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  • BDCs And 'The One Thing' [View article]
    AFAHM - (1) TCPC has a annualized dividend of (4 times 36) $1.44 and a 2015 NII projection of $1.56. A realistic dividend/NII ratio should be (144/156) 92.31%. Compared to other BDCs - that is a decent ratio. Compared to other stocks - the ratio is terrible. I have no context in which to assess the Schwab number. On the surface it looks like a phony baloney number.

    (2) The surprise was on NII - not NAV.

    (3) TCPC, like the majority of BDCs, fails to report NII with adequate transparency. You do not learn much from a raw NII number - I am way out of the consensus on that opinion (and that issue should not fall in the category of 'opinions' - I am right and the market is wrong). One needs to know how much OID discounts and accelerated amortizations went into the significantly higher NII. Were there other one time fees?

    Going by lots of history - there were big 'one time events' that moved the NII. Odds are the run rate NII has not moved.

    Right after posting the 11:30 AM update - TCPC jumped to a 3% gain for the day. It is back to a 2.68% gain as I write this.

    The correct decision for the intelligent investor is to do nothing. The correct action is to think "shame on TCPC for pre-releasing a number with zero context concerning one time events that contributed to the surprise". While that IMHO is the correct reaction, it is not what I anticipated as the market's reaction. I expected a 4% jump today - and that jump to be mostly erased as the rest of the month played out.
    Jul 28, 2015. 01:30 PM | Likes Like |Link to Comment
  • BDCs And 'The One Thing' [View article]
    More murky evidence NAV is 'the one thing' - TCPC's 7-27 announcement:

    TCP Capital Corp.(TCPC) will report its financial results for the second quarter ended June 30, 2015 on Thursday, August 6, 2015, prior to the opening of the financial markets. After yesterday's market close TCPC reported two preliminary numbers. NAV was just OK. The NII was a good number. TPCP's total return has been slightly less than sector average year to date - and the fall in the 2015 NII projections has been slightly more. It is a reasonable expectation that this pre-release will improve the NII projection. If NII/share is important, TCPC's price should jump.

    Q1-15 NAV was $15.03. "As of the date of this press release, we estimate that our net asset value per share as of June 30, 2015 was between $15.09 and $15.11." The Q2-14 NAV was $15.31 - so TCPC will still have a falling LTM NAV change - which is not good news. At least the NAV improved over Q1-15.

    The current consensus NII projection for Q2-15 is $0.39/share. "As of the date of this press release, we currently expect that our adjusted net investment income per share after preferred dividends and incentive compensation was between $0.43 and $0.45 for the three months ended June 30, 2015." This is a BIG earnings surprise.

    On the other hand, given the (44/39) 12.8% size of the NII jump, the NAV improvement of (1510/1503) 0.46% looks out of line at first glance. At second glance, maybe not. With a dividend of $0.36, the NII of $0.44 would result in a eight cent NAV improvement. And that is the projection for the NAV improvement.

    So did the market cheer the large NII surprise - or yawn due to anemic NAV growth? As of 11 AM market time, TCPC is up 1.30% (with that change moving with each transaction) while the BDCS is up a relatively steady 0.72%. Given the size of the good news on NII, the reaction looks more like a yawn than a cheer.

    But before I declare that this is strong evidence of the superior importance of NAV - I need to remind myself that the market can't 'size' anything well. It is easy for me (and I hope you, too) to do the 44/39 math to see the NII is a big surprise. The market may need to wait for an 'analyst' to report the size.

    My first reaction to 'all this' was to believe it supported the belief that NAV is the main thing. My second reaction, maybe it does not. Maybe it is evidence that the market is so dumb it has to wait for an analyst to interpret the news.
    Jul 28, 2015. 11:27 AM | Likes Like |Link to Comment
  • MLPs: Finding Small Advantages In A Hostile Market [View article]
    nperpa2ity - Anyone posting a query on ZMLP to an article done by someone who preaches "invest with CAGR awareness" must be trying to be ironic. Please take that kind of humor elsewhere.
    Jul 25, 2015. 11:32 AM | Likes Like |Link to Comment
  • MLPs: Finding Small Advantages In A Hostile Market [View article]
    I posted updated midstream and ETN/ETF stats for 7-24-15 on my Seeking Alpha InstaBlog this morning. Allow me to share the intro to those stats here:

    (1) Many MLP investments purchased on margin are probably getting margin calls - and that is causing some forced selling. It is a safe bet that a hedge fund or two has done that. (2) Any MLP investment purchased by someone who does not understand the metrics of MLPs is being sold (or a sale is being contemplated) simply because the prices are down - big. It is a safe bet that most retail MLP investors fall into that grouping. (3) Almost every MLP has a commodity sensitive component in their earnings. MLPs are about to report earnings. It is a safe bet there will be some unpleasant reports. That adds up to a lot of headwinds for the sector. (4) When EBITDAs fall, debt covenants can be triggered. That can cause distribution cuts and/or needed secondary offerings to raise capital. These kind of secondary offerings are dilutive to DCF per unit. So falling earnings can cause further falling earnings per unit. And that is the only 'headwind' that is not being talked about (with the midstreams).

