Register for free to join our community of investors and share your ideas. You will also get access to streaming quotes, interactive charts, trades, portfolio, live options flow and more tools.
Register for free to join our community of investors and share your ideas. You will also get access to streaming quotes, interactive charts, trades, portfolio, live options flow and more tools.
I'd also like to point out that this is an exceedingly unfavorable example because AAV is a low-priced stock.
Okay, so here’s a real-world example (since I just ran out of books to read, I haven’t got anything better to do). We’ll take the numbers as they are today although I would probably wait a bit for this trade to get closer to parity.
Take AAV Feb ’08 options. AAV closed at $12.08; puts are going for .30 and calls are going for .60 (actually .55 but let’s not make this too complicated). If you sell the calls and buy the puts, your cost basis in AAV is roughly $11.80 (again rounded).
Now my head starts to spin because I got up really early, so correct my math if it’s wrong. It’s all rounded, so don’t get too picky with the numbers.
Say you buy 1000 AAV and another 1000 on margin. Your yield is roughly 30%, minus the cost of money, so 23%.
Worst case: If AAV goes down to $10 and the dividend gets cut to $0, you have a fat 29% loss. But if the dividend was suddenly cut to $0, you’d end up with a $6 or $7 stock anyway. With 100% leverage and without protection (a hugely bad idea, but this is just a thought experiment) you’d have an 81% loss if it declined to $7. Without the collar or any leverage, you’d have a 41% loss.
If AAV goes down below $10, and the dividend remains intact, you end up with a 6% loss over a year. This is the most likely downside scenario, in my opinion, although I think it is relatively unlikely because Canroys in general are slightly undervalued.
If AAV goes up to $12.50 just before the next dividend (which is paid monthly), it gets called away. You get .70 (call premium + increase in stock value to $12.50), or just about 6%. Not bad if you annualize it.
If AAV sits n’ spins, you get your 23%.
Feel free to smack me around if I’m wrong. As I’ve said before, I know biotech but I’m relatively new to other areas.
None of this should be taken as a suggestion to use that much leverage, of course.
Mr. Godot told me to tell you he won't come this evening but surely tomorrow.
Soaring Oil Trust Yields
I have not read this yet, just posting for future reference. Just on a scan I found a little quote that made me happy.
Dividends on Canadian oil and gas trusts and partnerships are out of sight, with more than a dozen once again paying out 10% or better.
By Jeffrey R. Kosnett
October 3, 2007
Late in September the investment arm of Abu Dhabi National Energy announced an unusual takeover: It put up $5 billion to buy PrimeWest Energy Trust for $26.75 a share. PrimeWest is a Canadian oil and natural gas royalty trust that sells 50,000 barrels of energy (oil and its gas equivalent) per day and each quarter collects 200 million Canadian dollars, which is now the equivalent of $200 million in U.S. currency.
In response to the takeover announcement, the stock (symbol PWI) leaped 30%, to $26.25. It closed at $25.03 (U.S. dollars) on October 3, down 5% for the day.
Based on the trust's last twelve monthly distributions, which total $3 Canadian, PrimeWest sports a yield of 11.7%. It had been yielding 15% before the units (the term for shares of a trust or partnership) soared on news of the buyout, which is likely to close in November.
Some Canadian politicians harrumphed about the national-security implication of selling an important asset to an Arab nation, but the government is unlikely to nix the deal or scare off the buyer. Even if Canada enacted a law to let the government review foreign purchases of energy reserves, it almost certainly wouldn't undo previously done deals.
The trusts have recovered nicely from a big drop last year after Canada enacted legislation that would have the effect of forcing many income trusts to reorganize as corporations, effective in 2011. Currently, Canadian trusts operate similarly to U.S. royalty trusts and real estate investment trusts. As long as the trust passes through most of the income it generates to shareholders, it avoids or defers income taxes.
The change would cut into the cash available for dividends and, in theory, cause either the shares to fall to maintain the yield or for the yield to shrink. But investors realized 2011 is a ways off and that, like Hong Kong after the handover to China, there's still money to be made from oil and gas in the ground in Alberta.
Still, the response of trust prices to the PrimeWest buyout has been surprisingly muted. Few of the other trusts soared after the announcement, despite the implication that many, if not most, of them are undervalued and are ripe for plucking by energy-hungry buyers.
Meanwhile, current yields on many of these trusts read like those of a roster of junk bonds issued by companies in bankruptcy: Harvest Energy (HTE), 17%; Canetic Resources Trust (CNE), 15%; Penn West Energy Trust (PWE) 13%, and Enerplus Resources (ERF), 11%. High yields generally suggest big risks, but how high can the risk be for trusts that own proven energy reserves?
Here's yet another puzzle. Because of the appreciation of the Canadian dollar (or the depreciation of the buck, if you prefer), the dividends from north-of-the-border trusts are no longer worth less than dividends in dollars.
So, in addition to higher dividends stemming from rising energy prices, you get the benefit of a stronger Loonie. Instead of translating a 14% Canadian yield into a 10% yield in dollars, you get the whole caribou. (There is a 15% Canadian withholding tax, but you can get it back from the Internal Revenue Service as a credit on foreign tax paid if you hold the shares in a taxable account. You don't get the break for tax-advantaged accounts, such as IRAs and 401(k)s.)
You'd think U.S. investors would be buying these trusts hand over fist. If they were, the units would be 50% higher, bringing their yields into line with other income investments.
Several trusts exhibited at a recent hard-money and natural resources investor show in Washington. When asked why the yields were so high, representatives of two of them said they didn't know and surmised that the market has just decided this is what they are worth.
There is optimism galore. And, frankly, there should be. Until the price of oil and gas starts to fall sharply, something that's unlikely unless there is a global recession, or Canada restricts investment in the energy sector, these investments offer about the best ratio of reward to risk that one can imagine. The real risk is the fricken' Canadian government.
One risk, of course, is the possibility of dividend cuts. But there's little talk of that. Consider Enerplus, which has paid 42 cents a month for two years. Although oil is priced in U.S., which means the real price in Canadian currency is falling, it has gone high enough to compensate for the move in the exchange rate. Enerplus has ten years of known reserves and several drilling and exploration programs, plus a piece of the famous Alberta tar sands from which energy companies are producing synthetic crude oil. So, Enerplus offers growth potential as well as substantial income.
That still doesn't explain the high yield. One drag on the share prices is that the province of Alberta, the source of most Canadian energy, is considering a big hike in the tax it collects off the top, from 25% to 30%, on energy production, says David West, a Toronto investment adviser and contributor to Canadian investor blogs. The Calgary Herald recently reported that the overwhelming majority of Alberta residents support a higher tax, which the energy industry is fighting. In my view, a local tax increase of this size isn't enough to overturn the case for these terrific investments.
