JT’s DAILY BLOG for Month Of March 2012

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

All times are Eastern Time - same as the NYSE

Final Posting Friday, 03/30/2012 6:55 PM

Today ended up being a quieter day than it appeared it was going to be at the outset. Volatility was minimal. The blue-chip indices, the Dow30, S & P 500, and the New York Composite all ended the day with decent, but not overwhelming, gains, while the NASDAQ Composite and the small cap index, the Russell 2000, both closed with small losses. 

One of my stocks, Raytheon (RTN), was downgraded from OutPerform to Sector Perform during the day today, by RBC Capital.

I made one buy today, adding to a small position in Penn Virginia Resources LP (PVR), a Coal MLP. I originally bought into PVR because it was one of the few MLPs that was not extended in price. It has dropped over $3 this week on no news that I can find. A recent Barron’s article noted the start of the decline, stating that it presented a buying opportunity. I had to agree, putting money behind the conviction. Coal is unpopular with the environmental set, for probably good reasons, but it isn’t going away soon.

Total Petroleum (TOT) continued to recover a little more of the $5 and change price drop it has endured this week, as the latest news states that the company is planning to drill a relief well to end the leak. With natural gas in the air, an explosion is always a threat, but if it can be avoided, the occurrence of this problem will have offered a great opportunity to buy TOT at a discount.  

Speaking of natural gas, the commodity is stuck at decade lows, barely holding above $2  per MMBTU. That is 1 million BTUs, for those unfamiliar with natural gas measurement acronyms. Not me, I led not one but two IT projects during my IT career to develop Gas Measurement systems. But I digress. The current depressed price is a classic demonstration of supply and demand at work. The low price is good news for consumers, but it is a threat to project economics for various gas industry projects. It just shows that for every silver lining, there is a dark cloud somewhere nearby.

I’m ready to call it a week.   

JT

1st Posting Friday, 03/30/2012 9:30 AM

Asian markets finished mixed, European markets are all trading up, and U.S. futures are indicating a positive start on this final trading day of the quarter. The Personal Income and Spending numbers for February came out at 8:30 AM, showing income was less than expected, while spending was more than expected. Same old same old, I guess.

None of my stocks have received any upgrades/downgrades so far today.

Today may be more lively than yesterday, as far as stocks are concerned. The best opportunity to pick up some shares of TOT at a bargain price under $50 may have passed, the shares are up another $.33 in the pre-market, approaching $51.

Time to get ready.

JT

Final Posting Thursday, 03/29/2012 5:25 PM

Stocks pulled back from the depths reached early in the session, but only the venerable Dow30 index managed to close above the flatline, as all of the other averages posted minor declines.

It was a quiet trading day. Minimal news flow, and no real catalysts to drive stocks up or down.

One of my stocks, Total Petroleum (TOT), is available today for $5 and change less than at this time a week ago, compliments of a natural gas leak at a North Sea platform operated by TOT. The platform had to be abandoned and a quarantine has been imposed on the surrounding area, because of the risk of an explosion. Natural gas, assuming an explosion can be avoided, is not a disaster in the same league as the BP fiasco, and the news can be delivering a buy opportunity for investors wanting a stake in “big oil” but not finding anything available at a reasonable price. I had a bid in today for some additional shares at less than $50, but it did not get filled; I was too slow on the draw. If it should drop again, I will resubmit.

I’m ready for Friday.

JT

1st Posting Thursday, 03/29/2012 9:25 AM

Asian markets all posted losses, and European markets, still open, appear slated to end the same way. U.S. futures are indicating a lower open for stocks here. The weekly unemployment numbers announced at 8:30 were pretty much in line, as was an update on 3rd quarter GDP. While the economic releases presented no shocks to the system, they also did not inspire much confidence.

Spain is rapidly becoming the new Greece, as it moves to center stage of the unfolding European debt crisis. Nationwide strikes are under way there as I write this.

A couple of upgrades/downgrades of interest that have come out this morning are:

Exelon (EXC) had coverage intiated with a Neutral rating from Goldman.

AT&T (T) was downgraded from OutPerform to Neutral at RW Baird.

Verizon (VZ) was also downgraded from OutPerform to Neutral at RW Baird.

At least R.W. isn’t showing any favoritism, treating both telecom giants the same.

Not much else to comment on, so in the immortal words of our former President, only this time applying to the market day, “bring it on”.  Probably one of several comments that he wishes he had not made, or at least that his political “handlers” wished that he had not made. 

JT

Final Posting Wednesday, 03/28/2012 6:45 PM

U.S. markets sagged today, with the Dow30 avoiding a triple-digit loss only because of a late surge of buying. There were several suspects as to the cause of the swoon, but perhaps it was just time. There might have been some profit taking contributing to the selling pressure. Durable Orders, excluding transportation, actually came in better than expected, so pundits citing the headline Durable Orders number as the cause are mistaken, in my opinion.

One of my stocks, Total Petroleum (TOT), is in the news because of a natural gas leak at one of it’s North Sea platforms, forcing abandonment of the platform and an area quarantine. The risk is of an explosion. Not good, but at least it will clean itself up without human assistance, as the gas dissipates. While not good, this is certainly not comparable to the BP disaster. TOT has dropped over $5.00 since this all started a couple of days ago, but appears to have stabilized.

Intel (INTC) was reiterated as a Buy at Argus, with a price target of $34, citing INTC’s push into ultrabook laptops.

I see, upon scanning for any news on my stocks, that Paychex (PAYX) reported earnings after the bell today. Somehow this announced report had escaped my radar when I was checking to see if any of my stocks were scheduled to report this week. Anyway, PAYX reported FQ3 EPS of $.37 and $570M in revenue, both in-line with analysts’ estimates. PAYX shares are down .3% in after-hours trade, so apparently meeting expectations was not enough for some holders of the stock. 

Finally, Annaly Capital (NLY) closed down 3.5% today, combining the usual ex-dividend adjustment (today is the ex-dividend date for the announced $.55 dividend)  with an announcement that 772K of preferred shares will be converted into 2.4M shares of common, diluting shareholders.

I finished my taxes today, including the onerous new form 8949. I am ready to call it a day.

JT

1st Posting Wednesday, 03/28/2012 9:00 AM

Chinese and Indian markets posted substantial declines Wednesday, while Japan and Australia finished in positive territory. The Shanghai Index dropped 2.65%. European stocks are trading down. U.S. futures are still negative, but have improved since earlier this morning. Economic releases of note today are Durable Orders and Petroleum Inventories.

Only two of my stocks have been tagged with upgrades/downgrades so far today:

Verizon (VZ) was downgraded from OutPerform to Sector Perform by RBC Capital.

Nestle SA (NSRGY) was downgraded from Buy to Neutral at UBS.

My struggle (where have I heard that phrase before?) continues with the new IRS Form 8949. I am getting the upper hand, but it hasn’t been easy. If there are a lot of errors in the data reported to the IRS by your brokerage, expect to spend a lot of time completing the form properly.

As the end of the quarter approaches, there may be an up tick in activity in stocks starting today, because of the phenomenon known as “window dressing”, whereby fund managers sell under performing stocks and buy perceived winners so the published list of stocks held as of the quarter-end looks better.  

The answer to the question above, my struggle, was the title of the book (Mein Kampf) written by Adolf Hitler while imprisoned for attempting to overthrow the German government in 1923. Unfortunately for the world, he was released from prison and went on to experience a political comeback, which led to the establishment of his dictatorship and World War II.  

JT

Final Posting Tuesday, 03/27/2012 6:00 PM

Stocks took a breather today, as all of the major averages posted modest declines following the strong start registered Monday. 

Several stocks I follow had coverage initiated today:

AT&T (T) was initiated at Hold by Canaccord Genuity.

Verizon (VZ) was initiated at Hold by Canaccord Genuity.

Digital Realty (DLR) was initiated at Hold by Canaccord Genuity.

I’ll never understand why an initiation of coverage would be with a Hold rating. If the rater has no opinion, why initiate coverage?

Not much happening today. I’m finally getting serious about taxes, getting into the depths of it, figuring out gains and losses and how to report them on the NEW form 8949 that must now be filled out along with Schedule D this year. It looks like the IRS is finally getting serious about reconciling taxpayer reported gains/losses with the data held by the brokerages. I expect this trend to intensify over the next few years as the government’s needs for ever more revenue will increase the pressure to avoid lost tax revenue from non-compliance.

JT     

1st Posting Tuesday, 03/27/2012 9:30 AM

Asian markets were up over 1% in most cases, except for the Shanghai Index, which had a small loss. European markets are trading in mixed fashion, some up, some down. U.S. futures are positive, but not by much, indicating there will not be much momentum left over from the big rally day yesterday. Economic releases to come out today are the Case-Shiller 20 City Housing Index and Consumer Confidence for March.

The only upgrade/downgrade action this morning affecting stocks I follow was for McDonalds (MCD), which had coverage initiated at Neutral at Atlantic Equities.

Today does not appear to be shaping up to be very exciting, but that could change. At any rate, it is here.

JT

Final Posting Monday, 03/26/2012 4:15 PM

Stocks managed pretty significant gains across all of the major averages today, overlooking a rather tepid reading on Pending Home Sales. One catalyst, supposedly, was Bernanke’s rather dour outlook on the job market, as expressed in prepared remarks today. In the perverse logic of the market, this was interpreted as good news; it would mean the central bank would be likely to continue to hold interest rates at record lows.    

Several upgrades/downgrades that have come out since this morning on stocks I track are:

Alliant Energy (LNT) was upgraded from Equal Weight to OverWeight at Barclays.

Westar Energy (WR) was upgraded from Equal Weight to Overweight at Barclays.

Philip Morris (PM) was upgraded from Neutral to Buy at Davenport.

All utilities and consumer staples stocks in my Tier1 and Tier2 lists have been updated to reflect my recent research. Further data on the changes is provided below.

Tier1 Drops:

Colgate Palmolive (CL) – Too much debt.

Clorox (CLX) – Too much debt, no equity.

Campbell Soup (CPB) – Too much debt.

Dominion Resources (D) – Too high a payout, yield low compared to other utilities.

DTE Energy (DTE) – Borderline case, dropped because of slow regional enonomy.

Duke Energy (DUK) – Mega-merger in progress, avoid.

First Energy (FE) – Payout too high.

Kellogg (K) – Too much debt.

McCormick (MCK) – Yield too low.

NSTAR (NST) – Yield too low for a utility.

 

Tier1 Adds:

Alliant Energy (LNT) – Utility with good all-around numbers & ratings.

 

Tier2 Drops:

Atmos Energy (ATO) – Borderline case, but deemed less attractive than alternatives.

Avista (AVA) – Dropped small-cap utilities.

Black Hills (BKH) – Dropped small caps, payout says N/A, not clear why.

Piedmont Natural Gas (PNY) – Yield too low.

Spectra Energy (SE) Yield too low.

 

Tier2 Adds:

Consolidated Edison (ED) - Solid but not spectacular, would be attractive upon a price pull-back.

Entergy Corp (ETR) – Higher risk, but a value play, price depressed.

ConAgra (CAG) – Solid staple stock with a decent yield.

 

Moved between Tiers:

Exelon (EXC) – Moved from Tier1 to Tier2, higher risk, near-term earnings and dividend growth predicted to be limited at best.

 

Tier3 Drops:

Southern Copper (SCCO) – Too much risk, even for Tier3.

 

Tier3 Adds:

Otelco (OTT)- Small rural telecom with big yieldseems to be holding up.

 

Counts: Tier1 – 62, Tier2 – 40, Tier3 – 28.

I expect these counts to be reduced by another 10 to 20 names after all is said and done. 

JT

1st Posting Monday, 03/26/2012 9:00 AM

Asian markets closed higher in Japan and China, lower in India and Australia. European markets are all trading in positive territory, except for Spain. U.S. futures are indicating a positive start for the trading week. The only economic data on tap is Pending Home Sales, due out at 10:00 AM.

