Please Note: Blog posts are not selected, edited or screened by Seeking Alpha editors.

Panick Value Research Report Sample Issue - January 2016

|Includes: BKEP, CDMO, CORR, DLNG, GNE, JCP, NGLS, NM, PSEC, STNG, TNP, WHLR, Exantas Capital Corp. (XAN)

Issue # 57, January 1st, 2016

Panick Value Research Report

There is value, there is deep value and then there is "Panick Value"

What's New in the January Issue?

2015 was a tough and volatile year for the high yield sector. The energy, shipping, retail, REIT, limited partnership and BDC sectors all got hit. There were few places to hide. I tend to take a "shoot first and ask questions later" defensive approach with the "Panick Value 10" picks when market conditions are difficult. Several energy preferred stock issues including ARP-PD, BBEPP, CPE-PA, GST-PA and YUMA-PA made profitable 2015 appearances in the "Panick Value 10". All went on to experience declines after they were dropped as picks for a gain. The shipping sector also required very active management. PRGNL, GSL-PB, SBLKL and SLTB all made profitable appearances in the "Panick Value 10". Those issues also declined sharply after they were dropped as picks for a gain. See the Performance Statistics worksheet of the Panick Report Excel model for details. The "Panick Value 10" picks as a group have had a 21% IRR since the newsletter was launched in September 2012.

The "Panick Value 10" contains a mix of moderate risk picks as well as some high risk / high reward picks with Risk Ratings as high as 7. Many subscribers have suggested a list of high yield picks including only more moderate risk issues. The "Moderate Risk 10" was added in December. These high yield picks are restricted to issues with Risk Ratings in the 2 - 3 range.

The Panick Report was launched in 2012 as an email subscription service, but has undergone some major changes lately. The subscriber based quadrupled in 2015, as I began writing Seeking Alpha articles. The online version of the Panick Report was launched in the Seeking Alpha Marketplace in September 2015. After less than 4 months, the Panick Report is already Seeking Alpha's most popular newsletter focused on income issues. Subscribers received an advance look at 60 Seeking Alpha articles in 2015. Numerous issues including GNE-PA, RFTA, FXENP, PPHMP, DLNG-PA and SLTB (just to name a few) had significant rallies as my articles were published.

PTAXF was dropped as a "Microcap Equity Pick" on 12/18/2015 at 92 cents. PTAXF could trade lower if the merger with GTE falls apart. The risks of this have increased as oil has declined in price since the deal was announced. BKEPP was added to the Panick 10 at $6.71 on 12/3/2015 with a 3 Risk Rating. TNP-PD was added to the Panick 10 at $20.74 on 12/7/2015 with a 2.5 Risk Rating. The GDP 2019 bonds were dropped from the Panick 10 at $8 on 12/26/2015. I am continuing to hold some GDP bond as well as some of the GDP preferred issues. Unfortunately with oil trading under $40, the bonds have become too speculative to remain in the Panick 10. A basket of 5 unsecured energy bonds was added to the Panick 10 on 12/26/2015 at $24.10 with an overall Risk Rating of 6.

A note to subscribers on distribution

The Panick Report has been distributed as an email newsletter and alert service since September 2012. Email subscribers should be sure to add my richard@panickreport.com address to their contacts list. Check your spam folder periodically and mark any Panick Report alerts as "not spam". These steps will help ensure that important email alerts are received in a timely manner. In September 2015 the Panick Report joined the Seeking Alpha Marketplace. Marketplace subscribers should message me their email address to receive the supporting Excel model.

Overview

The Panick Value Research Report is a monthly report with daily alerts focused on identifying and tracking undervalued microcap high yield and equity issues. Most of these issues have market capitalizations of under $100 million with no coverage by traditional Wall Street analysts. Large institutional investors requiring very large position sizes are often unable to trade these somewhat illiquid issues, creating excellent values for smaller investors. Larger market capitalization issues may be included if a significant discount occurs for other reasons such as a "pink sheet" discount.

The "Panick Value 10" is the author's selection of the 10 best high yield and deferred dividend issues. The "Microcap Equity Picks" are the author's equity picks for the $10 million to $300 million market capitalization range. The "Watch List" provides coverage for issues that don't currently rate selection, but may be of future interest. Some issues to avoid are covered in the "Preferred Stock Hall of Shame". All subscribers also receive daily "Alerts" with breaking news, trading opportunities and updated analysis.

