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Monty Spivak

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  • BP Prudhoe Bay Royalty Trust: Why Worry About This High Yielder? [View article]
    I am among the few who do not like the US royalty trust model. This excerpt from an article explains my position (

    US Royalty Trusts and any other investment vehicle which extinguish the asset with their distributions qualify for a “sell” rating. The high yield is tempting, but you are simply getting back your own money. Lacking a means to reinvest and build their business, all of them will (eventually) reach a zero-value. I would like to get my money back from my investments, so this is a non-starter. Let’s look at an example. Back in January, 2011, there were fantastic articles about the value of BP Prudhoe Bay Royalty Trust (BPT) - BP Prudhoe Bay Royalty Trust: The Most Overvalued Trust of All ( ) and BP Prudhoe Bay Royalty Trust: Most Overvalued or Most Misunderstood? (Part I) ( ) and (Part 2) ( ). The two authors did brilliant work examining the return and assumptions around this royalty trust, and the many comments from the readers added to our understanding. Regardless of the financial models and exact calculations, the conclusions were consistent – this royalty trust was overvalued relatively to the expected return over its lifetime. If this would be common shares, with the ability to invest and build the business (and sustain the payout), perhaps it would be an attractive investment; however, with the depleting asset, the yield is only the return OF (not return ON) your invested capital, with the hope of timing the market for the right exit point before the asset value equals zero.
    Jan 26, 2012. 05:48 PM | 1 Like Like |Link to Comment
  • 4 Best Canadian REITs For 2012 [View article]
    Thanks for your interesting article.

    I own many Canadian REITs (including Riocan), and am in the midst of a series of articles identifying Canadian real estate investment opportunities (if you are interested, the link to the article which mentions Riocan is:

    I believe that it is worthwhile to mention 2 caveats regarding your list:
    1. Canadian real estate, and related securities, are currently at highs, and various government and industry leaders are warning that there may be a correction.
    2. Cominar has offered to buy Canmarc REIT (formerly Homburg REIT), which may be either good or bad for performance in 2012. This may disqualify it as 1 of the 4 best Canadian REITs. My $0.02 is that Calloway, Canadian Apartments, Chartwell, Killam (I am long the latter 3) and some others, may provide a better balance of risk and return in the top 4. Of course, it depends on one's definition of "top" :)

    Your Canadian Dividend Stocks website is a great resource!

    Cheers, Monty
    Jan 26, 2012. 05:32 PM | 1 Like Like |Link to Comment
  • Analyzing Canadian REITs, Part VI: Hospitality, Hotel And Leisure [View article]
    Hi hat_trick3, Good idea to leave this one alone. I am also long (and break-even) on Rogers Sugar and Canexus. Although I own the larger Canadian Banks (BNS, CM, BMO), I suggest that there is a lot more growth in Canadian Western. I like your Liquour Stores investment, but it has not dropped to a price for me to buy-in. Frankly, at this juncture, I am just watching for potential investments - I rarely buy within 20% of the 52-week high. Cheers, Monty
    Jan 18, 2012. 08:28 AM | Likes Like |Link to Comment
  • Analyzing Canadian REITs, Part VI: Hospitality, Hotel And Leisure [View article]
    Hi Hat_trick3,

    I have no positions in this real estate sector, as I am not overly optimistic. Also, I propose that none of these would qualify for "blue chips" - all seem to have declining financial results and returns. InnVest may be a better choice among this group of securities, but I would not define this a high-quality/low-risk. Hotels depend upon business activity and vacationers. My read of the situation is that in tough times, businesses cut travel budgets, and people do not vacation when they are indebted and feel insecure about their future cash-flow..

    Lanesborough has not had a positive Operating Income in the last 5 years. Moreover, they have restated their financials for most of this period. They are selling their properties to compensate for decreasing cashflows (check out their press release: There are covenant breaches on their mortgages. In 2011, they extended the maturity of their debt for 4 years at an additional 2% premium (over the previous 7.5%). In other words, I suggest that their distribution may be at risk, as their financial position is not strong.

    I hope that this helps. Cheers, Monty
    Jan 16, 2012. 06:18 PM | Likes Like |Link to Comment
  • Analyzing Canadian REITs, Part IV: Residential [View article]
    Hi Howard,

    Great point! I was looking at how non-Canadians can buy (through a discount broker) the Canadian TSX/S&P real estate indices, real estate ETFs, and CEFs on US exchanges. I drew a blank - nothing OTC or on the usual exchanges.

    One of the next articles will be devoted to the various funds, but it seems that non-Canadians must use a full-service broker (and possibly pay significant fees).

