Seeking Alpha
View as an RSS Feed

South Gent  

View South Gent's Comments BY TICKER:
Latest  |  Highest rated
  • Update On Closed End Fund Basket Strategy As Of 7/28/15 [View instapost]
    My next post will be a new category called Bonds and Equity Preferred Stocks.

    I have been fascinated by some of the recent movements in those securities.

    On 7/9/15, I sold my 50 shares of GSTPRB at $24.25, an equity preferred stock issued by the small E & P company Gastar (GST). I will discuss that disposition in the next post.

    I sold earlier my Lottery Ticket in the common at $3.33 (6/25 or so). And, I also sold the two GST second lien bonds near break-even. All of that was due to concerns about energy prices. If I was going to take the risk, I would go with the 2 LINN 8.625% senior unsecured purchased at 61 for now.

    Sometimes it is just better to avoid the loss or cut it short. I made a profit on the GSTPRB due to ROC and received several monthly dividends at the 10.75% coupon rate since December 2013.

    I had not looked at the preferred since I sold it. I noticed yesterday that it closed at $16.01 and rose 4.62% today closing at $16.75. It fell off a cliff shortly after I sold it at $24.25.

    http://tinyurl.com/nhy...

    When playing in that kind of sandbox, the investor has to be willing to light a match to whatever sum is devoted to the "gamble". That kind of security is not an investment. I said the same thing about my 2 Linn 2020 bond purchase in the comments to this Instablog.

    http://tinyurl.com/q6r...

    Starting last December, I previously bought that LINN bond twice near 80 and sold at near 90. This time I hesitated when the bond blew through 80 until it got close to 60 before repurchasing the 2 bonds for the third time.

    The GST preferred stocks are far riskier in my opinion. They are unrated but the second lien Gastar bond has only a Caa2 rating from Moody's:

    http://tinyurl.com/p9b...

    The Linn 2020 has a B1 from Moody's:
    http://tinyurl.com/npk...

    However, it is trading more like a Ca IMO. At least it closed below my purchase price today.

    Moody's Rankings:

    http://tinyurl.com/plc...
    Jul 28, 2015. 08:36 PM | Likes Like |Link to Comment
  • Update On Regional Bank Basket Strategy As Of 7/17/15 [View instapost]
    FMER & TRMK:

    FMER's report was a slight disappointment to me, and the stock fell 6% to close at $18.96.

    E.P.S. was $.33 vs. $.35 in the 2014 second quarter and 1 cent below the consensus estimate.

    http://tinyurl.com/oeg...

    FMER is one of my larger banks, where institutional investors dominate trading and they will frequently stampede together toward a narrow exit door based on slight disappointments that mean nothing long term.

    My cost basis is $14.55 per share, and see no reason to sell at today's closing price.

    Some of the numbers were fine:

    Average total loans to deposits 79.06%
    Net charge-offs to average loans ratio 0.20%
    NPAs to loans and other real estate 0.87%
    Period end tangible common equity to assets (1) 8.09%

    Return on Assets and Return on Equity were below 1% and 10% respectively:

    Return on average assets (ROA) 0.90%
    Return on average equity (ROE) 7.85%
    Return on average tangible common equity 11.44%

    The efficiency ratio is neither good or bad at 62.37% but is ticking up which is not good.

    NIM continues to decline, falling to 3.39% from 3.75% in the 2014 second quarter and that probably caused a lot of the selling. Part of the problem is the gradual loss of interest income due to accretion from acquired loans. So, the earlier numbers from last year and the previous year were juiced due to that accounting convention. That probably surprised a lot of institutional investors. I have discussed the accounting accretion juice in the blog for about 2 years. A story appeared in Barron's back in March 2014 on the subject:

    http://tinyurl.com/otu...

    Trustmark (TMRK) has the same issue.


    TRUSTMARK 2nd Q. Earnings Report
    http://tinyurl.com/oyl...

