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charliezap

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  • Nymex crude settled -2.6% at $91.03 after today's inventory report revealed crude stockpiles climbed to 6.696M barrels, a record high dating back to 1982 when the EIA began tracking the data. E&P equities took a beating, from higher-beta names such as QEP Resources (QEP -6.1%) to giants such as Exxon (XOM -1.6%) and Chevron (CVX -1.4%). (ETFs: USO, UCO, OIL, BNO[View news story]
    The idea that XOM will increase production by 25% over the next 4 years, when it has been flat for 10 years, stretches the imagination. Plus, not counting acquisitions, which don't come cheap (see XTO), buybacks have exceeded spending for exploration and production in the past 10 years. In other words, XOM has become more adept at financial engineering than petroleum engineering. As for the 2.9% dividend yield, it is below that of CVX, RDSA, BP, COP, TOT, etc. It will not protect the stock in a market downturn.

    Finally, the big unknown is the oil (equivalent) price. Oil company profits are much more dependent on price than on production volumes.
    May 1 07:06 PM | 1 Like Like |Link to Comment
  • I've Never Owned A Rolex, But Maybe It's Time To Invest In Taubman [View article]
    Since REIT dividends are "non-qualified", they do not get the lower (20%) dividend rate in a taxable account, so there is good reason to own REIT's in an IRA. But for some REIT's, a portion of the dividend is classed as a return of capital, on which no tax is due (in a taxable account). And sometimes a portion of the dividend may be classified as emanating from a capital gain. If held in an IRA, any withdrawals are taxed at ordinary income rates, regardless of origin. Some investors would rather not hold REIT's that make return of capital or capital gain distributions in IRA's. For information on the tax status of past dividends, check the website of the individual REIT. (My guess is that there are SA articles on this topic in the past.)
    Apr 29 07:05 PM | 1 Like Like |Link to Comment
  • The U.S. Economy: How Did We Get Here? Where Are We Headed? [View article]
    Salmo, OK, I will concede 1 point. The major rise in debt came after the recession in 2008, and this was government debt. For government debt to increase in a recession is to be expected, of course -- tax collections down, unemployment comp and food stamps up. The issue is to when does that additional borrowing become a problem, and to what extent does cutting government spending retard the recovery.

    But prior to 2008, debt rose faster than incomes. Federal government debt doubled under the GW Bush administration, but private mortgage and credit card debt also rose rapidly. While I don't have the breakdown readily at hand, there is no doubt in my mind that the ratio of household debt to incomes rose to an unsustainable level in the 2000-2007 period, leading to the calamity that followed.
    Apr 25 09:36 AM | 1 Like Like |Link to Comment
  • Where You Should Accumulate Shares Of BP [View article]
    1. Linking the stock price of BP to the US unemployment rate is a bit of a stretch, IMO. One could even argue that people who are unemployed have more time to drive around in their cars. On the demand side there are many other factors involved. New cars are more efficient. Homes are switching from oil to natural gas for heating. Then there's the international area. Yes, Europe and Japan are economically depressed and in these areas demand for oil is more responsive to economic conditions. But there is rapidly growing demand in China and India.

    Then there is the supply side. Worldwide supply and demand determine price. And oil company earnings are much more dependent on price than on volume (demand). By the same token, stock prices for integrated oil companies are generally taken as a function of earnings (P/E), and not sales (P/S).

    2. In fact, using price/sales ratios as a valuation tool for integrated oil companies is a meaningless exercise. P/S as a financial tool was invented during the dotcom era to value dotcom companies that had no earnings. Now computers grind out P/S ratios willy-nilly for everything.

    For an oil company, P/S is totally dependent on the degree and manner of integration. Take one oil company that sells all of its crude oil production to its own refineries. The crude oil sales are eliminated is consolidation and only the refinery sales are in the published financials. Take another oil company that for geographic or other reasons sells all of its crude on the open market, and buys crude for its refineries from third parties. The consolidated sales of the latter company will reflect both the crude oil sales and the refined product sales. If the two companies have about the same amount of net earnings and about the same market cap, then the P/S for the first company will be about twice as high as the second -- the denominator for the second will be much greater!

    Not an especially helpful article, IMO.
    Apr 19 10:17 AM | 1 Like Like |Link to Comment
  • Here's When To Buy Exxon Mobil Stock [View article]
    I searched lists of Berkshire holdings and could find no XOM. I could be wrong, but I don't believe he holds any XOM. Buffett is on record as not favoring oil companies. He bought some ConocoPhillips a while back, later said it was a mistake, and still owns some. It seems to be his only holding of an oil producing company.
    Apr 12 12:47 AM | 1 Like Like |Link to Comment
  • BP - The Resolution Of Legal Issues Will Be The Catalyst To Propel The Stock Higher [View article]
    According to the BP website, the shares are 38% owned by US investors, 35% by UK investors, and only 15% by the rest of Europe. BP operates worldwide, and has 30,000 US employees. Most of its upstream operations (the more profitable sector) are outside of western Europe. BP produces more crude oil in the USA than in Europe (excluding Russia). It also refines more in the US, and sells more oil and chemical products in the USA than in Europe. In any case, crude oil is sold in the world market and priced on world market conditions. Being "based in Europe" absolutely does NOT mean that it is "engulfed in a recession and unemployment".
    Apr 1 12:30 PM | 1 Like Like |Link to Comment
  • The False Link Between Higher Stocks And A Stronger Economy [View article]
    For S&P chart go to Yahoo --> Finance --> S&P -->Chart
    and click on 5y (for a 5-year chart). Here is a link to Yahoo Finance:

    http://finance.yahoo.com
    Mar 27 01:47 PM | 1 Like Like |Link to Comment
  • Why Price/Sales Is A Dangerous Valuation Metric [View article]
    The service I use and like is the AAII's Stock Investor Pro. Their database covers 9,000 companies and a very large number of stock variables including EV and ratios such as EV / EBITDA. The service includes 50 stock screens. Variables include income statement and balance sheet data, earnings estimates, stock prices, and company descriptions. Reports include an excellent company summary. The latest data can be downloaded weekly. Building one's own screens, reports, custom variables, notebooks, etc can be time consuming at first, but the service is extremely useful once one is familiarized. The service costs $198 per year. Membership in the AAII may also be required -- $30 per year.
    Mar 24 03:35 PM | 1 Like Like |Link to Comment
  • A Word Of Caution About Bank Of America's Share Buyback [View article]
    willfly, according to this link, Ken Lewis went into Countrywide with his eyes wide open -- there is no mention of any fed or admin involvement:

    http://n.pr/UzAFMW
    Mar 18 10:34 PM | 1 Like Like |Link to Comment
  • Just How Risky Are REITs? [View article]
    Good article. Of course, everything got hit in 2008-09 -- there was no place to hide. I agree with you that liquidity became the main issue. People forget that special IRS rules in 2009 permitted REIT's to cut or eliminate dividends, by temporarily suspending the 90% payout rule. Many REIT's took advantage of the suspension to retain funds and build liquidity, a smart move in my opinion. But the market penalized the REIT's that cut dividends, and the memory has persisted. But the crash did indeed create opportunities that in hindsight are quite remarkable -- like SPG (largest mall owner) going from 29 to 159, virtually in a straight line. The yield is now under 3%, however, and one has to wonder whether prospective future returns justify the risk.

    Remember, the peak price in 2007 was about 124, so there was a scary downhill ride prior to the current uptrend.
    Mar 13 05:09 PM | 1 Like Like |Link to Comment
  • Monmouth: A REIT Insiders Believe In [View article]
    I have taken the following from another posted comment of mine:
    ----------------------...
    Why use FFO instead of EPS? 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.
    Mar 12 01:37 PM | 1 Like Like |Link to Comment
  • Monmouth: A REIT Insiders Believe In [View article]
    Ve . ery interesting! think I saw a recent survey where office and industrial were the least popular choices among REIT sectors. Taking a contrarian approach, this might be a good time to enter. After all, recent employment gains have been better than expected. I've always like Mack-Cali (CLI) in the office sector and it might be worth a look along with MNR. Just need to do a little more due diligence before taking a position.
    Mar 11 10:26 AM | 1 Like Like |Link to Comment
  • 5 Bullet-Proof Dividend Growers Yielding 5% [View article]
    While I don't want to argue about it, it is my understanding that holding a partnership interest in an IRA is what gives rise to the concept of UBTI. I don't quite follow how an MLP can be structured so that UBTI can be separated from "income", unless it is something along the lines of the following, which is taken from the link below: "" "two MLPs (Enbridge Energy Partners and Kinder Morgan Energy Partners) have affiliates that issue special shares that pay distributions in the form of additional shares and do not trigger UBIT; an additional MLP (Linn Energy, LLC) has formed an affiliate that pays cash dividends. If you don’t want your retirement account to pay UBIT but hate to pass on the income opportunity, you may want to check out these options." ""

    http://bit.ly/sqR4tD
    Mar 9 12:18 PM | 1 Like Like |Link to Comment
  • 5 Bullet-Proof Dividend Growers Yielding 5% [View article]
    """ REITs and MLPs do not pay a dividend. They make distributions to unit holders or limited partners."""

    Bob, when you lump REIT's and MLP's in the same sentence, I think you are confusing the issue.

    MLP's are partnerships, and unitholders get a Schedule K-1 that designates the income that is taxable to the unitholder. The taxable amount may be less the amount of the distribution. If the MLP units are held in an IRA and the income is more than $1,000, the issue of UBTI arises, which complicates tax reporting.

    REIT's are, for practical purposes, treated as corporations, except that taxes are not payable at the corporate level if it makes dividend distributions to unitholders in excess of 90% of taxable income. In a taxable account, a portion of the distribution may be characterized as a return of capital, or as a capital gain. If not so characterized, the dividends are "non-qualifying" and are treated as ordinary income. This means that the top tax rate is 43.4% in 2013 (the maximum rate of 39.6% applying to MFJ taxable income over $450,000 , plus the 3.8% surtax on investment income). Plus state taxes.

    For more of the unpleasant details, see:
    http://bit.ly/SZulb0
    Mar 9 09:18 AM | 1 Like Like |Link to Comment
  • Why REIT Dividends Are Not A Mirage [View article]
    Yes, Bryce, you have it. The value of property REIT assets (land and buildings -- apartments, offices, & retail) generally appreciates as rents increase over time, as opposed to depreciates. So REIT analysts track FFO rather than EPS. For instance, the "Analyst Estimates" page for property REIT's on Yahoo does not show EPS estimates; the estimates shown are actually FFO per share. Here is the page for O:
    http://yhoo.it/WMFpv8

    Here is the 4th quarter earnings release:
    http://yhoo.it/WMFpvc

    Q4 FFO was $0.56. EPS was 0.21. Dividends paid were $0.454.
    Mar 7 09:49 AM | 1 Like Like |Link to Comment
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