    That said, you have some great researching talent, and may come up with something for all of us!

    Cheers, Monty
    Jan 14, 2012. 10:45 AM | Likes Like |Link to Comment
  • Analyzing Canadian REITs, Part II: Diversified Office, Retail, And Industrial [View article]

    Thanks for your comments! If it makes you feel any better, Canadians are subject to similar withholding taxes with US investments, and our tax-sheltered retirement plans.

    Cheers, Monty
    Jan 12, 2012. 09:00 AM | 2 Likes Like |Link to Comment
  • Analyzing Canadian REITs, Part IV: Residential [View article]

    I appreciate your interest, comments, and feedback.

    User 86074 is correct that this article only addresses Residential real estate (in Canada). This will be a ~10-part series, in order to first identify and describe potential investment targets, and then rank them for yield/return and risk. The other real estate companies that he mentioned are included in other articles in the series (for example, Whiterock is in Part II, and I am long).

    Charles Whaley has an excellent comment about the indexes/funds for Canadian real estate. One of the next articles will cover the funds (ETFs, CEFs). Perhaps the big problem is that I cannot seem to find if/how one can buy Canadian real estate funds on a US market. None are traded OTC or on the NYSE - perhaps I have missed something?

    Cheers, Monty
    Jan 12, 2012. 08:42 AM | Likes Like |Link to Comment
  • Analyzing Canadian REITs, Part III: Commercial, Industrial, And Office [View article]

    Thanks for your comments/feedback.

    Whiterock and Artis are covered under another article - Part II - Diversified Office/Retail/Industrial. Some REITs were difficult to categorize, so the allocation into 1 area or another can be debated. This article focussed on single-purpose REITs in these categories. I am also interested in these 2 REITs - In fact, I am long on both!

    With regards to the update on MIM, from agchi - he is absolutely correct. I used Q3/2011 information wherever possible, in order to provide comparability, which ignored the very important changes in the Magna "empire". As well, I invested most of my time attempting to uncover information on the more obscure, smaller-cap (higher-yield) names. Since MIM paid Frank Stronach a special $2M consulting fee a few years ago, I have ignored their stock. Thanks, again, to agchi for identifying this for all of us!

    Cheers, Monty
    Jan 12, 2012. 08:25 AM | Likes Like |Link to Comment
  • Dividend Yield Vs. Dividend Growth: Merck And Coca-Cola [View article]

    Thanks for your interesting article.

    I propose that if you discount the cashflows, that it will take at lot longer than 10 years for KO to catch up to MRK. After all, $1 today is worth more than $1 in the future.

    Some time ago, I wrote an article which examined the discounted cashflow impact on high-yield versus dividend growth ( The inevitable conclusion is that dividend-growth stocks (such as KO) require a substantial capital appreciation "boost" in order to perform comparably to the high-yield (MRK) alternative.

    In other words, if you want high yield, then buy high yielding securities; if you prefer low-yield with less risk and growth, then buy securities such as Coke (KO). Based on yield ONLY, do not expect the yield-growth stocks to outperform the high-yield stocks, except after a lifetime of holding the yield-growth security.

    Cheers, Monty
    Dec 14, 2011. 12:58 PM | Likes Like |Link to Comment
  • Positioning Your Equity Portfolio For High Yield With Moderate Risk, Part V [View article]

    Thanks for your feedback.

    I also hold GGN. Compared to the alternatives, it looked good to me in early 2010 - I might add that it is currently trading around what I paid for it (so as CPA and others identified, it went up and down over 10% - in the interim, I "earned" over 10%... although it was mostly a return of capital). My position on CEFs is closely aligned with the view expressed by nivramkoorb. In fact, I DRIP most of my CEFs: GGN, a Dow 30 fund, an Asian Fund, a Canadian Fund, and a European Fund (which is really NOT doing well).

    This was the article that I published that identifies my thought process around gold holdings - and my conclusion is that GGN is the "lesser of the evils":

    Buying Gold Without Sacrificing Yield (2010-07-08)

    I may write Part 2, but I am struggling to find worthwhile candidates to consider.

    Many global banks are high dividend-payers, including STD. I hold only 1 non-Canadian bank, DB (TruPS), and these days, even this seems to be risky. Again, I would demand a very high return to any investment with PIIGS exposure, and most global banks have this - my $0.02 is to buy when Greece/Italy/Spain default, if you choose to jump.