Another concern holding down unit prices is the possibility that some trusts will convert to corporations. Canadian Oil Sands Trust (COS.UN), which owns 37% of the largest synthetic crude project and whose shares have rocketed from $5 to $35 (Canadian) in five years, is already weighing a conversion.
Since 2005, the trust has boosted its distributions by 300%, and it now yields 4.5%. The low yield reflects the higher capital investment needed to turn tar into sweet crude. Over time, profits should continue to grow handsomely and more of your return may come from growth rather than yield. Is that so terrible? No.
Over the years, supportive investment advisers have expressed amazement that the yields from various energy-related income-pass-through entities have generally trounced those of bonds and real estate investment trusts. The reason: Trusts are little known and little covered by professionals. Yet you can buy them with the same click of a mouse that you can buy ExxonMobil shares or a mutual fund.
Don't let their obscurity deter you. Trusts are a wonderful way to ride the energy boom and the strong Canadian economy.
Sure. Although it's not a perfect example, watch AAV February '08 options. Not quite ripe for the picking yet--but they will be if the Canroys have a bad day.
ADVDX
Anyone more intelligent than me (eg, anyone) want to comment on this?
http://socialize.morningstar.com/NewSocialize/forums/2/2438026/ShowThread.aspx
Behold, Albertastan
What do you call it when a government enacts multiple huge tax increases and then prevents companies from selling themselves to foreign entities? Nationalization, perhaps?
http://www.fool.com/investing/international/2007/10/03/behold-albertastan.aspx
Toby Shute
October 3, 2007
"Alberta must be internationally competitive and developers must be rewarded for their risks and investments. Nonetheless, the fact remains that the resources do not belong to the developers; they belong to the people."
-- Our Fair Share: Report of the Alberta Royalty Review Panel
Since its release in mid-September, a startlingly anti-business report has caused some serious shudders up in Alberta. The above statement pretty much sets the tone for the 100-plus-page tome. The report's premise is that Albertans aren't benefiting enough from oil and gas development in the province. The panel's prescription is to hike the government's take by 20%, or about $2 billion annually.
You can imagine how industry players have reacted to this report. Our neighbor to the north has been dubbed Canazuela, or -- my personal favorite -- Albertastan. As much as I love wordplay waggery, this characterization is clearly over the top. There's no expropriation suggested here, and no revocation of licenses on legal technicalities. Alberta still offers one of the most stable political and business environments of any hydrocarbon haven in the world. Conducting business there just might get meaningfully more expensive.
Cost inflation is a tax
The timing here probably couldn't be much worse. Costs in the Canadian oil patch are running extremely high. EnCana (NYSE: ECA) cut their expenditures by $400 million this year on account of cost inflation, and Precision Drilling Trust (NYSE: PDS), which depends on high exploration and development activity, has gotten drilled.
Now, enormous EnCana, which has an enterprise value greater than Devon Energy (NYSE: DVN) and even Occidental Petroleum (NYSE: OXY), has stated that if the new royalty regime is implemented as outlined in the panel's report, the company will slash 2008 Albertan investments by $1 billion, a 30%-40% cut.
Now, I don't know what good all that marginal oil and gas will do for The People when it's left in the ground. But I can envision the economic harm from all of the secondary and tertiary employment that would evaporate if the energy companies pack up and shift their resources to projects elsewhere.
Running the numbers
The CEO of TransCanada (NYSE: TRP), Canada's largest pipeline operator, presents some useful numbers in a recent op-ed. Between finding and development (F&D) and production, average costs in Alberta have risen from $8 per BOE in 1996 to somewhere between $20 and $30 today. Operators aren't selling Alberta's heavy oil and bitumen anywhere near the $80 spot price for light, sweet oil. That's why I say a lot of this supply is marginal -- raise the government take, and it won't be economic to produce.
The most interesting figure, which is one that I would have expected the royalty panel to calculate, is the amount of money that will disappear from the economy for each marginal barrel left in the ground. TransCanada's CEO pegs it at $20 to $30. I'm not equipped to evaluate that assertion, but a panel stacked with economists and industry analysts surely was. The closest the report ever comes to acknowledging the impact of its recommendations on activity levels is the statement that "higher royalties and taxes will slow the pace of oil sands investment."
The Foolish bottom line
Is this specter of disappearing jobs just an industry bogeyman? I don't think it is, but then again, I don't have much information at hand. This panel of experts spent reams of pages pointing out how much the government can get away with, and very little space addressing the implications of the hike, other than the fact that the take will be more on par with places like Texas.
I can only guess that the likes of Imperial Oil (NYSE: IMO) and Petro-Canada (NYSE: PCZ) will follow EnCana's lead. Shops, hotels, and restaurants will get pinched. And a few years out, government receipts will actually be lower than had they left the current scheme in place. The people deserve better.
Don't make me think too hard
True that it will not work in all cases. Also absolutely true that your stock can get called away.
HTE
Although I'd normally not post distribution announcements, this one is significant because there has been so much babble about HTE reducing its distribution--this, despite the fact that their payout ratio is only 62%
Harvest Confirms November 15, 2007 Distribution of C$0.38 Per Trust Unit
Thursday October 4, 12:40 pm ET
CALGARY, ALBERTA--(MARKET WIRE)--Oct 4, 2007 -- Harvest Energy Trust (Toronto:HTE-UN.TO - News) (NYSE:HTE - News) ("Harvest") today announces that a cash distribution of Cdn$0.38 per trust unit will be paid on November 15, 2007 to unitholders of record on October 22, 2007. Harvest trust units are expected to commence trading on an ex-distribution basis on October 18th, 2007.
The Cdn$0.38 per unit is equivalent to approximately U.S.$0.38 per unit if converted using a Canadian/U.S. dollar exchange ratio of 1.003. Nice dividend hike thanks to the exchange ratio
For U.S. beneficial holders, the U.S. dollar equivalent distribution will be based upon the actual Canadian/U.S. exchange rate applied on the payment date and will be net of any Canadian withholding taxes that may apply.
On a go forward basis, Harvest intends to continue declaring distributions on a quarterly cycle commencing with the release of our third quarter 2007 financial and operating results in November. It is expected that by this time, there will be better clarity on our economics, such as a more complete assessment of quarterly results, annual budget expectations and currently, the impact of the royalty review by the Province of Alberta.
Harvest is one of Canada's largest energy royalty trusts offering unitholders exposure to an integrated structure with upstream and downstream operations. We are focused on identifying opportunities to create and deliver value to unitholders through monthly distributions and unit price appreciation. With an active acquisition program and the technical approach taken to maximizing our assets, we strive to grow cash flow per unit. Harvest is a sustainable trust with current production from our oil and gas business weighted approximately 73% to crude oil and liquids and 27% to natural gas, and complemented by our long-life refining and marketing business. Harvest trust units are traded on the Toronto Stock Exchange ("TSX") under the symbol "HTE.UN" and on the New York Stock Exchange ("NYSE") under the symbol "HTE".
