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  • Realty Income, Keynes And 5% [View article]
    I see it this way:
    The Fed rate (one hopes) reflects the inflation rate (that we all want to beat with our investments).
    O generally pays about 2.5 points above the Fed rate.
    However, sometimes the Fed raises rates. (The reverse is also true, but let’s look at this for now)
    “(O Yield) – (Treasury Yield)” initially drops …… (i.e., the differential drops)
    Subsequently, O price drops (because Treasuries become more interesting to other than O die-hard fans)
    This causes Price/FFO to drop initially (assuming FFO is INITIALY fixed)
    The subsequent price drop also causes O yield rate to increase
    Then, given a more inflationary environment, O can eventually boost rental rates
    More rent income means more FFO
    More FFO means a high yield
    Higher yield means “(O Yield) – (Treasury Yield)” rises (or at least O Yield rise start to match Treasury Yield rise.
    Eventually, Treasury Yield rise goes to zero, and eventually O Yield rate catches up.
    We are back to 2.5% above Fed yield rate.

    Bottom line:
    Part I
    On average, O historically pays about 2.5 points above the Fed rate – but not always. (This and the reliability is the reason I own it).
    O dividend payouts generally rise with inflation rises, and O dividend yield changes generally match Treasury yield changes. However, there is sometimes a lag.
    If Treasury rate (yield) varies slowly, (in a relatively straight and non-steep line) all is good.
    If Treasury rate (yield) varies quickly, the “(O Yield) – (Treasury Yield)” can get out of balance, resulting in a temporary price change that can effect a good or bad entry point.
    Part II
    Holding O long term is a very good bet. (safety, past performance, etc.)
    Choosing a good entry point is better.
    Choosing an exit point can be better, too.
    Part III
    FWIW- I tend to believe that the market has anticipated an upcoming lag that will not happen. (The rise will be too slow). I tend to believe that this has provided a better entry point than we have seen for many months – even if it is only an average entry point.
    May 9, 2015. 05:07 PM | 3 Likes Like |Link to Comment
  • Linn Energy, A Perfect Cash Burner [View article]
    As a short, I hope you are prepared to pay out all those dividends that are burning cash.

    Best of luck, and happy trading.
    May 1, 2015. 06:32 PM | 18 Likes Like |Link to Comment
  • This Farmland REIT Is Growing Like A Weed [View article]
    I echo Mr. Leach’s questions. What are your thoughts on the concerns stated in this Seeking Alpha article: ? Particularly relating to the short-term nature of the debt, and the possible conflict of interest with management as a tenant?
    Apr 17, 2015. 09:19 AM | 4 Likes Like |Link to Comment
  • Quickchat #279, March 19, 2015 [View instapost]
    Note Freya's very short comment above on 22 Mar, 03:54 PM:
    "BLGO..... "5-10 bagger" within 1-3 years.... DD required, do not own it..looking for a bottom.

    REED potential double in 12 months own it like chart.
    Apr 12, 2015. 03:19 PM | 2 Likes Like |Link to Comment
  • Engility: Formerly Unattractive Spin-Off Transformed With Recent Acquisition [View article]
    “High Barriers To Entry”
    The barriers to entry are actually very low considering that every Government contractor is constantly looking to expand their presence into areas related to their specialty. Why?
    There are only 4 methods of growth for Government contractors like EGL considering that they have only 1 customer in the US Government: 1) Convincing the Government to add to your sole-sourced project (This is your best option, because there is no competition and profitability is higher); 2) Winning new projects in your area of expertise; 3) Buying another company in another area of expertise; or, 4) Sliding into adjacent area of expertise (either with the current Government agency or a new one). The contractor has little control over Option 1 (There are exceptions for large acquisitions like Raytheon’s missiles or GD’s submarines where there is no real competition for follow-on work. But this is not true for service providers who are really just hiring ex-military who used to do the same work with a uniform on. Any contractor could hire these experts and provide the service as well as any other.) Option 2 is highly competitive. Option 3 is really a trade of investment capital to buy the returns of another business just like your own company – although there may be modest economies of scale from paring back-office expenses. That leaves Option 4 as yours and everyone else’s only choice – which is, of course, highly competitive. Consequently, there are few barriers to entry.
    In addition to competition from other large competitors, there are hordes of small businesses providing the Government with services in any given area due to Government-mandated set-asides (a waste of taxpayer dollars, but one that is unlikely to go away). Every one of these small businesses is looking to expand and take away the business of the large players.

