JT’s DAILY (WEEKLY as of 12/9/2013) BLOG for Month Of November 2018

Note: All previous month's posts are available in the archives, as noted above. 

All postings for the month are available here, sorted in descending order - i.e. most recent at the top.

1st Posting for Week Beginning Monday 11/12/2018

Posted Monday 11/11/2018 08:00 AM

Stocks posted gains for the week just ended, aided by a huge up day on Wednesday, the day after the election. Some pundits have ascribed this to relief that neither party will be able to do much in the next two years, with the Democraps holding the House, the Repugnants holding the Senate, and Trump continuing as President. The good feeling only lasted one day, as stocks sold off on Friday, and election snafus emerged in Arizona, Georgia, and (of course) Florida. My guess is, after it all shakes out, stocks will hold up at least through the end of the year, as the holidays are usually a good time for stocks, and of course for business generally. If something positive should come out of the US-China trade talks, which no one really expects, hold onto your blue chips and any other stocks you may have, a blow-out rally is likely to occur.

My dividend payers aren’t blowing away investors, but they are grinding out income month after month, which is what they are expected to do. Stocks on my lists going ex-dividend in the week ahead are listed following.  Payouts are quarterly if not otherwise noted. Yields are annualized per the current payout rate and Friday’s closing price.

Exelon (EXC), 11/14/2018, yield 3.08%.

Smucker JM Co (SJM), 11/15/2018, yield 3.07%.

Chevron (CVX), 11/15/2018, yield 3.75%.

Emerson Electric (EMR), 11/15/2018, yield 2.81%.

Kraft Heinz Co (KHC), 11/15/2018, yield 4.69%.

Duke Energy (DUK), 11/15/2018, yield 4.40%.

Royal Dutch Shell (RDS.B), 11/15/2018, yield 5.80%.

GlaxoSmithKline (GSK), 11/15/2018, yield 5.20%.

Pan American Silver (PAAS), 11/16/2018, yield 0.98%. PAAS is a speculation on silver, and is on the Tier3 list for that reason, certainly not because of the dividend. Still, it is nice to get something while waiting for silver to become highly valued once again. It has been a long wait, and likely will be longer still.

Southern Co (SO), 11/16/2018, yield 5.15%.

Horizon Technology Finance (HRZN), 11/16/2018, yield 10.20%. This BDC pays monthly.

United Parcel Service (UPS), 11/16/2018, yield 3.26%.

Gladstone Investment (GAIN), 11/19/2018, yield 8.24%. GAIN pays monthly.

Main Street Capital (MAIN), 11/19/2018, yield 6.02%. This BDC also pays monthly.

Both Kraft Heinz (KHC) and Royal Dutch Shell (RDS.B) are on my radar for starting a new position next week, as both are in my buy range, and at or above my expected yield for the stock classification. If buying RDS, be sure and go with the “B” shares to avoid any foreign tax withholding. As a reminder, the yields I expect, by stock category, in order for an acquisition to be attractive, are as follows:

Solid Blue Chip – 3%

Utility – 4%

Integrated Major Oil Company – 4%

Property REIT – 5%

Solid MLP or BDC – 6% (examples: Enterprise Products Partners LP (EPD), Main Street Capital (MAIN))

Most MLPs – 7%

Mortgage REIT – 8%

Most BDCs – 8%

Higher risk BDCs, MREITS, MLPs, smaller firms, without a long track record – 9% or more.    

Note that these are rough guidelines only.

One stock that went ex-dividend last week that I missed was Buckeye Partners LP (BPL), which went ex-dividend 11/9/2018. I own BPL, having started a new position last August at $35 or so. At that time, with a yield exceeding 14%, this one-time stalwart MLP was available at a bargain price, considering it was trading above $70 as recently as January 2017. After collecting one dividend at the 14% rate, BPL cut the payout, and now, trading a little above $32, it still yields over 9%. I’m OK with the cut, management is doing what is needed to allow BPL to grow and prosper. Besides, I certainly can’t complain about a 9% yield.

Earnings season is winding down, with only three of my stocks scheduled to report next week:

Amerigas Partners LP (APU) reports on 11/12/2018, while Cisco Systems (CSCO) and Wheaton Precious Metals (WPM) both report on 11/14/2018.