The Panick Report occasionally flags issues as shorter term potential trades. Many of these shorter term trades have done very well, although performance is not being tracked due to time constraints. "Speculative Watch List" Issues with a Risk Rating of 7.5 or higher may be covered and flagged as potential short term trades only. The "Microcap Equity Picks" and "Panick Value 10" are restricted to issues with a maximum Risk Rating of 7. The "Moderate Risk 10" is restricted to issues with a maximum Risk Rating of 3. Bold text is used to highlight sections of the report that are new or have been substantially revised since the prior issue.

The author periodically screens for under-valued issues, but subscribers are also invited to make recommendations. Several of the issues included in this report were originally subscriber suggestions. In the less liquid, dark and out of favor corners of the market there is value, there is deep value and then there is "Panick Value".

Panick Risk Rating

This newsletter is focused on aggressive issues, but some are riskier than others. The Panick Risk Rating reflects the author's subjective evaluation of how risky each issue is. The ratings range from 1 (strong balance sheet & cash flow) to 10 (most risky and speculative of all issues). The author considers any issue with a Risk Rating of 7.5 or above to be highly speculative.

Panick Report Excel Model

In an effort to make this report shorter and more readable, some of the supporting details, Watch List Issues and calculations have been moved to the Panick Report Excel file distributed with this report. The YieldModel sheet of the Excel file includes calculations such as Cash Yield, Yield to Call and Yield to Maturity. Panick 10 Picks are highlighted in Green with their current Panick 10 Ranking. The Performance Statistics sheet shows the performance of all current and former Panick 10 and Microcap Equity picks. The Documentation sheet has the author's notes and documentation for the Excel model.

Panick Value 10 Rankings

1. RSO (Risk Rating: 3.5)

2. PSEC (Risk Rating: 2)

3. BKEPP (Risk Rating: 3)

4. TNP-PD (Risk Rating:2.5)

5. NM-PH (Risk Rating: 5.5)

6. PFH (Risk Rating: 3.5)

7. DLNG-PA (Risk Rating: 3.5)

8. PPHMP (Risk Rating: 3.5)

9. SSRAP (Risk Rating: 5.5)

10. Energy Bond Basket( Risk Rating: 6)

Moderate Risk 10 Rankings

1. PSEC (Added on 12/27/2015 at $7.29, Risk Rating: 2)

2. RSO-PC (Added on 12/27/2015 at $18.90, Risk Rating: 3)

3. BKEPP (Added on 12/27/2015 at $6.50, Risk Rating: 3)

4. RFTA (Added on 12/27/2015 at $20.69, Risk Rating: 3)

5. WHLRP (Added on 12/27/2015 at $23.28, Risk Rating: 3)

6. SBNA (Added on 12/27/2015 at $22.18, Risk Rating: 2)

7. TNP-PD (Added on 12/27/2015 at $21.43, Risk Rating: 2.5)

8. GNE-PA (Added on 12/27/2015 at $7.52, Risk Rating: 2)

9. NGLS-PA (Added on 12/27/2015 at $19.35, Risk Rating: 3)

10. CORR-PA (Added on 12/27/2015 at $18.26, Risk Rating: 3)

1. RSO (Added on 7/22/15 at $14.52, Panick Risk Rating: 3.5) NEW!

See my 8/17/2015 Seeking Alpha article, my 9/30/2015 Seeking Alpha article and my 10/29/2015 article for more on RSO and the RSO preferred issues. Both are excellent choices. At a recent price of $12.76, RSO yields 13.2% and is trading at just 71% of its $17.95 book value. The modest dividend cut enables RSO to retain more capital, but doesn't change the strong fundamentals and valuation.

2. PSEC (Added on 7/22/15 at $7.22, Panick Risk Rating: 2) NEW!

At a recent price of $6.98, PSEC is trading at just 69% of the $10.17 book value and yields 13.8%. The low Risk Rating reflects moderate balance sheet leverage. The majority of assets are invested in a diversified basket of 1st lien loans. See my 7/14/2015 article, my 10/22/205 article and my 12/23/2015 article for additional analysis.