    Summation: The headwinds appear (IMHO) to be significantly stronger than the bounce back to logical valuations.
    Jul 25, 2015. 10:25 AM | 1 Like Like |Link to Comment
  • Can AmerisourceBergen Corporation Get A Dead Cat Bounce? [View article]
    Posting the Friday results:

    Health Care stocks as measured by the XLV EFT were down 2.50% for the day. The big event - or market moving event - of the day was a change in the forward projections made by genetics company Biogen Idec (BIIB). BIBB fell 22.08%. (Which is a reminder that many of the genetic sector stocks are 'one trick ponies' vulnerable to projection changes based on the performance of a single drug.) Other genetics sector stocks fell in sympathy - which is a reminder of what happened to CAH and MCK on Thursday. Amgen (AMGN) fell 3.36%. Celgene Corporation (CELG) fell 2.96%. Gilead Sciences (GILD) fell 4.11%.

    The S&P 500 (SPY) fell 1.04% - and the fall in large cap pharma was much more in line with the SPY and not the XLV. Eli Lilly (LLY) fell 2.35%; Merck (MRK) fell 1.14%; and Pfizer (PFE) fell 1.50%.

    On a day as bad as this, I would call any health care stock having a daily price change of 'less than a 1.50% fall' as having a relatively good day. AmerisourceBergen (ABC) fell 1.26%. Cardinal Health (CAH) fell 1.16%. McKesson (MCK) fell 1.23%. I would call those 'relative' bounces. As projected, CAH fell the least. The difference between the three was so minor to be meaningless. It was a noisy, news driven, low trading volume, summer Friday. Given those obstacles, I am a bit surprised that my 'no bounce' projection was close to accurate. I will give myself a "B" for the projection; a "B+" for the explanation; and a (already mentioned and regretted) "D" for the article headline.
    Jul 24, 2015. 07:25 PM | Likes Like |Link to Comment
  • Can AmerisourceBergen Corporation Get A Dead Cat Bounce? [View article]
    Isuavecito - I own shares in both. I wanted 'the best foreign stock' in health care. NVO beat BAYRY, GLK, NVS, RHBBY and SNY at the time I was making my choices in January of 2014 - and it is still the case today. And diabetics should be a growth segment. VTR has a fair amount (mid 30s weighting) in 'RIDE-A' properties - as opposed to being a pure triple-net. And that should result in better FFO (and NOI) growth.
    Jul 24, 2015. 12:49 PM | Likes Like |Link to Comment
  • Can AmerisourceBergen Corporation Get A Dead Cat Bounce? [View article]
    Hungry4dvdnds - Thanks for your comments. ABC is the star of my health care portfolio. And it is a company that was not on my radar up to two years ago. When I thought health care, I thought of BMY, JNJ, MRK and PFE.

    I used the skills (and the javascripts) I developed for MLPs. I used the lessons, like 'have a big coverage universe' to get lots of things on your radar. I used 'historical earnings projection accuracy' and credit ratings to set logical Required Rates of Return. I used the same computer code I used to set my MLP CAGRs to set my health care dividend CAGRs.

    I am still surprised that some of the best growth stocks in health care are in distribution (ABC, CAH and MKC). I am not surprised that the stocks with the best earnings visibility are in distribution. My key objective in buying ABC was to de-risk my health care portfolio. (Many other stocks in the sector are just one competitor's innovation away from potential problems.) High growth plus high visibility is a winning combination. That generates the expectation that I (and you) will be happy with ABC for many years.

    It is now noon on Wall Street. ABC is down 1.24% on a day the XLV is down 1.64%. CAH is down 0.74%. I'm going to call that a 'relative' bounce for CAH - and applaud the market for temporarily being logical.
    Jul 24, 2015. 12:09 PM | Likes Like |Link to Comment
  • Can AmerisourceBergen Corporation Get A Dead Cat Bounce? [View article]
    sroniv - I submitted an edit that says "I am a very diversified investor with 1% of my net worth invested in each of the 65 individual stock investments I hold."