    “Attractive Financial Characteristics”
    Yes, the pendulum does swing, but we have been in an extended period of tight Government spending which equates to “Best Value” meaning the lowest price of anyone that the Government thinks could possibly handle this job. Currently the Government attributes only token value to past performance and expertise because the Government is unable to adequately apply meaningful metrics to assess performance, and they are under extreme budget pressure. (e.g., It’s so much easier to count how many Afghan police have been trained than to measure how effective the resulting police force actually is.) This, of course yields a race to the bottom for price and squeezes margins.
    There are, of course, exceptions to the rule. Many Government agencies have their favorite providers – no matter how expensive or poorly performing they are – and the agency will always pick the same provider for the service desired. (Give due credit to the contractor’s marketing department).
    Government contracting is a difficult business. It isn't like contracting in the old days.
    Apr 9, 2015. 12:16 PM | 1 Like Like |Link to Comment
  • Beaten Down BDCs: American Capital [View article]
    Any additional insight into a time frame for the spinoff?
    (I remember thinking (hoping?) ~3Q 2015, but memory is fuzzy, and it was only a guess to begin with).
    Jan 14, 2015. 03:22 PM | Likes Like |Link to Comment
  • 2015 Outlook And Picks [View article]
    Per your suggestion some time ago, I've been watching the S&P dividend rate. Do you feel that we may break out of the 1.8-2.2% range in late 2016-2017? I'm starting to feel that as the time frame based on estimated time frame for ECB QE results.
    Thank you.
    Jan 1, 2015. 03:55 PM | Likes Like |Link to Comment
  • North Atlantic Drilling's Results Are Much Stronger Than The Market Reaction To Them Indicates [View article]

    While I do think oil prices will climb again within a few months to a year, and I understand that the projects are in the pre-production exploration stage and therefore less affected by short-term market volatility, I am more concerned about Rosneft’s short-term ability to pay NADL for use of their rigs for exploration drilling given current Russian monetary issues resulting from sanctions/low oil pricing. Thoughts?

    Is Rosneft likely to wait it out for a few quarters until crude rises and their coffers refill, or will China help them out? And what cost is China likely to demand?

    Dec 4, 2014. 03:25 PM | Likes Like |Link to Comment
  • BlackRock Kelso: Why We Went From Bear To Bull [View article]
    Thank you for the update.
    What time frame do you have for your Realizable Value of $9.90?
    Nov 17, 2014. 09:21 PM | Likes Like |Link to Comment
  • The Reliable Dividend Yield Metric Is Flashing A Faint Buy Signal [View article]
    Thanks for the update/reminder. I've been watching since 2 articles ago. The ratio has been a bit high, but seemed happy to stay in that range, so I didn't really expect this dive. At the same time, I'm not shocked. We'll see how close it gets to 2.2% or about 1750 (if I calculated right). Another 50 to 75 points down would more than seal it for me.
    Oct 10, 2014. 09:21 PM | 1 Like Like |Link to Comment
  • Prospect Capital Locks In The Dividend For January 2015 [View article]
    A back-to-basics thought.

    The process is that a company first determines a dividend AMOUNT. The market considers that dividend amount and its sustainability, and then sets a price for the stock through a bidding process. That open market price is what determines the dividend RATE.

    A high yield indicates ONLY that the market (CORRECTLY or INCORRECTLY) believes that future payback through dividend payments is more risky and requires a lower stock purchase price relative to the other opportunities available in the marketplace. If enough people decide that the likelihood and amount of future payments is worth a higher price now, they will bid up the price of the stock, and the yield will fall.

    The evaluations of different people analyzing the cost/risk ratio is what makes the market. The question for tentative buyers/sellers of PSEC is what price will I pay NOW for TENTATIVE FUTURE monthly payments of 11 cents ($1.33/year) GIVEN PSEC’s financial status? Is there a better way for me to invest now to get a total return in the future, taking into account all risks and rewards? There are many positives and negatives to weigh.

    I welcome new information and new points of view that I may have missed. Thank you to those who provide this without emotion.
    Good luck to all with your choice.
    Sep 24, 2014. 03:50 PM | 4 Likes Like |Link to Comment
  • Axion Power Concentrator 362 Sep. 01 '14: EPower & Axion Present At The Battery Show; 10-Q For Q1 2014; S-1 For $15MM Share Issuance; Changed Loan, IP-Secured MDA [View instapost]
    For those of you who track such things:

    You’re as Cold as Ice—The Economics of Switching from Diesel to LNG
    Sep 6, 2014. 11:16 AM | 5 Likes Like |Link to Comment
  • Update: North Atlantic Drilling Sells 30% Equity Stake To Rosneft In Exchange For Onshore Drilling Assets In Russia [View article]
    Saratoga, Tanker, Deb,
    At current prices, would you lean more toward NADL or SDRL (or any of the other subsidiaries)?
    Aug 22, 2014. 02:05 PM | Likes Like |Link to Comment
  • QuickChat #273, August 15 2014 [View instapost]
    A view on QE3 end and Money Supply:
    Aug 21, 2014. 12:38 PM | 3 Likes Like |Link to Comment
  • Axion Power Concentrator 356 August 7 '14: Changed Loan, IP-Secured MDA; David DiGiacinto Appointed Chairman And CEO; Share Reverse Split And Authorized Share Reduction Approved [View instapost]
    Does anyone remember how long NS tested the original 999 with "standard" batteries before they threw in the towel?

    (Oops, meant to clarify that I'm not asking about bench testing, I'm asking about field testing)
    Aug 7, 2014. 04:24 PM | 2 Likes Like |Link to Comment