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Adam Jones

 
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AIG, BAC, BKCC, C, DD, FCX, GM, HIG, JPM, KMI, PNC, WFC
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  • AIG Earnings Preview: Messy Report Ahead [View article]
    Rising rates will result in write-downs of assets (as they have to be marked-to-market) so that will result in non-cash charges they will take when they report. On the positive side, it will help the company earn more on their investment book (invested premiums) and result in higher insurance rates they can charge.

    Overall, it will certainly be a good thing as long as it happens in a controlled manner.
    Jul 28 06:36 PM | 2 Likes Like |Link to Comment
  • Expected Stress Test Results For Bank Of America And What They Mean For The Warrants [View article]
    I'm not sure what price the would by the warrants at and they have not announced any plans to do so. They would have to buy them the same way you and I do - so they would have to pay market prices for them.

    I do not think there is a good chance they buy warrants back. The market for these warrants is not liquid enough that the bank could buy them back in a meaningful way without having an impact on the price. They could do a tender offer for them but it would be much easier to just buy back the common stock.
    Mar 18 08:46 AM | 2 Likes Like |Link to Comment
  • Expected Stress Test Results For Bank Of America And What They Mean For The Warrants [View article]
    I think there is a chance that under an optimistic scenario, BAC could double. However, I don't want to be put into a position where I lose my entire investment if that doesn't happen. As a result, I'm sticking with the Series A warrants instead of the Series B warrants.
    Mar 17 06:40 AM | 2 Likes Like |Link to Comment
  • Bullish On GM? Unconventional Opportunities Are Out There [View article]
    Yes, commonstockwarrants.com rates the Series A warrants as fairly valued. This could be because there is a relatively low amount of time until expiration and investors could buy the January 2016 call for roughly the same amount of time premium - which has more leverage. For additional information on the warrant rating service, you'd have to contact the company directly to check what goes into the ratings.

    As for your comment about a dividend in the common stock, a dividend could spur investors to convert warrants to common stock - but that decision depends upon the dividend amount. Given that the company has not declared a divided, I didn't want to assume a dividend amount. Once a dividend is announced, I will re-evaluate the position. GM recently commented that they have no immediate plans for a dividend but many investors expect a dividend in the next year or two. http://reut.rs/1aKeUQW
    Nov 24 04:13 PM | 2 Likes Like |Link to Comment
  • Kinder Morgan: All 5 Tickers Explained [View article]
    The dividends paid to holders of KMI are taxed at the normal dividend tax rate - and should be listed on 1099-DIV tax forms. KMI is a c-corp so dividends paid from it are treated the same way a dividends from Coke, Ford, etc.
    Sep 3 09:33 AM | 2 Likes Like |Link to Comment
  • New Freeport Still Worth A Look [View article]
    I am very curious to see what the formation of copper ETFs will do to pricing. One negative to the formation of copper ETFs could be that investors will leave the copper miners and get exposure to copper from the ETF instead.
    Jan 6 12:13 PM | 2 Likes Like |Link to Comment
  • AIG Earnings Preview: Messy Report Ahead [View article]
    I think the quarter will be messy because there are going to be quite a few extraneous charges and credits on the income statement and the balance sheet will change meaningfully. As a result, it will take some work to back out all of that and get a good understanding of how the continuing business performed during the period.

    So messy terms of a lot of stuff happening that will obscure the real business.
    Jul 28 02:25 PM | 1 Like Like |Link to Comment
  • Expected Stress Test Results For Bank Of America And What They Mean For The Warrants [View article]
    That is a good point about potential tax advantages. With this structure of having dividend payments reduce the strike price, they essentially produce additional capital gains upon a sale or expiration. I hadn't thought of that.

    I am interested to see if BAC actually buys back any of the warrants.
    Mar 27 07:18 AM | 1 Like Like |Link to Comment
  • Expected Stress Test Results For Bank Of America And What They Mean For The Warrants [View article]
    The numbers you mention are possible within the next 5 years or so especially if bond yields finally move upwards. If they do come to fruition, then the warrant adjustments will be much more meaningful than what I calculate above. Also given that outlook, the Series B warrants probably present a pretty compelling value.