3. BKEPP (Added on 12/3/15 at $6.71, Panick Risk Rating: 3) NEW!

See my 12/15/2015 article for analysis.

4. TNP-PD (Added on 12/7/15 at $20.74, Panick Risk Rating: 2.5) NEW!

See my 12/9/2015 article for analysis.

5. NM-PH (Added on 6/8/15 at $19.75, Panick Risk Rating: 5.5) NEW!

See my 12/30/2015 article for a sum of the parts analysis. NM is an efficient, diversified and well managed shipping company.

6. PFH (Added 3rd time on 7/19/14 at $19.85, Panick Risk Rating: 3.5)

PFH is one of the JCP microcap exchange traded debt issues. The JCP 2097 bonds are held in a trust and the interest is passed through as dividends to shareholders. See Panick Report Excel model for all the JCP microcap exchange traded debt issues and a yield comparison to the underlying JCP 2097 bond issue. At a recent price of $16.30, PFH is trading with 74 cents of accrued interest and a 12.3% yield. The underlying JCP 2097 bond last traded at $64.90 with an 11.8% yield.

The JCP equity market cap of $2.0 billion accounts for 30% of the total enterprise value including debt. Operating results have been improving, the JCP common stock has stabilized and the company is again generating positive cash flow from operations. Liquidity is excellent and the company has access to the credit markets as demonstrated by their successful unsecured bond offering in Q3 2014. See also my 4/15/2015 Seeking Alpha article for more analysis.

7. DLNG-PA (Added on 10/26/15 at $19.75, Panick Risk Rating: 3.5) NEW!

See my 10/6/2015 article and my 11/13/2015 article for more on DLNG-PA. Note that the Risk Rating has been increased to reflect recent weakness in the DLNG common stock.

8. PPHMP (Added on 3/18/15 at $22.05, Panick Risk Rating: 3.5) NEW!

The Risk Rating was decreased slightly on PPHMP due to the successful $20 million private placement of PPHM common stock. Cash burn is increasing due to increased drug trial activity which has caused some nervousness for preferred holders. Revenues continue to ramp up for the contract manufacturing business which could provide some support for the preferred stock in the event that drug development fails. See my 11/27/2015 Seeking Alpha article for more on PPHMP.

9. SSRAP (Added 3rd time on 10/21/14 at $12.75, Panick Risk Rating: 5.5)

SSRAP is a trust that holds Sears bonds due 6/1/2032 and passes the interest through to shareholders as dividends. SSRAP is modeled along with the underlying 2032 bond market bond issue and two other SHLD bond issues in the Panick Report Excel model.

Eddie Lampert controls almost half the SHLD common stock and is now also a major unsecured bond holder. He is extremely motivated to keep SHLD out of bankruptcy by any means necessary. At a recent price of $12.10, SSRAP is trading with 26 cents of accrued interest and a yield to maturity of 16.7%. SSRAP remains a bargain compared to the underlying 2032 bonds that last traded at $67 with a yield to maturity of 11.5%. See my 10/12/2015 Seeking Alpha article for more analysis.

10. Unsecured Energy Bond Basket (Added on 12/26/15 at average cost of $24.10, Panick Risk Rating: 6) NEW!

- Vanguard 7.875% maturing 4/1/2020 at $26.80 (CUSIP 92205CAA1)

- Breitburn 7.875% maturing 4/15/2022 at $20 (CUSIP 106777AD7)

- Atlas Resources 7.75% maturing on 1/15/2021 at $21.67 (CUSIP 049296AC0)

- Rex Energy 8.875% maturing on 12/1/2020 at $20.40 (CUSIP 761565AB6)

- Legacy 8% maturing on 12/1/2020 at $31.60, CUSIP (52471TAB3)

The basket of unsecured energy bonds was added since these issues have hedging and reasonable levels of balance sheet leverage. With a moderate rebound in commodity prices, some may survive the energy downturn. All these issues are already priced for bankruptcy. For example, the Atlas Resources bonds were added for less than 3 years of interest. Atlas is almost fully hedged through 2018 and their nearest bond maturity is 2020.

