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  • Get Skeptical About This MLP Claim [View article]
    This article was written Thursday January 23rd - and has stats in the provided spreadsheets as of 1-17-2014. I have provided spreadsheets with data as of 1-24-17 in my Seeking Alpha InstaBlog for both the midstream and the E&P sub-sectors. The E&P "DCF projection accuracy" stats - which are not provided - are even worse than those for midstream MLPs.
    Jan 27 03:32 PM | 4 Likes Like |Link to Comment
  • Simple Rules For MLP Investing [View article]
    I tracked MLP CEFs in the days prior to the existence of MLP ETNs. The CEFs tended to under perform the sector. The ETNs have tended to have sector average performance. CEF distribution growth under performed the sector by a wide margin.
    It was my perception that the CEFs with low price/NAVs were those that borrowed money to buy stocks that had the metric attributes that were worse than average. If that perception was correct, then that was not a winning recipe. I have not followed CEFs since 2010.

    In summation - due to not having recent data, I am not the guy to ask. And the old data I have - it resulted in my having a strong bias against the group. MLP CEFs are like bad BDCs (Business Development Companies) - they exist to make money for those who run then - not those who invest in them.
    Jan 20 02:30 PM | 4 Likes Like |Link to Comment
  • Why BDC Portfolio Weighted Average Yields Are Falling [View article]
    SA writers are paid a penny per page view. And page views are strongly determined by getting referrals (or link mentions) on popular tickers by Yahoo Finance. None of the BDC bonds have popular tickers. So I have the impression that anything I would write on BDC bonds would have extremely low page views.

    I do some "charity work" on tickers that I know in advance will have low page views - but not much. My last example was an article on newbie BDC WHF - written 11-19-13. It has had 497 page views. That means I will receive $4.97 for the three to five hours it took to write.

    I have the expectations that the page views on a baby bond article could be even lower than that. It is reasonable to project that other SA writers would have the same expectations.

    Scanning the "recent news" at Yahoo Finance on the 22 baby bonds that I do track, I do not see a single article on them going back to October 27th of this year. The only articles showing for those tickers are mostly for SEC filings that have a quick mention of those tickers in the filings made for the companies themselves.

    Going by the bond ratings, BDC baby bonds are relatively safe. Because they are exchange traded, they have decent liquidity for the small portfolio retail investor. I track some MLP bonds that are not exchange traded - and the liquidity for some of those is terrible.

    I use the portfolio weighted average yields as a key safety metric for the BDC bonds - along with the debt/NAV ratio. And you are fortunate to have that exact data provided in the above article.

    Commenting on your holdings - FULL is so small and has such a bad track record that holding bonds from that company would worry me more than holding bonds from other BDCs.

    I would also have too high a level of concern about long term inflation to want to hold 20 year bonds - so SLRA would be a concern.

    I would stick with the ten year bonds from Ares, Fifth Street, Medley, PennantPark and Triangle Capital. I would prefer to hold them over any junk bond fund.
    Dec 20 02:11 AM | 4 Likes Like |Link to Comment
  • Right Now Is The Wrong Time To Be Buying Healthcare REITs [View article]
    My valuation stats would steer me to buy VTR AFTER years end - if you are a patient "buy and hold" investor -- and if you want or need an income component from your portfolio -- and if you share my RRR assessment of VTR and your portfolio needs some lower risk components.

    Part of my valuation assessment is setting the required rate of return or RRR. I have found REITs to have superior FFO or earnings projection accuracy. The spreads between the high and low projections are low. Most of the REITs that I would buy have superior credit ratings. Most have low interest rates on their credit facilities. All those attributes lead to me giving relatively low RRRs to REITs when compared to other sectors.

    It is my impression that most retail investors have lots of difficulty getting their hands around the RRR setting process. Dang! From the message board polling I have done, most do not even know that "RRR setting" is a part of the due diligence process.

    There is so little written about RRR assessment that I have no idea if I am doing a superior job at it. Even those of us who have the skill and guts to publicly share our diligence -- benefit from feedback and the shared research of others.

