Seeking Alpha

Brendan O'Boyle

View as an RSS Feed
View Brendan O'Boyle's Comments BY TICKER:
Latest  |  Highest rated
  • Tetraphase Pharmaceuticals: A Compelling High-Risk / High-Reward Biotech Investment [View article]
    Most readers aren't as familiar with the subject and generally I've found pieces on small-caps don't get tons of comments. Hopefully it will encourage some readers to think outside the box regardless of what they write.

    Thanks for following!
    Aug 6 02:00 AM | Likes Like |Link to Comment
  • Aflac beats EPS estimates [View news story]
    Yes, but TRV did miss on revenue as well. The market shouldn't be surprised, rising interest rates are wonderful news for insurers for the long term.
    Jul 30 08:17 PM | Likes Like |Link to Comment
  • What Is Wrong With This Picture? Maybe Investors Should Switch Canadian Pacific For CSX [View article]
    CNI beats them both.
    Jul 19 06:56 AM | 4 Likes Like |Link to Comment
  • IBM And The Media Attempt To Obscure Its Declining Business Results [View article]
    Why are we discussing T-Note yields that are dead, gone and will never come again save for huge pain in the fixed income market?

    Let's get it behind us, stocks were not the great buy of the last 30 years, bonds were.

    But we aren't living 30 years ago...
    Jul 18 09:23 PM | 2 Likes Like |Link to Comment
  • PIMCO's Dynamic Income Fund Is A Buy [View article]
    PDI is still my favorite, PCN is also good but a bit more richly valued. Under 16 bucks I think it's a good buy as well though. I haven't had time to look over RCS or PTY.

    The special divvy last year for PDI was 59 cents and I don't see why there wouldn't be one this year as well. I know PCN almost always pays a pretty good extra divvy at the end of the year.

    After thinking about it for a while, I doubled my position in PDI at 27.50. After my first buy at 30.50 and with several months of dividends, my cost basis is now slightly under 29. After one month I may sell my original shares and take the 27.50 cost basis or maybe I'll keep the more overweight position than I was originally intending.

    I believe that Bernanke's comments last week mean that it won't take too long for the closed end sell off to be over. There are no interest rate hikes coming, in my opinion this means that the bearishness on bond funds is way overdone.
    Jul 14 07:43 PM | Likes Like |Link to Comment
  • WTI crude (USO +1.9%) takes out $103 per barrel for the first time in more than a year as "Rejection Friday" in Egypt turns increasingly violent - a health ministry official claims 10 are dead and 210 wounded. Supporters of ousted President Morsi continue to call his removal invalid and vow continued protests until he is reinstalled. Whatever may be happening, EGPT is up 17.5% in the last 5 sessions, retaking all the ground it lost in June. [View news story]
    Apparently riots are bullish.
    Jul 5 03:44 PM | Likes Like |Link to Comment
  • Big Obstacles Face Retail MLP Investors [View article]
    Yes, 8% is the growth rate of earnings 2% is the dividend (although the dividend growth will most likely approximate earnings growth).

    I tend to agree with you about GDP growth and view MLPs as very desirable investments in a low-growth environment.
    Jun 23 12:45 PM | 1 Like Like |Link to Comment
  • Big Obstacles Face Retail MLP Investors [View article]
    This is simply a rule of thumb that says that the total return from an investment is the dividend yield plus the growth rate.

    Presumably if you buy a stock for $100 with an 8% growth rate plus a 2% dividend then one year later you have a stock worth $108 and $2 in dividends that you have received.

    Then the next year you repeat (except now the dividend is $2.16 and 8% growth from $110 with dividends reinvested is $8.80), the issue is that you are counting on the market to fairly price in the 8% growth rate, which may or may not be the case over shorter periods of time (or even over fairly long periods of time).

    This is part of the reason that MLPs are quite desirable within a reasonably well diversified portfolio (particularly if you need to use the investment income as you can do so without ever selling a share). KMP for example pays a 6.5% yield, maybe you only get 5% growth, but you can count on the dividend because it is paid in cash. If for a few years the market doesn't fairly price in the growth at least you get half of the total return as cash.
    Jun 23 11:17 AM | 5 Likes Like |Link to Comment
  • Is The Recent Sell-Off In Closed-End Funds A Buying Opportunity? [View article]
    Sure the NAV could go lower, but if it's down 3% on a 100 basis point rise in the 10 year rate, I doubt we'll see more than 5% downside.