None of the stocks I follow have received any upgrades/downgrades so far today. A few have ex-dividend dates coming up this week:

Philip Morris (PM), 3/27/2012, yield 3.55%.

Illinois Tool Works (ITW), 3/28/2012, yield 2.53%.

National Health Invs (NHI) 3/28/2012, yield 5.30%.

Windstream Corp (WIN) 3/28/2012, yield 8.40%.

Annaly Capital Management (NLY) 3/28/2012, yield 13.51%.

Realty Income (O) 3/29/2012, yield 4.59%. O pays a monthly dividend.

None of my stocks report earnings this week.

I have a new article out on Seeking Alpha (SA) just this morning, presenting a review of dividend-paying consumer staples stocks. A link is available under the major selection “SA Articles”.

I am reviewing all of my stocks by sector, to filter out less attractive stocks, and to get the number down to a more manageable level of around 100 to 110 stocks. For each group, I include all of my stocks in that group, plus I include a few other prominent stocks in the sector, as identified by a scanning process. So far I have completed reviews of two groups/sectors: utilities and consumer staples. For those stocks kept, I am updating my buy levels to reflect current conditions. My lists have already been updated to reflect the utilities review, and I will update the lists again later on today to reflect the consumer staples review. In tonight’s post I will provide a recap of stocks dropped/added.  Only stocks on my lists with status dates of March 2012 or later should be considered to have been vetted by this process. I will present the results of each review in a Seeking Alpha article with the title beginning with the words “Yield, Value, Safety …etc”.  I will stay at it until all stocks have been reviewed. My goal is to complete this process by June 1st.

JT

Final Posting Friday, 03/23/2012 7:30 PM

Stocks finished the day, but not the week, with modest gains. Mixed signals from the various reports that came out this week on the state of the U.S. housing market dampened enthusiasm, compounded by concerns over slowdowns in China and Europe.

My focus has been on trying to locate something decent to buy at current levels, as I have just about given up on a big down move opening up great buying opportunities. It could still happen, and I will save some cash to be ready if it comes, but as I sit over-allocated to cash, I have to ask myself, what if the storm never comes? As usual, a compromise position is what I have opted for. Pick up a few shares here and there of good, solid, dividend-paying stocks at reasonable, but not great, prices, and leave room to buy more if a downturn comes along. Following this plan, in the past two weeks I have purchased shares of:

American Electric Power (AEP), at $38.55.

Amerigas Partners LP (APU), at $40.40.

ConAgra (CAG), at $26.25.

Westar Energy (WR), at $27.51.

Public Service Enterprise Group (PEG), at $30.55.

I am currently slightly underwater or barely at break-even on all of these stocks, but that does not concern me. I bought these to become part of my long-term holdings of dividend-paying stocks. I will add to these positions if better prices become available. I usually require at least a $1.50 to $2.00 decline for stocks in these price ranges before adding more.

Time to call it a week.

JT

1st Posting Friday, 03/23/2012 9:30 AM

Asian markets closed down, except for India, which recovered a good bit of the loss posted yesterday. European markets are all trading down. The only economic release on tap is New Home Sales, due out at 10:00 AM.

MarketWatch has a cheery article on the front page, with the latest prognostications from five well-known “doomsayers”. And columnist Mark Hulbert writes that the long-awaited correction has begun. It is amazing what a couple of down days will do.

The only stock I track that was tagged with an upgrade/downgrade this morning was Altria (MO), which was upgraded from Market Perform to OutPerform at Wells Fargo.

U.S. futures indicate a tepid open. The release of New Home Sales data may move the market when it comes out shortly.

JT

Final Posting Thursday, 03/22/2012 9:00 PM

Stocks dropped at the open and stayed there all day, extending their losses a bit as the day wore on. Still, it was not even close to being a panic sell-off, just a slow, grinding, down day.

I made a buy today, of ConAgra (CAG). I was in too much of a hurry, paying $26.25, when I could have gotten in for 20 cents less, but since it came back up to close at $26.21, I guess it’s OK. Somehow, I thought the market might rebound today, so my thinking was I needed to get the stock bought before things turned up. Wrong again!

If you check my recommended stocks, you won’t find CAG. I am in the process of reviewing all of my stocks, and until that process is complete, the picks as shown should be considered as under review IF the status date is earlier than March 2012. Utilities have been updated, per my utilities review, and soon consumer staples will be updated, with CAG to be added to my Tier2 list.

One day to go this week.

JT

1st Posting Thursday, 03/22/2012 10:00 AM

Asian markets closed mostly in the green, except for India, which posted a significant 2.3% loss. European markets all posted losses, in most cases over 1%. U.S. futures are indicating a lower start, even as the weekly unemployment numbers show the improving job market is continuing, although at only a very modest pace. There is minimal corporate news so far today. The reason cited for the dour outlook is concern about the slowing economies in both China and Europe.

Scanning MarketWatch for upgrades/downgrades on stocks I track, there are a few:

Exxon Mobil (XOM) was upgraded from UnderWeight to Neutral at JP Morgan.

Annaly Capital (NLY) was downgraded from Neutral to UnderPerform at Sterne Agee.

Emerson Electric (EMR) was upgraded from Neutral to Buy at Nomura.

American Electric Power (AEP) was upgraded from UnderPerform to Sector Perform at RBC Capital.

As advertised, stocks have opened up on a down note.

As noted in yesterday’s morning post, I’m working on a new article for Seeking Alpha, comparing consumer staples stocks to each other, to determine the best choices available today. While I’m still reviewing the numbers, one stock that has stood out as a value is Conagra Foods (CAG). In fact, CAG is about the only one of the 22 “finalists” in value territory. The next dividend should be coming along around the fourth week in April, so now might be a good time to consider CAG. CAG released earnings just this morning, posting a modest earnings surprise, as FQ3 EPS of $.51 beat estimates by $.02. The release noted that, quote:

 "Conditions have been difficult..due to high inflation and soft volumes for retail consumer food brands,".

This is a common refrain from all of the stocks in this sector. Still, CAG expects continued low FY 2012 EPS growth.

Time to post. I’m afraid my internal clock is not yet in sync with the time change from shifting to Daylight Savings Time. But, better late than never.

JT

Final Posting Wednesday, 03/21/2012 7:15 PM

Stocks finished with mostly modest losses, except for the NASDAQ and the small-cap Russell 2000, both of which finished with very small gains. The Existing Home Sales number released this morning was a minor disappointment, showing a slight decline after a couple of positive months.

One of my stocks reported earnings this morning, as General Mills (GIS) reported FQ3 EPS of $.55, which was in-line with analyst’s estimates. Revenue of $4.12B was +13% Y/Y, beating by $40M. GIS lost $.18 today, closing at $38.58. As with many of the food giants, margins are being squeezed by rising input costs.  

No additional upgrades/downgrades came out since this morning on stocks I follow.

I initiated a new position today, as one of my recommended stocks came within a few cents of my buy-under price, a rarity in these times. The stock is Amerigas Partners L.P. (APU), an MLP primarily involved in propane distribution. Purchased at $40.40, the stock is down significantly from the highs in excess of $50 reached in January 2011. Bargains like this don’t come along for no reason, and there are reasons aplenty for APU’s tough times. First and foremost, the unbelievably warm winter in most of the U.S. this year has resulted in reduced propane usage, and not by just a little bit. Further, APU just issued seven million additional units, the proceeds of which will be used primarily to reduce indebtedness. Stocks usually decline when new shares/units are issued, as investors react negatively to the dilution. Further increasing the negative pressure, Fitch downgraded APU debt to ‘BB’ from ‘BB+’, with a negative outlook, citing the warm weather impact and the costs of integrating APU’s recent acquisition of Heritage Propane. Al Gore notwithstanding, APU’s troubles are not permanent, as the weather will likely return to normal long before APU has significant debt coming due, reported in the Fitch news release to be not be until 2019. It could, however, go down further in the interim; if so, I will buy more. APU yields 7.58% as of today’s close.

That’s about the only action today.

JT 

1st Posting Wednesday, 03/21/2012 9:30 AM

Asian markets finished mostly down, except for India, which rose 1.6%. European markets are trading down. U.S. futures are basically flat. The main economic release scheduled for today is Existing Home Sales, due out at 10:00 AM, which could be a market-mover.

No upgrades/downgrades to report this AM, at least not on stocks I track.

I am currently reviewing Consumer Staples stocks, trying to determine which stocks would be the best investments today, considering current prices and the most recent financial reports. I started with 22 stocks, eliminated 7 fairly easily, but now am struggling to differentiate the remaining 15. Top contenders sure to make the final list are Proctor & Gamble (PG), Conagra (CAG), and Unilever (UL). It may be into next week before I’m ready to submit the results (as an article) to Seeking Alpha. Stay tuned.

JT

Final Posting Tuesday, 03/20/2012 5:45 PM

Stocks dropped significantly at the open, and mostly stayed there all day, clawing back up to regain maybe a fourth of the lost ground, closing down, but off the lows reached early in the day.

This was a slow news day. Nothing much was happening anywhere.

The only additional upgrade/downgrade of interest was Vodafone (VOD), which was upgraded from Buy to Conviction Buy at Goldman.

As I suggested in the morning posting, I put in an order to buy more shares of PEG exactly $1.00 below the price paid initially. The new buy attempt at $29.55 did not get executed, as the lowest price of the day on PEG was $29.59, which occurred early.

Perhaps tomorrow we will see something interesting happen – it couldn’t be much slower than today.     

JT

1st Posting Tuesday, 03/20/2012 10:00 AM

Running behind today, a big storm last night here in Austin caused a power outage. Chinese markets closed down, while Japan and India closed in positive territory. European markets are all trading down, and U.S. futures indicated a negative open, which indeed occurred, as all of the major averages are presenting significant losses in the first 15 minutes of trade. The main concern is a slowdown in China, and the effect on the world economy. U.S. housing data released at 8:30 did nothing to improve the tone, as Housing Starts came in below expectations, even though Building Permits actually came in above the estimated number.

Upgrades/downgrades this morning on stocks of interest were:

United Parcel (UPS) was downgraded from Buy to Hold at Stifel Nicolaus.

Public Service Enterprise Group (PEG) was downgraded from Buy to Hold by Deutsche Bank, citing competitive challenges.

PEG, which I just recently purchased, is down today. It is trading at $29.68 as I type this, and I paid $30.55 on March 6. That just illustrates why I don’t buy all my shares at once. In fact, I only bought PEG on March 7 because I wanted to start getting a dividend, and the next day it was due to go ex-dividend. I actually bought fewer shares than usual when starting a new position, suspecting a better buy price might be coming. I will watch it carefully, and maybe pick up some more today if it drops as much as $1.00 below my initial buy level. You can never tell which way a stock will go in the short-term, so the best approach is to have a plan for both up and down moves.

Time to publish, before it gets any later.

JT

Final Posting Monday, 03/19/2012 4:15 PM

Stocks flatlined for about an hour or two, then moved up to an apex about 2:00 PM, and then pulled back a bit into the close. At the final gun, all of the major averages managed to end the day with decent gains, except for the Dow30, which only managed a small gain of 6.5 points, to close at 13239.

No additional upgrades/downgrades have come out on stocks I follow since this morning.

I managed to buy an initial position in American Electric Power (AEP), finally, after raising my bid from $38.45 to $38.55. Of course, the stock dropped into the close, wouldn’t you know, to register a low on the day below $38.45. I would have been filled at my original price. But, it did not look like that was going to happen until late in the day, so I can’t beat myself up too bad for giving up 10 cents. At any rate, I am consoled, as a trader, in that at least I didn’t buy at the high of the day, $38.78. Of course, this is all nonsense anyway when talking about a long-term dividend stock investment – but I like to believe I am improving returns overall by employing trading strategies, shaving a few pennies here and there when buying and selling.

I am working on a new article modeled after the utilities article, this time focusing on consumer staples, another favorite sector for income investors. What I’m finding out is that some of the household names I’ve always thought were solid as Gibraltar may not be as solid as I thought. Stay tuned.

