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charliezap

charliezap
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  • 6 REITs For Monthly Income [View article]
    A useful article if one is looking for a list of REIT's that pay monthly dividends, but not especially useful if one is seeking to choose the best values among them.

    In particular, Price to Book is a virtually useless concept when looking at equity REIT's.

    The reason: GAAP accounting rules require the accountants to deduct depreciation when producing a company financial statements. But for a property REIT, the major assets are land, buildings, and other improvements. In the aggregate, the values for these assets are much more likely to appreciate over time then to depreciate. This fact causes conventional measures such as Net Income, PE, and Book Value to be grossly misleading as valuation determinants.

    Instead, REIT analysts focus on FFO (Funds from Operations) and NAV (Net Asset Value). FFO is essentially Net Income with depreciation added back, plus other adjustments, such as the elimination of the effects of asset sales and other non-recurring events. NAV is derived by replacing the depreciated book value of property assets with estimates of their market value.

    In fact, one of the REIT's above (WHLR) must have a negative book value, since the article states that Price/Book is negative (the price, at least, must be positive). I owned a REIT a few years ago (Town and Country Trust) that had a negative book value. But the underlying market value of the properties was positive, even after deducting the debt, and the stock was taken out in a merger at over $40 per share!
    Jan 29 07:26 PM | 3 Likes Like |Link to Comment
  • Realty Income Raises Dividends By A Record 19.20% [View article]
    The latest report is dated Jan 23, and update after the div increase. The NAV is from their Global Property Hunter valuation table, dated 19 November. The reports are available through my account. I will read the Thomas article when I have the time. I am on the run now.

    Here are words from the report:

    <<<
    Investment strategy
    We rate the shares of Realty Income Sell (3). Our rating reflects the current valuation premium relative to peers and the private market. Additionally, high exposure to non-IG tenancy adds risk amid renewed economic concerns; however, a good underwriting track record and relatively stable portfolio over time provide some comfort. Realty Income’s stable operating performance, clean balance sheet, deep management team, and secure and growing dividend help balance the story. The company’s portfolio of more than 2,500 freestanding retail properties should continue to generate consistent, predictable cash flow within the structural stability of 10- to 20-year triple net leases.

    Valuation
    We value Realty Income using a combination of NAV, AFFO and FFO multiple valuation. For O, our valuation methodologies take into consideration the company's low leverage and available capital with which to acquire, well covered dividend, stable core operations, and on the negative side, heavy exposure to non-investment grade tenants which presents risk should tenants falter amid economic concerns. This methodology results in a target price of $27.

    Risks
    If private market cap rates expand more than we anticipate, the stock could underperform our target price. If private market cap rates compress more than we anticipate, the stock could outperform our target price. Other risks to our target price include a core portfolio that is made of up predominantly non-investment grade tenants which give cause for concern should unanticipated bankruptcies emerge. Some comfort is provided given O's good underwriting track record and relatively stable tenant credit history over time. Conversely, if these tenant credit risk factors turn more positive than we expect, our target price might be materially surpassed. Also, given O's significant dry powder, acquisition volumes could be above our expectations and O could exceed our target price.
    >>>

    For a copy of the Jan 23 report, email me at

    >charliezap
    > at
    > aol
    > dot
    > com
    Jan 29 04:07 PM | Likes Like |Link to Comment
  • Citigroup: One Of The 10 Best Stocks For 2013 [View article]
    Actually, I did sell the Citi $43 calls, and the BAC $12.50 calls. Both expired worthless and I made about $1,000. In hind sight, it would have been better to sell the stocks outright.

    On the charts, stock has gone sideways since the 1/7 post, but the MACD histogram is negative, indicating a downtrend. There is some support around 40-41. We shall see.
    Jan 29 03:41 PM | Likes Like |Link to Comment
  • Realty Income Raises Dividends By A Record 19.20% [View article]
    Holders of O should be aware that a recent report by Citigroup has a Sell rating on O with a target price of $27.

