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geodan85

geodan85
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  • Is It Too Soon To Look At Nordic American Tankers? [View article]
    The 7th annual shipping forum was last Thursday in NYC. A friend of my went and said there was some buzz that things are picking up, although most of it was related to product tankers. Also, John Frederiksen (absolutely the most respected name in shipping) said a couple of months ago that tankers would lead the rebound (VLCCs will take longer he also pointed out), although he was forecasting it was still a year to a year and half away.

    The only metric that really matters for NAT is the suezmax spot rate and that still is low. Stronger global growth is needed for the rate to be sustained north of $20,000 per day (what the author is looking for as mentioned) and given the U.S., Europe and China it seems we still are not there.

    The recent rally looks like a short covering rally. The average volume of the last seven days and including today (~1.4mil as I write) is ~1.3 million shares, which means if it is a short squeeze going into month/quarter end it will likely end soon. If the stock continues to rally next week, then something else is going on.

    I believe NAT is too low, although I also remember when the stock acted well (similar to the recent move) and was rallying back from the low teens to the mid teens with the potential to move back toward $19 - $20. However, management stopped the rally cold with a secondary (I think it was ~$15.50) which was disappointing since I though they should have waited for higher prices to do the deal.

    Finally, with the recent management company buy out and now larger stock position held by Hansen and family (in at $8.90 on deal price) maybe they won't be so quick to pull the trigger on another secondary, but somehow I don't feel confident that it won't happen if the rally continues.
    Mar 25, 2013. 03:58 PM | 2 Likes Like |Link to Comment
  • Poor cash flow trends for Nokia's (NOK -0.7%) phone business are being masked by the strong performance of a resurgent Nokia Siemens, argues BofA/Merrill, which reiterates an Underperform. Should a spinoff, sale, or IPO of NSN happen following the pending expiration of Nokia and Siemens' JV agreement (as many expect), the firm thinks Nokia's handset cash flow challenges will become more apparent. [View news story]
    I can't remember when Merrill had an analyst that has made a right call on Nokia in decades. I pay no attention to their analysis on this stock.
    Mar 21, 2013. 11:43 AM | 10 Likes Like |Link to Comment
  • Bank Of America Profits Point To Dividend Growth [View article]
    BAC will likely trade back toward the $15.00 level (providing the overall market rally doesn't fade). I have commented on why BAC should have increased the dividend and why they most likely didn't on other articles on SA and do not want to be redundant. A small dividend increase combined with the buyback would have sent a stronger message about the improvement in BAC.

    Obviously, Countrywide was/is a disaster and likely will not yield anything close to what BAC anticipated when they swooped in pre-maturely to buy them right before a bankruptcy for a very questionable aggressive lender. However, Merrill Lynch (the most profitable wealth manager in the world) was an excellent buy and has and will continue to yield returns BAC anticipated.

    Merrill never would have been available if their former horrendously bad CEO Stan O'Neal didn't blow the firm up with the ridiculously bad move into sub-prime CDOs. The man's arrogance was without equal and he ignored warnings from seasoned executives within the firm about the exposure to sub-prime when Merrill's holdings were ~$2.5 billion (after many executives left or were forced out O'Neal took the exposure to ~$50.0 billion and actually bought a sub prime lender).

    The point here is that Merrill's sub prime fiasco is long gone and the firm is back to being a money machine that BAC will benefit from. It remains to be seen what's left of Countrywide's network and how much it can produce when lending is done responsibly and not just to people with a heartbeat.

    All the talk of buybacks to reduce the share count is fine, but do the math. Someone posted buying back 40% which would be ~4.32 billion shares or ~$56.0 billion at $13.00, is that realistic? I don't believe it is since it is over 60% of revenue (which has been shrinking fast as BAC is forced to shrink by regulators and shed assets) and how long will investors (not traders) be willing to wait while not be compensated/paid to wait with dividends. They can buy other bank stocks that yield market rates while participating in share appreciation if the economy improves.