 

Microcap Equity Picks

1. East West Petroleum (Added on 2/11/14 at 46.5 cents, Panick Risk Rating: 3)

East West Petroleum is a tiny microcap Canadian oil company with non-operated joint ventures in New Zealand and Romania. The stock trades in Canada as EW.V and on the pink sheets as EWPMF. Use limit orders and patience when trading this small microcap, especially when trading on the Pink Sheets. The moderate Risk Rating reflects their strong balance sheet and my expectation that the company will be approximately cash flow breakeven in 2016.

Cheal North wells such as E-1 and E-6 are shallow wells that cost only $2.5 million to drill and complete. The oil at Cheal North sells at a premium to Brent and operating costs are very low. Royalties of only 7.5% are exceptionally low. Tag has extensive infrastructure at Cheal. EW's breakeven point including drilling costs is about $36 Brent Oil as per their January 2015 investor presentation.

At a recent price of 7 cents the company has a market cap of just $6 million with $6 million in cash on their debt free balance sheet. Things are starting to get exciting in Romania where EW (15% interest) is fully carried on 4 blocks by NIS Petrol (Serbian company controlled by Gazprom). After years of delays, NIS Petrol is finally moving ahead with drilling over the next few months. They are targeting natural gas which sells in Europe for a multiple of US pricing. See also my 2/22/2015 Seeking Alpha Blog article, founder David Sidoo's 3/26/2015 interview and my 5/21/2015 blog article.

2. Tag Oil (Added on 2/16/14 at $2.74, Panick Risk Rating: 2) NEW!

Tag Oil is a Canadian oil company with operations in New Zealand. The company has a great diversified asset base including extensive infrastructure and impressive lease holdings with years of growth potential. Tag Oil trades in Canada as TAO.TO and on the Pink Sheets as TAOIF. Even in pink sheet trading, I have found fairly good liquidity for small to moderate size orders with relatively tight bid / ask spreads. The low Risk Rating reflects that the company should be cash flow break-even with $45 Brent oil, has $15 million in cash and no debt. They have a share repurchase plan and the company has repurchased some shares as the stock has sold off.

New Zealand is a stable Western style Democracy with very low geopolitical risk. There is an active environmental movement which is opposed to fracking. Tag Oil has excellent lease terms and a clean environmental record. New Zealand requires additional natural gas supplies and regulators have generally behaved sensibly despite some high visibility protesters. .

See also my 2/22/2015 Seeking Alpha Blog article and my 5/7/2015 Seeking Alpha article At a recent price of 39 cents, 2/3 of the market capitalization is accounted for by balance sheet cash.

3. IKNX (Added on 9/3/2015 at $12.5, Panick Risk Rating: 3)

I believe recent insider buying at IKNX reflects excitement over their superior new process for machining carbon fiber composites. These advanced materials are increasingly being used in aerospace. Ikonics has a new factory under construction to exploit this technology. IKNX is a profitable debt free small company trading at only 1.2X trailing sales. I expect rapid growth from their AMS division over the next few quarters and this is not priced into the stock. See my 9/17/2015 Seeking Alpha article for additional analysis.

Q3 earnings were consistent with Q3 2014 despite the strong dollar. Liquidity remains excellent even with some spending on the new manufacturing facility for their AMS process. Management reports a significant new AMS customer. I have lowered the Risk Rating slightly to reflect the above.

4. NURO (Added on 8/4/2015 at 82 cents, Panick Risk Rating: 5) NEW!

See my 8/10/2015 Seeking Alpha article for the NURO write-up. Quell is now being sold on Amazon and QVC. A new distribution agreement should also put it in some drug stores. Quell continues to get great reviews from those who suffer from chronic pain. Quell sales continue to ramp up quickly, but the company's heavy spending on marketing has depressed the stock price as they chose to raise equity rather than finding a strategic partner to help fund Quell.

Watch List

See Panick Report Excel model and daily email alerts for numerous additional comments and updates.

• ADK-PA (Panick Risk Rating: 6) NEW!

See my 10/27/2015 article for more on ADK-PA. The Risk Rating was increased to 6 due to tightening liquidity and concerns that the SEC investigation of a former executive could delay necessary property refinancing.

• AIW / AIC (Panick Risk Rating: 5)

High balance sheet leverage, high volatility and complex hedging make these mREIT exchange traded debt issues kind of scary. I don't think the yield is high enough to justify the risks.

• ARP-PD/ ARP-PE (Panick Risk Rating: 6.5) NEW!

