. Spinoffs can be great opportunities if the spun off business was obscured in a larger corporation, but I'd rather buy the spin off than the parent. Pfizer's animal products spin off turned out to be a winner and there are many others that have been successfully. However, not all spinoffs are good. They have to be real businesses -- not just financial engineering.
MWE has been breaking down and now is under $60. Yield is 6%. The RSI is 35. Some already own. I sold out in Jan when oil prices started to collapse, but I have continued to follow them. With all of the merger activity in the MLP space, I could see someone taking a run at them with their price very depressed. They have been a target before and spurned offers. It would probably take an offer over $100 to get a deal done as the CEO and founders kids have big positions. But someone is going to come calling eventually and you get paid to wait.
Sarge, before you get all mad at me for offering a different view, FB is now slightly overbought and at the top of its channel. Whenever it has reached this point in the past, it comes back. Cramer is a contrary indicator. I missed the chance to buy FB when it traded down to the $77 level and the slow stochastics turned up, but I wouldn't chase it here.
bear, I actually don't see this acting any more volatile than some of the other stocks I follow. All the fear and constant chatter about the Fed wanting to raise rates really hasn't affected the price that much, probably because most know the Fed is bluffing and/or impotent. As for taking "big risks in their hedging strategy" some posters (Jack) have argued in the past that WMC was "overhedging" for a rate rise that is unlikely to come. If WMC was overhedging, then the fact that rates remained relatively stable actually hurt them. As for rates rising, it all depends on which rates actually rise and what happens to spreads. Interest rates don't move uniformly and neither do spreads. The biggest risk to mREITs is a rise in repo rates.