    Finally, I think BAC moves higher, as stated earlier, but litigation needs to end and the government needs to stop using banks as their ATM. If this were to occur AND BAC grows their revenues back toward the $100.0 billion level with increased profitability the share could reach $20.00 or even a little higher which would give BAC a market cap over $200.0 billion, which would put them in the company of other U.S. large cap blue chip household names. Anything significantly higher than theses levels is likely wishful thinking and would take huge increase in inflation in the coming years, which may happen, but that is whole other discussion.
    Mar 21, 2013. 10:49 AM | 3 Likes Like |Link to Comment
  • How To Prepare For A Stock Market Downturn [View article]
    Sell half or a third of your core holdings at high valuations, providing you don't need it all for income. Buy them back when they go to historical averages or become undervalued.

    This is an easy way to rebalance portfolios and you never will second guess yourself when major sell offs come with "should of", "could of", "would of" or the classic "if I only".
    Mar 20, 2013. 10:43 AM | 3 Likes Like |Link to Comment
  • Short Interest For Nokia Is At An All-Time High [View article]
    I failed to mention that share totals long/short would need to be equal to eliminate the equity risk. If long side is larger, then equity risk is tilted that way.
    Mar 19, 2013. 11:54 AM | 1 Like Like |Link to Comment
  • Short Interest For Nokia Is At An All-Time High [View article]
    A long NOK adr position while short ordinary share position in or for the same account is no longer an equity position and has become a synthetic currency bet/position. In the case described by Seppo2, the position is long euros and short U.S. dollar.
    Mar 19, 2013. 11:47 AM | 2 Likes Like |Link to Comment
  • Short Interest For Nokia Is At An All-Time High [View article]
    Jacob,

    Do not forget the Nokia issued a convertible bond last October. The amount convertible represents ~287 million shares, so much of the short interest increase was likely Stat/Convert Arbitrage strategies that are always employed by hedge funds and trading desks when convertibles are issued.
    Mar 19, 2013. 09:33 AM | 1 Like Like |Link to Comment
  • Bank Of America Has Failed Shareholders [View article]
    Regarded Solutions,

    I am with your thinking that it is very disappointing they didn't increase the dividend, since it is better to be paid to wait for further share price appreciation and bank stocks should yield some cash flow for investors. Below are my comments from another BAC article as to why I think they didn't increase the dividend.

    I think one reason for no increase in the dividend may have been influenced by the cost of the TARP A warrants that adjust for any dividend increase above the current annual rate of $.04 cents (the "B" warrants I believe are almost worthless given their strike price). The strike is $13.30 for ~150.0 million "A" warrants which would adjust downward by any dividend increases above $.04 cents per share until maturity at 1/16/2019. Therefore, a decent dividend increase would have increased dilution (bringing the strike in/at the money by maturity given current prices if they went with a $.21 dividend increase to an annual rate of $.25) and worked against the reason for the buyback which is to reduce float.

    I am disappointed that the dividend was not increased at all. A dividend increase shows confidence in a better sustained operational metric (both internally and externally) as well as less concern over ongoing litigation. The $10.5 billion announced capital return by BAC is welcome and certainly dwarfs Citi's $1.2 billion announcement showing how much further a head BAC is in recovery, which is important. Also, the $5.5 billion redemption of the two preferred series will save ~$460 million annually and interestingly covers the current common annual dividend of ~$432 million (I am sure the Fed liked this math) which portends well for a future increase if economic recovery continues..

    However, a share repurchase only returns cash to shareholders if they sell into strength (actually favors traders/speculators over long term investors) or the price never falls again below the price when the buyback is announced ($12.11). Also, it needs to be fully implemented which BAC says will potentially be over the next year as stated in press release:

    "The timing and exact amount of common share repurchases will be consistent with the company’s capital plan and will be subject to various factors, including the company’s capital position, liquidity, financial performance and alternative uses of capital, stock trading price, and general market conditions, and may be suspended at any time. The common share repurchases may be effected through open market purchases or privately negotiated transactions, including Rule 10b5-1 plans, over the next four quarters. The company’s 2013 capital plan did not include a request to increase the quarterly common stock dividend rate of $0.01 per share".

    The $5.0 billion announced would remove ~396mil shares at current prices which is ~2.4 days trading volume, a drop in the bucket when spread over a year and less if they negotiate private transactions as mentioned above (Uncle Warren's warrants? Tarp warrants? all represent dilution).

    Finally, companies can and usually do suspend buybacks more quickly than cut dividends, so hence my disappointment that the dividend wasn't increased from the current token amount.
    Mar 17, 2013. 08:42 PM | 2 Likes Like |Link to Comment
  • Bank Of America Hits A Home Run [View article]
    A Newell,

    I agree, and that is the point I made earlier. Your reason for no dividend increase might be right, although I hope management isn't that timid.

