Seeking Alpha

charliezap

charliezap
Send Message
View as an RSS Feed
View charliezap's Comments BY TICKER:
Latest  |  Highest rated
  • Sasol President/CEO Constable to step down next year [View news story]
    """ The government would probably think twice before imposing on the management of a company that is South Africa's largest taxpayer . ."""

    I think you are giving the incompetents in the SA government credit for more intelligence than they actually have. When push comes to shove in present day SA, politics will always triumph over economics. The attitude of some of those in politics in SA is that Sasol is a golden goose that is ready to be plucked. Perhaps that is why Mr Constable has decided to resign.

    """One result [of a slowing down in the SA economy] is a gradual devaluation of the rand against the dollar and other hard currencies, leading to lower dollar denominated profits and dividends."""

    1. One reason for the slowing down in the SA economy are new laws that raises taxes and government participation in new oil and minerals ventures in SA. This has deterred new foreign investment and slowed down growth.

    2. The decline in the rand vs the US$ actually increases Sasol's profits, even when expressed in US$. This is because the bulk of Sasol's revenues are keyed to $$$ -- the prices of fuel products sold in SA are set by a formula that is based on the dollar price of Brent crude oil, and Sasol's chemical exports are priced in $$$. Meanwhile, the major part of Sasol's costs are in rands, so the profit margin widens when the rand declines.

    3. It is actually the decline in the crude oil price since last year that is responsible for the current forecast (fiscal 2015 and 2016) slump in Sasol's profits.
    Jun 8, 2015. 10:58 PM | Likes Like |Link to Comment
  • Portnoys' RMR to go public; managed REITs now own about half [View news story]
    I don't know where you get the sinking ship analogy. Anyway, the market likes the news. SNH and HPT are each up 2% or more as of now, more than any of the 26 other REITs on my watch list. My advice: get in while these stocks are still cheap.

    Disclosure: Long SNH and HPT, and enjoying the 7.7% and 6.4% respective yields.
    Jun 8, 2015. 10:29 AM | 4 Likes Like |Link to Comment
  • Sasol President/CEO Constable to step down next year [View news story]
    The risk in Sasol is that the political incompetents in South Africa will gain influence in the appointment of the next CEO, especially as big project decisions come up, such as whether to go ahead with GTL in Louisiana.

    For example, one only has to look at the travails of the government owned PetrgSA -- running out of gas to supply its GTL operation, soured investments in Equatorial Guinea, and a proposal to build a monster refinery at a time of overcapacity in the international market.

    Also, electric power supply problems at the government owned utility, Eskom.
    Jun 8, 2015. 09:31 AM | Likes Like |Link to Comment
  • Citigroup: The Tortoise, Not The Hare [View article]
    C made a 5-year closing high on Friday. It looks ready to break out to the upside. Higher interest rate spreads will help. My target is $71, which is 1.25 X TBV.

    Technically, the daily MACD is on a positive signal, and the RSI is above 50, pointing to a continuing move up. Its wrong right now to call it a value trap.
    Jun 8, 2015. 09:18 AM | 1 Like Like |Link to Comment
  • Physicians Realty: Fast Growth, But Not Cheap [View article]
    The only thing that DOC and VGHCX have in common is that both invest in the healthcare sector.

    DOC is a REIT that happens to invest in medical office buildings. To maintain its REIT status, DOC must pay out as dividends at least 90% of taxable income. The current yield is 5%. Equity REITs like DOC are sensitive to likely increases in the yield on the 10-year Tbond.

    VGHCX is a mutual fund. Within healthcare, its largest sector is biotech. The average yield on its 3 largest holdings is 1.3%. Most of the cash flow of the holdings of VGHCX is ploughed back for future growth.

    Conclusion: The past growth rate of VGHCX is in no way indicative of the future growth of DOC.
    Jun 8, 2015. 08:47 AM | Likes Like |Link to Comment
  • Could Hospitality Properties Trust Become Another Sucker Yield REIT? [View article]
    Brad, I am not saying that external management is a good thing for a REIT. In fact, I believe internal management is preferred. But, in any investment there are pluses and minuses and you have to weigh up all of the factors. one of the factors is the price. Another is the dividend yield. Another is the FFO yield. When I weigh everything up and consider my overall portfolio, I find there is a place for HPT.