VRUS
My god, what idiot negotiated this deal...what a sweet bargain for Horizon.
>For each $10 million loan, Pharmasset will pay interest only for the first 15 months followed by 30 equal monthly installments of principal and accrued interest. The interest rate for the initial loan will be 12%. In addition, Pharmasset issued to Horizon a seven-year warrant to purchase up to 149,377 shares of common stock at an exercise price of $12.05 per share, a volume- weighted average of recent closing prices. The warrant is immediately exercisable for 66,390 shares, and the remaining 82,987 shares become exercisable in varying increments upon the achievement of certain milestones related to Pharmasset's product development and future advances under the loan agreement.<
CSE--
PS--you might consider selling CSE $20 April puts. The premium is good (about $2.70 now), and it's a good, high-yielding company so if it gets put to you no big deal.
Jim,
The whole point of using a collar is to be able to use leverage while minimizing risk.
A strictly hypothetical example using 100% leverage to simplify (I wouldn't use 100% leverage, though)
1) Buy 1000 shares of a $100 stock yielding 15%
2) Buy another 1000 shares on margin
3) Your yield is 30% on the $100k, minus the cost of money (say 7%), so your effective yield is about 23%.
4) Sell $105 calls, buy $95 puts (if done at the right time, your only cost is the transaction fee)
5) Downside and upside is limited to $5 (5%). Times leverage, so your downside/upside can be as much as 10% of the initial 100k.
6) So your theoretical maximum loss is $10,000 before the put kicks in. But that's only if the dividend is cut to 0% as well (and that's not a common event).
7) If the dividend remains stable at 15% of your cost basis and the stock falls below $95, you're still 13% ahead if you hold for a year, even after the cost of money. If it gets cut in half, you're still ahead for the year.
I'm writing this fast and may have made some mistakes in the exact calcs, but you get the picture. On a 100k, the difference is about 8%, or about $8000/year, minus frictional costs. It could also be a little more or less than that because you can't always get a perfect no-cost collar.
You also have to have a broker with cheap money--TradeKing is at 7.5%, Just2Trade is at broker call (6.5%).
Plus as interest rates decline, broker call goes down, so you make more money, plus your high-yield stocks go up because they become relatively more attractive.
Anyone want to criticize this strategy? I'm just experimenting with it right now.
That's a lot of activity...I have a similar amount of activity, but it's all been buys as I scale into positions.
Instead of all the buying and selling, consider collaring your high-yield stocks to limit downside and using leverage to enhance your yield. I'm pretty sure you understand the concept, but I can explain further if anyone wants me to.
Speedel
DRITTER RENINHEMMER VON SPEEDEL TRITT IN DIE KLINISCHE ENTWICKLUNGSPHASE EIN
Ha! Just kidding!
SPEEDEL'S THIRD RENIN INHIBITOR ADVANCES TO THE CLINIC
- STRATEGY ON TRACK FOR BUILDING FAMILY OF NEXT GENERATION COMPOUNDS -
Basel/Switzerland and Bridgewater NJ/USA, 4 October 2007
Speedel Holding Ltd (SWX: SPPN), today unveiled SPP676 as a new renin inhibitor with the announcement that the promising new compound is beginning Phase I clinical trials. SPP676 is from the SPP600 series of renin inhibitors for the treatment of hypertension and related end-organ diseases. The Phase I trial will test the safety and tolerability of single and multiple oral doses in healthy volunteers and first results are expected in 2008. SPP676 is one of several novel compounds developed by Speedel Experimenta, the company's late-stage research unit.
Dr. Alice Huxley, CEO, commented: "Our strategy is on track for building a family of next generation compounds, and this important milestone further strengthens Speedel's position as a world leader in renin inhibition. SPP676 is the third compound developed by our in-house laboratory to enter clinical trials, following SPP635 in Phase II and SPP1148 in Phase I. We believe that renin inhibition will become the gold standard in the treatment of cardiovascular diseases, the largest segment in the pharmaceutical industry and Speedel intends to be a significant player in this huge market."
The Phase I trial of SPP676 is a double-blind, randomised, placebo-controlled study in healthy male volunteers designed to evaluate clinical safety and tolerability following single and multiple oral doses. In addition, the pharmacokinetics and pharmacodynamics of the compound will be assessed. Testing of the single doses
has started in October 2007, and the multiple-dose phase of the study is planned to start in 2008.
Speedel's first renin inhibitor SPP100 (Tekturna/Rasilez)[1] was approved by the FDA in the US in March 2007, and by the EMEA in the EU in August 2007, and is marketed by Novartis in these markets. Both Speedel and Novartis recently won the Wall Street Journal Gold Award for Technology Innovation, which was given to the companies for their work in discovering and developing SPP100 as a novel therapy for hypertension. Speedel is developing a number of series of next generation renin inhibitors, including the SPP600, SPP800 and SPP1100 series.
About SPP600 series
In June 2007 Speedel reported promising Phase IIa results with SPP635 in hypertensive patients.
SPP635 is the most advanced compound of the SPP600 series of renin inhibitors being developed by Speedel. The company has made significant progress in the optimisation and development of this series of newly synthesised compounds by using rational drug design, including computer assisted molecular modelling techniques, state-of-the art preclinical disease models and human microdosing.
In December 2001, Speedel acquired a worldwide exclusive license from Roche covering its entire programme in renin inhibition. This license allows Speedel to use the acquired know-how for lead optimisation of its own compounds designated as the SPP600 series. Speedel holds full development and commercialisation rights for these product candidates under the license agreement with Roche. If Speedel decides to offer rights to any Speedel compound from the series to a third party, Roche has a right of first negotiation with respect to such rights. If Roche has not expressed its interest in acquiring such rights within a defined period of time, or the parties have not reached an agreement on the terms of such rights, Speedel is free to grant such rights to any third party.
A little trick for you: Move the plane into the upper-left corner, then move your point *around* the outside of the game area until you reach the right-hand side of the box. Then pick a point about a third of the way up, and move your pointer to the left into the box. You'll reliably get 110 M+.
PS: Nerf, I want to thank you for making a very boring all-day meeting much more entertaining.