APU is another MLP on my radar, available now under $37, with a yield exceeding 10%. This propane dealer has been waiting years for a cold winter, and this may be the year we have one. WPM, formerly named Silver Wheaton, is another silver speculation, which pays a near-respectable dividend yielding over 2%.

The pace of new analyst ratings seems to have slowed a bit, but there were a few of note last week on my stocks, as listed following.

BlackRock Capital Investment (BKCC) was downgraded from OverWeight to Neutral at JP Morgan.

Chevron (CVX) was upgraded from Neutral to OutPerform at Credit Suisse.

Main Street Capital (MAIN) was upgraded from Market Perform at Raymond James.

Pattern Energy Group (PEGI) was upgraded from Market Perform to OutPerform at Raymond James.

Procter & Gamble (PG) was reiterated at Neutral at Bank of America. PG is one of the bluest of blue chips, but is at sell levels now, based on valuation.

Freeport-McMoRan (FCX) was downgraded from Sector Perform to UnderPerform at RBC Capital Markets. FCX is another precious metals speculation, and also pays a small dividend.

Frontier Communications (FTR) was downgraded from Neutral to Sell at UBS. FTR, formerly Citizens Communications in its better days, is on my Tier4 list. Between reverse splits and a suspended dividend, FTR has been a perennial loser since 2014, and the sooner one exited the stock since then, the better.

Monroe Capital (MRCC) was downgraded from OutPerform to Market Perform at Raymond James, and from Market OutPerform to Market Perform at JMP Securities.

NGL Energy Partners LP (NGL) was reiterated at Buy at Bank of America. With a yield of more than 14%, this is a worthy speculation at the current price. I thought so back in October when I started a new position, at a little over $11, and indeed I still think so. Just be aware, you are not buying PG or CVX, or even EPD or MAIN, but are making a bet on a small firm in the energy business doing better than the market thinks it will.

Monroe Capital (MRCC) was reiterated at Neutral at B. Riley FBR.

Alliant Energy (LNT) was reiterated at Market Perform at Wells Fargo.

Sanofi (SNY) was reiterated at Buy at Argus.

General Electric (GE) was reiterated at UnderWeight at JP Morgan. Anyone who has had a substantial position in GE acquired after the 2008 financial crisis, and on through early 2017, and has not sold, is most assuredly “underweight” GE, based on the value of their position in GE as a percent of their total portfolio. GE is a poster child of how a one-time bluest of blue chips can be run into the ground by a series of bad decisions by management. One of the most widely-held stocks, particularly by retirees, the demise of GE and the reduction of the dividend to one cent has definitely delivered some pain to shareholders. This is why diversification is a must – any company can falter, no matter how solid it seems, how long it has endured, and how storied a past it has.

I used up most of my editorial comments in the body of this report, as I was going through the regular updates on my stocks, and my thoughts were triggered by the review. To summarize my approach, with a higher than usual cash position for some time now, I am not constrained from making selective buys of stocks that are seemingly available at attractive prices, and paying out at attractive yields, even though the bull market is getting somewhat aged, and many favorites are somewhat over-valued. Now is a time to be very selective, and hold to my strategy, which is to buy what seems to be under-valued, but cautiously, acquiring a position incrementally over several months. Cash levels remain elevated, as dividends continue to be received, and are occasionally boosted by selling holdings that seem to be over-valued. Above all, remain vigilant, pay attention to what is happening, and be prepared to move on any buy opportunities, and also to take action and sell to avoid further damage from positions that are deteriorating.

JT

1st Posting for Week Beginning Monday 11/05/2018

Posted Monday 11/05/2018 10:00 AM

Running a bit behind schedule this week, took the weekend off to go ski at Wolf Creek in the San Juans. The market logged a win on all the major averages last week, with down days on Monday and Friday more than compensated by gains on the other days. The Monthly Jobs report on Friday exceeded expectations, which were high to begin with. We are also in the middle of earnings season, with most firms coming in at or above expectations. What’s not to like? There is the upcoming election and the state of campaigning in these times, concerns about trade relations with China, the expectation that the Fed will raise interest rates further, and the migrant “caravan” heading towards the US, to name a few distractions tending to tamp down the euphoria.  

Meanwhile, I can achieve a state of euphoria when I consider the upcoming dividends announced by stocks on my lists, as listed following. Payouts are quarterly if not otherwise noted. Yields are as annualized per the current payout rate and Friday’s closing price.