    I think one reason for no increase in the dividend may have been influenced by the cost of the TARP A warrants that adjust for any dividend increase above the current annual rate of $.04 cents (the "B" warrants I believe are almost worthless given their strike price). The strike is $13.30 for ~150.0 million "A" warrants which would adjust downward by any dividend increases above $.04 cents per share until maturity at 1/16/2019. Therefore, a decent dividend increase would have increased dilution (bringing the strike in/at the money by maturity given current prices if they went with a $.21 dividend increase to an annual rate of $.25) and worked against the reason for the buyback which is to reduce float.

    If BAC management believes the share price is too low, they should use some of the targeted $5.0 billion to buyback the "A" warrants since the strike is low relative to book value.
    Mar 15, 2013. 01:22 PM | Likes Like |Link to Comment
  • Bank Of America Hits A Home Run [View article]
    Colin,

    A small increase in the dividend combined with the share repurchase program would have been the right thing in my opinion, since it would benefit long term investors in the stock.

    As to Warren Buffet's great investment in BAC, there really was no risk at all, if he didn't want any risk that is. Only Warren Buffet gets the terms he demands. Below is a post I made last year commenting on the investment he made in BAC.

    From last year:

    Buffet's deal was risk free. He gets 6% ($300mil per year) on preferred and got the warrants for free to buy 700mil shs at ~$7.14. On the day of the deal he could have hedged half of the 700mil warrants at a price of close to $8.00 (VWAP over 1 billion BAC traded that day) and subsequently the rest in the next few days.

    Bottom line, say he locked in the 700mil BAC shs short at say $7.64 against the warrants (likely higher). BAC goes to zero, Buffet makes $5.348bil which covers his preferred investment and a $348mil profit on top. BAC recovers (which it has), good ole Warren still has $348mil to ring up anytime he wants to by converting the warrants which would give BAC another $5.0bil in capital and everyone says the old boy is loving BAC again. Now, I not saying he did this, but as a retired professional trader (from a major investment bank) the opportunity was the there to lock in this risk free trade. The headlines said Buffet believes in BAC by the investment, but in reality he is a good businessman and when there is risk free money being offered he isn't one to turn it down. It's good to be king or in the case Warren Buffet.
    Mar 15, 2013. 09:50 AM | 1 Like Like |Link to Comment
  • Bank Of America Hits A Home Run [View article]
    I am disappointed that the dividend was not increased at all. A dividend increase shows confidence in a better sustained operational metric (both internally and externally) as well as less concern over ongoing litigation. The $10.5 billion announced capital return by BAC is welcome and certainly dwarfs Citi's $1.2 billion announcement showing how much further a head BAC is in recovery, which is an important. Also, the $5.5 billion redemption of the two preferred series will save ~$460 million annually (as the author mentions) and interestingly covers the current common annual dividend of ~$432 million (I am sure the Fed liked this math) which portends well for a future increase if economic recovery continues..

    However, a share repurchase only returns cash to shareholders if they sell into strength (actually favors traders/speculators over long term investors) or the price never falls again below the price when the buyback is announced ($12.11). Also, it needs to be fully implemented which BAC says will potentially be over the next year as stated in press release:

    "The timing and exact amount of common share repurchases will be consistent with the company’s capital plan and will be subject to various factors, including the company’s capital position, liquidity, financial performance and alternative uses of capital, stock trading price, and general market conditions, and may be suspended at any time. The common share repurchases may be effected through open market purchases or privately negotiated transactions, including Rule 10b5-1 plans, over the next four quarters. The company’s 2013 capital plan did not include a request to increase the quarterly common stock dividend rate of $0.01 per share".

    The $5.0 billion announced would remove ~396mil shares at current prices which is ~2.4 days trading volume, a drop in the bucket when spread over a year and less if they negotiate private transactions as mentioned above (Uncle Warren's warrants? Tarp warrants? all represent dilution).