113.527 Meters
Showoff
The Big List of High-dividend Stocks
AAV ADVANTAGE ENERGY FD 14.50%
ABR ARBOR REALTY TR 13.10%
ACAS AMER CAP STRATEGIE 8.60%
ADVDX ALPINE DYNAMIC DIVIDEND FUND
AGD ALPINE GLOBAL DYNAMI 8.80%
AHR ANTHRACITE CAP INC 13.20%
AHT ASHFORD HOSP TR INC 8.40%
AINV APOLLO INVESTMENT CO 10.00%
AOD ALPINE TOTAL DYNAMIC -
APL ATLAS PIPELINE PTNRS 7.40%
APU AMERIGAS PARTNERS LP 9.60%
ARCC ARES CAPITAL CORP 10.30%
AWP ALPINE GBL PRMR PROP -
BEP S&P 500 CVRD CALL FD 11.60%
BFK BLACKROCK MUN INC TR 6.00%
BGF B&G FOODS INC. EIS -
BGM GENL MTRS CP SR NT -
BIF BOULDER GR & INC FD 14.20%
BKCC BLACKROCK KELSO CAPI 11.60%
BKN BLACKROCK INV MUNI 5.90%
BNY BLACKROCK NY MUN INC 5.50%
BPT B P PRUDHOE BAY UTS 10.80%
BRT B R T REALTY TRUST 14.30%
BSD BLACKROCK ST MUNI TR 6.00%
BTE BAYTEX ENERGY TR UTS 10.60%
BVF BIOVAIL CORP 8.60%
CHI CALAMOS CV OPP & INC 10.50%
CNE CANETIC RESOURCES TR 14.80%
CPL CPFL ENERGIA SA ADS 8.70%
CRZ CRYSTAL RIVER CAPITA 16.20%
CSE CAPITALSOURCE INC 11.90%
CVP CENTERPLATE INC IDS N/A
DCA DIV CAP RTY INC FD 11.80%
DMLP DORCHESTER MINLS 9.30%
DMLP DORCHESTER MINLS 9.30%
DOM DOMINION RES WARR TR 13.60%
DSX DIANA SHIPPING INC. 7.20%
EBI EVGRN INTL BAL INCM 8.10%
EDD MORGAN STANLEY EMDD -
EGLE EAGLE BULK SHIPPING 7.30%
EOD EVGRN GBL DIV OPP FD -
EOS EATON VANCE ENH EQ 9.00%
ERF ENERPLUS RES FD 10.10%
ERH EVERGREEN UTILITIES 10.10%
FHI 1ST TR STR HI INC FD 12.40%
FHO 1ST TR STR HI IN FD3 -
FRO FRONTLINE LTD 12.40%
GHS GATEHOUSE MEDIA, INC 12.50%
GNV GSC INVESTMENT CORP 12.10%
HCD HIGHLAND DIST OP INC -
HQH H Q HEALTHCARE SBI 8.60%
HQL HQ LIFE SCIENCES IND 8.60%
HTE HARVEST ENERGY TRUST 16.90%
HYB NEW AMER HIG INCM FD 11.00%
JDD NUVEEN DI DIV & INC 9.30%
JGT NUVEEN MUL-CUR ST GV -
JLA NUVEEN EQ PRM ADV FD 10.50%
JSN NUVEEN EQ PREM OP FD 10.30%
KMR KINDER MORGAN MNGMNT 7.30%
MCGC MCG CAPITAL CORP 12.20%
MFD MACQUARIE FIRST GLBL 12.40%
MTR MESA ROYALTY TR 9.90%
NCT NEWCASTLE INV CP 16.30%
NCV NICHOLASAPPLGT CV IN 10.10%
NCZ NICHOLAS -APP CONV & 9.70%
NRI NEUBERGER BRMN RLTY 11.70%
NRO NB RE SECS INC FD 11.90%
PFN PIMCO FL RT STGY FND 10.30%
PGH PENGROWTH EGY UTS 14.20%
PHF PACHOLDER HI YLD FD 10.10%
PHK PIMCO HIGH INCOME FD 10.00%
PHT PIONEER HIGH INC TR 9.90%
PIPDX PIMCO INTL STKPLUS TR STRATEGY -
RDR RMR PFD DIVIDEND FD 13.20%
RSO RESOURCE CAP CORP 14.60%
SFL SHIP FINC INTL 8.40%
SJT SAN JUAN BASIN ROYAL 8.50%
TAR TELEFONICA ARG NEW 13.20%
TICC TECHNOLOGYINVESTMENT 10.80%
TICC TECHNOLOGYINVESTMENT 10.80%
TRMD AKTIESELSKABET DAM 12.30%
USS US SHIPPING PARTNERS 9.10%
VRTB VESTIN REALTY MORTGA 11.00%
And an attempt to post as a JPG. Thanks again Dew.
Okay damn it, just go to this link if you want to see the chart:
http://img520.imageshack.us/my.php?image=63895646ux8.jpg
Many Happy Returns: REITs crowd a list of stocks with mega yields
Here's the Barron's article mentioned a few days ago.
FOR YIELD-YEARNING INVESTORS Bear Stearns has compiled a lengthy list of stocks that return anywhere from 4% to nearly 20%. The firm's Global Equity Linked Strategy team scanned issues in the Russell 3000, the Nasdaq 100 and the Standard & Poor's 1500, then chose those that have a Bloomberg-projected 12-month dividend yield greater than 4%. Many are real-estate investment trusts, including four of the top five Big Board-listed names that follow.
• Coming in with a projected 19.1% return was Newcastle Investment (ticker: NCT). Currently priced at a bit above 18, Newcastle, which has a $1 billion market-capitalization, invests in credit-sensitive real-estate securities, including commercial and residential mortgage-backed securities and unsecured REIT debt. Residential loans account for about 10% of its portfolio, with the rest spread out over retail, office, industrial, health-care and other property types.
• With a projected 18.68% yield, Resource Capital (RSO) invests in a combination of commercial real-estate-related assets and higher-yielding commercial-finance assets, such as syndicated bank loans and equipment leases. Residential mortgage-backed securities make up approximately half of its portfolio, although the company continues to diversify. Trading at around 11.75, Resource Capital was launched in 2005.
• GateHouse Media (GHS) appeared in this space June 25 on the occasion of its second dividend boost in 2007. The company is one of the largest publishers of locally based print and online media, serving more than 10 million readers across 20 states. Its chief revenue source is advertising. GateHouse's projected dividend yield in the Bear Stearns screen is 15.33%, and it changes hands at 12.60.
• At an anticipated yield of 15.22%, two-year-old Crystal River Capital (CRZ) invests in commercial and residential mortgage-backed securities, commercial real estate, real-estate loans and instruments, and other alternative assets, such as timber and power plants. Recent price: 17.32.
• Anthracite Capital (AHR), which is externally managed by a subsidiary of BlackRock, has a projected 12-month dividend yield of 14.84% and trades around 9.50. It primarily invests in high-yielding commercial real-estate debt and equity both in the U.S. and abroad.
On the New York Stock Exchange for 78 years, Curtiss-Wright (CW) is the corporate descendant of the Wright Brothers and aircraft designer Glenn Curtiss. Tuesday, the Roseland, N.J.-based company announced it would lift its quarterly common dividend 33%, to eight cents a share from six cents. Disbursement is slated for Oct. 26 to investors of record Oct. 12. The stock goes ex-dividend Oct. 10. Payouts have been ongoing since 1974.