American Midstream Partners LP (AMID), 11/05/2018, yield 6.78%.

Martin Midstream Partners LP (MMLP), 11/06/2018, yield 14.79%.

Magellan Midstream Partners LP (MMP), 11/06/2018, yield 6.38%.

Crestwood Equity Partners LP (CEQP), 11/06/2018, yield 7.25%.

Intel (INTC), 11/06/2018, yield 2.49%.

NuStar Energy LP (NS), 11/07/2018, yield 10.24%.

NGL Energy Partners LP (NGL), 11/07/2018, yield 16.08%.

Entergy (ETR), 11/07/2018, yield 4.39%.

Energy Transfer LP (ET), 11/07/2018, yield 7.71%. ET is the firm created by the merger of Energy Transfer Equity LP (ETE) and Energy Transfer Partners LP (ETP), which was completed 9/7/2018.

Amerigas Partners LP (APU), 11/08/2018, yield 10.17%.

Welltower (WELL) 11/08/2018, yield 5.16%.

Hercules Capital (HTGC), 11/08/2018, yield 9.88%.

Exxon Mobil (XOM), 11/12/2018, yield 4.07%.

As noted, we are in the middle of earnings season. A number of firms that I follow will be reporting earnings next week, as listed following, by date:

11/05/2018

 NuStar Energy LP (NS), Pattern Energy Group (PEGI), Spirit Realty Capital (SRC).

11/06/2018

Emerson Electric (EMR), MFA Financial (MFA), National Health Investors (NHI), Senior Properties Trust (SNH), Alliant Energy (LNT), Frontier Communications (FTR), Pan American Silver (PAAS), Plains All American Pipeline LP (PAA), Prospect Capital (PSEC), American Midstream Partners LP (AMID).

11/07/2018

Southern Co (SO), Energy Transfer LP (ET).

11/08/2018

Windstream Holdings (WIN), CenturyLink (CTL).

11/09/2018

Enerplus (ERF), Calumet Specialty Products Partners LP (CLMT).

Earnings season generates a lot of analyst ratings changes, as the analysts digest the newly released results and fold the new information into their opinions regarding the stocks they follow. Last week’s ratings coming out on the stocks I track were as follows:

Colgate Palmolive (CL) was downgraded from Neutral to UnderWeight at JP Morgan.

Colgate Palmolive (CL) was reiterated at Market Perform at Wells Fargo, and at Neutral at Citigroup.

Colgate Palmolive (CL) was downgraded to Hold at Sun Trust Robinson Humphrey.

Merck (MRK) was reiterated at Buy at Sun Trust Robinson Humphrey.

Verizon (VZ) was reiterated at OverWeight at Morgan Stanley.

Altria (MO) was reiterated at Buy at Argus.

Southern Company (SO) was reiterated at Neutral at UBS.

Hershey Co (HSY) was upgraded from UnderPerform to Neutral at Credit Suisse.

Senior Properties Trust (SNH) was downgraded from Equal Weight to UnderWeight at Morgan Stanley.

PotlatchDeltic (PCH) was upgraded from Neutral to Buy at DA Davidson.

Ventas (VTR) was initiated at Neutral at JP Morgan.

General Electric (GE) was reiterated at Buy at Citigroup. It won’t cost much to take the advice, GE became a “single-digit midget” last week after yet another disappointing report and a dividend cut to a penny per share per quarter.

B&G Foods (BGS) was reiterated at Buy at Citigroup.

Eaton (ETN) was reiterated at OutPerform at Wells Fargo, and at Buy at Deutsche Bank.

General Electric (GE) was upgraded from Neutral to Buy at UBS, and reiterated at Hold at Deutsche Bank.

Coca Cola (KO) was reiterated at Buy at Deutsche Bank.

Crestwood Equity Partners LP (CEQP) was downgraded from OutPerform to Market Perform at Wells Fargo.

Public Service Enterprise Group (PEG) was reiterated at Hold at Deutsche Bank.

General Electric (GE) was reiterated at OverWeight at Barclays. The ratings for GE seem to indicate a degree of optimism that a recovery from the current lows is in store. That may happen, but it probably won’t be right away.

Sanofi (SNY) was upgraded from UnderWeight to Equal Weight at Barclays.

Entergy (ETR) was reiterated at Buy at Bank of America.

Eaton (ETN) was reiterated at UnderWeight at Barclays.

