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Brian Gorban
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Brian Gorban has been an active investor for almost twenty years. Mr. Gorban is a graduate from the University of California, Berkeley with a degree in Economics and minor in Business Administration from the Haas School of Business. Upon his graduation, he worked as an investment banker in the... More
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  • Are these the best Places to get higher Returns in this very low rate environment?

    As I'm sure you are aware, Federal Reserve Chairman Ben Bernanke is absolutely adamant about going into a deflationary spiral and backs up his word by saying that rates will stay at the ultra-low 0-.25% rate for at least another two years. That's fantastic for borrowers, but absolutely hammers the savers and people reliant on a fixed income using CD's, savings accounts, and other secure forms of fixed savings. Therefore, I think it's wise and actually necessary to search for a higher yield as the real return will eat into the prinicipal rather quickly as fuel, food, tuition for the kids and grandchildren, etc. grow at a far faster rate than the approximate 1% returns these common forms of savings give.  We can look for high yielding stocks such as one's I mentioned here or look to get some additional income as we hold our stocks which I described here. Moreover, lets see if there are any Exchange-traded Funds (ETF's) and dividend paying stocks to consider:

    1. I currently own the SPDR Barclays Capital High Yield bond ETF (JNK) and what really is enticing right away is its 8%+ dividend yield paid monthly. However, there is of course risk as the fund normally invests at least 80% of its fund in non-investment grade bonds, but I believe a person is getting paid very well for that risk when the spread is 600+ basis points above the 10-year treasury bond. Moreover, the underlying companies that sell these bonds are having right near record low defaults, even after the bleak economic times of the last four years, and the fund is well-diversified as demonstrated by their ten largest holdings only compromising just over 20% of the portfolio. The iShares High Yield Corporate Bond Index (HYG) has a very similar make-up as its yield is just over 8%+ paid monthly as well and well-diversified as well with their ten largest holdings only compromising just over 10% of the portfolio. I feel confident recommending them both to the long-term dividend seeker right here at these current price levels.

    2. The iShare Select Dividend Index (DVY) is for the more conservative investor, but still gives a considerable 3.8% dividend yield paid quarterly. The fund simply looks to mimic the Dow Jones U.S. Select Dividend Index by having at least 90% of its assets in securities comprising that index, such as Chevron (CVX) and McDonald's (MCD), and is well-diversified as shown by their top 10 holdings compromising less than 25% of the total portfolio. I think this is a solid buy at these leves and if one is interested in more specific names, they can be found here.

    3. Some energy limited partnerships have caught my eye as their dividends look very generous and more importantly secure. Martin Midstream Partners (MMLP) currently is apprxoimately 9% and has been not only maintaining their dividend since going public in 2003, but raising it. Linn Energy (LINE), named after it's very competent CEO Michael Linn)has a fantastic management team who hedged almost all of their natural gas prices a few years back and therefore look to have a very secure 7.4% dividend going forward for the next few years. Their dividend has not only been maintained, but raised as well every year since going public in 2006. I think it's a solid buy here. At the beginning of 2011, the Canadian independent oil and gas producer, Enerplus (ERF), became a corporation and as such has different tax ramifications that, as always, should be consulted with your tax professional. Nonetheless, this monthly dividend payer has a yield just under 8% and while it has not raised it as consistently as the previous two mentioned, still looks secure with their strong free cash flow. This is a good buy at this price level. Magellan Midstream (MMP) has the same, great consistent history of raising dividends since going public in 2001 and currently sports a 5% quarterly dividend. Even though it’s trading right near its highs, it still offers some great secure income and trading at reasonable valuations. Finally, I would be remiss by leaving the biggest one of them all, which also has great value, Enterprise Products Partners (EPD). Since going public in 1998, has not only kept, but raised its dividend consistently and now sports a yield just under 5.5%. This is a buy here at these levels.