Week's Dividend Payments: NYSE | Nasdaq | AMEX
Week's Ex-Dividend Payments: NYSE | Nasdaq | AMEXChief Executive Martin Benante commented that "Curtiss-Wright has achieved significant growth and operating performance over the last several years while maintaining a solid balance sheet." He added that the payout boost reflects confidence in the continuation of that trend. Curtiss-Wright set a 52-week high Thursday of 50.26. It yields a modest 0.65%.
The $1.5 billion company provides motion- and flow-control systems and metal treatment for the aerospace and defense industries, among others. Its order backlog at June 30 was $1.04 billion, up 19% from the Dec. 31 level. Over the last five years, sales have grown at a compound annual rate of 30%, while operating income has advanced at a 26% yearly rate.
ONE OF THE WORLD'S LARGEST publicly traded tanker concerns, Tsakos Energy Navigation (TNP) hiked its semiannual common dividend to $1.65 a share from $1.50. Holders of record Oct. 22 will receive the new payout Oct. 26, and the ex-date is Oct. 18. Trading on the Big Board at about 73, Tsakos yields 4.53%. The company distributes between a fourth and a half of ordinary net income annually; the final dividend for 2007 will be paid next April. Chairman D. John Stavropoulos said that Tsakos, which is based in Athens, Greece, remains focused on "growing our fleet and optimizing utilization to sustain a steady stream of revenue and a healthy return to our shareholders."
American Capital Strategies: Why I'm Holding Back
More stuff from Seeking Alpha. Again, take it for what it's worth.
posted on: September 24, 2007 | about stocks: ACAS
How can something so utterly predictable still manage to catch the markets off-guard (including yours truly)? Of course, I am referring to the 50bp cut in the Fed Funds Rate this past week.
Our portfolio is focused mainly on energy and precious metals, so obviously, we are expecting inflationary policies from the Fed. But what surprised me was how willingly Ben Bernanke gave up his pretense at fighting inflation to claim his true identity: Helicopter Ben. The violent reaction in the currency, commodities and bond markets left me wondering if the end is nigh and we have progressed from the middle to the end game.
For the last few years, oil and gold related issues have followed almost seasonal patterns of volatility. The market is happy to play along with the Fed's inflation farce while simultaneously ignoring the glaring oil supply shocks headed our way, thus suppressing the true value of both markets. That's fine with us as we'd like to get as much skin in the game as possible before the world wakes up to the situation at hand. We've been taking advantage of the situation to pick our spots, using value-based principles to build positions to hopefully maximize returns above what these secular bull markets will yield. At some point, we will enter the main legs of the gold and oil bull markets at which point these markets will not pull back to attractive levels.
The off-Wall-Street reaction in gold, oil and the dollar index suggests the market is slowly digesting the facts on the ground: inflation is accelerating, energy supplies are strained, the real economy stands on shaky ground and the full faith and credit of the US government doesn't seem to hold much water.
A few numbers have circulated showing how equity markets historically rally when the Fed begins a rate-cutting cycle (the one notable exception being the last rate-cut cycle in 2001). But the present rally seems tenuous and forced. Wall Street's schizophrenic stance is confused. Is the Fed acting to preempt a recession? Aren't corporate profits at record levels due to booming exports? Isn't unemployment still low? Is the consumer maxxed out or are their stock returns offsetting any loss in home equity? Is good news bad or good? Wall Street seems to be talking out of both sides of its mouth but what else is new?
This leaves me at an uncertain junction.
Is it time to adjust our price range when valuing gold and oil stocks? Is the economy headed toward recession? Will the US dollar fall through the 78 support level? If so, should this affect our investment strategy going forward?
Case in point: a possible investment I've been researching, American Capital Strategies (ACAS), was mentioned Barron's this week, much to my chagrin. ACAS is structured as a business development company [BDC] that is transitioning from a BDC/private equity company to more of an asset management company. They operate primarily in the fragmented US middle market, taking controlling stakes or providing mezzanine or senior debt financing to middle-market private companies. Additionally, they manage various equity funds (including one in Europe) and underwrite debt securitizations. With a 9% dividend and a low market valuation, I've been considering a position.
A few concerns hold me back.
The credit crunch seems to have further to run. In ten years of public trading, the only year ACAS failed to beat the S&P 500 was during the last credit crisis with the LTCM/Russian debt/Asian currency turbulence. So perhaps we can get it cheaper with some patience.
Also, ACAS' non-accruing loans are at a historically low 4.1%. In general, US corporate defaults are near all-time lows. If the economy slows into recession, expect a reversion to the mean. During the last recession, American Capital's non-accruing loans reached 12% in 2002.
Earnings composition is subject to a high degree of volatility and subjectivity, comprised of net operating income [NOI], realized and unrealized capital gains (or losses). NOI has stagnated the last few years as they ramp up spending on talent to transition to more asset management. Their pattern of trend-chasing may work against them as the asset management industry appears to be losing momentum of late. A slow economic environment may dampen their ability to exit portfolio companies at attractive prices, thus lowering realized earnings. And portfolio appreciation is highly subjective and somewhat opaque. During the last slow period (2000-2002), realized and unrealized capital gains markedly reduced total earnings per share. NOI/share averaged $2.29 while EPS averaged $0.30.
To the ACAS' credit, they have never reduced their dividend even during hard times. Management seems to mind shareholder interests and if the American economic outlook stood on firmer ground, I'd be happy to be a shareholder. At $41, I'm waiting for at least a 10% drop before giving it another thought.
At this time, the way forward is unclear. Discretion getting the better part of valor, I'm waiting to see if the game has changed. In the meantime, current conditions and the recent bump suggests now is not the time to open bold, new positions. With all the uncertainty (in my mind at least), perhaps the best path for the time being is selling volatility in relatively safe positions. No one ever lost money picking up dimes and quarters.
Provident, Enerplus, and Canetic: Is it Time to Reconsider Canadian Energy Trusts?
This is a Seeking Alpha article, so take it for what it's worth.
posted on: October 01, 2007 | about stocks: CNE / PVX / ERF
I recently spent a couple weeks pondering over my opinions about Canadian trusts, and just as I'm finishing up a little post on them, boom, there goes my thunder. First, Abu Dhabi buys up PrimeWest (PWI) at a big premium and catches everyone's attention, and then, I hear Jim Cramer turned back to the trusts again last Wednesday on Mad Money.
Surprisingly enough, the PrimeWest buyout offer didn't really move the prices of most of the other trusts.
I've got some thoughts to share, so I'm going to share them anyway, even if Abu Dhabi and Jim Cramer get all the credit, well then they can have it. I won't be bitter or anything, honest.