JT

1st Posting Monday, 03/19/2012 9:15 AM

Today is shaping up to be a lack-luster market day. Asian markets were mixed, while European markets are trading mostly down, with the exception being Spain, which is up over half a percent. The big stock news of the morning is that Apple will begin paying a dividend of $2.65 per quarter, plus will buy back shares. The dividend works out to a yield of 1.81%, based on the Friday closing price of $585.57. Buybacks frequently are a huge waste of company funds, and with Apple setting new highs every other day, it seems, this one looks to me like it will follow that script.

The only economic release on the horizon today is the National Association of Home Builders/Wells Fargo Housing Market Index, due out at 10:00 AM. The index is defined as:

"A weighted, seasonally adjusted statistic derived from ratings for present single-family sales, single-family sales in the next six months and buyers' traffic."

This is from the NAHB web site.

Upgrades/downgrades of interest that have come out this morning are:

Colgate-Palmolive (CL) was upgraded from UnderPerform to OutPerform at CLSA, with a new price target of $105.

United Parcel (UPS) was upgraded from Neutral to OverWeight at JP Morgan, with a new price target of $92.

Nucor (NUE) was upgraded from Neutral to Buy at UBS, with a $47.50 price target.

Abbott Labs (ABT) was upgraded from Hold to Buy at Deutsche Bank, with a price target of $70, a big jump from the prior target of $58.  

Eni SpA (E), the Italian integrated oil company, was upgraded from Neutral to OutPerform by Credit Suisse. No price target was reported in the announcement. 

Apparently today was the day for upgrades.

My new article on Seeking Alpha on utilities has received a lot of commentary. As I have noted before, frequently the comments are as informative as the original article, and in many cases are posted by very knowledgeable individuals. I encourage anyone reading to take in all the comments as well, to get a complete picture of the topic.

I inadvertently omitted SCG from my list of recommended utilities. One last time, here are the article results:

American Electric Power (AEP), yield 4.9%, buy under $37, very safe utility.

Public Service Enterprise Group (PEG), yield 4.7%, buy under $30, also very safe.

Westar Energy (WR), yield 4.7%, buy under $27, also very safe.

Exelon Corp (EXC), yield 5.40%, buy under $39, the largest nuclear plant operator in the United States. EXC has traded down since the start of the year, and presents a good value now, although I would concede there is a little more risk here. EXC is also facing the task of integrating the recently-acquired Constellation Energy acquisition, which introduces some uncertainty, and may be part of the reason for the recent EXC sell-off. 

Entergy (ETR), yield 4.8%, buy under $67, also a significant nuclear operator. ETR represents the best value of the five, possibly because of a report that came out February 14, whereby the NRC (Nuclear Regulatory Commission) cited an ETR nuclear plant for safety violations, and placed the plant in a lower category, which will result in increased scrutiny. The violations stem from a couple of incidents last year. After Fukushima, all nuclear plants are under more scrutiny, or so I hope. This may be the cause of the sell-off in ETR and EXC since the first of the year. At any rate, EXC and ETR present the best values, but possibly more risk as well. Just keep in mind that nearly all major electric utilities have a finger or two in the nuclear pie, due to shared ownerships / joint endeavors, so don’t assume a company is “nuclear free” unless you have checked it out.

Scana (SCG), yield 4.4%, buy under $44. I inadvertently failed to list SCG Friday.

Note: SCG buy-under price changed at 9:55 AM from $36 to $44. You could have purchased SCG under $36 during the sell-off of August 2011, but today $44 would be a good price. I am qualified to become a member of the "gang that can't type straight".

Another four great utilities that are just too pricey right now are:

Southern Company (SO), yield 4.24%, buy under $40.

Nextera Energy (NEE), yield 4.03%, buy under $52.

Consoldated Edison (ED), yield 4.14%, buy under $48.

Alliant Energy (LNT), yield 4.15%, buy under $40.

That’s enough for a Monday morning.

JT

Final Posting Friday, 03/16/2012 6:00 AM

Stocks started out strong, but ended up with small losses by the closing bell. Still, all of the major averages were up for the week. The University of Michigan Sentiment Index came out around 10:00 AM, lower than expected, as high gas prices are putting a damper on things. Stocks meandered around a bit after that, then drifted down slowly the rest of the day.

No further upgrades/downgrades of interest have come out today since this morning.

I barely missed buying American Electric Power (AEP) today, as it dropped within two cents of my buy price. I should have just gone in and bought it right after that, but I didn’t, figuring it might drop down again. It did not, closing up over fifty cents higher. So I definitely outsmarted myself today on that one.

On a more positive note, my new utilities article is now available on Seeking Alpha (SA). Go to the major selection SA Articles on this website for a link. I’ve already received some interesting comments. Hopefully there will be more. Getting feedback from the SA readership is the most interesting and fun part of being an author on SA.

I will be updating my recommended stock lists on the website this weekend, to conform to my current thinking, as expressed in the article. Until I get that done, consider that the opinions expressed in the article, which have also been repeated on my recent blogs, override the recommendations implied by the stock lists.

My plan is to review all of the stocks on my lists by sector / group over the next few weeks, generating new SA articles and updated recommendations simultaneously.

JT

1st Posting Friday, 03/16/2012 9:15 AM

Asian markets finished mostly down, but not by a lot, while European markets are mostly trading higher. U.S. futures remain positive, even after the 8:30 release of the Consumer Price Index data for February. CPI came in at 4%, while Core CPI came in at 2%. While not yet considered a problem by the Fed, anyway, inflation concerns will start to manifest if the price of food and fuel keeps rising. 

Only one of my stocks was tagged with an upgrade/downgrade this morning; MicroSoft (MSFT) was upgraded from Hold to Buy at Argus.

I plan to try again to pick up some shares of American Electric Power (AEP) today. The way the market is rallying, I’m putting a hold on selling anything I want to own for the long-term, since I can’t count on an opportunity to get back in coming along anytime soon. Of course, if a stock rises to a ridiculous level, I may not be able to keep my greedy side from selling it.

JT

Final Posting Thursday, 03/15/2012 5:30 PM

Stocks finished on the upside today, and the headline writers are all a-giddy, as I see “Lucky 7 for Dow”, as the Dow30 gains seven sessions in a row, and “S&P Tops 1400 For First Time In Nearly 4 Years”. In truth, the current rally that has been going since late last year is certainly not what many expected, including yours truly. The long-predicted pullback continues to be nowhere in sight. The economic news continues to indicate a recovering economy, with today’s batch of decent, if not great, results continuing to reflect that hypothesis.

I had a couple of orders in today, with one hit and one miss. The miss was a buy order for American Electric Power (AEP), as I am trying to get a position started without paying too much over $38.00. No rush here, there are a couple of months to go before the next dividend. I’ll keep trying. The hit was a call sale against Allstate (ALL), as I sold a $35.00 October call for $.95. ALL is one of the fallen, having cut their dividend during the financial crisis, and is no longer on my recommended stocks list. The yield today is a marginally respectable 2.70%, which is less than I normally consider, so if I lose the shares, I’ll just say  “sayonara”, and be glad I broke even, or at least close enough.   

The current action isn’t what I was expecting, but all one can do is ”just go with it”, like the Adam Sandler movie. That is how you survive in the markets.

The utilities article is in the gentle hands of Seeking Alpha’s editors. I realistically expect to be directed towards some rework before it “breaks on through to the other side”, as per the title and key lyrics to the Door’s classic.

JT 

1st Posting Thursday, 03/15/2012 9:00 AM

Asian markets finished mixed, with the Nikkei and Hang Seng finishing up, and the Shanghai, Sensex, and S&P ASX finishing down. European markets are trading in a similar fashion, some up, some down. U.S. futures are mildly positive, as we await a deluge of economic data coming out at 8:30.

While we wait, a quick scan of the early upgrades/downgrades from Marketwatch revealed that some of the stocks I track were tagged:

J.M. Smucker (SJM) was upgraded from UnderPerform to Market Perform at Bernstein, citing an expected margin improvement in 2013.

Amerigas Partners L.P. (APU) was downgraded from Buy to Neutral at Janney Capital. No reason cited, but the largest propane distributor in the U.S. has suffered with the mild winter experienced throughout most of the country this year.

Digital Realty (DLR) was downgraded from Buy to Hold at Jeffries, citing valuation and slowing demand in some markets.

The economic data has come out: Initial and Continuing Claims for unemployment came in slightly below expectations, at 351K and 3343K, respectively. So far, so good. Not great, but good. The NY Manufacturing Index was 20.2 vs. 15 expected. That was also a good reading. Finally, the Producer Prices Indices, the basic PPI, and the one excluding volatile non-essentials like food and fuel, otherwise known as the Core PPI, came in at 0.4% and 0.2%, respectively, essentially as expected. This reading is OK in the context of expectations, but persistent readings of PPI above 4% will translate eventually into higher readings on the Consumer Price Indices, CPI and Core CPI, which will get more attention. Of course, high gas prices are in the news already, as the silly season (election season) continues. U.S. futures remain positive, indicating a positive open for stocks.

Later today, I will be submitting my new article on utilities to Seeking Alpha. It may take a few days and some rework to get through the editing process, but I feel good about it, I think it presents some valid data. To share the conclusions with the readers of this blog, of 57 utilities reviewed, I recommend 5 now, and another 4 if their prices should pull back a little – actually, they would have to pull back a lot.

 The top five recommendations are:

American Electric Power (AEP), yield 4.9%, buy under $37, very safe utility.

Public Service Enterprise Group (PEG), yield 4.7%, buy under $30, also very safe.

Westar Energy (WR), yield 4.7%, buy under $27, also very safe.

Exelon Corp (EXC), yield 5.40%, buy under $39, the largest nuclear plant operator in the United States. EXC has traded down since the start of the year, and presents a good value now, although I would concede there is a little more risk here.

Entergy (ETR), yield 4.8%, buy under $67, also a significant nuclear operator. ETR represents the best value of the five, possibly because of a report that came out February 14, whereby the NRC (Nuclear Regulatory Commission) cited an ETR nuclear plant for safety violations, and placed the plant in a lower category, which will result in increased scrutiny. The violations stem from a couple of incidents last year. After Fukushima, all nuclear plants are under more scrutiny, or so I hope. This may be the cause of the sell-off in ETR and EXC since the first of the year. At any rate, EXC and ETR present the best values, but possibly more risk as well. Just keep in mind that nearly all major electric utilities have a finger or two in the nuclear pie, due to shared ownerships / joint endeavors, so don’t assume a company is “nuclear free” unless you have checked it out.

Another four great utilities that are just too pricey right now are:

Southern Company (SO), yield 4.24%, buy under $40.

Nextera Energy (NEE), yield 4.03%, buy under $52.

Consoldated Edison (ED), yield 4.14%, buy under $48.

Alliant Energy (LNT), yield 4.15%, buy under $40.

These buy-under prices may seem extreme, and there can be some give here, just be aware that going too far beyond them may be paying too much.

You heard it here first.

JT

Final Posting Wednesday, 03/14/2012 4:30 PM

Today was a down day for stocks, with the slightly positive close on the Dow30 average reflective of the fact that the venerable average is not representative of the actual market. All of the other averages reflected the reality more clearly, finishing with losses across the board. Energy and utilities, two sectors I focus on, had nearly 100% losers today.

Only two upgrades/downgrades showed up during the day today, on stocks I follow:

Chevron (CVX) was downgraded from Buy to Hold by Societe Generale, citing a change in their rating system. That’s a new one, I haven’t heard that reason before.

Vodafone (VOD) was downgraded from Neutral to UnderPerform by Exane BNP Paribas. No reason was cited.

If today’s lackluster action didn’t bring you down enough from yesterday’s euphoria, a new column from Paul B. Farrell on MarketWatch should do the trick. Entitled “10 reasons Wall Street will hit bottom, crash”, it blasts away with an extreme of pessimism that only Paul can deliver. If you can’t find it on the MarketWatch home page, enter “Paul B. Farrell” in the search box to get it up on your screen. It contrasts nicely with all the hoopla out today on the successful Fed bank “stress tests” that supposedly went so well.