    E.P.S. of $.45 beats by 4 cents, but E.P.S. was down from $.49 in the 2014 second quarter.

    NIM 3.81% down from 4.42% (lower accretion interest)
    Return on assets 1.01 %
    Return on equity 8.44 %
    Return on average tangible equity 12.05%
    Efficiency ratio 66.00% (too high)
    Tangible book value $15.58
    Tangible equity/tangible assets 8.93%

    Net charge-offs/average loans 0.07 %
    Nonperforming loans/total loans (incl LHFS) 1.04%
    ALL/nonperforming loans -
    (excl impaired loans) 192.60%

    ALL= Allowance for Loan Losses to Non-Performing Loans-Another Important Ratio

    Total risk-based capital ratio 15.07%

    The quarterly dividend is $.23 per share. I own just 50 shares. I have never been able to hold onto the shares for long. My last purchase was made last January:

    2. Bought Back 50 TRMK at $22.25
    http://tinyurl.com/ngd...

    Snapshots can be found there for 4 prior flips netting in small lots $674.13 in profit.

    TRMK is a smaller bank ($1.62B cap) than FMER ($3.14B Market Cap at today's closing price) It will be interesting to see how the market reacts tomorrow to that swoon in NIM.
    Jul 28, 2015. 07:31 PM | Likes Like |Link to Comment
  • Update For Equity REIT Basket Strategy As Of 7/24/15 [View instapost]
    MPW: The market was apparently not pleased with this announced acquisition of Capella Holdings.

    Medical Properties Trust Inc. (MPW)
    $13.45 Down 0.35(-2.54%) 4:03PM EDT

    The close was near the intra-day low of $13.43.

    Volume Today: 4,097,557
    Average Volume: 1,838,180

    The first reaction may not be the right one, but I have not looked at the deal except to read the press announcement, to look at pictures of Capella's hospitals and to review a press announcement on Capella's joint venture with St. Thomas in Nashville which is interesting.

    http://tinyurl.com/q4l...

    I saw an issue looking at the locations:

    http://tinyurl.com/p5u...

    Capella owns four hospitals in Tennessee and all of them are in relatively small communities: Smithville, Sparta, McMinnville, and Woodbury. The joint venture arrangement with St. Thomas, a very large hospital based in Nashville, includes an exclusive deal for Capella to develop other facilities in middle Tennessee and southern Kentucky.

    The McMinnville hospital looks like the largest of the four located in TN:

    http://tinyurl.com/p9c...

    There are a number of health care companies located in the Nashville area. I mentioned in the prior comment that MPW was buying a privately held company based in Franklin.

    Many of the companies are publicly traded. My first stock purchase was HCA back in 1968 founded by Nashville entrepreneurs and is still based here.

    Healthcare REITs include Healthcare Realty Trust Incorporated (HR) and National Health Investors Inc. (NHI) based in Murfreesboro, TN where another one of my great-great grandfathers was almost killed in 1862 as a bullet whizzed by him, grazing his uniform and then struck Gen. James E. Rains who was next to him in the heart. In those days, Brigadier and Major Generals were in the front line.

    "Battle of Stones River or Second Battle of Murfreesboro (in the South, simply the Battle of Murfreesboro)"

    http://tinyurl.com/od7...

    Yet another lineal ancestor who just barely survived that conflict.

    There is an ETF that owns Nashville area companies. I thought the idea was a bit silly for an ETF, so I have not bought shares. The holdings list can be found at

    Nashville Area ETF
    Ticker: (NASH)
    http://tinyurl.com/ouc...

    The ETF has only gathered about $11.25M in assets but has done well over the past two years:

    http://tinyurl.com/o7l...#{"showSma":true,"smaC...
    Jul 28, 2015. 06:44 PM | Likes Like |Link to Comment
  • Update For Equity REIT Basket Strategy As Of 7/24/15 [View instapost]
    LXP: It was announced today that Corporate Office Properties (OFC) has agreed to acquire LXP's Transamerica Building located in Baltimore which is the tallest building in Maryland.

    http://bit.ly/1DMz7kE

    The deal requires OFC to assume a $55M mortgage.