So, much like other U.S. individual investors, I immediately dismissed investing in Canadian Royalty Trusts when they pushed through new legislation last year that will significantly change the tax landscape for these investments beginning in 2011. I only held one of the trusts at the time, Precision Drilling (PDS), and I sold it not too long after the shares collapsed by 25% or so, along with all other trust shares, in the wake of the new tax announcement.
But now, I've done a bit more reading, and I attended a presentation by a few representatives of some of the oil and gas trusts, and I'm starting to wonder whether the current (still depressed) prices represent a possible buying opportunity. I am definitely not interested in getting into any of the business trusts now - the ones, like Precision Drilling, that don't have energy assets. But the energy trusts, just maybe.
For those who don't know the current situation, it is essentially this: Canadian Royalty Trusts used to be sort of like U.S. REITs in terms of taxation. They were not taxed at the corporate level, as they distributed most of their cash flow to shareholders, and shareholders were on the hook for whatever taxes might be forthcoming.
This was such a popular sector as oil climbed from $20 to $60 in the early 2000s that the Canadian government gradually started to get a bit nervous. More and more non-Canadian investors jumped on board, and more non-energy companies started converting into trusts, or considered doing so, including some of Canada's largest companies.
The budget implications for Canada were significant, as they could get back a similar level of tax payments from individual taxable Canadian investors, but U.S. investors paid just the U.S. dividend tax or the Canadian withholding tax, both were 15%, and tax-exempt investors in Canada paid nothing. I imagine that trusts were very popular holdings in Canadian retirement accounts.
So the thought of much corporate tax money going the way of the dodo got everyone a little jittery, especially when the big firms like BCE (Canada's Bell telephone company) started toying with the idea of converting to trust status. So even though most politicians have historically promised not to touch the trust structure, which is very popular with income-oriented investors (like retirees) as well as with foreign investors from the U.S., and around the world, they reneged on their promise, and essentially determined that all current trusts would begin paying tax at the corporate rate at the end of a grace period of about four years. Trusts that haven't formed yet pay the new tax immediately upon formation, so you may have noticed that no one has started a new trust, or converted to a trust recently.
So essentially, it works out that most U.S. investors might have previously owed only a 15% tax, but in 2011 the effective tax could roughly triple to the 45% range. The actual numbers that any one stakeholder or company would pay are of course, highly varied, and it's a corporate tax so investors would never actually see the withholding. But this should mean a significant cut to the high yield distributions that CanRoy enthusiasts have enjoyed for so long.
In addition to the fact that some people (not I) think energy prices are peaking here and will decline, which would have a significant negative impact on nearly every trust, folks are looking at the existing distribution, cutting it in their minds by anywhere from 20-50%, and wondering whether these investments are still worth it at that new dividend rate.
That's what I was thinking, too, but, if you start to incorporate some other variables in your analysis, it's possible that this thinking is too black and white, then maybe there is still value, and a decent future, in some of the better Canadian trusts. Certainly, the folks who invested in PrimeWest are realizing this, after the buyout offer from Abu Dhabi sent their shares surging last Monday by close to 30%, which I expect probably brought the shares back to where they would have been without the new tax law.
The companies that I took some interest in were Enerplus (ERF), Provident (PVX), and Canetic (CNE), largely because they were all part of a panel at a recent investing conference, moderated by a newsletter editor who writes a letter that covers trusts. In case you haven't said it yourself in your mind yet, yes, that means information from these sources is a bit prejudiced. Still, I found it interesting. And I did own Enerplus several years ago, and it's the real big cap bellwether for this group, so I paid special attention to them.
Here's what essentially got my thoughts rolling in this direction. The following comments were taken all three of these companies:
There is virtually no chance that the big trusts will take the new law laying down, and just pay a high tax rate and cut their distributions. They will come up with some kind of plan or reorganization.
There are significant tax breaks available to energy producers in Canada, and it might be that there is potential for a year or few of using those tax breaks following the transition even if these companies remain as trusts, which would allow them to keep distributions high for at least a little while. ERF in particular noted that it thinks that the tax pools that it has available to it will probably dictate its initial reaction to the 2011 changeover, but that it might use up those tax pools quickly, and need to react further in the years following.
The likelihood of any of these companies actually paying the full corporate tax rate, regardless of their corporate structure, is remote. The average Canadian exploration and production company pays an effective tax rate of 6% (I haven't verified that, but that's what the ERF rep said), so many trusts believe that somehow they will be able to "hammer down" their tax rate to the single digits. also climbed, so the U.S. distribution already is more like 10%, so you can make your own adjustments from that).
So that's what got me started. All of the companies who spoke said that any hope of the tax law changing before 2011 is very faint, and such hope should not be the basis for investing in their companies. They also noted that the chance of their companies remaining in their current structure without any changes after 2011 is also quite faint, since all of the trusts currently have teams of tax lawyers looking at how they can reorganize, use tax credits, spin off units, or otherwise remain competitive income investments following the tax change.
For those of you who haven't fallen asleep yet, here are my notes about each of these companies, and, in particular, why each of these companies believes their shares are undervalued:
Provident (PVX)
This one is a little bit interesting, because it's already explored the step that several companies are considering. This is the conversion to a U.S. Master Limited Partnership (MLP) to keep its tax pass-through status. It only did it with a portion of the U.S.-based assets, but it still has that experience.
So what does it think is keeping its share price low?
Low natural gas prices (this is a constant, as most trusts produce more gas than oil, and even the ones that don't get lumped in with the gas producers much of the time. Sure, gas prices are still historically relatively high, but they're way down from last year.
Provident noted that it is hedged significantly from volatile prices (up or down), and it doesn't believe that investors are giving it credit for that.
The most significant part of that "hedge," in my opinion, is its upstream business. PVX says that its upstream is about 60% of income, and 40% is from midstream NG liquids production. The nice thing about that is that natural gas liquids such as butane, propane, etc., use natural gas as their feedstock but are priced against a crude oil benchmark, so that's a natural hedge against low gas prices at a time of high crude prices.
I appreciate PVX's long-lived assets, especially the midstream assets that require relatively little in capital investment yet throw off good cash flow. PVX is probably better suited to the MLP status than any other big trust, and of course it's already spun off some assets in to an MLP. Its representative thinks the one thing that remains as a catalyst for the shares, save for a big boost in gas prices, is recognition by the market that the sum of its parts is of a higher value than it's being granted at the current price.
Enerplus (ERF)
ERF was in my portfolio back in 2003 and 2004, and I still kick myself for selling it. I enjoyed a nice profit, but it has more than tripled since then even without the dividends. Apparently this is my day for being bitter.
It is about twice as big as PVX, although PVX is also one of the larger trusts.
So, what does it think will unlock the value of ERF shares?