See my 8/21/2015 Seeking Alpha article. I continue to advise preferred stock holders to swap into the bonds. See Excel model for comparison. A preferred dividend deferral is anticipated for 2016.

• BBEPP (Panick Risk Rating: 6.5) NEW!

See my 3/31/2014 Seeking Alpha article. I continue to advise preferred stock holders to swap into the bonds. See Excel model for comparison. A preferred dividend deferral is anticipated for 2016.

• BPOP Preferred and Trust Preferred issues (Panick Risk Rating: 2 to 3)

See Panick Report Excel model.

• CDORO / CDORP (Panick Risk Rating: 5)

The company has made excellent progress in extending debt maturities and improving liquidity. See Panick Report Excel model for issue details including the calculation of deferred dividends.

• CMRE-PD (Panick Risk Rating: 4) NEW!

See my 9/8/2015 Seeking Alpha article. CMRE-PD remains a good issue, but even with their long term leasing model the Risk Rating has been raised again slightly to reflect weakness in the containership sector. See Excel model for a comparison between CMRE-PB, CMRE-PC and CMRE-PD.

• CORR-PA (Moderate Rick 10 Pick Panick Risk Rating: 3) NEW!

See Panick Report Excel model.

•CPE-PA (Panick Risk Rating: 3) NEW!

CPE-PA is the par 50 cumulative preferred issue for CPE. The issue has an attractive 10% coupon and is not callable prior to 5/30/2018. See Panick Report Excel model for additional details. I have raised the Risk Rating slightly despite the successful equity capital raise, strong performance of the CPE common stock, very strong operational results and modest balance sheet leverage. Good company in a bad sector.

• CYCCP (Panick Risk Rating: 7)

See Panick Report Excel model.

• DLTA-P (Panick Risk Rating: 6)

DLTA has been released from the Preferred Stock Hall of Shame and the Risk Rating has been lowered to 6. In court proceedings, the CFO reaffirmed the right of the preferred stock to receive dividends ahead of the privately held equity. He provided a "conservative" estimate that the cumulative dividend might be paid in 8 years. See Excel model for a calculation of accumulated dividends. Although the Risk Rating has been lowered, the valuation does not appear compelling given the likelihood of having to wait several years to restore the dividend.

• DSXN / DSX-PB (Panick Risk Rating: 4 / 5) NEW!

See Panick Report Excel model. Note that the Risk Rating for the DSXN exchange traded debt and DSX-PB preferred stock issues has been increased to reflect continued weakness in the dry bulk sector. Even though DSX is less leveraged than peers, I would sell DSXN near $19. A dividend deferral for DSX-PB is likely in 2016.

• ENRJ-P (Panick Risk Rating: 9.9) NEW!

ENRJ-P has lost about ¾ of its value since the dividend was deferred as predicted in my 10/21/15 note to subscribers. Given their weak assets, bank debt and high production costs the probability of the dividend ever being restored is nil. The best case scenario is a low ball buyout offer conditioned on ENRJ-P accepting a tiny fraction of par value. With commodity prices this low, just covering the bank loan will be a challenge. The Risk Rating has been increased to 9.9 due to low commodity prices. A 10 Risk Rating is reserved for a company actually in bankruptcy.

i

• EXIXF (Panick Risk Rating: 8.5)

See my 6/28/2015 Seeking Alpha article. EXXI continues to make remarkable progress in reducing operating costs and debt levels while maintaining production levels with greatly reduced capital expenditures. Unfortunately commodity prices continue to work against them. I anticipate that the company will pay the upcoming dividend in shares of EXXI common stock rather than cash. Liquidity is tightening as some cash has been utilized for deeply discounted buybacks of unsecured bond.

• FBP Preferred issues (Panick Risk Rating: 4) NEW!

See Panick Report Excel model for more on these non-cumulative preferred issues. Dividend is suspended. The bank is in no danger of failing due to the Puerto Rican crisis, but the uncertainty is delaying the reinstatement of the preferred dividend.

• GDP-PC, GDP-PD and GDPAN (Panick Risk Rating: 8.5) NEW!

The Panick Report Excel model provides more details on the GDP preferred issues, with a comparison to the 2019 bonds. All the GDP issues are extremely speculative given the continued decline in commodity prices, as illustrated by the bonds trading at less than 10 cents on the dollar.