    The 100 Light Street office building property is shown as a LXP property at page 33:

    http://1.usa.gov/1Pcezdm

    The total purchase price for both the office and garage was reported at $121M. Apparently LXP owns only the office building. LXP has been marketing the office building since at least earlier this year. I have not yet seen a press release from LXP.
    Jul 28, 2015. 02:32 PM | Likes Like |Link to Comment
  • Update For Equity REIT Basket Strategy As Of 7/24/15 [View instapost]
    MPW: After the close today, Medical Properties announced that it had agreed to acquire Capella Holdings, a privately owned hospital company located near HQ in Franklin, TN.

    http://bit.ly/1OxAcmc

    "MPW claims that this acquisition will be immediately accretive to normalized FFO by $.04 in the first year.
    With this acquisition, MPT will be adding to its acute care portfolio seven hospitals located in five states, with an aggregate 1,169 beds and over two million square feet. MPT’s interest in the hospitals, valued at an aggregate $600 million, will be subject to sale leaseback and mortgage loan arrangements that will have cross default provisions and a blended GAAP yield of 9.1% giving consideration to annual CPI-based rent escalators subject to a 2% floor and 4% ceiling. The initial lease term will be 15 years with four 5-year renewal options. The EBITDAR coverage ratio for the real estate is expected to exceed 2.3x in the first year.... "

    My great-great grandfather had the misfortune of being in Hood's Army of Tennessee on 11/30/1864:

    Battle of Franklin (1864)
    http://bit.ly/1OxAeKI)

    Snow was on the ground and he was shoeless which was normal. His feet were bleeding into the snow as his unit was ordered to attack over open ground a large Union force well entrenched behind stone fences.

    A similar type event is the subject of an Infamous Stringduster song called Three Days in July:

    http://bit.ly/1OxAeKM

    A nephew is a member of that group, recognized as one of the best dobro players in the U.S., and writes many of their songs like "Well, Well", "The Way I see You Now" and Blackrock on this album:

    http://bit.ly/1OxAeKN

    The group has three lead singers.
    Jul 27, 2015. 10:45 PM | Likes Like |Link to Comment
  • Update On Regional Bank Basket Strategy As Of 7/17/15 [View instapost]
    UBSI: I had no takers on my question "WHAT WOULD YOU DO" with UBSI.

    I decided to eject the position today and stick with my traditional opinions about valuations in the regional bank sector. I view this stock to be overvalued at today's close of $41.67.

    The numbers referenced in the preceding post are nothing special and mostly average. However, the TTM P/E at 21.48 and the forward P/E of 19.75 are far above anything else that I own.

    The profit snapshot is now at the end of my Gateway Post:

    REGIONAL BANK BASKET STRATEGY GATEWAY POST

    http://bit.ly/WbVA5R


    50 Share Profit: $1,235.01

    I am frequently asked how do I make any money with small lots. You do not need to buy many shares to win. You just need to buy the right stocks. The 50 share lot of the SCEDN preferred mentioned in my prior comment here somewhere, a really boring security, generated close to a $1,000 in profit and five years of preferred dividend payments taxed at 15%. I try not to think what a 100 share Berkshire Hathaway bought at $16 during the 1974 meltdown would be worth now. That one was almost bought then.

    Total Regional Bank Basket Profits Now: +$22,226.05 (all small lots)
    Jul 27, 2015. 09:58 PM | Likes Like |Link to Comment
  • Update On Regional Bank Basket Strategy As Of 7/17/15 [View instapost]
    Pursuing this line of thought further, and this is a thinking exercise for me, I sold an equity preferred floater today because it had no juice left.

    I had bought the $100 par value equity preferred stock (SCEDN) issued by Southern California Edison at $84 back in 2009.