It keeps debt below annual cash flow and have kept the distribution steady for a couple years -- they think they're not getting credit for their better-than-average balance sheet and stability (stability with a 10%+ yield is, I agree, pretty nice).
Enerplus noted that it also has significant U.S. operations, but that its U.S. operations (about 10-15% fo the company) are not really appropriate for an MLP spinoff (not long-lived enough. Even if it could spin them off, it needs the cash flow from these wells to help pay for its oil sands projects.
According to Enerplus, according to them, its hidden growth story is its oil sands leases, which it still has not even really begun to explore. It thinks the biggest catalyst in its near future will be the market recognizing the option value of its oil sands leases. According to its rep., it has 467 million barrels of contingent resources in Alberta that still haven't been turned into reserves.
Enerplus has paid an unchanging dividend for several years (about 10.5% today), so it looks to me like it's reinvesting in production, and is starting to explore its oil sands leases instead of raising distributions as income from higher realized prices climb.
As far as future, post-2011 plans, Enerplus, like the others, said that nothing is decided yet. But it went further, essentially guaranteeing that it would not just start paying the corporate tax rate when the ball falls on New Year's Eve, 2010.
So, Enerplus would like more credit for its oil sands projects, even though production is at least four years off, and it would really like higher gas prices, please.
Canetic (CNE)
This is one I hadn't ever really looked at before, because I thought the name was just too silly. But again, I heard some promising things:
CNE doesn't think they’re getting credit for its very profitable hedges, which might be a catalyst as soon as the next quarterly report. This was actually a pretty strongly worded hint from their representative, I don't know whether or not he was blowing smoke.
It has been brought down by the natural gas price like everyone else, but only 25% of its production is gas. Its oil production might not be getting the credit it deserves, especially with $80 oil.
Its gas projects are pretty high cost. When compared to other trusts, it needs $6.50-7 gas price to make many of its projects economical.
These three companies have somewhat different philosophies, as I read them (and I could be wrong). To me, this is what you get:
Canetic: This is a fairly aggressive exploration, and production company that happens to pay a big dividend. It seems focused on being a good producer and being profitable, not necessarily on the future yield as its core driving principle. If it produces well, the yield will take care of itself, maybe as just a regular corporate dividend. It's also more interested in oversease expansion than the others.
Enerplus: This one really feels like a financially-focused income investment to me. Its intent is very specifically to continue to be a high-yielding income investment that's based on energy production, and clearly the past tendency to keep the yield on the low side compared to some peers, even when cash flow is high, is designed to enable them to invest for the future of the stable dividend. When looking 5-10 years out, ERF strikes me as a big bet on oil sands, so you better believe that oil is going to remain above $40 (at least) to consider this one attractive in the long term.
Provident: This one seems to me to be among the more flexible trusts. It's got a very nice vertically integrated business, with parts that probably would be worth more as separate companies, but it has managed to keep dividends high even with the kind of midstream assets that, in the U.S., typically produce significantly smaller yields. To me, it seems to be quite open to some signficant spinoff/reorganization in a few years, at least more so than many of its compatriots (since it's already done a little spinning off of assets).
Again, that's my psychoanalyzing of their public statements, and some off the cuff chatter from their representatives It may be way off base.
So now that I've looked in some more detail at a few of these trusts, do I want to buy some? I must admit, I'm tempted. I see some significant appeal in all of these, and in a few of the other larger, high quality and long-life reserve trusts. In essence, this is because I'm starting to understand that, regardless of the tax law, these companies are focused on their work of developing and producing cost-effective oil and natural gas on the front porch of the world's largest consumer of both of those commodities.
Investing in CanRoys takes somewhat of a leap of faith now, and remains, even with Cramer's blessing, a little bit contrarian for the always tax-obsessed Wall Streeters among us - you have to assume not only that energy prices will remain at historically high levels, but also that these companies are really going to come up with a plan to manage effectively after 2011, whether that's through reorganizations, spinoffs, mergers, takeovers, or tax credits.
I think it's likely that they will develop some effective plans, and that they will pay more taxes but remain investments that pay a higher, and more consistent yield than any comparable U.S. company. And unfortunately, I also think it's quite likely that they won't share their specific plans with us - and with their competitors - until we are right on the cusp of the tax deadline, so it's certainly quite possible that prices will trend down significantly if investors grow nervous about the imminence of 2011 and haven't yet heard anything concrete or encouraging.
>Rubin expects Mexican oil imports to the U.S. will dry up by about 2012. Some of that decline will be made up by imports from other parts of the world, but the lions' share -- nearly a third of all U.S. oil imports -- will come from Canadian oil sands, he predicted.<
Okay, so which Canroy has the biggest oil sands holdings? I know HTE has some.
I find it remarkable that the Canroys aren't doing better. I own HTE, CNE, and AAV. Although I'm slightly in the green on all of them, you'd think that news (plus the Abu Dhabi acquisition) would launch some real accumulation.
HQH and HQL
I'm posting this in honor of Dew
Press Release Source: H&Q Healthcare Investors
H&Q Healthcare Investors Pays Stock Distribution
Monday October 1, 2:22 pm ET
BOSTON--(BUSINESS WIRE)--On September 28, 2007, H&Q Healthcare Investors paid a stock distribution of $0.37 per share. Of the eligible shares, 49% opted to receive stock. The new shares were issued at a share price of $17.34 and 23,202,594 shares are now outstanding.
This payment of $0.37 per share in capital gains represents a quarterly distribution to shareholders of 2% of net asset value per share at quarter-end in accordance with the Fund's previously announced fixed distribution policy. It is the intention of the Fund to use net realized capital gains when making quarterly distributions, however this distribution policy would result in a return of capital to shareholders if the amount of the distribution exceeds the Fund's net investment income and realized capital gains. As of the record date, it is estimated that this distribution is derived from long-term capital gains. This estimate is based on earnings and net capital gains as of the record date. The actual composition of the distribution may change based on the Fund's investment activity through December 31, 2007. Shareholders will receive a Form 1099 notifying them regarding the source of all distributions for the year early in 2008.
Since the Fund's inception on May 1, 1987, the Fund's net asset value per share has ranged from a high of $53.69 to a low of $6.16 (unadjusted for capital gains of $35.11). The market price per share has ranged from a high of $40.00 to a low of $4.37. The stock price to net asset value premium has been as high as 21.5% and the discount as wide as 30.9%. At the close of the NYSE on September 28, 2007, the Fund's net asset value was $19.14 per share and its share price was $17.30 representing a 9.6% discount to net asset value.
H&Q Healthcare Investors (NYSE: HQH - News) is a closed-end fund that invests in public and private companies in the healthcare industries. Hambrecht & Quist Capital Management LLC, based in Boston, serves as Investment Adviser to the Fund. Shares of the Fund can be purchased on the New York Stock Exchange through any securities broker.