Tomorrow is the day I will be submitting my new article on utilities to Seeking Alpha. Today’s market action actually brought the numbers back closer to where they were last week when I pulled in the data for the article, so hopefully Seeking Alpha will find the article relevant, and allow it into (electronic) print.

JT

1st Posting Wednesday, 03/14/2012 9:15 AM

Asian markets were up except for China, which closed down. European markets are all trading higher. U.S. futures are flat, which suggests there may not be much follow-through from yesterday’s big rally. The day’s economic releases are out, with Import Prices, excluding oil, down slightly below the prior month, and Export Prices, excluding agriculture, up from flat to +.5%. As to why exclude oil and agriculture, don’t ask me, the last I heard we were still importing oil and exporting agricultural products. The Current Account deficit came in even worse than expected, -124.1B vs. -113.8B expected. Time for another economics pop quiz – what is the Current Account reading and who puts it out? I will answer the second half of the question first. It comes out quarterly from the U.S. Department of Commerce. As to what it means, I will simply paste in the description from the government’s website:  

The U.S. current-account deficit—the combined balances on trade in goods and services, income, and net unilateral current transfers —increased to $124.1 billion (preliminary) in the fourth quarter of 2011, from $107.6 billion (revised) in the third quarter. Most of the increase in the current-account deficit was due to a decrease in the surplus on income and an increase in the deficit on goods and services.

 

Still confused?  You are not alone. Just remember that a deficit is not good, and a larger than expected deficit is even worse.

None of the stocks I follow were upgraded or downgraded today, so far at least.

The major news of the economic day is the results of the Fed’s bank “stress tests”, which seems to have been mostly positive, which probably contributed towards yesterday’s rally.

This might be a ho-hum day.

JT

Final Posting Tuesday, 03/13/2012 5:30 PM

Today was a good day to be a Bull on Wall Street. In addition to the major averages all being up significantly, all of the various market “thermometers” indicated that the patient was indeed doing quite well. The TICK was mostly on the positive side, the TRIN and TRINQ marched steadily down (remember, these trader’s indices move inversely to the market), and the composite (equity and index) Put/Call ratio declined steadily throughout the trading day. Further, the various “fear” gauges, the VIX, VXO, VXN, and QQV, all registered new lows. There certainly is not much fear in the market right now, unless you are short stock. Today was the largest point gain on the venerable DOW30 index of the year, so far. The DOW has only had four triple-digit gains in 2012, on 1/3, 2/3, 2/16, and today. There has only been one triple-digit loss this year, on 3/6. For now, the Bulls have the spotlight.

As expected, the FOMC held the rates they control at near-zero, and the statement reiterated that they will likely remain there into 2014.  

None of the stocks I follow received any upgrades/downgrades since this morning. 

I did take advantage of the up day to sell a few shares of BlackRock Kelso (BKCC), a BDC I own. I had purchased some “extra” shares back on October 4th , when the sky was dark, and I’ve been waiting until I had a $3.00 gain, after commissions, to sell. Today was the first day that this goal was within reach. For the most part, I am reluctant to sell stocks right now, as I have a high cash position already, and this rally may continue longer than anyone can now imagine, just like in March 2009. Remember back then, most pundits believed the rally that was starting would be short-lived, with the plunge to DOW 5000 sure to resume soon. My view is it can always go either way, so have a Plan A if it goes up, a Plan B if it goes down, and a Plan C if it stays where it’s at. Does that cover everything? I think so.     

I’m working feverishly to get the utilities article completed, before all the data in the article gets completely out of date.

JT

1st Posting Tuesday, 03/13/2012 9:30 AM

Running behind this morning. Asian markets ended up strongly, and European markets are trading similarly. U.S. futures are solidly positive, indicating a strong opening to the upside. Retail Sales, released at 8:30 AM, were slightly better than expected. The FOMC announcement is expected today at 2:15 PM. Somehow, there is not much anticipation these days when the Federal Open Market Committee (FOMC) meets, unlike in prior years. As usual, the pundits will analyze every word of the statement, searching for hidden meaning.

Only one of my stocks was named in the upgrades/downgrades list this morning from Marketwatch, as Eaton (ETN) was initiated at Buy at Stifel Nicolus.

Still working on the utilities article. I hope to be ready to submit it to the editors at Seeking Alpha today or tomorrow.

JT

Final Posting Monday, 03/12/2012 5:00 PM

Stocks ended essentially flat today, with the Dow30 and the S&P 500 ending up slightly positive, while the NASDAQ, New York Composite, and Russell 2000 ended up slightly negative. Oil and Natural Gas also traded down, as did Gold and Silver. It was not a good day for the Bulls in any arena.

A few additional upgrades/downgrades/initiations that came out since this morning on stocks I follow are:

Magellan Midstream Partners L.P. (MMP) was downgraded from Buy to Neutral by Ladenburg, citing valuation.

Intel (INTC) was initiated at Neutral by Avian.

Main Street Capital (MAIN) was downgraded from OutPerform to Market Perform at Morgan Keenan. MAIN has had a big run-up lately, so this is probably only a valuation downgrade.

The lone economic release of the day showed the government deficit is even worse than expected, running 231.7B in the red vs. 229.0B expected. And this is for one month.

The day of reckoning will arrive someday, count on it.

All-in-all, it was a ho-hum day, nothing to get excited about.

JT

1st Posting Monday, 03/12/2012 9:15 AM

Asian markets ended mixed, with Hang Seng and Sensex up, Nikkei and Shanghai down.  European markets are mostly trading down, although the Dax is holding on with a small gain. U.S. futures are indicating a lower open. The only economic release on tap is the monthly Treasury Budget, sure to register another huge deficit. This will have to get better someday, but it will not be today, you can count on that.

Upgrades/downgrades this morning, on stocks I follow, are:

United Parcel (UPS) was initiated with an OverWeight rating by Atlantic Equities.

General Mills (GIS) was downgraded from Conviction Buy to Neutral by Goldman, citing lower volume (of sales, I presume) and valuation. I guess they didn’t have as much conviction as they thought when GIS was a Conviction Buy. That is a two-level drop.

J.M. Smucker (SJM) was downgraded from Buy to Neutral by Goldman. With a name like Smucker’s, it has to be over-valued – at least, that’s what I have believed for years.

American Capital Agency (AGNC) was upgraded from Market Perform to OutPerform at JMP Securities, with a price target of $31. The MREIT had a successful secondary offering last week.

There are no earnings expected this week on stocks I follow. One report that was expected today actually came out Friday, as Piedmont Natural Gas (PNY) reported a 10% profit decline and declining margins, due to warmer weather. This over-valued natural gas distribution utility is probably going to go off my lists after my utilities review is completed, mainly because of the less than 4% yield.

Stocks on my lists going ex-dividend this week are:

Monday 3/12

Triangle Capital (TCAP), yield 9.57%.

Tuesday 3/13

Coca Cola (KO), yield 2.93%.

Altria (MO), yield 5.38%.

Merck (MRK), yield 4.47%.

Digital Realty (DLR), yield 4.09%.

Mercury General (MCY), yield 5.51%.

Valley National Bancorp (VLY), yield 5.56%.

Ares Capital (ARCC), yield 9.00%.

Fifth Street Finance (FSC), yield 11.58%. FSC pays monthly.

Medical Properties Trust (MPW), yield 8.33%.

Otelco (OTT), yield 11.24%.

Wednesday, 3/14

Total S A ADR (TOT), yield 6.99%, not counting foreign tax withholding.

Thursday, 3/15

DTE Energy, yield 4.24%.

Friday, 3/16

Greif Cl B (GEF.B), yield 4.87%.

Solar Capital (SLRC), yield 10.58%.

To reiterate and expand upon the utilities I favor, following my review:

American Electric Power (AEP), yield 4.9%, buy under $37, very safe utility.

Public Service Enterprise Group (PEG), yield 4.7%, buy under $30, also very safe.

Westar Energy (WR), yield 4.7%, buy under $27, also very safe.

Exelon Corp (EXC), yield 5.40%, buy under $39, the largest nuclear plant operator in the United States. EXC has traded down since the start of the year, and presents a good value now, although I would concede there is a little more risk here.

Entergy (ETR), yield 4.8%, buy under $67, also a significant nuclear operator.

Scana (SCG), yield 4.4%, buy under $36. I inadvertently failed to list SCG Friday.

A second tier of lower-yielding, but still attractive, utilities I would consider at lower prices are:

Alliant Energy (LNT), yield 4.15%. Consider under $40.

Southern Co (SO), yield 4.19%. Consider under $40.

Nextra Energy (NEE), yield 4.00%. Consider under $52.

Consolidated Edison (ED), yield 4.14%. The “grand-daddy” of regulated utilities, consider under $48.

That’s enough to chew on for a Monday morning.

JT

Final Posting Friday, 03/09/2012 8:00 PM

Stocks finished the day with modest gains on all of the major averages, but not enough to avoid a second week of closing lower than when the week began. Various news accounts stated that the Greek government utilized Collective Action Clauses (CAC) to force participation in it's debt swap, which was recognized as a credit event by the International Swaps and Derivatives Association (ISDA), which would entitle holders of Credit Default Swaps (CDS) to payouts. The authorities had hoped to avoid this recognition, by getting enough of the players to participate voluntarily. I really do not know what the repercussions of all this will be – who does – but it does not sound too promising. Anyway, this news was cited as a cause for the bullish start to the day cooling off.

Only one additional upgrade/downgrade has come out since this morning on stocks I follow, as Otelco (OTT) was downgraded from Strong Buy to OutPerform by Raymond James, citing valuation.

One of my companies reported earnings yesterday after the close, Safety Insurance Group (SAFT). Q4 EPS came in at $.31 vs. $.86 for the comparable period from 2010. Full-year EPS for 2011 was reported at $.90, while for 2010 it was $3.74. These results were due to severe storm and flood losses (SAFT is an insurance company) in 2011, while 2010 was a calm year. Amazingly, at least to me, SAFT actually went up today by $.23, closing at $41.98. Apparently the market was prepped for the poor comparisons, proving once again that it’s not the results that matter; it’s the results vs. the expectations.

My review of over 30 utility stocks has yielded five that I would consider at today’s price ranges:

American Electric Power (AEP), yield 4.9%, buy under $37, very safe utility.

Public Service Enterprise Group (PEG), yield 4.7%, buy under $30, also very safe.

Westar Energy (WR), yield 4.7%, buy under $27, also very safe.

Exelon Corp (EXC), yield 5.40%, buy under $39, the largest nuclear plant operator in the United States. EXC has traded down since the start of the year, and presents a good value now, although I would concede there is a little more risk here.

Entergy (ETR), yield 4.8%, buy under $67, also a significant nuclear operator. ETR represents the best value of the five, possibly because of a report that came out February 14, whereby the Nuclear Regulatory Commission (NRC) cited an ETR nuclear plant for safety violations, and placed the plant in a lower category, which will result in increased scrutiny. The violations stem from a couple of incidents last year. After Fukushima, all nuclear plants are under more scrutiny, or so I hope. This may be the cause of the sell-off in ETR and EXC since the first of the year. At any rate, EXC and ETR present the best values, but possibly more risk as well. Just keep in mind that nearly all major electric utilities have a finger or two in the nuclear pie, due to shared ownerships / joint endeavors, so don’t assume a company is “nuclear free” unless you have checked it out.

I am working on an article, to be submitted to Seeking Alpha, on my review methodology and rationales for the results, hopefully in the next few days. There are many good utilities besides these five, but based on my data, these represented the best values, considering today’s prices.

Time to call it a week.

JT

1st Posting Friday, 03/09/2012 9:15 AM

Asian markets all ended with gains, while European markets are trading mixed. Britain and Spain are trading in the red, while Germany and France are trading in the green. U.S. futures are positive for the moment, but readings at this point are meaningless, as the market awaits the 8:30 AM release of the employment figures from the Department of Labor.