    Finally, companies can and usually do suspend buybacks more quickly than cut dividends, so hence my disappointment that the dividend wasn't increased from the current token amount.
    Mar 15, 2013. 09:13 AM | 1 Like Like |Link to Comment
  • Once Again, Nokia Gets Downgraded By Goldman Sachs [View article]
    This analyst sounds like he is a valuable indicator. I traded NOK for a major investment bank over ten years ago (during the tech/telco bubble in the late 90's / those were the days) and we had an analyst covering Nokia we nicknamed "wrong way". Every time he changed his rating, it presented an opportunity on that day to do the opposite of the recommendation (short the buy / buy the sell). Within one day (as well as the medium term trend), NOK would reverse and the trades could be closed out very profitability. Eventually the analyst was gone (blew-up retail way too much), but his ability as a contrary indicator was remarkable.

    Most securities analysts are not very good stock pickers and really are tools of the investment banking/trading operations. Some things never change despite what is reported publicly.
    Mar 14, 2013. 02:49 PM | 8 Likes Like |Link to Comment
  • Bank Of America: Buy Now Before Dividend Increases [View article]
    BAC has 10.82 billion shares outstanding. I believe GE is the only other share above 10.0 billion (10.4 billion), MSFT has 8.38 billion. Both GE and MSFT have market caps north of $200 billion. BAC's current market cap is ~$128 billion. In a healthy growing economy BAC could certainly see a market cap above $200 billion (JPM's current market cap is ~$190 billion) and higher once true earnings capacity is realized (litigation has to end as well).

    A $.25 dividend would cost BAC ~$2.7billion and would pay shareholders at least something to wait for better economic growth and profitability. If they bought back $2.7 billion worth of shares (at current prices) in a buy back it would amount to ~226mil shares, which is ~1.36 days average volume and still leave over 10.5 billion shares outstanding. Does anyone really think this will make a large impact on price? A reinstated decent dividend yield will show confidence that operating conditions at the bank have improved and money can be consistently returned to shareholders.

    Over time, BAC's share price can double even with the large amount of shares outstanding, although patience is required and it is easier to be patient if you are paid to wait.
    Mar 7, 2013. 08:09 AM | 2 Likes Like |Link to Comment
  • Coal Is Dead [View article]
    Yorick

    Well said. I also believe earth tremors are potentially a side impact of fracking.

    Also, as you stated the declining flow rates after a year require new wells to be drilled to maintain production and that comes at additional costs, unlike traditional wells that deplete more slowly. The sales of shale acreage to large foreign oil/gas companies is one way the smarter domestic players offset the higher costs associated with shale drilling. Eventually, even this procedure will be diminished and natgas prices will need to rise to cover the economics of shale and when this happens coal will be very attractive once again.
    Mar 6, 2013. 10:32 AM | Likes Like |Link to Comment
  • Bank Of America: Buy Now Before Dividend Increases [View article]
    What no one seems to mention with BAC has been the effort to make their balance sheet the safest amongst the big U.S. banks. As of last October, BAC had the highest tier 1 capital ratio (safest most liquid) of all the U.S G-SIFI (globally systematically important financial institutions / link below from Fitch). They also have the lowest tier 3 ratio (most illiquid risky assets). BAC has been reducing tier 3 assets for years, while JPM has increased tier 2 and 3 (ask JPM how the London Whale trade worked out) which in my opinion makes that bank more risky given those tier assets are the mark to model variety (one reason the financial crisis occurred) and not the clear mark to market for very liquid assets.

    http://bit.ly/XPxr70

    BAC's biggest mistake, as everyone knows, was the Countrywide purchase which they are still paying for with it seems endless litigation. However, at some point the litigation issues will mostly be behind BAC and the earnings will rebound and allow for a basis change in valuation and increased dividend capacity. I commented yesterday on another SA article on BAC and will repeat why I think (if allowed by Fed) BAC will increase their dividend.

    From yesterday:

    BAC needs to raise their dividend after the latest stress test results are announced. If the Fed allows it, a $.21 increase to $.25 annually would make sense and yield ~2.1% with the potential to continue to raise it incrementally going forward as long as the economy improves and litigation risks fade.

    Given that senior management of the bank has a lot of restricted stock from prior compensation years and their personal tax rates have recently risen, an increased dividend essentially gives them a tax efficient raise. A stock buyback is also a possibility, but I believe a dividend that pays something of a noticeable yield will come first, given what BAC's peers pay and the self interest of management.
    Mar 6, 2013. 09:58 AM | 2 Likes Like |Link to Comment
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