• GFNCP / GFNSL (Panick Risk Rating: 3.5 / 4.5)

Adjusted EBIDTA dropped below prior guidance, but was no worse than I had anticipated given the further declines in the energy related portion (about 25%) of their business. A majority of their funding is provided through low interest rate bank loans and this is a key issue to watch. Given recent setbacks, the GFNSL debt issue appears to be better choice than the GFNCP preferred stock issue.

• GNE-PA (Moderate Risk 10 Pick, Panick Risk Rating: 2) NEW!

See my 11/20/2015 article. See also the Panick Report Excel model for a yield to call calculation and additional issue details.

• GRH-PC (Panick Risk Rating: 9) NEW!

See my 8/20/2015 Seeking Alpha article. The high Risk Rating reflects very tight liquidity, weakness in the GRH common stock and the continued drop in natural gas prices which has further curtailed drilling activity. MHR bankruptcy could speed up payments to GRH by improving MHR's liquidity.

• GSL-PB (Panick Risk Rating: 5) NEW!

See my 8/28/2015 Seeking Alpha article. The Risk Rating has been increased slightly due to weakness in the GSL common stock and the containership sector. Even with their long term leasing model providing near and intermediate term protection, there is concern that low shipping rates may persist for years.

• GST-PA / GST-PB (Panick Risk Rating: 6.5)

Gastar is a well managed low cost producer of oil, natural gas liquids and natural gas. The preferred dividend was not deferred even when the GST common traded below $1 in late 2012. Gastar is well prepared for the downturn in commodity prices with strong liquidity. See my 7/31/2015 Seeking Alpha article. The bonds look like a better value than the preferred stock issues at current prices.

• HKRCP (Panick Risk Rating: 7) NEW!

See my 9/10/2015 Seeking Alpha article. HK continues to execute well operationally and with debt swaps, but can't make any headway with depressed commodity prices. The par1000 cumulative preferred convertible issue has good speculative potential trading at a fraction of the bonds. Note that the next preferred dividend may be deferred, paid in cash or paid in shares of HK common stock. Your guess is as good as mine.

ISH-PA / ISH-PB (Panick Risk Rating: 6) NEW!

The preferred issues contain punitive covenants that rapidly escalate the coupon as dividends are deferred. This may actually work against preferred holders. An excessively high level of deferred dividends will result in dividends that can never be paid. The Risk Rating has been lowered to reflect substantial progress with asset sales. Unfortunately, I still don't believe that the company plans to restore the preferred dividend. Avoid this issue.

• LGCYO / LGCYP (Panick Risk Rating: 6.5) NEW!

I advise preferred stock holders to swap into the bonds. See Excel model for comparison. A preferred dividend deferral is anticipated for 2016.

• LTS-PA (Panick Risk Rating: 3)

See Panick Report Excel model.

• NGLS-PA (Moderate Rick 10 Pick Panick Risk Rating: 3) NEW!

See Panick Report Excel model.

• OAKS-PA (Panick Risk Rating: 6)

High balance sheet leverage, high volatility and complex hedging make these mREIT exchange traded debt issues kind of scary.

• OFG Preferred issues (Panick Risk Rating: 4)

See Panick Report Excel model.

• PFX (Panick Risk Rating: 2.5)

See my 10/6/2015 Seeking Alpha article.

• PRGNL (Panick Risk Rating: 9.9)

PRGNL is a par $25 exchange traded debt issue that matures on 8/15/2021 with an 8.375% coupon. PRGN is a dry bulk shipping company with heavy exposure to short term shipping rates. With the further decline in shipping rates, PRGN is quickly running out of time and liquidity. They can no longer sell a meaningful amount of equity and the CEO has been unwilling to put in more cash personally. Ship sales to raise cash seem very doubtful given further recent declines in ship values. PRGN was already juggling bank covenants prior to the latest market downturn. The Risk Rating of 9.9 reflects my expectation of a bankruptcy filing within the next 6 - 9 months.

• PTQEP (Panick Risk Rating: 6.5) NEW!

See Panick Report Excel model. The increased Risk Rating reflects a sharp selloff in bond prices and commodity prices. Note this is a thinly traded grey market issue and patience is required to trade it.

• RAS Preferred and debt issues (Panick Risk Rating: 3 to 3.5) NEW!