    Sorry if the RRR tangent was not needed.
    Dec 3 07:57 PM | 4 Likes Like |Link to Comment
  • Right Now Is The Wrong Time To Be Buying BDCs [View article]
    Anonymous 2 wrote "It might be of some interest to your readers to add a column between the Target and the DIV and named it the % CHG to measure the % difference between the Most recent stock price and the estimated Target Stock price to which one could add the projected 12 month Dividend yield based on the most recent stock price to determine the projected "Total Return" "

    1 - You have an implied hypothesis -- that stocks that have the biggest differences between their current price and the current target outperform stocks with smaller differences between their current price and their target. For the sectors where I have done tests on the data - the opposite is true. Stocks with the greatest "positive" change in target outperform stocks with the smallest change in target.

    2 - For sectors where I have a strong amount of confidence in the dividend/distribution CAGR projections AND a Required Rate of Return assessment, I produce a "Yield + CAGR Total Return Expectations" spreadsheet. Those who have read my SA InstaBlog have seen such a spreadsheet for MLPs and for Health Care REITs.

    I have four problems producing such a spreadsheet for BDCs. First - too many BDCs have a zero or even negative dividend CAGR projection. I strongly believe that the CAGR projections that one can find for BDCs at Yahoo Finance are garbage. Second - I lean heavily on S&P bond ratings for the production of a RRR assessment. Too many BDCs lack such a rating. Third - I also lean on "Historical EPS projection Accuracy" as a component in my RRR assessment. A fair amount of BDCs in my coverage universe lack much of a history since their IPO. Fourth - my spreadsheets measure EPS projection accuracy since the beginning of the calendar year. A fair amount of BDCs do not have calendar and fiscal year overlap. That gives the stocks that start their calendar year before January a small advantage when measured that way. On its own - this is a small thing. But when combined with the other problem with RRR assessment (the lack of bond ratings) - it could add to a big thing.

    In sum - I have thought "deep thoughts" about your suggestion before. And there are several obstacles - that are unique to BDCs - to providing quality input one needs to generate quality output.
    Nov 30 06:09 PM | 4 Likes Like |Link to Comment
  • The REIT Obamacare Shopping List [View article]
    From the Health Care REIT Omega Healthcare Investors (OHI) conference call: We project that the Affordable Care Act will have a limited impact on our specific business. Most of our residents are already covered - either via private insurance through the Medicare program or through the Medicaid program. We think the Affordable Care Act will extend insurance to a younger crowd. That really has limited effect in terms of what happens inside skilled nursing facilities. There is one element of the Affordable Care Act that will affect our tenant partners - and that’s the cost of insurance. And it’s not terribly significant. But it will affect the expense equation for a number of our operators having to meet the mandate. Again, it's not going to really move coverage ratios in a material way - but it is something that they all have to think about.

    I only read the transcripts of four Health Care REITs this quarter. This was the only instance where the Affordable Care Act was discussed. Most Health Care REITs are also heavy in real estate that serves seniors. The above question came from a retail investor. The REITs are not talking about an impact. The analysts are not asking questions about any impact.
    Nov 18 12:16 PM | 4 Likes Like |Link to Comment
  • Why PennantPark Floating Rate Capital Is A Tough Call [View article]
    "R we there yet" - I would argue that the specific BDCs in your current portfolio are relatively safe. That is not true for the whole sector. Of course, that is not something that you specifically wrote. I am erring on the side of hyper-clarity in writing this. And this risk perception is something that is clear to those doing moderate due diligence on this sector.

    It is my impression that the high yields one finds in this sector draws too many due diligence lite investors. This sector is also heavy in credit metrics that can generate a "My Eyes Glaze Over" - or "MEGO" reaction. The closer you are to a MEGO reaction when you read a transcript or listen to a conference call - the higher your need to keep your weightings lite.

    On the other hand, the more you understand about the sector, the more you may be prone to keep your weighting lite.

    Do not let my ownership of PNNT - a BDC with an "uncovered" dividend - cause anyone to believe that BDCs with uncovered dividend are safe. An uncovered dividend is where the dividend per share is higher than the NII - or EPS projection - for the BDC. There was a one time event that crashed PNNT's NII in Q1-13 -- and that led to a lower 2013 EPS or NII projection than the current dividend. For PNNT, their run rate NII is higher than the dividend.