H&Q Life Sciences Investors Pays Stock Distribution
Monday October 1, 2:24 pm ET
BOSTON--(BUSINESS WIRE)--On September 28, 2007, H&Q Life Sciences Investors paid a stock distribution of $0.29 per share. Of the eligible shares, 52% opted to receive stock. The new shares were issued at a share price of $13.37 and 20,083,135 shares are now outstanding.
This payment of $0.29 per share in capital gains represents a quarterly distribution to shareholders of 2% of net asset value per share at quarter-end in accordance with the Fund's previously announced fixed distribution policy. It is the intention of the Fund to use net realized capital gains when making quarterly distributions, however this distribution policy would result in a return of capital to shareholders if the amount of the distribution exceeds the Fund's net investment income and realized capital gains. As of the record date, it is estimated that this distribution is derived from long-term capital gains. This estimate is based on earnings and net capital gains as of the record date. The actual composition of the distribution may change based on the Fund's investment activity through December 31, 2007. Shareholders will receive a Form 1099 notifying them regarding the source of all distributions for the year early in 2008.
Since the Fund's inception on May 8, 1992, the Fund's net asset value per share has ranged from a high of $44.80 to a low of $9.98 (unadjusted for capital gains of $20.02). The market price per share has ranged from a high of $41.06 to a low of $8.13. The stock price to net asset value premium has been as high as 13.7% and the discount as wide as 29.9%. At the close of the NYSE on September 28, 2007 the Fund's net asset value was $15.34 per share and its share price was $13.53, representing a 11.8% discount to net asset value.
H&Q Life Sciences Investors (NYSE: HQL - News) is a closed-end fund that invests in public and private companies in the life sciences industries. Hambrecht & Quist Capital Management LLC, based in Boston, serves as Investment Adviser to the Fund. Shares of the Fund can be purchased on the New York Stock Exchange through any securities broker.
Because they are based on trivia, not useful knowledge.
Perhaps I shouldn't have said unfair--when I write test questions for, say, a sales training learning module, the training directors get PO'd if I write that type of question because you don't learn anything useful from it.
Just curious, Dew: how do you balance your portfolio? Like me, you're holding some volatile biotech. Do you hold anything for income, or are you strictly a growth investor?
I’m afraid I failed the quiz. I got 2, 4, 5, and 8 right, which gives me a gentleman’s D.
Speaking as someone who writes quizzes frequently, numbers 1 and 6 are kind of unfair.
Does the WSJ do quizzes now? Given the new owners, the next step is centerfolds of topless celebrities.
High-yield--The first 3 months
Although I've held high-yield stocks for a while--most notably, FRO, I didn't make the decision to really concentrate in this area until about three months ago. Prior to that, I had held mostly biotechs and cash and low-risk mutual funds to balance the volatility in my biotech portfolio.
I'm taking an extended approach to reinvesting my money in high-yield, so I still have a bit to go to put all my cash to work. The original plan was to take 20 weeks to get completely reinvested, but I blew that by being greedy in early September. Which actually worked out quite well.
The other thing I like about this is I can talk about the stocks I own--and buy and sell--without unduly influencing price. Plus I don't have the sickening ups and downs.
My portfolio so far and the yields at my cost basis (more or less):
CSE 14.5% (This was a great pick, and I learned about it right here)
ADVDX 12.8%
PIPDX 14.4%
GNV 12.1%
NCT: 16.6%
AAV: 14.5%
CNE: 14.8%
HTE: 16.77%
As far as options go, I also sold CSE $20 puts. I was considering selling calls on the Canroys, but the premiums are terrible, so I've started working on collaring my stocks (to limit risk) and then using leverage to enhance yields. Anyone have any comments on this strategy.
My biotech portfolio still contains ARAY (good), JAV (bad), RPRX (okay, but this is the third round with RPRX and I've done very well with it), and VRUS (great!).
I'm also switching to TradeKing because margin rates are broker call + 1.0% (which is dramatically lower than either E*Trade or Fidelity). Was considering switching to Just2Trade, but I don't trust them: their interface is so poor it looks like it was designed by a 12-year-old.
So there it is. Good, bad, and ugly. Comments appreciated--although I can speak with some authority on biotechs, the high-yield stuff is all new to me.
Does anyone have any suggestions for high yield non-mortgage REITs? Preferably ones that pay quarterly.
As always, I find the hardest thing to do is come up with an initial list of names to research.
OT: I found what I believe are the cheapest rates:
www.just2trade.com.
Ranges from broker call +.25% for <100K (6.75%) to broker call - 1.0% for >500k.
I am putting the margin to work in a *very* conservative strategy, not using it to buy biotech.
Now I'm going to see if I can extort lower rates from E*Trade and Fidelity before moving my accounts.
Just2Trade appears to have the best margin rates, for what it's worth.
http://www.just2trade.com/html/fees.php
Also $2.50 trades, options at .60/contract. Not that this is a huge issue for me since I don't make that many trades. Margin rate is more important.
Another article I'd really like to see...maybe I'll have to get a subscription to Barron's.
NCT is yielding 16% right now.
I would love to get my hands on a few mortgage REITs such as the ones you listed, but I am not comfortable analyzing them.
Anyone have any thoughts on this?
Seems like a *really* bad idea.
http://www.prosper.com/
Sandra Ward's interview in Barrons' of head hedge fund honcho Ray Dalio, of Bridgewater Associates, just up the Merritt Parkway, leaves one a little cold about chasing high yields. It's worth picking up or logging on for his forward view of high yield.
This article was published in Barrons' on or around May 27, 2007. Anyone have access to this old article?
>Your board has lead me to BKCC and CSE also and have done well with them.<
PS: What happened to BKCC--down 7%?
>Also like to sell covered calls to juice up the yields a bit and have done so successfully on my HTE and looking at doing so on the CSE shares I own.<
Even better, use margin to increase your positions in high-yield stocks, and couple with an option collar (not sure if that's the right term) to limit downside. After the cost of money, you can turn a 14% yielder into a 20%+ yielder with limited downside risk (limited upside too, but not so worried about that).
OT: Margin Rates
I've been shopping around for a new broker. Anyone know which one has the lowest margin rates?
I'm not tremendously worried about transaction costs as my yield portfolio is relatively stable, and I don't need any fancy stuff like the crap that passes for research. Planning to keep my biotechs at E-Trade.
Margin Rates
I've been shopping around for a new broker. Anyone know which one has the lowest margin rates?
I'm not tremendously worried about transaction costs as my yield portfolio is relatively stable, and I don't need any fancy stuff like the crap that passes for research.
Flashing banner ads I can understand, but those green underlined links with popup boxes step over the line of advertising into sheer annoyance.
I don't know if they're there for that purpose, but all I can say is I'd *never* buy anything from one of their advertisers.