See Panick Report Excel model. See my 10/16/2015 Seeking Alpha article. RFTA is currently a "Moderate Risk 10" Pick.

• RXNRP (Panick Risk Rating: 7) NEW!

See Panick Report Excel model. This par $100 cumulative preferred convertible issue has excellent speculative potential given the large discount to the REXX bonds. Note that the next preferred dividend may be deferred, paid in cash or paid in shares of REXX common stock. Your guess is as good as mine.

• SBLKL (Panick Risk Rating: 5.5) NEW!

SBLKL is a par $25 exchange traded debt issue for SBLK. See Panick Report Excel model for issue details and calculations. See my 11/24/2015 article.

• SBNA / SBNB (Moderate Risk 10 Pick, Panick Risk Rating: 2)

See Panick Report Excel model and my 10/8/2015 Seeking Alpha article.

• SB Preferred issues (Panick Risk Rating: 6) NEW!

See Panick Report Excel model. I expect that the SB preferred dividends will be deferred in 2016 and advise avoiding these issues.

• SDRXP (Panick Risk Rating: 8.5) NEW!

SDRXP is a par 100 cumulative preferred convertible issue for SD with an 8.5% coupon. See the Panick Report Excel model for a comparison with thinly traded SDRXN and a Sandridge bond issue. See also my Seeking Alpha articles for more on SDRXP. The increased Risk Rating of 8.5 reflects lower oil prices, lower natural gas prices and increased regulatory pressure on the disposal well earthquake issue.

• SLTB (Panick Risk Rating: 5) NEW!

See my 12/24/2015 article for more on SLTB.

• SSW issues (Panick Risk Rating: 3 to 3.5)

See Panick Report Excel model. Good issues, but valuation not that compelling.

TEU-PC (Panick Risk Rating: 8.5) NEW!

TEU-PC is a par $25 cumulative preferred stock issue with a 9% coupon. Liquidity remains tight, but TEU is making progress as reflected by decreasing debt and progress with debt covenants. The Risk Rating has been increased to reflect rapid deterioration in the containership sector leasing rates and weakness in the TEU common stock. Although the Q4 dividend was paid, a deferral (or worse) is probable over the next 6 - 12 months as favorable long term charters end.

• TOO-PA / TOO-PB (Panick Risk Rating: 5) NEW!

See Panick Report Excel model. The Risk Rating has been increased to reflect continued weakness in the TOO common stock and bleak prospects for the offshore drilling support business as their long term contracts eventually expire.

• VNR preferred issues (Panick Risk Rating: 6.5) NEW!

I advise preferred stock holders to swap into the bonds. See Excel model for comparison. A preferred dividend deferral is anticipated for 2016.

• WHLRP (Moderate Rick 10 Pick, Panick Risk Rating: 2.5)

See my 6/22/2015 Seeking Alpha article.

• XKE (Panick Risk Rating: 6.5)

XKE is a par 10 bond trust with a 7.75% dividend. The trust holds Toys R Us unsecured 2021 bonds (CUSIP 892335AC4) and passes through the interest as dividends to shareholders. See Panick Report Excel model file for a yield comparison to the actively traded Toys R Us 2017 & 2018 bonds. Note that the underlying 2021 bonds are much less actively traded than the 2017 / 2018 bonds. Trying to value XKE using the 2021 bonds is therefore not recommended. See my 4/15/12015 Seeking Alpha article for additional analysis.

• YUMA-PA (Panick Risk Rating: 6.5)

See my 9/1/2015 Seeking Alpha article for more on YUMA-PA. YUMA-PA was dropped as a pick at $12 prior to the deferral as liquidity tightened and bond valuations for other energy issues became more compelling. Although YUMA has deferred the dividend due to tighter liquidity and extremely low commodity prices, I believe that they will survive and recover from the energy sector bear market. Debt is modest as compared to even depressed asset values. Founder Sam Banks owns a majority of the common stock.

Preferred Stock Hall of Shame

• EMMSP (Panick Risk Rating: 9.5)

EMMSP illustrates that even a preferred issue with well funded & well organized activist investors and strong protective covenants can sometimes be defeated and rendered near worthless provided that company management has sufficient determination and evil intent. Dubious (but apparently legal) procedures were used to remove the right to receive past and future dividends and protective covenants were stripped. All that's left is a lawsuit seeking to reverse these injustices. As per the company's 3/4/14 press release, that lawsuit was dismissed. Further appeals or new lawsuits are always possible. Subscribers are strongly advised to steer clear of this disaster.