    Jarco raised a great point on inflation and (unrealized) capital losses associated with the declining asset value of holding high-yield stocks.
    1. Inflation: My approach is to treat the inflation rate as the local government TBill rate. If you are targeting 5% after taxes (~6.7% yield @ 30%), this should more than cover inflation. That said, lower-yielding stocks and dividend-growth stocks may be equally challenged to match/exceed your local inflation rate - at least you get a yield.
    2. Declining asset value: I also have this problem - I believe that we all do - the price of the security fluctuates, and seems to head down - any bad news, world issues, and general market perceptions, will impact any stock portfolio. There is simply no avoiding the risk if you want the return. Let's not forget dividend cuts - I had 3 securities cut theirs in the last 2 months. All you can do is choose carefully - and even this will often not help. That said, you may well incur the same risk with non-dividend paying stocks.

    Cheers, Monty
    Dec 7, 2011. 06:03 PM | Likes Like |Link to Comment
  • Positioning Your Equity Portfolio For High Yield With Moderate Risk, Part IV [View article]
    Hi, Thanks, again, for your comments and feedback. I am finalizing that last article - what securities not to buy - over the next few days. Afterwards, I will start publishing articles identifying "non-mainstream" (mainly OTC) high-yield securities, for your consideration. Cheers, Monty
    Nov 27, 2011. 09:19 AM | Likes Like |Link to Comment
  • Positioning Your Equity Portfolio For High Yield With Moderate Risk, Part III [View article]

    Thanks, again for your comments!

    I believe that we are in "violent agreement" in a number of key areas.

    - Real estate is not zero-risk; even in Canada (which has not imploded in this cycle). Property prices have a volitile history in Canada, with big downward moves in the early 1980s and 1990s. That said, the highly-leveraged household mortgages are guaranteed by the CMHC (which is a federal government agency); in other words, this is much like Government of Canada debt, and these are not bank assets on their balance sheets. If you look at REITs as a property-secured income stream, then it is still high-yield with moderate risk from my perspective. Additionally, Canadian REITS pay a much higher yield than US REITs (excluding mortgage REITS, as jayridescarbon identified in his comment). I plan to identify and explain some of the Canadian REIT opportunities in future articles. Many are traded OTC, and most offer +6% yield (almost all of it as a return of capital).

    - Being "green" may present an issue for yield-oriented investors, as we typically have over-represented assets in Energy and O&G, which often pay great dividends. TransAlta (TAC.N and TA.TSX) generates most of its power from coal (although it is also one of the larger Canadian generators of alternate power). The 5.7% yield does not seem to compensate for the future investment that would be required to green this source. As martinfrosa pointed out, EONGY.PK and RWEOY.PK will have 10+ years of financial challenges (I believe that they generate 15% of their revenue from nuclear power), and it is very expensive to shut-down refineries, reactors, and other such factories. In fact, I raised this as an example in Part 4 (what to buy).

    - Investing is risky. Not investing and holding cash is also risky (after all, what are fiat currencies worth?). Gold may be a bubble or a non-sovereign currency substitute. It is all a question of balancing risks.

    Thanks, again, for your interest and contributions. Let's continue to share our ideas and see if we can identify the best way to protect our assets while generating "alpha-yield".

    Cheers, Monty
    Nov 21, 2011. 05:06 PM | Likes Like |Link to Comment
  • Positioning Your Equity Portfolio For High Yield With Moderate Risk [View article]
    Hi, Thanks for your great additional comments! In fact, I have posted the 3rd article for publication, and it addresses some of your points, such as buying into the positions (as part of a section which suggests that this investment approach requires additional work). Cheers, Monty
    Nov 19, 2011. 09:25 AM | 1 Like Like |Link to Comment
  • Positioning Your Equity Portfolio For High Yield With Moderate Risk, Part II [View article]

    Thanks for your comments and ideas! It is interesting to see that many of us share similar goals and concerns.

    I propose that our high yield holdings need to move beyond the US-based MLPs, BDCs, and mREITs. The foreign high-yielding lists also seem to cover a limited group of large-caps (e.g., TEF, VOD, RDS.B, TOT). Although I have a couple of small holdings of these types of securities, I propose that these investments alone, will not lead us to "yield alpha".

    I will soon post Part 3, which will drill-down into target industries and geographies (including tax implications), and begin to examine more yield-oriented alternatives. I appreciate and look forward to your continued feedback.

    Cheers, Monty
    Nov 18, 2011. 08:35 PM | Likes Like |Link to Comment
  • Positioning Your Equity Portfolio For High Yield With Moderate Risk [View article]
    Hi, Thanks-you for your comments and support - I will endeavour to live up to your expectations! I will put the finishing touches on Part 2 - the actual strategy - in the next one or two evenings, and then get the last 2 installments finalized. Cheers, Monty
    Nov 14, 2011. 12:22 PM | 1 Like Like |Link to Comment