    Because I write under a pseudonym and very few 'real world' folks know I write financial fiction for Seeking Alpha, I am transparent to the extreme. I periodically post the exact dollar amounts I have invested in all individual stocks on my Seeking Alpha InstaBlog. I redact the dollar amounts three days after the update - leaving the list of names and my portfolio 'yield + dividend CAGR'. My last update was posted on 3-27-15. There has been only one investment change since that update.
    Jul 24, 2015. 08:22 AM | Likes Like |Link to Comment
  • Can AmerisourceBergen Corporation Get A Dead Cat Bounce? [View article]
    Some times, a writer gets too cute with a headline. This was the case with this article. From Wikipedia: "In finance, a dead cat bounce is a small, brief recovery in the price of a declining stock. Derived from the idea that "even a dead cat will bounce if it falls from a great height", the phrase, which originated on Wall Street, is also popularly applied to any case where a subject experiences a brief resurgence during or following a severe decline."

    A 4% decline that ABC had yesterday was not 'severe'. Given that ABC is beating the health care sector average year to date, I would not call it a 'declining stock'.
    Jul 24, 2015. 06:19 AM | 2 Likes Like |Link to Comment
  • MLPs: Finding Small Advantages In A Hostile Market [View article]
    Alkotwo - My DCF projections are a consensus from 11 brokerages. MPLX has its Q2-15 earnings release conference call on 7-30-15. The analyst will produce their updated projections - and I will have new data. I want to see if the 2017 and 2018 DCF projections will fall due to the dilution with MWE. I want to see if the five year CAGR projection will fall. I am at least ten days from getting all that information.

    Concerning BDCs - I have written two recent articles on that topic. Why be content with the mention of a few when you can have access to data on 39?
    Jul 23, 2015. 10:08 AM | Likes Like |Link to Comment
  • MLPs: Finding Small Advantages In A Hostile Market [View article]
    9403281 asked about investing in MLPs via ETNs and ETFs

    The answer is a big loud NOOOO! All the indexes provide 'average' performance -- and average performance is poor performance - in that it trails the S&P 500 (as tracked by SPY) by a mile. I will post my ETN stats for 7-10-15 to my Seeking Alpha Instablog so that you can see the data (which I just did).

    If you do not have access to multiple brokerage analysts distribution CAGR projections - then you will probably do poorly with MLPs. If you depend on a broker to guide you - then you will probably do poorly. If you do not invest with "CAGR projection awareness", then you will under perform. This is a poor sector to do 'on the job training' in portfolio component selection. Come to think of it, that statement is probably true in all the sectors I follow.
    Jul 22, 2015. 03:48 PM | 3 Likes Like |Link to Comment
  • MLPs: Finding Small Advantages In A Hostile Market [View article]
    Tips2 asked if now is the time to add PAA shares (units)?

    I do an annual tune-up on my portfolio - and that is it for 90% of my trading. I really do not try to time the market. My metrics are of better use in choosing what to buy - not when to buy. But I do produce some 'when' numbers - and this is a good time to buy.

    That said, MLPs are moving with the WTI. While the WTI is at a low - it could easily go lower. So if a were making a 'when' decision, I would buy one third of my expected total purchase now - one third in two months - one third at the end of the year.

    I have a five year distribution CAGR projection for PAA at 6.30%. That is below the LTM trend. It is also in line the analysts average projection. The current formula I am using calibrates the 'price implied CAGR', based on the price/DCF ratio, at 3.5% (meaning it is under valued - as are all MLPs). The "RRR - yield" formula puts the price implied CAGR at 3.4%. I have a history of making money when the 'price implied CAGR' is well below the projected CAGR. And PAA fits that description.

    As long as the WTI is low, MLPs lack a catalyst for a bounce back. I think the distribution cuts made by the E&Ps paints all MLPs in an unflattering color. In 'fashion-like' terms, MLPs merit being on the clearance rack. And they will stay there until all the weak hands sell. It is anyone's guess when that will be - and at what price it will take to sell those 'weak hand' units. That means it is a bad time for impatient investors to be buying. That is bad news IMHO - because it may take both patient and impatient to be buying before there is a decent recovery.
    Jul 22, 2015. 12:11 PM | 5 Likes Like |Link to Comment
  • MLPs: Finding Small Advantages In A Hostile Market [View article]
    Uncle Ted wrote: "Replacing the income is a challenge."