    4. Bought 50 SCEDN at $84
    http://bit.ly/1MvYNuf

    Edison had already redeemed some of my shares at par value.

    Partial Redemption SCEDN 2012
    http://bit.ly/1euqpQB

    I sold the remaining shares today at $100.91. This one just went ex dividend and is stuck at its par value value due to the optional redemption right and the terms of the preferred.

    Some investors may like it at or near par value. I do not. It is currently paying a 1.45% spread to the 30 year treasury bond.

    http://1.usa.gov/175OeW9

    Assuming the applicable 30 year yield was the close today at 2.93%, that would give me a 4.38% coupon.

    If the 30 year starts to go up, then Edison will just redeem at par value. If there was no optional redemption, I would continue to hold but the current coupon is not appetizing under the circumstances. I could use the proceeds to buy your JPM preferred and add current yield with a five year call protection.

    So, in this case, I would rather have the profit on SCEDN and find another preferred stock yielding more with the proceeds plus the call protection which has some value.
    Jul 27, 2015. 08:25 PM | Likes Like |Link to Comment
  • Update On Regional Bank Basket Strategy As Of 7/17/15 [View instapost]
    Extreme: I disagree with your argument that the fixed coupon will outperform with a rise in intermediate or long term rates. That was the case in 2013, but may not happen in 2015-2016.

    The difference between now and then is future expectations.

    The market was not anticipating an increase in the federal funds rate in 2013. Both the FED and the market are anticipating starting later this year a steady though slow rise in the FF rate. Each quarter point rise will bring the float activation closer and closer and could easily result in a repricing upward of GSPRD and down for COFPRC or the new JPM preferred. It is all about the future even for floating rate preferred stocks.

    The bump in the coupon does not occur at 4% but at 3.33%+ during the relevant computation period.

    At a 4% three month LIBOR during a relevant computation period, the GSPRD coupon would be 4.67% (4% + the .67% Libor spread) The yield at a total cost of $19.63 would then be 5.95%, close to your JPM preferred now. The price will not be $19.63 then. A par value price would give me a 27.74% gain or about 4.45 years of dividends paid by a 6.15% fixed coupon preferred assuming it is still trading at par and has not depreciated in value. I got the juice (i.e. discount to the $25 par). I only need patience to win.

    A 6.15% fixed coupon par value bought at par has just a little juice unless rates plummet.

    My best guess now is that the GSPRD price will be near par value when and if the 3 month Libor approaches 4%, which is close to a normal rate historically before the Fed's Jihad Against the Saving Class started in late 2008.

    GSPRD was trading at $26 in 2007 and hit $24 as recently as 2013.

    http://on.mktw.net/1Mv...

    The 3 month Libor was about 5.35% when GSPRD was trading at $26:

    3-Month London Interbank Offered Rate (LIBOR),

    http://bit.ly/1OxmCiC

    The temporary symbol for the new JPM preferred is JMPRP which closed at $24.82 today:

    http://bit.ly/1JDObDl

    10,000 buys 402.9 shares.

    GSPRD was unchanged so I have 509.4 shares.
    Jul 27, 2015. 08:05 PM | Likes Like |Link to Comment
  • Update For Equity REIT Basket Strategy As Of 7/24/15 [View instapost]
    LXP: The snapshot showing the reinvestment of LXP's dividend shows that 8.501 shares were purchased at $8.1923 per share. The dividend amount is shown as $73.29. It is my understanding that this accounting is correct for a taxable account but not for a Roth IRA where I own this position IMO.

    If you divide the alleged dividend of $73.29 by 8.501 shares, the result is not $8.1923 per share cost basis but $8.621 which is what Fidelity shows as my cost basis.

    I bought the shares at a 5% discount. My total dividend was not $73.29. I actually received 8.501 x. $8.1923 or $69.64 rounded. The IRS treats the discount as income so a pretend dividend is created equal to that 5% discount. In this case the fictional dividend amounted to $3.65. For a taxable account, the cost basis would then be increased by that fictional taxable dividend.