HCP Inc (HCP) was reiterated at OverWeight at Cantor Fitzgerald.

Kellogg (K) was reiterated at Buy at Citigroup, at Hold at Deutsche Bank, and at Buy at Buckingham.

Pfizer (PFE) was downgraded from OutPerform to Market Perform at BMO Capital Markets.

B&G Foods (BGS) was reiterated at Buy at Citigroup, again.

General Electric (GE) was also reiterated at Buy a second time this week by Citigroup.

Merck (MRK) was reiterated at Buy at Citigroup.

Eaton (ETN) was reiterated at Buy at Citigroup.

Magellan Midstream Partners LP (MMP) was reiterated at Equal Weight at Barclays, and at Buy at Citigroup.

Hi Crush Partners LP (HCLP) was downgraded from Equal Weight to UnderWeight at Barclays.

HCP Inc (HCP) was upgraded to OutPerform at RBC Capital Markets.

ONEOK (OKE) was upgraded from Neutral to Buy at Bank of America.

After a wild October, November has started off on a positive note. The mid-terms will finally occur this week. It will be interesting to see how the market reacts if the Dems take over the House, as predicted. There certainly is no telling whether that will indeed happen, and even if it does, how the market will respond. My reaction to any traders wanting to make a big bet on the election outcome is, Good Luck With That, you’ll need it. My own plan is to hold off on making any portfolio changes until I see how it shakes out.

JT

1st Posting for Week Beginning Monday 10/29/2018

Posted Sunday 10/28/2018 10:00 AM

The stock decline resumed last week after a middling prior week, with the major averages losing ground every day but Thursday. While national and international developments provided a worrying backdrop, the market seemed to be mostly influenced by disappointing earnings and equally disappointing guidance from some bellwether stock earnings reports.

After a lackluster lineup the past two weeks, I am personally heartened by a more impressive lineup this week of stocks on my lists going ex-dividend in the week ahead. These are listed following by date, with annualized yield as of Friday’s close indicated. Assume the standard quarterly payout schedule unless otherwise indicated.

10/29/2018

Enerplus (ERF), 0.97%. ERF pays monthly.

10/30/2018

Enterprise Products Partners LP (EPD), 6.45%.

AGNC Investment (AGNC), 11.96%. AGNC is a monthly payer.

Plains All American Pipeline LP (PAA), 5.35%.

STAG Industrial (STAG), 5.28%. STAG is a monthly payer.

Alliant Energy (LNT), 3.08%.

Kinder Morgan (KMI), 4.83%. 

Prospect Capital (PSEC), 10.73%. PSEC is a monthly payer.

Tanger Factory Outlet Centers (SKT), 6.32%.

10/31/2018

Hi Crush Partners LP (HCLP), 18.11%.

Hoegh LNG Partners LP (HMLP), 9.90%.

Realty Income (O), 4.39%. O pays monthly.

Paychex (PAYX), 3.45%.

11/01/2018

Eaton (ETN), 3.66%.

Unilever (UL), 3.34%.

11/02/2018

ONEOK (OKE), 5.29%.

HCP Inc (HCP), 5.48%.

A number of firms that I follow will be reporting earnings next week, as listed following by date:

10/29/2018

PotlatchDeltic (PCH), Ensco PLC (ESV), Transocean LTD (RIG).

10/30/2018

Coca Cola (KO), Crestwood Equity Partners LP (CEQP), Eaton (ETN), General Electric (GE), Pfizer (PFE), Public Service Enterprise Group (PEG), Apollo Investment (AINV), B&G Foods (BGS), Hi Crush Partners LP (HCLP), ONEOK (OKE), Welltower (WELL).

10/31/2018

Ares Capital (ARCC), Chimera Investment (CIM), Diebold Nixdorf (DBD), Entergy (ETR), Enterprise Products Partners LP (EPD), Exelon (EXC), HCP Inc (HCP), Kellogg (K), Sanofi (SNY), Annaly Capital Management (NLY), Realty Income (O), Williams Companies (WMB), GlaxoSmithKline (GSK), Legacy Reserves (LGCY).

11/01/2018

Magellan Midstream Partners LP (MMP), Medical Properties Trust (MPW), Pitney Bowes (PBI), Royal Dutch Shell (RDS.B), Main Street Capital (MAIN), Spectra Energy Partners LP (SEP), Hercules Capital (HTGC), Kraft Heinz (KHC), STAG Industrial (STAG), Tanger Factory Outlet Centers (SKT), Buckeye Partners LP (BPL), Safety Insurance Group (SAFT), Park Hotels Resorts (PK). 