While waiting for said release, a quick scan for upgrades/downgrades proved more interesting than usual this morning:

Medtronic (MDT) was downgraded from Hold to Sell at Argus, citing slowing sales growth that Argus believes is secular, i.e. a long-term trend. A pretty severe sentence for a successful company with slowing growth perhaps, but other positives.

Royal Dutch Shell (RDS.A, RDS.B) was downgraded from OutPerform to Market Perform at Bernstein, citing valuation. That means there is nothing wrong with the company, it is just that the shares have been bid up beyond what it is worth, in their view. I can’t argue too much with that – the stock closed yesterday at $73.42, while my buy-under price is $60.00.

Now comes the interesting stuff. ENI S P A ADR (E), the Italian integrated oil company, was upgraded from Buy – yes, that’s right, upgraded – to Conviction Buy, at Goldman, citing valuation, profit growth, and superior exploration. Yet, E was downgraded from OutPerform to Market Perform at Bernstein, citing valuation. Evidently these firms are using different valuation yardsticks. E closed yesterday at $46.04. My buy-under price is $38.00, so you would think I would be more in agreement with Bernstein’s view. But don’t forget, I have conceded my buy-under prices are out-of-date, and I am in the process of reviewing all of my recommended stocks, to see which buy-under prices are too low. If E is over-valued, it is not as over-valued as the U.S. majors, such as Chevron (CVX), Exxon (XOM), and ConocoPhillips (COP).  E pays semi-annually, and the first dividend of 2012 should be coming along in the next two months.

Another interesting contrast in ratings was shown in two new ratings for Statoil (STO), the Norwegian integrated oil company. STO was upgraded from Hold to Buy at Deutsche Bank, and was downgraded from Neutral to Sell by Goldman. No details as to what was behind the ratings changes were provided in either case, at least as per my source, MarketWatch. I will concede STO has been bid up lately, approaching it’s 52 week high, closing at $28.68 yesterday, while my buy-under price is $20.00, which I will likely be raising soon. Also, remember that STO only pays annually, and the next annual dividend is only a couple of months away. I own STO, and I would probably consider selling to take advantage of the price run-up, except that I don’t want to miss the next dividend.

I will defer posting the results of my utilities review to this evening’s posting. Now for the Department of Labor’s latest figures on unemployment:

The Unemployment Rate came in as expected, at 8.3%. The Nonfarm Payrolls and Nonfarm Private Payrolls numbers came in at 227K and 233K, respectively, slightly better than estimated in each case. The Hourly Earnings came in at +.1% vs. +.2% expected, reflecting the fact that wage growth is very slow in today’s tight labor market. The Average Workweek came in at 34.5 hours, in-line with estimates. Overall, not a bad report, but not a great one either.

Lost in the hubbub of the labor report, another release, of the latest Trade Balance figures, showed another depressing trade deficit, $52.6B, vs. $48.2B expected.

The U.S. futures have actually improved since the releases, indicating a strong start to the trading day is in store.

Time to get ready for the market day.

JT

Final Posting Thursday, 03/08/2012 7:15 PM

Stocks jumped up at the open and stayed up all day, as all of the major averages finished with gains. Notably, the Dow30 index, watched most closely by the masses, closed above 12900, and would go back above the magic level of 13000 with another day or two like today. Crude oil is also back on the upswing, closing above $108 today.

Only one stock of those on my lists was affected by upgrades/downgrades/initiations today, as Johnson & Johnson (JNJ) had coverage initiated with a hold rating, by Jeffries.

Tomorrow it’s the big one, as far as economic releases are concerned, the monthly unemployment numbers from the Department of Labor. As we move further into the political season, it takes on even more significance. Barring some type of cataclysmic happening elsewhere in the world, the trade tomorrow will be determined by the unemployment data to be released before the open tomorrow.

I sold a call against my position in Cisco (CSCO) today, with a strike of $21, expiration in June 2012, sale price $.49. CSCO is not a stock I recommend, as it does not yield enough to be an income stock. I couldn’t help but buy in when it took a fall a few months (or was it years?) ago. Anyway, my average cost is a little above $17, and while I still believe there could be some upside, I’m ready to exit and get a higher yielding holding with those funds. So, I will sell fairly tight calls against the shares until CSCO surges, and they are called away.

Tomorrow morning’s post should have some results of my review of utilities, if I can get on the ball tonight and finish the review. Until tomorrow, adieu.

JT

1st Posting Thursday, 03/08/2012 9:00 AM

Asian markets closed with gains except for India, while European markets are all trading higher. U.S. futures indicate a strongly positive start to the trading day here. Even though the Greek bond swap will not be over until later in the day, the markets are apparently no longer concerned about the deal falling apart at the last minute. The main catalyst at this point is the U.S. employment picture, which will develop further today, as the latest Challenger Job Cuts report is issued, followed by the weekly Unemployment Claims data.

The Challenger job cuts showed a slight decline, from 53486 last month to 51728. The Unemployment Claims data, just released, is a little less positive than expected, with New Claims rising to 362K vs. 355K expected, and Continuing Claims also higher than expected, at 3620K vs. 3450K. Per MarketWatch, the claims data apparently did not derail the futures, which are still indicating a positive start to the trading day.

After a quick scan of upgrades/downgrades coming out this morning, per MarketWatch, there are none to report, on stocks I follow.

One of my Tier3 (high-yield) stocks reported early, TICC Capital (TICC). The BDC reported Q4 EPS of $.26 vs, consensus of $.25, although the release stated that the result may not be comparable, possibly due to one-time items. TICC also announced that a quarterly dividend of $.27 will be paid in the first quarter 2012. If the ex-dividend date was specified in the release, I couldn’t find it, but I’m sure it will be very soon. The dividend rate represents a 2 cent increase, or 8%, bumping the yield up over 10%. TICC is trading up .6% in the pre-market.

As I mentioned a post or two ago, I’m reviewing all of my stocks, deciding which ones to keep on my lists, and which ones to drop. For the keepers, I’m determining whether new buy-under prices are in order. Following Warren Buffet’s famous advice, I’m starting with the A’s. (When asked once about finding stocks to buy, Warren supposedly responded that there were around 27.000 public companies, and suggested that one should start with the stocks with symbols (or names) starting with “A”, and presumably continue on through to the “Z’s”.)

My review of American Electric Power (AEP) is complete. It stays on the Tier1 list, as a very safe utility stock, with a buy-under price of $37, and an ideal buy-under price of $35. I don’t own it now, but I may buy some shares if it pulls back a little.

Time to cinch up the seat belt and fortify with more coffee, the hour approaches.

JT

Final Posting Wednesday, 03/07/2012 5:15 PM

Stocks managed a partial rebound from the prior session sell-off, as the Dow30 tacked on 78 points, and the S&P 500 added 9 points. The Nasdaq, Russell Small-Cap Index (RUT), Oil, and Gold all gained as well. The economic data that came out today generally met expectations, as the ADP Jobs Added number came in at 216K, in-line with the 218K estimated, or at least close enough.

No additional upgrades/downgrades came out since this morning on stocks I follow.

Triangle Capital (TCAP) reported Q4 EPS of $.53, beating estimates by $.03. Revenue, however, missed badly, coming in at $12.00M vs. $17.47M estimated. Results still were significantly ahead of the prior year quarter. TCAP gained $.57 on the day, closing at $19.77, before the earnings announcement was released.

If tomorrow brings another positive day, it will begin to look like yesterday’s sell-off was not the start of the long-awaited decline of 4% to 5%, as postulated by Doug Kass-Andra and others a few day’s ago, in their warnings to “beware the Ides of March”. For those of you who are scholars of Greek mythology and / or Shakespeare, I am aware that I have mixed up Cassandra, the Greek beauty who could foretell the future, and warned Troy about the Trojan Horse,  but no one believed her warnings, and the soothsayer in Shakespeare’s Julius Caesar, who issued the famous warning to the Roman, which was also not heeded. Unlike the historical figures, I am heeding the warnings, holding cash in reserve, awaiting the storm, and opportunities.

Tomorrow will be interesting.

JT

1st Posting Wednesday, 03/07/2012 8:30 AM

Asian stocks declined again, although not by huge amounts. European stocks are actually trading higher, excluding Spain, with increased optimism over the Greek debt-swap being concluded successfully getting the credit, or blame, depending on how you look at it. U.S. futures are indicating a modestly positive start to the day, at least so far, with about an hour to go.

The employment / labor emphasis on the economic reporting front gets underway today, with the ADP employment report, followed by the latest revisions to Q4 figures for Productivity and Unit Labor Costs from the Department of Labor, all due out before the open.

Only one upgrade/downgrade to report this morning on stocks I follow, as Unilever (UN & UL) was downgraded from OutPerform to Neutral at Exane BNP Paribas. Who the heck is that? Answer – a bank and investment company headquartered in the United Kingdom.  More specifically, from their website:

"BNP Paribas is one of the best rated banks in the world (Rated AA- by Standard & Poor's). The Group has one of the largest international networks with operations in 80 countries  and counts with nearly 200,000 employees."

"BNP Paribas has key positions in its three core businesses: Retail banking , Corporate & Investment Banking and Investment Solutions."

"Present across Europe through all its business lines, the Group has four domestic retail banking markets in France, Italy, Belgium and Luxembourg."

This doesn’t appear to be a “boutique” operation. Back to the downgrade, no information was cited as to the reason for the downgrade. I could say that it was because their research turned up the fact that I own Unilever, but that would seem to be a bit paranoid on my part.

Anyway, it will be interesting to see how the day plays out, following yesterday’s sell off.

Time to get ready.

JT

Final Posting Tuesday, 03/06/2012 5:30 PM

At last, a down day worthy of recognition, as all of the major averages were down over 1%. Even as the pundits lament that this was the most significant down day of 2012, I could not help but notice that it was rather tame. The TRIN was basically a flatline, rising at the open, then just staying there all day. Volume was average, not like what would be seen in a true panic-driven sell off. The TICK only managed two readings below -1000. I have seen a few panic sell-offs in my time, and this was definitely not one. The real question is whether this turns out to be a one-day outlier, or the start of a major downswing extending out over the next few weeks, or months.

Only one additional upgrade/downgrade came out since this morning on my stocks, as Lockheed Martin (LMT) was upgraded from UnderPerform to OutPerform by RBC Capital Markets.

I bought two stocks today, both utilities, both going ex-dividend tomorrow, and both for a price at what passes for reasonable these days. Further, in both cases I only started out with a small, initial position, as I am expecting lower prices ahead. The stocks are Westar Energy (WR) and Public Service Enterprise Group (PEG).

At times like these, with nothing available to buy at a good price, I will sometimes initiate a small position in a good company that is not too far extended, just prior to the ex-dividend date. That way, I can at least “get on board” with the company, receive some dividend cash sooner rather than later, and be ready to add to the position when better prices are available.

Tomorrow and the rest of the week will be focused on employment, with the all-important monthly employment numbers coming out Friday., the weekly unemployment claims on Thursday, and beginning tomorrow, with the ADP employment data.

JT    

1st Posting Tuesday, 03/06/2012 9:15 AM

In a replay of yesterday, Asian stocks declined across the board, led by the Hang Seng index and the Shanghai index, down by 2.16% and 1.41%, respectively. European bourses are likewise all trading in the red, down over 1% in all cases. Concerns are slowing growth in China, and a Greek bond swap which is scheduled for Thursday. U.S. futures are indicating a negative start to the trading day.

There are no economic releases scheduled for today, unless you count ICSC and Redbook store sales data, which I don’t.

There have been three upgrades/downgrades so far today, on stocks I follow:

Annaly Capital Management (NLY) was downgraded from OutPerform to Market Perform by WellsFargo.

Sanofi ADR (SNY) was upgraded from Neutral to OverWeight by JP Morgan.

Novartis A G ADR (NVS) was downgraded from OverWeight to Neutral by JP Morgan.

