PCL rallied on the close just as it was supposed to. The underwriters pumped it in the final minutes to guarantee that the secondary would be fully sold out on Monday, but there's no guarantee that the price will hold on Monday. This is a very predictable game that I've seen many times. The 8+% dilution factor will weigh on the stock until lumber prices in PCL's geographical area get a lot stronger. Anyone who put in for shares and went short on the pop today is guaranteed a nice profit on Monday when they can automatically close out the trade.
I contend that DE is headed still lower... a lot lower! I also contend that 98% of the people on this board would be a whole lot better off in VTI than DE. VTI is up 30% so far this year.. what has DE done? Trying to pick individual stocks is a loser's game. The only people making money in DE are the shorts. VTI lets you sleep at night and participate fully in the overall market at miniscule cost (0.05%) and no commission (if you buy it through a Vanguard account.)
Give up on DE... buy the VTI instead. VTI is up 30% so far this year... what has DE done? Trying to pick individual stocks is a loser's game.
You would be a whole lot better off with the VTI. Give up on individual stocks... it's a loser's game. The VTI is up 30% so far this year... what has DE done?
If you can get protected on an allocation of shares at $45, short the stock here ($45.65) and use the "new" shares to cover. The underwriters are "holding" the price right where they want it to be sure it all sells (and they get their fees.) There's heavy shorting going on now to grab the spread on Monday when the deal closes. It's a no-risk situation as long as you're assured of the availability of enough shares to cover the full short position. The present spread may look small, but it's actually more than enough to make the trade very worthwhile.
Once the secondary is complete, I see the stock sliding lower. The present price is being manipulated by GS (as they do with everything they touch.)
If you're so anxious to own this dog, I know where you can buy 12.1 million shares at $45 net of commissions. I'm sure your broker can get you as much as you want.
When your children inherit your stocks, any gains (or losses) will disappear. It doesn't make any difference whether you had a paper gain or loss; the stock is automatically passed on with the cost basis adjusted to the closing price as of the date of the grantor's death. This has no effect on estate or inheritance taxes; they are also calculated using the adjusted price. The way PCL is acting lately, you won't have any gain left by the time you die. Don't delude yourself into thinking that PCL's "hard assets" will support the stock price in a time of a sinking dollar. Your so-called "hard assets" are standing, live trees that can be wiped out by fire, disease, insects, drought and other natural disasters not to mention economic forces that can quickly reduce the value of the asset by killing demand. The land won't go away, but it's not worth diddly without healthy trees and a strong demand for lumber. PCL sells at a hefty P/E ratio that is too high to support the stock. The dividend is hardly what can be called "safe"; the company has gone through numerous cuts to the dividend in times of lower earnings. If the company if forced to sell land in order to pay the dividend, what's the point? Rising interest rates, which will inevitably come sooner or later, will have the effect of slowing new housing construction which will lower demand for lumber. This is a very tough business with big risks and little consistency. Furthermore, the dividend won't look nearly as appealing when matched or bested by much safer investments.
If the precipitous drop yesterday followed by a further drop today totaling 10% doesn't demonstrate the risk, then you better take another look at the definition of the word risk. PCL is, has been, and will always be a risky investment. The whole business is risky. Fires, diseases, insects, price fluctuations, economic slowdowns all make this business highly risky. Also, PCL has not hesitated to cut the dividend when business turned sour. The current price shows that the underwriters are doing their job supporting the stock.
If the underwriters support the stock, it'll hold right around $45. Once the underwriting is completed, the stock will likely sink like a stone. No one with any investing common sense wants to hold a dead-money stock. The dividend is meaningless when the stock demonstrates that it can drop the equivalent of nearly 3 times the annual dividend in a single day. It's a good thing the market was strong... it might have been a lot worse. IMO, PCL will drop below $40 before it goes above $50. This is now a broken stock. There's no longer any technical support in sight. Management should have pre-announced some hints about what they were planning with a strong argument in its favor. That might have blunted the impact somewhat and made it possible to get a better price for the secondary. They handled this thing like total amateurs. I'm glad I'm out and feel sorry for the longs. Congratulations to the shorts.
The action of the stock today speaks volumes. I'm not in the lumber or the land business, but it seems to me that the easy money has already been made in land values. The inevitable rise in interest rates will slow homebuilding which will cut the demand for lumber products which will hurt PCL. It looked as if their focus was shifting toward the minerals under the ground and away from lumber, and I presume that's where they see better profit opportunities. This seems like an about face from that strategy. Anyway, I see the stock headed south of 40 in the very near future. If I had not sold yesterday, I'd sell now. There might be room for a reflex rally, but that's all.
I'm very relaxed having sold all 4000 of my shares yesterday at 50. Should have sold when it hit 50 a long time ago, but I seduced by the dividend. I got in at 36, so I came out okay. Dividends are meaningless if the stock price doesn't go up. When interest rates go back to "normal" - and they will - these dividend stocks will get crushed. Getting out yesterday was the luckiest decision I've made since I sold CAT at 89.
Major dillution from the secondary will kill the present shareholders. I expect to see PCL continue the slide to 40. This is a game-changer. I'm kicking myself for not shorting the stock when I sold it at 50.
Market action strongly indicates a very disappointing report. I got out at 50 this morning in the belief that expectations are way too optimistic. Even if I'm wrong, I believe there will be a better buying opportunity. We'll know soon enough.
Companies with severely shrinking earnings do not grow their dividends. Even MCD had to cut the rate of dividend increase to 5%, the lowest in many years. If you don't like the VTI, take a look at the VIG (Vanguard Dividend Appreciation ETF.) The point is that CAT has severe headwinds going forward. They'll probably pull a PBI (Pitney Bowes) and just increase the dividend by a miniscule amount to remain a Dividend Aristocrat. PBI was finally forced to substantially slash the dividend thereby dropping off the D/A list in order to conserve cash and remain in business. CAT may find themselves boxed into the same corner if they're not careful.
If you're in this for the next 20 years and don't care about holding a dead money situation, you're on the right track. You'd be a whole lot better off just holding something like the VTI. Don't try to beat the market... you can't do it consistently on a long term basis. This proves it.
On the heels of the CAT disastrous earnings report, I look for DE to get crushed since they move very much in tandem. I view the overall market as very overpriced, and DE won't be immune to the sell-off. DE should test the 82.50 area, and I don't believe it will hold. I'm looking for a drop to 77-78 at the very least by the end of the year.
This is about what I expected. The signs were too clear to miss. I'd continue to stay out for the foreseeable future. Maybe 72 would be a decent re-entry point.
There's no question that CSCO is acting really sick. To be down on a day like today, there has to be some fundamental reason. At least part of the reason is probably the fact that Cramer still likes the stock. The irrefutable fact is that CRAMER IS THE KISS OF DEATH!!! He'll wait for it to get down below 18 before he throws in the towel. Then, and only then, will CSCO be a compelling buy.