11/02/2018

Chevron (CVX), Exxon Mobil (XOM), Duke Energy (DUK).

A couple of new names have been listed preceding that have not yet been added to my lists. I will be adding the following firms to my Tier 3 list soon:

Chimera Investment (CIM), a Mortgage REIT yielding over 11%.

Coventa Holding (CVA), a firm specializing in facilities generating energy from waste, which yields over 6%.

Hoegh LNG Partners LP (HMLP), a partnership involved in exporting LNG, yielding over 9%.

Hi Crush Partners LP (HCLP), a partnership supplying sand for onshore drilling, yielding a whopping 18%.

Park Hotels Resorts (PK), a REIT yielding nearly 6%.

Upgrades / downgrades / initiations / reiterations coming out last week regarding my stocks were as follows:

AT&T (T) was upgraded from Neutral to Buy at Tigress Financial.

Intel (INTC) was reiterated at Buy at B. Riley FBR.

Barrick Gold (ABX) was downgraded from OutPerform to Neutral at Macquarie.

Digital Realty (DLR) was upgraded from Neutral to Buy at Guggenheim.

Horizon Technology Finance (HRZN) was downgraded to UnderPerform at Keefe Bruyette & Woods.

Intel (INTC) was upgraded from Neutral to Buy at Nomura.

Mid America Apartment Communities (MAA) was initiated at Equal Weight at Capital One Financial.

Exxon Mobil (XOM) was initiated at Neutral at Piper Jaffray.

Royal Dutch Shell (RDS.B) was initiated at Neutral at Piper Jaffray.

Chevron (CVX) was initiated at OverWeight at Piper Jaffray.

Total S A (TOT) was initiated at OverWeight at Piper Jaffray.

Hershey Co (HSY) was reiterated at Neutral at Susquehanna.

Hi-Crush Partners LP (HCLP) was reiterated at Buy at B. Riley FBR.

Procter & Gamble (PG) was reiterated at Equal Weight at Morgan Stanley.

Washington Real Estate (WRE) was upgraded from Sell to Hold at Stifel Nicolaus.

McDonalds (MCD) was reiterated at OutPerform at Telsey Advisory Group, and at OverWeight at KeyBanc.

Kimberly Clark (KMB) was reiterated at Sell at Citigroup.

3M Co (MMM) was reiterated at Buy at Citigroup.

Verizon (VZ) was reiterated at OverWeight at JP Morgan.

Darden Restaurants (DRI) was initiated at Buy at Loop Capital.

United Parcel Service (UPS) was downgraded from Buy to Neutral at Bank of America.

Intel (INTC) was reiterated at UnderWeight at Barclays, at OutPerform at BMO Capital, at Buy at Needham and also at B. Riley FBR, Nomura, and Roth Capital, at Market Perform at Cowen, at Equal Weight at Morgan Stanley, and Positive at Susquehanna. Interesting that after a positive earnings report, all of these firms reiterated the rating that they had previously held on INTC, and none changed their opinion.

Colgate Palmolive (CL) was downgraded from Buy to Hold at SunTrust.

American Electric Power (AEP) was reiterated at Buy at Bank of America.

AGNC Investment (AGNC) was reiterated at Equal Weight at Barclays.

Note my usual admonition regarding analyst ratings, which is that I report these as being of interest, but not as actionable advice. My advice remains to buy under a set price or to sell over a set price, for Tiers 1, 2, and 3, and avoid if on Tier 4. Further, be aware of the risk associated with whichever list the stock is on. For example, if you are somewhat risk averse, stick with Tiers 1 and 2, and avoid the Tier 3 stocks. Of course, if you are extremely risk adverse, I suggest you avoid stocks altogether.

Well, another week, another batch of declines. October has definitely been spooky for stock investors, and it is not over yet. Of course, if stocks never declined unless or until they deserved to, there would never be any stock bargains available, which can happen when good stocks get dragged down by a general market selloff. That is the real trick, figuring out which stocks fall into that category, then buying them when the selloff seems to be about over.  Easy to say, hard to do, but in my opinion, an approach that works, even when not executed to perfection.  

JT