It looks like it is shaping up to be another blah day. Even though it will likely be a down day, it is not likely to be down enough to present any bargains. At times like these, a good use of the time is to double-down on research and analysis, to be better prepared for when things start to move again. That’s what I’m doing. I have maintained for months now that I would wait until after the 1st quarter of 2012 to re-visit my buy levels on the stocks I track, so I’m starting now. Some will be raised, as I concede the stock has moved up in value, some will not change, as I remain firm that the stock is overvalued currently, and some will drop off, as I give up on the stock ever being a good investment opportunity.

Time for the day to begin.

JT

Final Posting Monday, 03/05/2012 4:15 PM

Today was a ho-hum day in stocks, with the major averages opening down, declining further in the first hour, but then grinding slowly higher until, by the end of the day, they were only down by modest percentages. The ISM services index came in at 57.3 vs. 56.0 expected, and Factory Orders came in at -1.0% vs. -1.9% expected. The market rebound began at about that point, presumably on the better-than-expected numbers.

A couple of additional upgrades/downgrades came out during the day:

Raytheon (RTN) was downgraded from Buy to Hold by Standpoint Research.

First Energy (FE) was upgraded from Hold to Buy at ISI Group.

I attempted to buy two stocks today, to start new, small positions. The stocks are two that are in a reasonable buy range, although not outright bargains: Boardwalk Pipeline Partners (BWP) was bid at $27.25, and Westar Energy (WR) was also bid at $27.25, coincidentally. I placed the orders prior to the open, hoping a market swoon might get me filled. It was no go – both stocks actually went up today, and neither one even came close to my price. My rant of this morning still applies – there are just no bargains to be had out there, at least not on quality stocks. I’ll just have to pack up my gear and come back to try my luck another day.

JT

1st Posting Monday, 03/05/2012 8:15 AM

Asian markets were all down today, and European markets are trading likewise. U.S. futures similarly are pointing to a negative start for the week. Happy Monday! The main reason for the dour attitude seems to be renewed concerns about the sustainability of China’s growth and concerns about imbalances in their economy. Don’t forget, noted short seller Jim Chanos, who was one of the first to suspect all was not well at Enron, has been famously bearish on China for some time now.

Upgrades/downgrades were sparse this morning:

Lockheed Martin (LMT) was upgraded from Perform to OutPerform by RBC Capital.

Greif Bros (GEF.B) was upgraded from Neutral to OverWeight by JP Morgan.

Stocks on my lists going ex-dividend this week are:

American Capital Agency (AGNC) – 3/5, yield 16.04%.

PDL Biopharma (PDLI) – 3/5, yield 9.13%.

Frontier Communications (FTR) – 3/7, yield 8.80%, even after the recent cut, compliments of a $4.54 share price.

Potlatch Corp (PCH) – 3/7, yield 4.01%.

Genuine Parts (GPC) – 3/7, yield 3.15%.

Kimberly Clark (KMB) – 3/7, yield 4.09%.

Public Service Enterprise Group (PEG) – 3/7, yield 4.58%.

PPL Corp (PPL) – 3/7, yield 5.06%.

Scana Corp (SCG) – 3/7, yield 4.44%.

Westar Energy (WR) – 3/7, 4.77%.

V F Corp (VFC) – 3/7, 1.96%. This stock will be dropped from my lists soon if the yield does not increase to at least 2.50%.

Waste Management (WM) – 3/7, yield 4.07%.

Ventas (VTR) – 3/7, yield 4.39%.

WalMart (WMT) – 3/8, yield 2.69%.

Hercules Technology Growth Capital (HTGC) – 3/8, yield 8.80%. 

Earnings Reporting slows down this week, with only four companies scheduled to report, of the stocks I follow:

Safety Insurance Group (SAFT) – 3/8.

TICC Capital Corp (TICC) – 3/8.

Triangle Capital (TCAP) – 3/8.

Main Street Capital (MAIN) – 3/9.

At this point, I can only lament the state of the market. Earnings could be peaking, and stocks have been seriously bid up in recent months, such that there are no bargains to be had. Buying in at these levels is not attractive to a value investor, while cash is earning zip. My approach is to counsel patience, continue to hold a healthy cash allocation, be very selective about selling calls, restricting call-selling to stocks one wouldn’t mind parting company with, and wait for better opportunities. Cash-covered put selling is not advisable in an over-bid market like this, since with the trend being up, put premiums are not extravagant. This is when the bulls cast off all doubts and you start to hear “Dow 16000”, and so on. Be very careful of committing funds at these levels. If you must, only buy a starter position, and plan to add more on a downturn, when it comes, as it surely will - I just can't say when.

JT

Final Posting Friday, 03/02/2012 5:15 PM

All the major averages finished with small losses on the day, as a lack-luster session ended quietly. Crude oil closed down today for a change, to $106.67.

Since this morning, Greif Bros (GEF.B) was upgraded from Market Perform to OutPerform by Barrington, with a $65 price target. So Greif wins one and loses one on the day, as far as upgrades/downgrades go.

After abandoning any thoughts of buying NRGY, I have been reviewing Boardwalk Pipeline Partners L.P. (BWP) as a possible buy. It is still in a reasonable range, unlike most of the popular MLPs. I tried to buy a starting position today, but I missed it by about 10 cents. I’ll try again next week. There is no hurry, another distribution won’t be coming along until May.

There’s not much else to talk about, so I’m going to call it a week.

JT

1st Posting Friday, 03/02/2012 9:00 AM

Asian markets all rallied to close out the week. European markets, by contrast, are all trading in the red at this point in the European market day. U.S. futures are pointing towards a modestly lower open. There are no economic releases scheduled for today, so relax, there will be no economics pop quiz this morning.

Upgrades/downgrades are usually sparse on Fridays, as the analysts begin focusing on their weekends (my assumption).  There were a few of note, however:

BlackRock Kelso (BKCC) was downgraded from OutPerform to Market Perform by Wells Fargo.

Medtronic (MDT) was initiated with a Buy rating at Northland Securities.

Magellan Midstream Partners L.P. (MMP) was downgraded from Buy to Hold by Wunderlich.

Greif Bros (GEF.B) was downgraded from Buy to Hold by Deutsche Bank.

While it is not on my lists, MCG Capital (MCGC) is a BDC I still own from before the financial crisis. MCGC received a downgrade today from Buy to Hold from BB&T. MCGC is one of the BDCs that had a “near-death” experience during the crisis, but held on to recover somewhat, resuming a dividend a year or so ago. With a share price of $4.45 and a 15.28% yield, the market obviously believes the dividend is not sustainable. While I hope for the best, it is often said that hope is not a strategy, and I have to agree, so I could not in good conscience recommend MCGC as it stands today.

Regarding my consideration of Inergy (NRGY) as a possible value play, which came up on my radar after a 50% + share price drop this past year, I’m disappointed to report that I believe it is “no go”. There are just too many dark clouds hanging over this MLP right now. Once the new dividend is announced, if it is still halfway decent, and the shares drop to the $15 range, NRGY could be attractive as a value play. But not today. With the shares around $17.50, and the new dividend rate a total unknown, there is just too much uncertainty.

Time to get ready.

JT

Final Posting Thursday, 03/01/2012 4:45 PM

Stocks managed to finish the day with moderate gains across all the major indices. While the economic data came in slightly under expectations in nearly every case, vehicle sales presented a picture of a continuing recovery, as all the major manufacturers reported sales gains, led by Fiat/Chrysler at +40%.

Consolidated Communications (CNSL) reported Q4 EPS of $.28, beating estimates by $.06. Revenue of $93.7M Y/Y beat estimates by $2M. CNSL gained $.04 today, closing at $19.01.

BlackRock Kelso (BKCC) reported Q4 Net Investment Income of $.15 per share. Net Asset Value per share at the end of the period was $9.58. BKCC gained $.06 today, closing at $9.83. 

For the first time in a while, no upgrades/downgrades came out today on any of the stocks I follow.

Anyone following the markets knows that there are few bargains to be had these days. I may have located one in Inergy (NRGY), a propane MLP that is down to $17.53 from a high of $43.95 in August 2010. The mild winter has been hard on propane distributors. NRGY’s board has clearly stated that a dividend cut will be required in 2012, to bring the payout in line with available cash to distribute. One argument is an extreme cut greater than what is coming is already priced in, and the shares could actually go up when the new dividend is announced. I’m not too sure about that, but if the cut leaves a NRGY with a still-sizeable dividend that is sustainable, the yield could still be in the 8% to 10% range on shares bought at today’s prices. This is obviously a speculative play, but I don’t believe NSRG is going away, and I believe that the downside is limited. I’m going to dig deeper before making a decision as to whether this is a value or a value trap. Even if I decide it represents an acceptable risk, it would still need to be approached cautiously, by only starting out with a small position. Stay tuned.

JT    

1st Posting Thursday, 03/01/2012 9:00 AM

As a new month begins, Asian markets all finished in the red, while European markets are all trading higher, and U.S. futures are indicating a positive open. A lot of economic data is due out today; in addition to the regular weekly release of unemployment claims, we have Personal Income, Spending, and the PCE Index for January, the ISM Index for February, Construction Spending for January, Natural Gas levels in storage, plus the various auto manufacturers will be releasing February sales numbers throughout the day. Econo watchers will have a full plate of data to digest today.

Time for another economics pop quiz: what is the PCE Index, and where does it come from?

PCE stands for Personal Consumption Index, and it is released monthly by the U.S. Commerce Department, along with figures for Personal Income and Expenditures. It  is an indicator of inflation. Core PCE excludes food and energy prices. (who needs that stuff, anyway?)

Moving on to Upgrades/Downgrades coming out this morning, on stocks I follow, we have: None. That is somewhat unusual. There will probably be some out later today. If so, I’ll report them in the evening posting. 

One stock I follow reported earnings since last night’s post. Greif Bros (GEF.B), reporting after the bell Wednesday, indicated that FQ1 EPS came in at $.55, and stated that it may not be comparable to the consensus value of $.59. Revenue of $992M, up 5.2% Y/Y, still missed consensus by $8M. 

Time to wrap this posting up and get ready for the day.

JT

Final Posting Wednesday, 02/29/2012 7:00 PM

Well, stocks followed the script that was expected, experiencing a down day after the Dow30 had closed above 13000 yesterday for the first time since the financial crisis. It did not look like it was going to play out that way at first, as a couple of encouraging economic releases in the morning kept the rally going. But then, Fed Chairman Ben Bernanke threw cold water on the rally, as he gave his testimony to the House Financial Services Committee, serving notice that QE3 was definitely off the table, even though the recovery pace has been uneven and modest. Another discouraging sign for the bulls is that NYSE trade volume hit a February high today.

Only one additional upgrade/downgrade came out today since this morning, as Paychex (PAYX) was initiated with a Buy rating by UBS.

Hercules Technology Growth Capital (HTGC), a BDC I own and recommend, reported Q4 EPS 0f $.25 today, beating estimates by $.02. It wasn’t enough to keep HTGC from declining $.17 today, along with the market, closing at $10.32.

Although it is not on my recommended lists, AirCastle LTD (AYR), a “legacy” holding, surged today at the open after releasing better than expected earnings. I immediately put in a sell order, alas, just about a minute too late to get the price I was asking. AYR declined along with the rest of the market, so I did not get filled. AYR ventured above $14 today, briefly, for the first time since the financial crisis. I believe AYR is well-run, but I am not optimistic about the sector’s prospects, so I will take the exit opportunity if AYR gets above $14 again soon.  Note: a “legacy” holding is a stock I bought before I “didn’t know what I didn’t know” about investing in stocks.

On that note, I’ll close up shop and start getting ready for March.

JT

1st Posting Wednesday, 02/29/2012 8:30 AM

Asian markets finished in the green except for Shanghai, which finished down nearly 1%. European markets are trading mostly in the green as well, except for Britain and Spain, which are very slightly below the flatline. U.S. futures are very modestly positive. Economic releases of note scheduled to come out today are the 4th Quarter, 2nd estimate of GDP, the Chicago PMI, Crude Oil and Products Inventories, and the Beige Book from the Fed. 