    The error is that my tax cost basis in the ROTH IRA should be $8.193 rather than $8.62 which would be cost basis under IRS rules when held in a taxable account.

    The pretend dividend income is not created when LXP is owned in the ROTH IRA where income is not taxed when received in that account. Fidelity's computers are simply not making a distinction between IRA and taxable accounts when doing this tax cost accounting.
    Jul 27, 2015. 03:34 PM | Likes Like |Link to Comment
  • Increasing Cash Flow: Bought Back JDD At $11.65 [View instapost]
    JDD: While preparing an update for my CEF basket strategy, I refreshed my recollection and remembered that this 100 share lot was sold at $12.44 since my last update.

    When I sold the shares, JDD closed at a -9.58% discount to its then net asset value of $13.67. The closing price that day was $12.36. I received on 4/1 a quarterly dividend of $27.

    I sold for the same reason discussed in a March 2015 post:

    Continued Paring Interest Rate Risk: Sold 100 of the CEF JDD at $12.45-Roth IRA
    http://bit.ly/1KtELx1

    I was not an owner when the fund declared and paid its second quarter dividend of $.27 per share.

    With the short term interest rate trend being down, I am considering a repurchase but have not made up my mind yet.

    The NAV per share closed last Friday at $13.25 with a then discount based on a $11.58 market price being -12.6%.

    If I add the $.27 distribution back to that last reported net asset value, the adjusted number would be $13.52 or $.15 below where it was when I last sold shares at $12.44 (4/30/15).
    Jul 27, 2015. 10:53 AM | Likes Like |Link to Comment
  • Update On Regional Bank Basket Strategy As Of 7/17/15 [View instapost]
    Extreme: I am in a trading mode, so I would switch out of GSPRC and into GSPRD.

    Goldman Sachs Group, Inc. (The) (GS-PD)
    $19.63 Down 0.17(0.86%) Jul 24, 4:02PM EDT

    Goldman Sachs Group, Inc. (The) (GS-PC)
    $20.55 Down 0.11(0.53%) Jul 24, 4:00PM EDT

    Both have a 4% minimum coupon applied to a $25 par value. Both are functionally equivalent except the C series has a slightly higher LIBOR float provision that is not likely to be activated for a few more years and the difference is not that important anyway.

    GSPRC: Greater of 4% or .75% over 3 month LIBOR
    http://1.usa.gov/1gYmLkF

    GSPRD: Greater of 4% or .67% over 3 month LIBOR
    http://1.usa.gov/SfX5RY

    $10,000 at $19.63=509.4 GSPRD Shares

    COFPRC closed last Friday at $25.76
    $10,000 buys 388.2 Shares

    Game on again.

    Jul 26, 2015. 11:14 PM | Likes Like |Link to Comment
  • Update For Equity REIT Basket Strategy As Of 7/24/15 [View instapost]
    J: The short answer is no.

    I have enough headaches without adding MLPs.

    I will occasionally buy small lots in an IRA where I can avoid the tax filing issue provided I stay under the UBTI limit of $1,000.

    I recently nibbled in MEMP, as noted in a recent comment to this Instablog involving a repurchase of a Linn 8.625% senior unsecured bond at 61:

    http://seekingalpha.co...

    Why buy Linn common units, where distribution cuts are possible, when I can buy a senior bond with a YTM of 22%, where the interest payments can not be cut and have a higher ranking in a BK:

    That bond has drifted down some since I bought at 61, closing last Friday at $59.75 which generates over a 23% YTM and a 14.48% current yield based on a 59.75 total cost per bond. YTM assumes survival to pay par at maturity and bond ghouls are not making that assumption at anywhere near 100%.


    http://bit.ly/16eDwTx

    I made the same point when buying a VNR bond since sold:

    Bought 2 Vanguard Natural Resources 7.875% Senior Unsecured Bonds Maturing 4/1/20 At 86.59
    http://seekingalpha.co...