    O's stock price is among the highest of any REIT relative to per share NAV (Net Asset Value, the net worth of the company, using the market value of the properties instead of the depreciated book value). Based on the Citi report the premium is over 80%.

    This gives O a strong incentive to sell new stock and buy more properties. This will probably work fine as long as the yield (cap rate) on the new properties exceeds the yield on the stock, but there is the risk that the acquisition drive will lower the average quality of the properties, and that a recession will lead to management problems and defaults.

    I would stay away.
    Jan 29 12:02 PM | 1 Like Like |Link to Comment
  • 8 Interestingly Undervalued Dividend Stocks That Have Strong Earnings Growth Trends [View article]
    Uses 3-year historic growth rates for EPS. This is probably too short a period to judge growth, especially for companies with cyclical earnings.

    The article is interesting, but still backward looking ("like driving by looking in the rear view mirror"). My favorite indicator is the Dividend Adjusted Forward PEG ratio, which uses the PE based on next year's estimated earnings, and is defined as:

    = (Forward PE) / ((5-yr Est Growth%) - Yield%)

    Here are the ratios for these companies, from lowest to highest:

    Ticker ** Div Adj PEG (Y1-Fwd)
    STO ** 0.7
    INTC ** 0.7
    CLF ** 0.7
    BSBR ** 0.7
    RTN ** 1.1
    SSL ** 1.3
    GFI ** 2.7
    YZC

    The first four pass the test with the ratio < 1. RTN, SSL, and GFI drop down due to low forward growth. YZC drops out due to lack of a growth rate estimate.

    (Ratios computed from data in the AAII Stock Investor data base.)
    Jan 29 11:21 AM | Likes Like |Link to Comment
  • Exxon Mobil: Speculative Buy At $55 [View article]
    I think the article was a silly joke. Let's not see any more from him!
    Jan 22 09:55 AM | 1 Like Like |Link to Comment
  • ConocoPhillips: Dividend Stock Analysis [View article]
    Personally, I find the numerous "numbers exercises" espoused by SA authors to be a waste of time, especially those that try to project the future, based on backward looking historic data. Plus those that ignore underlying industry specifics. Also, misleading ratios that have no application to the oil industry, such as price/sales (which depends on the degree of oil industry integration for the company) and price/book (which depends on the degree of efficiency in locating new oil and gas reserves).

    I would put this article in the same category, using as it does some inexplicable "black box" (the "D4L-PreScreen.xls model") that pumps in historic accounting data, and pumps out what . . . ? Why not instead use a model that determines the intrinsic value of the underlying reserves and other assets. I suggest you check out Kurt Wolff's analysis at McDep dot com:

    http://bit.ly/Yj3NKq

    Wolff thinks ConocoPhillips is at a 29% discount to intrinsic value, based on his McDep Ratio (Market cap and Debt to present value of energy businesses). But Marathon is at a 39% discount and represents better value.
    Jan 21 02:11 PM | 4 Likes Like |Link to Comment
  • Exxon Mobil: Speculative Buy At $55 [View article]
    This article is a useless theoretical exercise, and a waste of time for most investors.

    I'm not saying that XOM will never again trade at 55, where there is long term chart support. But lets do the analysis when we know what took it down there. For instance, Jim Chanos has been predicting a collapse in China for the past 5 years. Maybe he will be right some time, but it hasn't happened yet.
    Jan 21 12:29 PM | 6 Likes Like |Link to Comment
  • The Bakken Oilfield: TransCanada Keystone XL Project May Bypass Federal Review [View article]
    """Lots and lots of discussion here and everywhere, but there does not seem to be a lot of factual information about this pipeline."""

