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Just another guy attempting to fight monetary policy with my savings
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  • Big Dividend-Paying MREIT In C-Corp Clothing Is Fleeced Pre-Market

    Arlington Asset Investment Corporation (NYSE:AI) is a mortgage REIT in C-corp clothing. The nifty outcome of the financial crisis is these guys have mountains of carry-forward losses so the dividend is high (12%+). The other nice trick about AI is that because they are a C-corp, they pay dividends not ordinary income. So the 12% is really more like 15%+ out of a pure mREIT like Annaly Capital Management (NYSE:NLY) -- where I'm also rather long.

    Early this morning AI announced a secondary offering at a price of $27.61; this pushed AI down pre-market 4%. I just picked up another large block pre-market at $27.22.

    I'm very long AI and have very nervously nibbled my way in over a dozen buys since 12/23/2013. Today was my largest purchase ever and pushed my average basis up to $26.43. With this buy AI is now a top ten holding.

    Side node: The drop is shocking due to the timing as the ECB announced this morning that they are cutting rates. IMO, this continued ZIRP and QE nonsense will cause the Fed to pause their rate hike talk. We delay the ultimate crash.

    I think stocks will react positively to the ECB news -- plus with reduced rate hike possibilities, I'd guess income stocks like AI will be up.

    But what do I know. We shall see if my pre-market bet pays off. :)

    Disclosure: The author is long AI, NLY.

    Tags: AI, NLY, mREIT
    Sep 04 9:41 AM | Link | 3 Comments
  • Running In Circles Like A Cyclical Deere

    Deere and Co (NYSE:DE) announced earnings today. They beat both top and bottom numbers but both were down (as expected) year-over-year.

    I agree with the case made by The Value Investor regarding the short- and long-term prospects of Deere. In short, Deere is in a cyclical business and sitting at or nearing the bottom of the cycle. The gloomy economic forecasts, forecasted higher interest rates, lower commodity prices, and potential return to recession all make it risk to buy right now.

    The 15 year FAST Graph is encouraging if the 2016 and beyond revenues can reverse the negative trend:

    (click to enlarge)

    IMO the 7 year graph is even more encouraging for long-term, buy-and-hold investors as it shows below-average PE even when looking at just the last five years:

    (click to enlarge)

    Obviously the continued lower estimates for future revenue and profit are weighing heavy on the stock.

    Although I bought five lots of Deere between 12/31/2013 and 2/18/2014 and sit at a full position, today I decided to add to my Deere commitment in two ways:

    1. Purchased another lot at $84.80 thus reducing my average share price to $87.71
    2. Wrote the December 2014 $82.50 puts at $2.50. Allowing for commission and the September dividend, the put pays 8.5% annualized over 129 days and provides a 5.6% discount at purchase compared to buying today. The break even is at $80.51

    So far I've been wrong on my timing to enter Deere; counting today's stock buy I'm down 3.7%. We will see how the puts works out in terms of free money or lower entry cost on my next Deere lot. Christmas might come a few days early this year for me and delivery a bunch of green-painted stock. :)

    Disclosure: The author is long DE.

    Tags: DE
    Aug 13 6:23 PM | Link | Comment!
  • My Mother Bought Tupperware And Now I Have, Too

    When I was married 25 years ago, my wife and I received Tupperware as a wedding gift. We're still using most of those pieces today. Like the product itself, the company has survived thorough the years and adapted with a tilt towards paying growing dividends in the last five years.

    Tupperware Brands (NYSE:TUP) has been hammered the last two days based on mildly missing top and bottom numbers. My thesis is that this is a huge overreaction and the stock is now oversold.

    As shown in the 7 year FAST Graph below, the closing price yesterday moved the stock back to a PE of 13.2 which is in-line with history PE.

    (click to enlarge)7 year FAST Graph

    The 15 year FAST Graph is equally inviting, IMO:

    (click to enlarge)

    While Tupperware is a company with a long history, the dividend payments only started growing in 2009. The 1, 3, and 5 year Dividend Growth Rates are 60.9%, 30.5%, and 20.3%, respectively.

    Given the huge growth in the dividend in the last few years, the Chowder Rule is a very impressive 23.6.

    Valuentum provides a recent overview of the business, growth opportunities, and risks.

    Like so many stocks in the market today, Tupperware is not a screaming deal -- rather, even with the large recent drop, it appears to be fairly valued if you believe the numbers will hold over time.

    While I don't expect to host a party and sell any product, I did open a new 1/3 position today at $72.22.

    Disclosure: The author is long TUP.

    Tags: TUP
    Jul 29 2:20 PM | Link | 1 Comment
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