    I mentioned somewhere in a recent comment that MLPs were IMO near a bottom. My preferred method to buy is in the ETN structure and I currently own AMJ and just bought AMU which I will not be discussing in my new format.

    The ETN structure avoids the tax hassle while creating another problem. The ETN is a "senior unsecured" bond issued by the sponsor and thus subjects me to issuer credit risk. The ETN is more preferable to a MLP ETF where a tax liability exists at the corporate level.

    Valuation is similar in that an investor is looking at distributable cash flow rather than GAAP earnings. However, what is cash flow is open to debate in the MLP sector and many disagree with the numbers provided by the company.

    REITs and MLPs are viewed by many investors as bond substitutes and consequently will be under selling pressure when interest rates are rising.

    I view MLPs as riskier than REITs for a variety of reasons. One is the amount of debt that needs to be refinanced that subjects the company to significant interest rate risks. There is some commodity risk present in some of them, and the infrastructure in place to serve a shale producing region may see less revenue when the producers are forced to cut back on production due to low prices or a BK which are likely to occur for many debt laden shale producers.

    I sold out of KMI in a trust account, bought in the low 30s, when the price cracked the 200 day SMA line in the low 40s:

    http://yhoo.it/1b4f4pD#{"showSma":true,"smaC...

    Since KMI is a regular corporation, I will buy it in a taxable account and may re-enter soon. Sort of day to day for me. Like the MLPs, KMI is showing no signs yet of finding a bottom, but that does not bother me as it does many others. It just puts me in a "feel" mode for picking an entry point and then establishing how much to buy and how much to buy later and at what price.
    Jul 26, 2015. 01:02 PM | Likes Like |Link to Comment
  • Update For Equity REIT Basket Strategy As Of 7/24/15 [View instapost]
    For those unfamiliar with REITs, valuation is based on their cash flow rather than GAAP earnings. The later includes a non-cash deduction for depreciation, which is a big item for real estate owners.

    An investor in a REIT is indirectly participating in cash flow generation through dividend distributions, without the headaches associated with directly owning the property.

    Unfortunately, there are several measures of cash flow and an investor needs to decide which measure is the appropriate one.

    FFO=Funds From Operations (adds back depreciation and other items to GAAP net income)

    AFFO= Adjusted Funds From Operations (adds or subtracts items from FFO)

    To be correct IMO, and I am not an accountant but looking at the issue only from an investor's perspective, AFFO should equal funds available for distribution (FAD or sometimes referred to as CAD or AFFO in some calculations) to the shareholder. In other words, an AFFO calculation needs to be a real cash flow number rather than one created by an accounting fiction. That is not always the case.

    When AFFO is significantly lower than FFO, I will use AFFO both for valuation and dividend related issues (e.g. sustainability and potential growth).


    One appropriate deduction from FFO is what is called a straight line rent adjustment, an accounting fiction that requires REITs to recognize revenue as cash that is not received (what?), but may be received in the future, possibly way into the future. This will occur, for example, in long term ground leases and is a big item in LXP's AFFO calculation.

    Some REITs might add back to FFO acquisition and/or refinancing costs to arrive at AFFO. Those are current cash expenses. If they are recurring in some meaningful way, I will not add back the amount back. Instead, I will use an average number over 5 or so years to reduce the FFO number to arrive at AFFO.

    Many individual investors just take the FFO number without discussing this issue, including authors here at SA.

    That failure led one author to recommend Washington REIT (WRE) using FFO data when the CAD number was significantly LOWER than FFO due primarily to ongoing maintenance expenditures that are commonplace for apartment and office buildings. Shortly after the recommendation, the REIT slashed its dividend. There was no analysis in the article about the sustainability of the dividend based on recurring cash flow.

    This is a constant and recurring problem with SA articles on REITs. I have found that my comments on this inadequacy are just ignored and the authors just continue to use FFO, when that is not an appropriate measure of cash flow, in order to assess dividend issues and to arrive at a valuation based on cash flow.