Upgrades/downgrades that have come out so far today on stocks I follow are:

NuStar Energy (NS) was upgraded from Sell to Neutral by Goldman, with a new price target of $61. I sold a call against my NS units on Monday, at a $65 strike, so if Goldman’s analysis is correct, I made a good option trade.

ONEOK Partners (OKS) was downgraded from Neutral to Sell by Goldman, citing valuation.

Plains All American (PAA) was upgraded from Neutral to Buy at Goldman.

Buckeye Partners (BPL) was downgraded from Conviction Buy to Buy at Goldman.

It appears that Goldman decided today was the day to announce new ratings for MLPs.

MarketWatch’s “Trading Deck” has a couple of articles on Warren Buffet, one analyzing his latest Berkshire missive to shareholders, and another critiquing his stance on gold as an investment.

Today should be an interesting day, as the first trading day following the Dow30’s close above 13000.

JT

Final Posting Tuesday, 02/28/2012 5:30 PM

The Dow30 average finally closed above 13000, so says the headline on MarketWatch, and probably a hundred other places. Below that, another headline proclaims “Nasdaq 3000 In Play”. Welcome to the new Teflon market, where bad economic news is ignored, as stocks grind higher. The Durable Goods report certainly wasn’t good news this morning, but after trading in the red for an hour or two, stocks turned positive and stayed there the rest of the day, closing with only modest gains, which still were enough to generate the afore-mentioned headlines.

Only one upgrade/downgrade came out today after the morning issuances, at least on stocks of interest to me; Chevron (CVX) was upgraded from Hold to Buy by Deutsche Bank. While I concur that CVX is a great company, it is priced accordingly these days, as are most great companies. If only one could go back to 2008 briefly, load up the portfolio, then fast-forward rapidly to return to the present. Sigh!

One stock that is a bit down, at least for a mega-cap blue chip, is Pepsico (PEP), which barely held above $63 today. I added a small number of shares to my PEP holdings, which seemed like a good move, as PEP goes ex-dividend tomorrow.

Ares Capital (ARCC) reported (early this morning) Q4 EPS of $.48, beating estimates by $.09. ARCC responded favorably by gaining $.22 today, closing at $16.52.    

First Energy (FE) reported full-year 2011 GAAP EPS of $2.21, fully diluted, and provided 2012 GAAP earnings guidance at EPS $2.87 to $3.17. These results were not released until after the close today.

I own both of these stocks; FE is on my Tier1 list, and ARCC is on my Tier3 list. On that happy note (two stocks I own are making money), I will close up shop and call it a day.

JT

1st  Posting Tuesday, 02/28/2012 9:00 AM

Asian markets were up, European markets are all trading in the green, and U.S. futures are indicating a positive start to the trading day on Wall Street. Perhaps Schaeffer’s Research was right in their contrarian view of the situation, as expressed in their Monday Morning Outlook article yesterday. That is, that because so many players are positioning for an anticipated pull-back, the market is likely to continue to advance, in keeping with the idea that market moves at all times are based on what will disappoint the most people. And who causes these moves?  The market gods, of course. Time will tell. Economic releases to come today are Durable Orders, the Case-Shiller Home Price Index, and Consumer Confidence. Durable Orders is a monthly manufacturer’s survey prepared by the U.S. Census Bureau. Today’s release will be from a survey performed in January. The Case-Shiller Home Price Index is sponsored by S&P, and tracks changes in the value of residential real estate nationally, with a key statistic being prices in 20 major metropolitan regions. Today’s release will cover prices through December. The Consumer Confidence survey is a monthly, probability-designed random sample prepared by The Conference Board, a private organization. The results are converted to an index, for comparison to prior periods. Today’s release will reflect a survey performed in February. 

Moving on, upgrades/downgrades that have come out today, for stocks I follow, are:

Genuine Parts (GPC) was downgraded from Buy to Hold by Argus, citing disappointing guidance and the prospect of slowing growth.

Procter & Gamble (PG) was upgraded from Neutral to Buy by BofA/Merrill.

Public Service Enterprise Group (PEG) was downgraded from OutPerform to Neutral by Credit Suisse, citing lower power price forecasts.

Durable Orders has come out since I started this letter, coming in at -4% vs. -.7% expected. European shares have turned negative, and U.S. futures have gone negative also. This was not an encouraging economic release. Perhaps ECRI is correct, that a new recession is coming, to arrive this summer. ECRI stands for Economic Cycle Research Institute, an independent, non-profit that has famously forecast a recession, even as the economic data has been showing improvement. Time will tell. I’ll bet you’re very weary of reading those three words. Unfortunately, when postulating about economics, stocks, and markets, those three words define the only sure status, as far as predictions are concerned.

JT  

Final Posting Monday, 02/27/2012 5:30 PM

Today was a mild roller-coaster ride, as stocks were down a fair amount for the first hour or so, then gradually moved into positive territory for a good part of the day, but then turned down again over the last hour or so to close modestly lower.

The only economic release today, Pending Home Sales, came in at a 2.0% increase Y/Y vs. 1.0% expected, which buoyed the early rise in the stock averages.

Only one additional upgrade/downgrade has come out (on stocks I follow) since this morning; Westar Energy (WR) was upgraded from Average to Above Average by Caris.

As for my own trading, I did accomplish a covered call sale today on NuStar (NS), which I’ve been trying to do for nearly a week now. It occurred as NS spiked up over $1.50 to $61.72 around 9:30 AM. NS then dropped back down below $61 within two minutes, staying there the rest of the day, closing at $60.78, a $.40 decline from Friday’s close. The option I sold was a September 2012 call with strike price $65, sold for $.75. Until today, the option was never quoted at more than $.60. This may not end well, but it is at least starting well. I have a new article out this afternoon on Seeking Alpha, where I present my results on covered calls on three stocks, NS being one of the three. My prior experience with NS, as detailed in the article, was such that it qualifies as my worst investment experience in covered call selling in the two years that I have been doing these trades. I selected it as an example of how you can get burned with covered call selling, when a stock that you have “pre-sold” with a call sale suddenly rockets up beyond all expectations. At that time, I had sold a $60 call. If it happens again, with a $65 call sold this time, I will hopefully not forfeit as large of a profit. Of course, if I really thought NS was going to shoot up to $70 or so again soon, I would not have sold the call. Stay tuned. If it happens again, I will probably add NS to my list of “Call Sales Not Allowed” stocks. Click on the “SA Articles” selection to get a link to the article.  

That’s enough excitement for today.

JT

1st Posting Monday, 02/27/2012 9:15 AM

Another week begins with Asian markets down, except for a modest gain in the Shanghai Index. A recent report issued last week, prepared by the World Bank and the Development Research Center of China, warned that the country will be facing an economic crisis if major reforms of state-owned industries are not undertaken. It appears the call for reform is being taken more seriously than in the past, as imbalances become more pronounced, and an economic chill in China becomes more widespread. European markets are universally down. There seems to be consensus that the near-term solution for Greece reached last week has merely bought a little time, but not much else. U.S. futures are indicating a negative outlook at the open for the markets here. The only economic release on tap for today is Pending Home Sales, which is not likely to be a market-moving data release.

Several upgrades/downgrades out this morning on stocks I follow are:

American Electric Power (AEP) was upgraded from Hold to Buy at Jeffries, and the price target was raised to $41.50 from $39.00.

Proctor & Gamble (PG) was upgraded from Market Perform to OutPerform by BMO Capital, and the price target was raised to $78 from $68.

Ventas (VTR) was downgraded from Buy to Neutral by UBS, citing uncertainty of lease renewals by major tenants.

Digital Realty Trust (DLR) was downgraded from OutPerform to Sector Perform by RBC Capital, citing valuation and concerns over increased capital requirements.

As is my custom on the first post of the week, I will indicate any stocks on my lists going ex-dividend this week, as follows:

Novartis A G ADR (NVS) – 2/27/2012, yield 4.47%. This is an annual dividend, so if you don’t already own it, you missed it for this year.

Kellogg (K) – 2/28/2012, yield 3.26%.

Lockheed Martin (LMT) – 2/28/2012, yield 4.47%.

McDonalds (MCD) – 2/28/2012, yield 2.79%.

NStar (NST) – 2/28/2012, yield 3.84%.

Realty Income (O) – 2/28/2012, yield 4.69%. This is a monthly payer.

Safety Insurance Group (SAFT) – 2/28/2012, yield 4.50%.

Dominion Resources (D) – 2/29/2012, yield 4.11%.

Nextera Energy (NEE) – 2/29/2012, 3.95%

Pepsico (PEP) – 2/29/2012, yield 3.25%.

Molson Coors (TAP) – 3/1/2012, yield 2.91%.

Old Republic (ORI) – 3/1/2012, 6.55%.

Century Link (CTL) – 3/2/2012, yield 7.26%.

Stocks I follow that are slated to report earnings in the coming week, tentatively, are:

First Energy (FE) – 2/28/2012.

Ares Capital (ARCC) – 2/28/2012.

Greif Inc (GEF.B) – 2/29/2012.

Hercules Technology Capital (HTGC) – 2/29/2012.

BlackRock Kelso (BKCC) – 3/1/2012.

A number of articles I have reviewed this morning, on Seeking Alpha and elsewhere, have had a decidedly bearish slant to them. By contrast, Schaeffer’s Research, interestingly, has indicated in their Monday Morning Outlook article that the bearish trade is a crowded trade, and that the bearish sentiment could result in stocks moving higher, based on their contrarian approach. Note that Schaeffer’s is a short-term oriented trading outlook website. For the serious investor, probably the best read that has come out recently is the new quarterly letter from noted value investing guru Jeremy Grantham, available at the GMO website, www.GMO.com/America. A shorter recap of the letter, which is entitled “10 Investment Lessons from Jeremy Grantham”, is available on MarketWatch’s “The Trading Deck”.    

Time to get ready for today’s action.

JT

Final Posting Friday, 02/24/2012 8:30 PM

It was a very quiet day in the markets today, with the major averages finishing mixed, some slightly above the flatline and some slightly below. The NYSE TICK reading never got above +1000 or below -1000, indicative of an extremely low volatility day.

There was minimal action on the upgrade/downgrade front today, with only two ratings to report:

American Electric Power (AEP) was downgraded from Buy to Hold by ISI Group.

Fifth Street Finance (FSC) had coverage initiated by Barclays Capital, with an Equal Weight rating.

Doug Kass of The Street.com appeared on CNBC’s “Fast Money” yesterday, in which he made the case for a likely 4% to 5% market correction to come any day now. A free recap article at The Street.com website is available for readers that want to know Doug’s thinking on the topic.

Probably influenced by the article, I decided to take some money off the table today, selling 50% of my position in MicroSoft (MSFT), which has run up to the $31.50 area since I bought in the $25.00 range. It could go higher, which is why I kept 50%. If we have a dip, I will probably buy back the shares upon a decline below $28 or so.

Not much else to report.   

JT

1st Posting Friday, 02/24/2012 9:00 AM

Asian markets finished higher except for India, and European markets are all trading higher except for Spain. U.S. futures indicate a slight bias to the upside, with less than hour to go before the open. Crude oil is making new interim highs, above $108, and the dollar is flat, with the Dollar Index at 78.52, down .11.

Economic releases scheduled for today are the final reading for the University of Michigan Sentiment Index for February, and New Home Sales for January, both to be released around 10:00 AM.

Upgrades/downgrades so far today on stocks of interest, at least to me, have been limited to just one:

Proctor & Gamble (PG) was upgraded from Hold to Buy by Buckingham, with a price target of $77.

As expected, Westar Energy (WR) reported after the bell yesterday, with Q4 EPS coming in at $.16, beating estimates by $.01.