    The problem is that to calculate the adjustments to the warrants, you need to determine the dividends they would pay out as well as the share price at the time. With that many variables to adjust (or guess at), you can pretty much pick a result and make the inputs work out. I tried to come up with a reasonable forecast for future dividends and share price - but I didn't have enough confidence in the numbers to publish them because relatively small changes in years three through five had big impacts on the ending numbers.
    Mar 18 07:09 AM | 1 Like Like |Link to Comment
  • Expected Stress Test Results For Bank Of America And What They Mean For The Warrants [View article]
    Yes, you are exactly right about the number of shares at expiration. Good clarification.

    I've been keeping an eye on the KMI warrants for a while but I want to have a good understanding of the issues that have brought the stock down before joining the conversation on it. That's a pretty emotional stock at this point.
    Mar 17 07:30 AM | 1 Like Like |Link to Comment
  • The Forgotten Benefits Of Warrants Explained [View article]
    Lists of warrants that trade are not easy to come by. There are paid services such as commonstockwarrants.com which list them. Also, I've written about a number of them as have other authors.

    For the prospectus, I just got to the SEC site and look for Form 424B5's filed around the time the warrants started trading.

    Neither of these two are easy processes - which explains why very few people invest in warrants.
    Mar 17 06:37 AM | 1 Like Like |Link to Comment
  • Bullish On GM? Unconventional Opportunities Are Out There [View article]
    I would probably change over from the Series B warrants I've got to common stock when the stock price gets closer to what I think is a fair value. It is dangerous for me to say this with the company reporting earnings in a few hours . . . but based on previous quarters and guidance going forward, I'd consider switching somewhere in the mid-40's. At that point, it would have a closer to market yield and PE ratio. With that said, based on what the company has to say today, that could change.

    Once it reaches that level, I would probably take the conservative route and reduce leverage.

    I do like the way you look at when to convert to the stock though. That's a good approach.
    Feb 6 06:40 AM | 1 Like Like |Link to Comment
  • The Forgotten Benefits Of Warrants Explained [View article]
    Both options and warrants have expiration dates - which are the end of the instrument's life. Here's an article on what happens at expiration: http://bit.ly/1cN6mGe

    In general, if an option or warrant is in-the-money near expiration, it is less hassle for me to just sell the instrument than hold it through expiration. If I still want exposure to the stock, I can then either buy another option/warrant or buy the stock.

    Does that answer your question?
    Dec 23 09:32 AM | 1 Like Like |Link to Comment
  • Bullish On GM? Unconventional Opportunities Are Out There [View article]
    The minimum price at which the warrant return is higher than the stock return was calculated by assuming there is no time premium value in the warrants. This will be the case at expiration. Given that the Series A and Series B warrants currently have a minimal amount of time premium in them, the warrant movements will be highly correlated with the common stock movements. The Series C warrants do move more independently of the stock price.

    The price is the point when the leverage of the warrant overcomes the premium of the warrant. For example, with the Series A warrant, at $39.21, both instruments (stock and warrant) return 4%. Above that level, the leverage of the warrants results in higher returns. Below that level, the common stock has higher returns because of the extra time premium paid in the warrant.

    You are right that there is no dividend adjustment mechanism in the warrants. If GM initiates a common stock dividend though, the total return for GM common stock will be higher at any future price than it is now. As a result, the price at which the return is higher in the warrants will increase.

    I disagree that you can't view these warrants as options. They are extremely similar. With both warrants and options, there is time premium value in the instruments even if they are out-of-the-money. If either the warrants or options reach expiration (or meaningfully close to it) and the stock is not above the strike price, the value will drop to $0.

    Does that answer your question?
    Nov 24 07:12 AM | 1 Like Like |Link to Comment
  • The Forgotten Benefits Of Warrants Explained [View article]
    I have been having a hard time comparing the future returns of HIG and AIG warrants. HIG warrants are very deep in-the-money while AIG warrants are basically at-the-money - but with a lot more premium built into the price. I think that once AIG gets close to book value I will look harder at switching to HIG.
    You are right, the longer duration till expiration is a big benefit to the AIG warrants.
    On the downside, the AIG warrants have a much higher dividend adjustment threshold.
    Sep 12 12:11 PM | 1 Like Like |Link to Comment
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