    I looked at this issue in connection with Commonwealth REIT back in 2012, a REIT so poorly managed by its external advisor, who had multiple conflict of interests issues, that the shareholders voted them out overwhelmingly, notwithstanding multiple legal hurdles in place that made that an extremely difficult thing to do.

    Scroll to:
    CAD and FAD Distinction for CWH
    http://bit.ly/17h4WGi

    The symbol is now EQC:

    Barron's July 11, 2015
    Sam Zell’s Equity Commonwealth Is a Bargain
    http://on.barrons.com/...

    See also:
    http://bloom.bg/1GRh3WB

    Let's look at OHI's last report by line items:

    Press Release Q/E 3/31/15
    http://1.usa.gov/1GRh5Ol

    Per Share
    Net Income $0.32 (GAAP)
    ADD BACK
    Depreciation $0.23
    Real estate impairment $0.04
    FFO =$0.59
    ADD or Subtract:
    Transaction costs +$0.04
    Interest – refinancing costs +$.07
    Stock-based compensation expense +$0.01
    AFFO= $.71 (many investors will blindly accept that number)
    Add or Subtract
    Non-Cash Interest Expense +$.01
    Non-CASH Revenue (-$.07)
    FAD= $.65

    Unlike other REITs the OHI AFFO number does not subtract the straight line rent adjustment (pretend revenue) from FFO to arrive at AFFO. Instead, OHI subtracts pretend revenue from AFFO.

    What is the True FAD number
    OHI FAD +.65
    Subtract:
    Transaction Costs: - $.04
    Refinancing Costs: - $.07
    Real Cash Flow=$.54

    To be fair about it, I would use some number between $.54 and $.65 when the transaction and refinancing costs are unusually high and would instead eyeball average recurring cash expenses. I am not about to slap a multiple on expense items or pretend revenue.

    Since the dividend is usually higher than the GAAP net income, this creates ROC which will vary among REITs. Some REITs may have a GAAP loss in a quarter and a FAD of $.2 per share just as a hypothetical.

    A financial website will have the "earnings" numbers in both GAAP and analyst cash flow estimates.

    The forward estimates are cash flow numbers whereas the TTM P/E is a GAAP number. Analysts do not estimate GAAP numbers.

    So for OHI I see an estimate $3.03 number for 2015 and $3.21 for 2016:

    http://yhoo.it/1GRh3WH

    It appears to me that those numbers are AFFO numbers. Frequently I just have to guess what cash flow measure is being used by the analysts. They are certainly not using FAD numbers as calculated by OHI. Sometimes the estimates are based on projected FFO, particularly when there is not much difference which is the case for Realty Income (O), which I own also.

    When the investor looks at OHI's key statistics page at YF, you see a TTM P/E of 22.54. That is a GAAP number, whereas the Forward P/E is 11.28.

    http://yhoo.it/1GRh5On

    The 11.28 number is the cash flow estimate and is not an "earnings" number in a GAAP sense. So financial websites are mixing apples and oranges here.

    What is the true real cash flow number for OHI on a recurring basis? Hard to say IMO. It takes a lot of time to figure it out. This exercise just tells me that the real cash for the 1st quarter is between $.54 and OHI's FAD number of $.65. Informed investors can argue where in that spread is the best estimate.

    So what is the true multiple to cash flow for OHI?

    I also discuss buying above IRT.

    There is no pretend revenue.

    The AFFO number is called "core funds from operations".

    That number takes FFO and adds back stock based compensation (okay in my opinion) and acquisition fees and expenses (not okay IMO if those expenses are recurring). This REIT is in an acquiring mode and transaction expenses totaled $.07 per share in 2014.

    Sure, if the REIT stopped buying and selling apartment complexes, this expense item will cease to exist, but that is a pretend world that does not exist.