    Disclosure: I am long JNK.
    Oct 18 4:24 PM | Link | Comment!
  • Market strength to continue next week?
    Strong close into the weekend.  Any thoughts if people think the cotinued Monday strength will continue as there is hope yet again that the EU situation will be cleared up?
    Oct 14 6:22 PM | Link | Comment!
  • Heavy Option Activity In These 7 stocks
    One of the best bullish indicators I've come across in my close to 15 years of investing is analyzing option activity as I recently wrote about here. The simplest reason is that these are some of the most leveraged derivatives which means that if somebody has a strong conviction of a stock going higher, buying calls allows him or her to maximize investment dollars. Moreover, selling puts is another bullish indicator as an investor is willing to pick up shares at that strike price since he sees value at that level. Let's analyze some stocks that have been experiencing positive option activity lately:

    1)  Ziopharm Oncology (NASDAQ:ZIOP) had option volume surge almost 2,500 percent above average.  Looks like an investor sold the Jan 5 calls and bought the O$5 calls, apparently rolling his either short or covered call position and heavy Oct $4 puts buying signifying a bearish position.  With the company losing almost $75 million in net income over the last year, trading at over 3.5x price/book (p/b), and a negative return on equity in excess of 100%, I can see why one would be bearish on the stock.  However, the company actually has a clean balance sheet with no debt and almost $2/share in net cash. However, this is a still a very speculative biotechnology name and if somebody is interested in one of those, I'd go with Opko Health as I recently discussed here.

    2)  CenterPoint Energy (NYSE:CNP) had option volume explode over 2,000 percent above average.   The Oct $20 calls and Nov $20 and $22.50 calls traded heavily indicating a bullish trade in these slightly out of the money calls. The company looks fairly priced at 17x price/earnings (p/e), 1x price/sales (p/s), and respectable 4% dividend yield.  I think this is a solid dividend holding for the long-term or you can find even more here.

    3)  Realty Income had option volume explode 1,654 percent above average.  There was heavy volume specifically in the 
    Dec 2011 $30 puts and the Dec 2011 $35 calls.  Looks like there were investors with opposing views of this REIT with one side buying these out of the money calls aggressively while the others buying out of the puts aggressively.  The company doesn't look particularly cheap trading at a 32x p/e, over 11x p/s, and almost 2.5x p/b.  However, it does sport a consistent 5.1% dividend yield with strong free cash flow, so I'd neither be short or long this stock at this price level.

    4)  Focus Media (NASDAQ:FMCN) had option volume increase 1,164 percent above average.  The stock got slammed today and there was bearish option activity with investors buying predominately the Oct 2011 $20 puts and selling the Oct 2011 $24 calls.  This stock doesn't seem too cheap even with today's fall as it trades over 3x p/tangible book value and 5x p/s. However, with analyst's expecting this company to grow approximately 20% over the next year, a 13x p/e is reasonably cheap and the company has no debt and almost $4.5/share in net cash.  I'd rate this stock a hold here at $20/share and wait to buy for the long-term if it falls closer to the mid-teens.

    5)  Family Dollar (NYSE:FDO) had Option volume rise almost 800 percent above average.  There was particularly strong volume in the Oct 2011 $49 calls and Nov 2011 $49 puts.  The stock fell today largely due to Trian Partners ending their buyout attempt after receiving a board seat.  The stock doesn't look particularly cheap at 17x p/e, almost 5.5x p/b, and mediocre 1.4% dividend yield.  However it does trade under .8x p/s and showing strong margins as buyers look to shop here more in these tough economic times.  I think its a hold at this price.

    6)  Coventry Health (CVH) had option volume skyrocket almost 750 percent above average.  The managed healthcare company had heavy Oct 2011 $29 and $30 put buying along with heavy volume all the way with the Aug 2012 $35 calls and puts. The stock looks cheap trading at 6.5x p/e, under .4x p/s and just under 1x p/b.  I don't see a particular reason to be short this stock as the option activity suggests.

    7)  Interpublic Group (NYSE:IPG) had option volume increase 737 percent above average.  There was strong volume particularly with the Oct, Nov 2011 and Jan 2012 $6 puts, along with the Apr 2012 $8 calls and puts.  The stock looks reasonably priced at 13x p/e, .5x p/s and respectable 3% dividend yield.  I don't see a reason to follow the options and go so bearish buying deep out of the money puts. I think this stock is a hold at these depressed levels.

















    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Additional disclosure: I provide my fundamental analysis and thoughts so not looking for a trade, but just using these options trade as a screening tool.
    Sep 29 5:11 PM | Link | Comment!
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