Protein Design Labs Biopharma (PDLI), also after the bell, reported Q4 EPS of $.24, missing estimates by $.04. Q4 Revenue of $72.8M, down 4.3% Y/Y, was in-line with estimates. Full-year revenue was up 2% over the prior year. As I noted in an earlier post, PDLI has already announced the next four dividends, which will be $.15 per quarter, with ex-dividend dates in March, June, September, and December. PDLI closed yesterday at $6.40, with a current yield of 9.38%. Nothing that I can see tells me that PDLI should be dropped, so it stays on my Tier3, ultra-high yield list.

John Mauldin’s email newsletter delivered this morning, his “Outside the Box” edition offering views of other commentators, is a great read, as John’s emails usually are. As I have mentioned before, anyone interested in the financial markets, or just the world in general, should sign up for a free email subscription at www.JohnMauldin.com

JT

Final Posting Thursday, 02/23/2012 5:00 PM

Stocks finished the day in positive territory, with all of the major averages sporting moderate gains.

The only earnings report that has come out so far today on stocks that I follow is for Public Service Enterprise Group (PEG), which reported Q4 EPS of $.47, missing estimates by $.01. The stock declined $.44 today, closing at $30.52. PDL Biopharma (PDLI) and Westar Energy (WR) are both slated to report after the close.  

No additional upgrades/downgrades have come out today on my stocks.

An interesting read on MarketWatch today describes the Euro crisis in terms of John Nash’s game theory, as portrayed in the movie “A Beautiful Mind”, as the various players struggle for advantage and practice various forms of one-upmanship. The author is Matthew Lynn, and the article is entitled “Greek Crisis Isn’t Economics, It’s Game Theory”.  

Only one more day to go this week.

JT

1st Posting Thursday, 02/23/2012 9:00 AM

Asian markets finished mixed, while European markets are mostly trading in the red. The latest projections for the Eurozone economies indicate that a mild recession is likely, which caused these markets to go into sell mode. After a dull session yesterday, U.S. futures are modestly positive, as we await the weekly numbers on claims for unemployment. The weekly numbers just came out, at 351K for new claims, and 3390K for ongoing claims. The futures hardly budged, and are still slightly positive.

Moving on to upgrades/downgrades, we have three so far today:

Boeing (BA) had coverage resumed with a Hold, by Stifel Nicolaus.

Fifth Street Finance (FSC) was downgraded from Buy to Hold by Gifford Securities.

Kellogg (K) was upgraded from Hold to Buy by Deutsche Bank.  

I’ll be on the lookout for earnings news today on three stocks on my lists:

PDL Biopharma (PDLI) 

Westar Energy (WR)

Public Service Enterprise Group (PEG)

I’m working on a new article to submit to Seeking Alpha, on covered calls, to illustrate returns with and without selling calls. The results are interesting. You generally are ahead with selective call selling, until that one stock suddenly turns into a rocket, causing you to forfeit a significant gain in return for a puny call premium. That’s the nature of the option selling game. Nassim Taleb’s (author of the acclaimed “Black Swan”) other book, “Fooled By Randomness”, discusses this phenomena, among other sub-topics. I highly recommend his books, especially if you start to think you have about gotten it all figured out. Possibly you are being “Fooled By Randomness”.

Time to hunker down and try to make the rent – or even the latest auto repair, after dealing with that irritating dash light “check engine soon”, or whatever the heck it said.

JT

Final Posting Wednesday, 02/22/2012 5:00 PM

Stocks finished the day with modest losses. The only economic data released today was indicative of a slowly recovering housing market, as Existing Home Sales came in at 4.57 million, a 4.3% increase.

Additional upgrades/downgrades on stocks I follow that came out today are:

Frontier Communications (FTR) was downgraded from Buy to Hold by Hudson Square Research.

Nucor (NUE) was downgraded from Buy to Neutral by Longbow.

Genuine Parts (GPC) was downgraded from Buy to Hold by Gabelli.

Public Service Enterprise Group (PEG) was downgraded from OverWeight to UnderWeight by Atlantic Equities.

Walmart  (WMT) was downgraded from Strong Buy to Market Perform by Raymond James.

Earnings reports that have come out today are;

Windstream Corp (WIN) reported Q4 EPS of $.19, missing estimates by $.01. WIN declined by $.35 today, closing at $12.12.

Solar Capital LTD (SLRC) reported earnings of $1.42 per share and net investment income of $.57 per share for the quarter ended 12/31/2011. NAV per share at year-end was $22.02. SLRC declined $.27 today, closing at $23.15.  

I did not execute any trades today. My GTC order to sell a September 2012 $65 strike call on Nustar (NS) remains in limbo.

JT

1st Posting Wednesday, 02/22/2012 8:45 AM

Asian markets closed in positive territory, except for India, which declined over 1.5%. European markets are all trading in the red, although not by huge margins. U.S. futures are slightly negative at the moment. Dell computer is down over 6% in the pre-market after an uninspiring earnings release. I mention this not because DELL is a stock on my lists, but because it is one of the giants that can impact the market. One news item of note on my stocks is that the CEO of Johnson & Johnson (JNJ), Bill Weldon, will step down. It appears the most recent embarrassing product recall, the latest in a long string of recalls, was the final push to achieve this result, which shareholders have been clamoring for in recent months, if not years. It remains to be seen whether a new CEO will be the solution, but one of the conditions that comes with the territory of being a CEO is that management failures (which product recalls certainly are) will eventually get you if they are not corrected.

Todd Harrison of Minyanville has a thought-provoking read out on MarketWatch, “Is the European Crisis Over or Just Beginning”. His concerns are shared by many.

There is minimal economic data due out today; only the worthless weekly MBA Mortgage Index, and the marginal Existing Home Sales.   

Upgrades/downgrades so far today on my stocks are:

ONEOK Partners (OKS) was downgraded from OutPerform to Neutral by Credit Suisse, citing valuation; Price target raised to $58.

Medtronic (MDT) was downgraded from OutPerform to Neutral by Credit Suisse, citing slowing growth; Price target lowered to $43.

Medtronic (MDT) received a second downgrade, from Buy to Hold, by Deutsche Bank; Price target lowered to $41.

Phillip Morris (PM) was downgraded from Neutral to Reduce by Nomura, citing valuation.

Since it looks like a slow day, time for a new economics pop quiz; what is the “MBA Mortgage Index”, and who puts it out? To answer the second question first, it is released weekly by the Mortgage Bankers Association. The index is a composite index that considers both new purchase financing and refinancing applications, and is based on a weekly survey of financing providers. It is a leading indicator of home buying and refinancing activity levels. One shortcoming is that the data only covers about half of the U.S. residential mortgage market, and needs to be smoothed, such as to a four-week or longer moving average, to be meaningful, as the weekly value is somewhat erratic. It is the erratic nature of the weekly release that causes me to consider it none too useful.

Time to get ready for what looks like a slow day – which of course may or may not be the case.

JT

Final Posting Tuesday, 02/21/2012 6:00 PM

Both the Dow30 and the NASDAQ indices threatened the next higher “round numbers” of 13,000 and 3,000, respectively, but were beaten back by the Bears to finish below those levels, on what was still a mostly positive day.

Two additional upgrades/downgrades came out on my stocks during the day:

Eaton Corp (ETN) was upgraded from Neutral to Buy at Longbow.

Norfolk Southern (NSC) was downgraded from Overweight to Neutral by J.P. Morgan.

Earnings out so far this week on my stocks are:

Penn Virginia Resources Partners L.P. (PVR) - Reported results Monday, as noted in this morning’s blog. The report was generally positive, with both full-year EBITDA and Adjusted Net Income for 2011 exceeding the comparable values for 2010. As is becoming more common for MLPs these days, PVR reported Distributable Cash Flow (DCF) for 2011, net of provisions for replacement capital expenditures, as $143.8 million, which based on 78 million units outstanding, computes to $1.83/unit. This is slightly less than the annual payout of $2.04 per unit, not ideal, but nothing to become overly alarmed about. PVR declined $.69 today, closing at $24.15.

Genuine Parts (GPC) – Q4 EPS of $.86 beat estimates by $.03. Evidently it wasn’t enough, as GPC declined $1.77 today, closing at $63.81.

Medtronic (MDT) – FQ3 EPS of $.84 was in-line with estimates. MDT declined $.95 today, closing at $38.99.

Oneok Partners L.P. (OKS) – Also reported results Monday, with Q4 earnings per unit of $1.26, a significant increase from Q4 of the prior year. Full-year 2011 results were similarly favorable. DCF for 2012 is expected to be in the range $925 million to $985 million. A few days earlier, OKS announced that a proposal for a 2 for 1 split will be voted on at the upcoming annual meeting in May. OKS increased $1.34 on the day, closing at $60.90.

Walmart (WMT) – Last, and also least, for today, WMT reported Q4 EPS of $1.51, beating estimates by $.05, but revenue of $122.3 billion, while up Y/Y by 5.8%, still fell short of estimates by $2 billion. Poor fellows, the stock declined today by $2.41, closing at $60.07.

I have a new article out on Seeking Alpha today, on my put selling experiences with ConocoPhillips (COP) the last two years. A link is available from the SA Articles selection at my website.   

I sold a new call against my Unilever (UN) stock today, with an August 2012 expiration at a strike of $35.00. My sale price was $1.26. My cost basis on these shares is about $30, so I will let them go if the price rises above the strike. Stay tuned.

That’s about it for today; time to hit the gym.

JT

1st Posting Tuesday, 02/21/2012 9:00 AM

Well, a nice long week-end it was. My wife, who is Chinese, has suddenly taken interest in professional basketball, part of the “Linsanity” phenomena. She has never watched an NBA game in her life, yet there she was Sunday, watching the Knicks and the Mavs, on an emotional roller-coaster with each basket, foul, or what-have-you.

Anyway, moving on to the markets, the big news of the day is the apparent approval of the Greek bailout. Other geo-economic news is the stand-off between Iran and the West continues to drive oil prices higher, and Japan posted a record trade deficit in January. Asian markets closed higher except for Japan, with the Nikkei posting a small loss. European markets are all trading in the red, but the U.S. futures are positive, presumably on the Greek news. No economic releases are scheduled for today.

Not much to report on upgrades/downgrades this morning. Only one so far today; Energy Transfer Partners L.P. (ETP) was downgraded from OutPerform to Market Perform by Wells Fargo.   

Stocks on my lists going ex-dividend this week are:

Avista Corp (AVA) – 2/22/2012, yield 4.53%.

General Electric (GE) – 2/23/2012, yield 3.53%.

Northrop Grumman (NOC) – 2/23/2012, yield 3.33%.

Atmos Energy (ATO) – 2/23/2012, yield 4.34%.

Johnson & Johnson (JNJ) – 2/24/2012, yield 3.51%.

Earnings announcements expected this week, tentatively, are:

Penn Virginia Resources Partners L.P. (PVR) – 2/20/2012. PVR did release results yesterday, regardless of the fact that it was a market holiday. I’ll report on PVR tonight with any others that come out today.  

Genuine Parts (GPC) – 2/21/2012.

Medtronic (MDT) – 2/21/2012.

Oneok Partners L.P. (OKS) – 2/21/2012.

Walmart (WMT) – 2/21/2012.

Windstream Corp (WIN) – 2/22/2012.

Solar Capital LTD (SLRC) – 2/22/2012.

PDL Biopharma (PDLI) – 2/23/2012. I’ll be watching this one; PDLI may be coming off my Tier3 list if the report is not encouraging. PDLI has already announced all four dividends for 2012, which is a bit unusual. Any reneging on the promised payouts would be a disaster for the stock.

Westar Energy (WR) – 2/23/2012.

Public Service Enterprise Group (PEG) – 2/23/2012.

It looks like the week won’t be too dull, with at least a few earnings reports on tap.

My February 2012 call, strike $35.00, on Unilever (UN) expired worthless, so I was informed when I logged on to my E*Trade account this morning. Of course, I already knew that, since UN closed at $33.78 Friday. Covered call selling is great when it works, just like “free money”. Of course, when it doesn’t work, it becomes clear that it isn’t “free money”, that risk is assumed when entering a covered call trade, same as for any trade in the markets. 

Time to buckle in and get ready for today’s action.

JT