    Core Funds From Operations was $.68 per share in 2014. A reduction of $.07 would lower that number to $.61. Even if I deduct the entire $.07, I am still at a P/CAD multiple of 12.62 which is reasonable IMO. Dividend sustainability is another issue with IRT paying out $.72 per share last year or $.04 more than its core funds from operations.

    IRT, like BRG which is also discussed in this post, are young REITs that are in an accumulation phase. It remains to be seen when cash flow will cover the payout or, more importantly, be at a comfortable level below CAD.

    As noted in the discussion with BRG, IRT is financing its growth in significant part with new stock sales:

    "During the year ended December 31, 2014 we completed three underwritten public offerings of our common stock raising gross proceeds of $200.9 million, in the aggregate. We deployed a portion of these proceeds during 2014 to acquire twenty properties with 6,029 units for aggregate purchase prices totaling $497.1 million, including the issuance of 1,282,449 limited partnership units in our operating partnership, or LP units, valued at $12.0 million, in the aggregate. These acquisitions contributed to our substantial growth in a number of key financial measures in 2014 when compared to 2013 as follows:

    • investments in real estate at cost increased 262% to $689.1 million from $190.1 million;

    • operating income increased 73% to $8.5 million from $4.9 million; and

    • total revenues grew 147% to $49.2 million from $19.9 million."

    Page 35:

    http://1.usa.gov/1GRh5Op
    Jul 26, 2015. 12:12 PM | 1 Like Like |Link to Comment
  • Update On Regional Bank Basket Strategy As Of 7/17/15 [View instapost]
    Texas Ratio: In the previous comment discussing WTBA's earnings, I included a line item called the "Texas Ratio".

    The WTBA Texas Ratio was a very good 3.43%.

    This ratio helps investors and even savers with lots of money (in excess of FDIC insurance limits) determine the safety of a bank.

    http://abt.cm/1D58rOd

    There are free sites that rank safety. One is Bauer Financial that gives a 5 star rating to WTBA:

    http://bit.ly/sKUphJ

    At that site, you can see the ranking 1 to 5 but have to pay for a report.

    Bankrate also ranks the banks by safety:

    http://bit.ly/1GQQa5l

    West is rated 5 stars:

    http://bit.ly/1GQQd0R

    That service has a nice summary. One area for improvement noted in the Bankrate report is non-interest income.
    Jul 26, 2015. 09:09 AM | 1 Like Like |Link to Comment
  • Going Slightly Deeper Into Swiss Franc Priced Assets: Added To The CEF Swiss Helvetia Fund (SWZ) [View instapost]
    I started writing my CEF update today. The last update was published here in April:

    Update For Closed End Fund Portfolio As Of 4/8/15

    http://bit.ly/1CzP23D

    I will note in the update that I sold the 100 SWZ shares held in the Roth and then bought 200 more in my main taxable account where I have been building up a position since 2008.

    That position is now generating significant distributions with the last one being almost $2,000 used to buy 172+ more shares last January. I will receive more shares purchased with the last dividend on 7/31/15.

    I trade this CEF in the Roth accounts in accordance with my dominant capital preservation objective. I sold that lot at $12.48 (5/19/15) realizing a quickie gain of $104.4. I noted in the post above a prior IRA trade.

    I looked at the discount today and SWZ closed last Friday at -15.23%.
    http://bit.ly/1fZ7oGb

    Average Premium/Discount Information

    As of 7/24/2015

    6 Month -13.42%
    1 Year -12.89%
    3 Year -12.40%
    5 Year -11.94%

    The current discount is high by historical standards, so I will consider buying back this 100 share lot in the Roth, though the timing will depend on whether I start having better "vibes" than I have now.

    The discount was high at -14.13% when I purchased the 100 share Roth lot back in January. Part of my trading in CEFs is related to the narrowing of a discount after purchase and buying when the discount is higher than normal.
    Jul 25, 2015. 01:19 PM | Likes Like |Link to Comment
COMMENTS STATS
4,064 Comments
3,040 Likes