    For that challenge, BDCs (Business Development Companies) can be a solution IF taken in small and well chosen doses. You have a few months before income reduction is an issue. The cash component of the conversion to MLPX will help. You have time to study up. I have produced a lot of content to study on the BDC option. And an upgrade in CAGR that comes with owning MLPX will mean you can afford to have more zero CAGR investments. You even have extra money from the $3.37 cash component that could fund a any costs of a IRA to Roth conversion - and you can purchase the BDCs inside the Roth (an idea for those immediately needing income). The only thing better than a kinda/sorta safe-ish 9% yield is a 9% tax free yield.

    I think I have been outside the consensus in pushing the idea of owning some of your tax deferred MLPs inside an IRA or Roth (an idea the experts hate) because I like the freedom of not being 'married for life' to any long term MLP selection. In hindsight, I wish I had done even more of this. That being said - I am not a tax expert. The wisdom of doing this could vary due to ones tax situation. And I could be wrong.
    Jul 21, 2015. 11:37 PM | 1 Like Like |Link to Comment
  • MLPs: Finding Small Advantages In A Hostile Market [View article]
    Each MWE gets 1.09 MPLX unit + 3.37 in cash.
    MPLX pays $0.44/unit/quarter or $1.76/unit/year
    $1.76 times 1.09 = $1.9184
    Current MWE annual distribution is $3.68
    Current MWE annual distribution growth = (92/88) 4.55%
    Current MPLX annual distribution growth = (44.0/34.3) 28.28%
    Current MWE yield = (368/6486) 5.67%
    Pre-merger - MWE hypothetical yield (368/5975) = 6.16%
    Current MLPX yield = (176/5438) 3.24%

    Yield + (LTM) CAGR - a backward looking view
    MWE current 5.67 + 4.55 = 10.22
    MWE hypothetical 6.16 + 4.55 = 10.71
    MLPX 3.24 + 28.28 = 31.52

    Comparing MLPX to MWE (hypothetical) - calculating a hypothetical break-even CAGR improvement:
    Yield drops (6.16 - 3.24) 2.92 basis points
    So a switch that improves CAGR 300 bps would do if the CAGR improvement exists into perpetuity.

    A more forward looking view:
    Analyst projections for MWE five year forward CAGR ranged from 5.0% to 9.3% - my conservative projection is 6.0%. The average analyst number was probably 7%.
    Analyst projections for MLPX five year forward CAGR ranged from 21.8% to 26.9%. Let skip using the big hair-cut I do when making conservative CAGRs. I will low ball and use 22% for the average analyst number.
    CAGR improvement = (22 - 7) 1500 bps. There 'here and now' improvement in CAGR is huge.

    The problem with the above numbers: (1) So much of the value of MLPX is based on future growth - and the numbers get substantially less visible on MLPX's distribution growth beyond the five year projection. The 22% distribution growth does not continue into perpetuity. My yield + CAGR comparison 'view' is way too simple due to its non-perpetuity nature. (2) MWE unit holders will have to live with a 50% cut in income. That is huge. For many investors, a 50% cut in the distribution is not worth any amount of CAGR improvement.

    Concerning your question on SE - I lack access to enough DCF projections to include SE in my GP coverage universe. I do not like commenting about stocks where I lack numbers.
    Jul 21, 2015. 05:20 PM | 1 Like Like |Link to Comment
  • MLPs: Finding Small Advantages In A Hostile Market [View article]
    Scooter-Pop - I am mostly retired and living off of distributions and dividends. If I were pre-retirement and tasked with building a nest egg, I could be enduring this downturn differently. That would be due to the nest egg shrinking. But with all but one MLP that I own (the lone E&P that began with a low weighting), my income is growing.
    I mainly view my portfolio performance as seen by my checking account (I value steady and increasing income) rather as being viewed by my heirs (who would prefer to see a rising net worth). I am not 'sweating over this decline' because my checking account is not feeling any decline.
    And even for younger investors building a nest egg - it can be just as important that your egg is growing its income production compared to the importance of building its size.
    For those who were building their next egg, the decade of the 2000's was a 'lost decade'. For many investors, the nest egg did not grow. And to follow up that loss with investments in MLPs that are not going anywhere in this decade (in terms of unit price appreciation), I can see how the pain and frustration could be growing. But if you are frustrated, then you are viewing retirement by the size of the egg. I would argue that such is not the optimum view.
    And yes - I know this is an out of the consensus opinion. I am not going to stay in business if my business was selling this opinion. But that is not my business. My business is maintaining a growing, safe and steady retirement income. MLPs are still doing just that.
    Jul 21, 2015. 08:52 AM | 9 Likes Like |Link to Comment
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