    I have provided the dividend/EPS numbers in one of the spreadsheets above. It is my perception that given their higher risk to do having uncovered dividends, that BDCs like BKCC, FSC, FULL, KCAP and TICC should be selling at prices that result in higher yields for those BDCs.

    Even in an economic environment that is relatively good for BDCs, there are BDCs that have cut the dividend in the last twelve months. And those BDCs tended to
    (1) have uncovered dividends;
    (2) have smaller portfolios as measured by the number of portfolio company investments;
    (3) had a higher weighting in subordinated loans.
    Oct 13 05:07 PM | 4 Likes Like |Link to Comment
  • The Self-Evident Truth About Healthcare REIT Valuations [View article]
    The "100% private pay" from MOBs is the number that HCN publishes in their earning release supplements. On one hand, I am thankful that there are two REITs giving a breakdown of that number by property type. On the other hand, I get really uncomfortable with some of those numbers.

    I probably erred in not disclosing that the "private pay" topic has the potential to be a big can of worms. Here is that data - HCN self reports that their total private pay percentage is 81.8%. Merrill Lynch reports the number as 82%. That is a match. HCP self reports that their total private pay percentage is 32%, Merrill Lynch reports that it is 68%. That is a huge difference. AVIV self-reports that their private pay percentage is 24.6%. Merrill Lynch reports that it is 25%. That is another match. So why the big discrepancy for the HCP number? I do not have an answer. LTC self reports a number - but it is not in the Merrill Lynch coverage universe.

    I attempt to be careful in not disclosing information provided by a brokerage analyst in any Seeking Alpha content that I create. I did investigate analyst reports from Merrill Lynch and three other brokerages in connection with the preparation of the above content. None of the other brokerages even touched on the private pay issue or disclosed private pay numbers.

    That scared the heck out of me. My central thesis is that property type matters because the pay source mattered. The REITs were not saying that in their conference calls. The brokerage reports were not saying that in their updates. It was only the raw numbers that was "saying that". I trusted my interpretation of what the numbers were telling me.

    I did disclose that the two central themes were "arguments" - and not "facts". I did use a lot of facts to support those arguments. But I am aware that I am parading around in a new set of "threads" - and I have some concern that someone is going to claim that Factoids is wearing no clothes.

    I hope that was an acceptable reply.
    Sep 7 12:48 PM | 4 Likes Like |Link to Comment
  • The Self-Evident Truth About Healthcare REIT Valuations [View article]
    I have provided the data for anyone to do their own comparison. VTR is heavily weighting in Senior Housing - one of the good sub-sectors. VTR has the historical dividend growth inertia. VTR has a great dividend/FAD ratio - suggesting continued strong dividend growth.. VTR has strong FAD/share growth - suggesting continued strong dividend growth. Given an abundance of positive attributes, VTR merits selling at a premium to the sector average price to FAD ratio. As of 8-31-13, VTR was selling just above average.
    Sep 6 10:01 AM | 4 Likes Like |Link to Comment
  • Overcoming Obstacles: A Unique Method For Assessing Risk By MLP [View article]
    Why do I not own PAA?
    (1) My weighting in MMP is big - so I felt I had the smaller "oil" portion of the MLP world covered. I also have some oil exposure with other MLPs.
    (2) I was slow to see the opportunity that fracking would bring to oil production in the US. I should have over weighted the oil MLPs.
    (3) I have been a victim of bad forward DCF projections. That can be seen in the positive earning surprises in the historical data on DCF projection accuracy. In the past, PAA looked fully valued based on DCF projections that under stated PAA's future. The same is also true for SXL. I really wish I had bought SXL! If the forward DCF projections had been closer to accurate for PAA and SXL, I would have purchased both.
    For the most part, leaning on the forward DCF projections has been "very, very good to me". So I do not regret the strategy of using the analysts numbers. But that strategy did let me down with those two MLPs.
    (4) I have the ability to crunch the numbers on my own in other sectors where I focus. But those are sectors where the earning releases and the earning release supplements are good. I really hate the quality of the earning releases that we get from the MLPs. So my failure to do my own projections from scratch prevented me from correctly sizing the historical growth in PAA and SXL.
    (5) It is mainly a combination of those four errors or factors that kept me from buying PAA and SXL. And there is one more factor. With PAA and SXL still paying IDRs - they are not on the top of my "buy list". I may have too strong of an anti-IDR bias. Most of that bias is due to personal history. EPD, MMP and MWE have been very good to me - and they are IDR free MLPs. TRGP - an IDR receiving GP - has also been great. I over came my bias to buy WES at the end of 2010. But that may turn out to be a one time victory. I still have that bias.