    You sound like a bozo. If you want facts, just google "transcanada keystone". Here is some of what you will find:

    http://bit.ly/TgPNYZ

    http://bit.ly/VcAOmZ
    Jan 19 12:16 AM | 1 Like Like |Link to Comment
  • Check Into These Hotel REITs For High Yield [View article]
    Yes of course, hotels suffer during a recession. But right now the economy is still trending up, albeit slowly, as it has since mid-2009 according to the NBER. There do not appear to be any imbalances or other economic conditions at this time that would lead to a new recession in the coming year.
    Jan 16 09:12 PM | Likes Like |Link to Comment
  • The U.S. will overtake Russia and Saudi Arabia to become the world’s largest oil producer this year, thanks to the boom in tight oil, rising production of biofuels and expected cuts in OPEC supply, BP says in its latest energy outlook. Other potential shale operators, such as China, lack the unique combination of factors that have helped launch the U.S. shale revolution. [View news story]
    Galt

    Thank you for your link, which I think covers the issues related to measuring resources very well. I also have no problem with the term "proved reserves" which I think counts the resources (oil) that can be recovered at today's prices and with today's technology. Each year, new drilling and new technology will add to proved reserves, while consumption will draw down proved reserves. I agree there's more out "there", as described in the pyramid in your link, but it may much higher prices to bring it all to market.
    Jan 16 09:01 PM | Likes Like |Link to Comment
  • The U.S. will overtake Russia and Saudi Arabia to become the world’s largest oil producer this year, thanks to the boom in tight oil, rising production of biofuels and expected cuts in OPEC supply, BP says in its latest energy outlook. Other potential shale operators, such as China, lack the unique combination of factors that have helped launch the U.S. shale revolution. [View news story]
    Actually, the US had only 1.9% of proved reserves at the end of 2011, and 8.8% of production in 2011. Undoubtedly, the US share of production and reserves increased in 2012, thanks to new reserves from fracking. Go see the report yourself (links below). From all of the political rhetoric, you would think the president is out there with his finger in the drill hole, trying to hold back production!

    BP .pdf:
    http://bit.ly/SKH9Zr

    BP .xlsx:
    http://bit.ly/We0sGZ

    Latest production #'s:
    http://1.usa.gov/zWEk2c
    Jan 16 12:54 PM | 4 Likes Like |Link to Comment
  • Check Into These Hotel REITs For High Yield [View article]
    An recent article by another SA author similarly confused Net Income and FFO. Here is a link:

    http://seekingalpha.co...

    In that article, I made the following comment on HPT's outlook: ""For HPT, FFO per share is expected to show increases under the expectation of a continuation of the current, albeit slow, economic expansion. New supply of hotel rooms lags demand and hotel rates and occupancies are expected to continue to increase in the coming year. HPT has had a number of its hotels under rehab recently, and expects better operating results when this is complete. Further dividend increases can be expected in the next year or two. 30 is a reasonable target price for the stock over the coming year.""
    Jan 16 10:49 AM | Likes Like |Link to Comment
  • Check Into These Hotel REITs For High Yield [View article]
    .Bret

    Good stocks and I own them both. However, in justifying these stocks, you misleadingly quote P/E ratios, PEG ratios, and Book Values. For property REIT's (i.e. equity REIT's), the REIT analysts focus on FFO (Funds from Operations), FFO multiples, and NAV (Net Asset Value).

    Here is why. Under GAAP accounting, the accountants deduct depreciation in each accounting period. But, over time, the value of the properties (land + buildings) generally appreciates. So the analysts add back depreciation to get FFO, at the same time making adjustments for non-recurring events, including asset sales. They also put the estimated market value of the properties on the balance sheet, replacing the depreciated book value, to get NAV.

    For property REIT's such as HPT and CLDT, the numbers quoted under "Earnings" on the Yahoo Analyst Estimates page, are not in fact "Earnings". Instead, the estimates are for FFO/share. The P/E ratio is in fact the P/FFO ratio. The PEG ratio is the Price to FFO growth ratio.

    Anyone wishing to get a better understanding of all this should simply read the last quarterly earning release, linked below:

    http://yhoo.it/13Dzeyg
    Jan 16 10:39 AM | 3 Likes Like |Link to Comment
  • ECRI's Imaginary Recession: Now In Its 7th Month [View article]
    I heard the recession speech back in the middle of last year. I was skeptical. It didn't happen.
    Jan 15 11:15 AM | Likes Like |Link to Comment
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