    Also, despite the hazards, I prefer to look at the forward prospects of a company, rather than just the history. There are a number of REITs that have done very well historically. That success has enabled them to extend their growth by raising the price of their stock and providing them with a low cost of capital for new acquisitions. The problem is that the bigger that they, the harder it becomes to sustain that growth. JMO.
    Jun 4, 2015. 01:00 PM | 2 Likes Like |Link to Comment
  • Exxon at a crossroads: Do a big deal, or shrink slowly [View news story]
    Under the previous CEO, Lee Raymond, XOM became one of the most uptight and conservative large companies in the USA. They decided to buy back stock instead of investing in new E&P. (Check the numbers and you will find that XOM spent more on buying back stock than in expanding oil and gas production). They made conservative assumptions on future crude oil prices, and set high hurdle rates. Even now they make much of their high ROCE, but financial theory says that to maximize shareholder value, you should invest in all projects down to the level of your average cost of capital (with some adjustments for risk).

    As a result, XOM had to play catchup by buying XTO. The fact that the XTO venture was mistimed pobably continues to keep XOM on the cautious side. There has been a lot of broker talk and speculation about making acquisitions in the current environment, but I have seen no signs that suggest that XOM is actually buying something. Until something happens, I would be sceptical.
    Jun 4, 2015. 12:49 PM | 3 Likes Like |Link to Comment
  • Could Hospitality Properties Trust Become Another Sucker Yield REIT? [View article]
    Yes, hotel REITs are cyclical. And they will cut dividends in recessions. But the odds of a sharp recession in the next 18 months are minimal. More likely, economic growth will pick up in the second half of 2015, as consumer spending picks up in the wake of low gasoline prices, and employment and housing continue to make gains.

    With a low supply of new hotels coming on the market, hotel RevPAR (Revenue per Available Room = Avg Room Rate X Occupancy%) will continue to gain, which is favorable for hotel REITs. Being more of a total return investor than an income investor, I remain long HPT.
    Jun 4, 2015. 10:22 AM | 1 Like Like |Link to Comment
  • Citigroup: The Tortoise, Not The Hare [View article]
    """At the time of the deal I was a graduate intern for World Wide Custody Operations at Citicorp which provided a front row seat on the day of the historic 2.5 for 1 stock swap."""

    A front row seat? Really?

    """ . . the stock price still lags well below its highs 10 years ago."""

    And it will still lag the old highs 10 years in the future. But what is the relevance of this? Citi was essentially bailed out and recapitalized by the feds in 2008 and adjusted shares went from 550 million to 2.84 billion, i.e., dilution was over 5 X. Citi is just not the same company today, neither in terms of its business or its capitalization. Prior to the crash, the share price was 2.5 X tangible book, but now it's at a discount. WFC sells at a very high premium. Citi has the most upside.
    Jun 4, 2015. 12:06 AM | 2 Likes Like |Link to Comment
  • Exxon at a crossroads: Do a big deal, or shrink slowly [View news story]
    XOM buying BP would be a very bad idea. I posted this 6 weeks ago. It still stands:

    """XOM buying BP would be a very bad idea. Besides BP's uncertain liability issues, it would involve taking on the US government, the UK govt, and possibly the Russian govt. It would create an unmanageable monster and a clash of cultures. XOM is already large enough to take on any oil project that may come along!"""

    http://seekingalpha.co...

    Since that was posted, the UK government has indicated that it would not like to see BP taken over by XOM or anyone else.
    Jun 3, 2015. 11:31 PM | 5 Likes Like |Link to Comment
  • Could Hospitality Properties Trust Become Another Sucker Yield REIT? [View article]
    Re: ""more trucks on the road""

    The margins on selling diesel fuel at the truck stops are pretty thin. It’s the restaurants that provide most of TA's profits. What's more, HPT gets additional rent when TA's revenues increase. To quote from a recent TA investor presentation: "HPT receives percentage rents based on gross property revenues over threshold amounts, providing additional upside potential in improving markets."

    This is also true for the hotels. Quoting from the same presentation: "Hotel management agreements provide for additional returns to HPT based on hotel net operating income above certain thresholds."

    Given the percentage rent clauses that benefit HPT, one really has to question one of Brad's lead statements above, the one that says: "I don’t understand why anyone would want to own a so-called Lodging REIT that is really a Net Lease REIT."