    Sorry for giving a complex answer to such a simple question.
    Aug 20 06:02 AM | 4 Likes Like |Link to Comment
  • Overcoming Obstacles: A Unique Method For Assessing Risk By MLP [View article]
    Given that this MLP bull does not like hearing that the much higher than average "Yield plus CAGRs" of MLPs is merited due to higher than average lack of earning projection accuracy - I thought that others would like to see more evidence.
    I have provided earning projection accuracy stats for Health Care REITs and Consumer Staple stocks in my coverage universe in my insta-blog.
    Aug 19 08:08 PM | 4 Likes Like |Link to Comment
  • The Evidence That MLP Valuations Are Based On DCF And Not EPS [View article]
    Low yield stocks strongly tend to be high distribution growth stocks. I believe that if you hunt for the word "growth" - you will find it.
    Jun 25 01:52 PM | 4 Likes Like |Link to Comment
  • A 9% Yield Keeps Apollo Looking Good [View article]
    There are BDCs where there are realistic expectations of dividend growth. Those BDCs have EPS growth, better dividend/EPS ratios, and dividend growth and NAV growth inertia.
    I believe every investment is a "portfolio decision". For retired investors like me, one has to balance the need for income in the here and now with income growth in the years yet to come. For every one dollar I invest in a high yielding BDC allows me to afford to invest two dollars in lower yielding but high dividend growth stocks like Colgate, Hormel and Smuckers.. I also like owning some lower due diligence stocks.
    Are BDCs "analytically opaque"? Yes they are. And my response to that is "ain't that great!". I like investing in sectors where other investors are struggling with their metric awareness.
    I have never sold puts, and I can to speak to that method of investing.
    May 24 11:00 PM | 4 Likes Like |Link to Comment
  • Is Dividend Growth Inertia Dead At Medley Capital? [View article]
    An investor's portfolio has to fit their temperament. I am a "yield plus dividend or distribution Compound Annual Growth Rate projection" investor. WmHilger1 wrote "I have more dividend income than I can comfortably spend". And one can invest their excess dividends to growth their portfolio - and thus next year's earnings.

    I want to be a tax efficient investor. If I had "more dividend income than I can comfortably spend", then I would have more taxable income than I would want to generate.

    It is also my perception that CAGRs sell at a discount. I want to buy at a discount.

    I also know my portfolio CAGR. I have a conservative projection of around 6% per year in dividend and distribution growth from my total income producing portfolio. Most of that is in "qualified" or lower tax dividends and tax deferred MLP distributions.

    Your portfolio yield is bigger than mine. My portfolio CAGR is bigger than yours. My portfolio dividend to EPS ratio is also probably lower than yours. So I should probably have more protection if another 2008 type year comes along. My portfolio is probably better prepped for hyper-inflation than yours.

    Let's call those last two attributes - the 2008 insured and 1970s prepped - a form of insurance. Let's call your "more dividend than you can comfortably spend" another kind of insurance. If the dividends are cut - you can comfortably live with those consequences. Current year "excess" dividend are insurance for the lean years.We are both insured - just in different ways.
    May 7 11:52 AM | 4 Likes Like |Link to Comment
  • Is Dividend Growth Inertia Dead At Medley Capital? [View article]
    My goal - as described in this and other messages - is to maximized the "yield plus dividend or distribution Compound Annual Growth Rate projection" while having a portfolio that is heavily weighted in lower risk investments.
    If I were buying today, I would buy PSEC and SLRC for the yield, PFLT for low risk, and MAIN and TCAP for growth. I would also keep my BDC portfolio allocation at about 5%. But that list could change with the news in the earning releases that are currently coming out..
    May 7 11:12 AM | 4 Likes Like |Link to Comment