    That uncertainty is why my range is 5-15%. Best case, everything is good PDI goes back to 34, worst case NAV goes down another 5% but the market price will come up to reach the NAV eventually. Getting paid 7.5% per year until that happens is a pretty good deal.
    Jun 21 07:30 PM | 1 Like Like |Link to Comment
  • Is The Recent Sell-Off In Closed-End Funds A Buying Opportunity? [View article]
    I recommended PDI at $30.25, at present the price it is off by $1.25 but one would have collected 35 cents in distributions in the mean time.

    Hardly a disaster during a time period in which CEFs have been smashed.

    There are only 3 things that an investor in PDI needs to know:

    1. Management has done a good job of controlling losses, NAV has only declined from 32.20 to 31.10 over a time when the 10 year has risen nearly 100 basis pts. Even during a much larger rise in rates it is hard to see the NAV declining to less than the current market price.

    2. PDI will continue to pay distributions - 7.5% at the present market price.

    3. At some point in the future cooler heads will prevail and PDI will trade for at least parity with its NAV (currently a 10% discount).

    Knowing these 3 things, PDI is priced to yield double digit returns in the next year. You will get 7.5% in distributions, plus 5-15% as the fund reverts to its NAV.

    I don't think buying PDI for $33 was a bad decision, it's just bad luck that the fund went from a 3% premium to a 10% discount very suddenly. All that means is a current buyer is in much better shape.
    Jun 21 03:14 PM | 2 Likes Like |Link to Comment
  • Is The Recent Sell-Off In Closed-End Funds A Buying Opportunity? [View article]
    In the time frame you mention the 10 year treasury has moved up in yield from 1.61% to 2.33%, a loss of principle of over 7%. My point is that on a yield adjusted basis the NAV performance of PDI has been exceptional. I don't worry too much about the market price, in good times it will always revert to a bit more than the NAV.

    I would love to get a great yield without any risk. But I don't see how any of the funds you mentioned are less risky, all are down about the same as PDI over the last several months. It's just been a tough time for fixed income all around lately.
    Jun 19 06:35 PM | 2 Likes Like |Link to Comment
  • Is The Recent Sell-Off In Closed-End Funds A Buying Opportunity? [View article]
    The leverage for most funds is ~20-30%. So if the overnight rate went from 0.25% to 3% it's a pretty modest difference paying 2.75% more on 30% of the fund - this would contribute 0.8% in higher costs for the leverage. The fund manager could also draw down the amount of leverage used if it was detrimental to returns.

    The main issue with higher rates is that bond prices will fall as rates rise, thus the immediate effect on the principle is what I would worry about. For PDI a 50 basis point rise in the 10 year rate knocked off 3.3% of the NAV, so a pretty significant rise in rates was already discounted when it was trading at a 10% below NAV (maybe another 3%).

    As the price has rebounded somewhat I think we are fairly discounting another 100 basis points or a ten year yielding 3%. So I think the fund is a good choice if you want current income and have some tolerance for risk.
    Jun 18 06:44 PM | Likes Like |Link to Comment
  • Is The Recent Sell-Off In Closed-End Funds A Buying Opportunity? [View article]
    Thanks for the comment, but Figure 2 is just the price performance not total return. I just wanted readers to get a sense for what the price volatility has been over the past few months.
    Jun 18 07:06 AM | Likes Like |Link to Comment
  • Is The Recent Sell-Off In Closed-End Funds A Buying Opportunity? [View article]
    I think you've had a modest correction here that is discounting roughly twice the current increase in rates.

    So if your expectations are for the rate on a ten year not to get much past 3% (which is about what I expect), CEFs aren't a horrible buy. You get paid 7.5% holding PDI, which is a nice yield while you wait.

    The key is to avoid buying the funds at a huge premium to NAV. I recommenced PDI at round $30.75 several months ago and even given the present turmoil it hasn't done too badly. If you need current income or a bit more aggressive allocation for your fixed income exposure I think this fund fits the bill. However, I agree with you that fixed income as a whole does not look too attractive at the moment, which is why I didn't try to paint the current correction as a huge buying opportunity.
    Jun 18 07:03 AM | 2 Likes Like |Link to Comment
  • Sell Zoetis Into Supply [View article]
    Interesting article, I like ZTS as a long-term investment, but am not crazy about the valuation. Here's hoping the price declines to $26, I think that would be a pretty reasonable entry point.
    Jun 14 01:03 PM | Likes Like |Link to Comment
COMMENTS STATS
991 Comments
1,215 Likes