    I have a couple of problems with this statement. First, one of the REITs that Brad owns, in fact, the one that he nominated as the #1 stock to own, is Realty Income (O), which is, of course, in the triple net category. The leases that O holds do not typically have percentage rent clauses, so O does not benefit directly from an improving business environment, unlike HPT. Instead, O has leases with fixed escalators of 1-2% annually, or perhaps escalators based on an inflation index such as the CPI. Brad also owns HTA, VTR, and OHI, which are healthcare REITs that derive most of their revenues from triple net leases: OHI, for instance, gets 90% of its revenue from triple net leases, according to the 2014 annual 10-K report.

    Second, HPT’s hotel leases, with a minimum rent plus a percentage rent, are somewhat similar to Host Hotels (formerly Host Marriott, HST), which gets a base fee plus an incentive fee. The TA leases also have percentage provisions. These are not found in the typical triple net lease.

    BTW: On the train trip out to the Hamptons this afternoon, I read an article in the May issue of the AAII Journal (http://www.aaii.com). It is subtitled, "Dividends Are Still Valuable". The main conclusion of the article is that in the 12 months after the Fed starts to raise interest rates, high yield stocks produce a higher total return, on average, than mid-yield stocks, which, in turn, do better than low yield stocks. All of these do better than no-div stocks. It supports my contention that high yield REITs, such as HPT, are better equipped to withstand rising rates than low yielding REITs, including large cap “blue chips” like SPG and BXP that yield less than 3%.

    Plus, HPT provides a greater margin of safety than, say, HST. Both sell at discounts to NAV, according to Citigroup estimates, but HPT sells at 8.2 X FFO vs HST at 13.6 X FFO (based on 2015 estimates). And HPT yields 6.8%, vs only 4.0% for HST.
    Jun 3, 2015. 11:15 PM | 1 Like Like |Link to Comment
  • Could Hospitality Properties Trust Become Another Sucker Yield REIT? [View article]
    Just added to my position. Thanks fo the opportunity, Brad. Got to catch a train to the Hamptons, so more later.
    Jun 3, 2015. 03:36 PM | Likes Like |Link to Comment
  • Senior Housing Properties Trust: Price Appreciation Needs To Improve For This 7% Yielder [View article]
    Healthcare REITs have been on a decline for the past 3 months. Look at the 3-month and 1-month charts for SNH, HCP, HCN, and VTR, and you will see a similar pattern. My interpretation is that SNH is tracing out a double bottom, and that at this level there is a buying opportunity. The daily MACD, for instance, is maintaining a positive signal -- (but it will go negative is there is a further drop from here).

    Absent a general market crisis, I doubt we will see $17. At that level the current yield would be over 9%. Won't happen!
    Jun 3, 2015. 12:02 PM | Likes Like |Link to Comment
  • 4.4% Dividend Health Care REIT Provides Steady Growth And Income [View article]
    At the close on 3/12, the publication date for this article, HCN was at $75.30. Now it is $70.48, down 6.4%, excluding the quarterly dividend, which is about 1.1%. By comparison the S&P is up 2.1% in the same timeframe.
    Jun 2, 2015. 03:49 PM | Likes Like |Link to Comment
  • My Intelligent REIT Of The Week: Tanger Factory Outlet Centers [View article]
    Regarding SKT, EXR, and many large cap REITS selling at yields of 3% or less, an article in today's WSJ may be of interest. Some quotes:

    <<< . . portfolio managers are pulling back from [utilities and REITs] in 2015, as the prospect of the first short-term interest-rate increase by the Federal Reserve in nine years makes high-dividend stocks less attractive. Investors reason that higher rates will boost the payout—and therefore the appeal—of more stable income-paying investments, like government and corporate debt. This year, managers have pulled $3.5 billion from REITs and utilities funds, according to Morningstar.

    “Equity investments that are kind of masquerading as a bond…are going to be the most vulnerable,” said Tim Courtney, chief investment officer at Exencial Wealth Advisors, a $1.4 billion financial adviser based in Oklahoma City. “They’ve had a huge run and now they’re going to have competition” from bond investments as rates rise.

    Mr. Courtney said he thinks that the investments most susceptible to a rate-induced selloff are those with dividend yields of around 3%—a basket that includes many utilities and REITs—because these investments will compete most directly with corporate and government bonds as rates start to rise. The MSCI US REIT index, a widely cited gauge of REIT performance, is down 1.7% this year, including dividends, after soaring 30% last year. >>>

    http://on.wsj.com/1I0Qxke
    Jun 1, 2015. 09:25 AM | Likes Like |Link to Comment
COMMENTS STATS
1,856 Comments
2,821 Likes