• HOVNP (Panick Risk Rating: 6)

Read the prospectus and beware of weak covenants. I especially love the part about "Advisory Directors" with no actual voting rights who get called in to discuss dividend non-payment and are then kicked out of the Board meeting. If the prospectus said that management couldn't toast marshmallows at any company picnic until they paid the preferred dividends that would probably be more effective than the "Advisory Directors". See my Seeking Alpha article.

• TLSRP (Panick Risk Rating: 9.5)

TLSRP surged in price some time ago when Wynnefield Capital issued a press release in an attempt to publically shame the company into paying the deferred dividends. The 8/15/13 press release (more recent filings and press releases by Wynnefield Capital are equally entertaining) notes that Par plus accrued is now over $47. Don't be fooled by this desperate attempt to shame Telos into the doing the right thing. They haven't paid dividends since 1991. The company has no shame! Litigation (which will probably drag on for years) is the only chance of forcing these ultimate deadbeats to pay up.

Even the "mandatory" redemption of the preferred issue was ignored. The accrued and never paid preferred dividends reduce taxable income and provide a nice indefinite tax shelter for this private company. Dividends have been paid on a newer more senior preferred issue (even those are now deferred) controlled by insiders while the public TLSRP issue gets nothing. See page 31 of the 11/14/13 10Q filing for an update on various reasons why the company can't or won't pay any preferred dividends.

Performance Summary

Panick Value 10:

Annualized return of 21% based on 83 open and closed picks with an average holding period of 134 days. See Performance Statistics sheet of the Panick Report Excel model for performance calculations and trade details.

Microcap Equity Picks:

Annualized return of 9% based on 33 open and closed picks with an average holding period of 228 days. See Performance Statistics sheet of the Panick Report Excel model for performance calculations and trade details.

Panick Report Performance Notes

Past performance may not be indicative of future results. See Performance Statistics sheet of the Panick Report Excel model for detailed performance calculations. No benchmark comparison has been provided, but the strong performance in part reflects generally favorable market conditions for the high yield and microcap equity sectors during the time period since the Panick Report was launched in Sept 2012.

Many of the issues covered in the Panick Report have limited liquidity - especially for those with larger position sizes. It may not always be possible to buy and sell issues at indicated prices due to limited liquidity, bid / ask spreads and commissions. Some picks were dropped or added via subscriber email alerts sent before the market opened. In those cases, prices were based on the price at the 9:30am open or the 9:45am trading price. See also "Important Disclosures" section below for a discussion of some of the risks involved in trading microcap issues. See also "Panick Risk Rating" section for additional discussion on risks. The picks are intended as a starting point for performing your own research and may not be appropriate for your individual circumstances. Many issues covered in this newsletter are speculative in nature and not appropriate for conservative investors. Please consult your financial adviser or broker before trading.

Performance statistics include both closed picks and unrealized gains and losses for picks that are still open. Given the limited history of the Panick Report, a few individual picks have had a large impact on performance. For example large gains in MILL, GST, SROYF, SFNS, HBSI, ENSV, NHLD and YUMA account for much of the positive performance of the Equity Picks.

The Panick Report often flags issues as potential short term trades via email alert. The performance of short term potential trades are not tracked due to time constrains, although many have done very well.

The number of picks in each section has varied. At times there have been vacant picks in the Panick 10. The average annualized return of each pick does not reflect sequential reinvestment in chronological order. Therefore, the annualized average internal rate of return generated by the picks does not exactly correspond to the annualized return that would have been generated by a model portfolio. A model portfolio would include cash at times and also require proceeds to be reinvested sequentially as trades were closed.

"Highly Speculative Picks" with a Risk Rating of 7.5 or higher were originally tracked in a separate "Highly Speculative Picks" section. Issues with a Risk Rating of 7.5 or higher have been excluded from the "Panick Value 10" and "Microcap Equity Picks" sections. These issues may be covered as "Watch List" issues or flagged as short term "potential trades". The "Highly Speculative Picks" section of the newsletter was eliminated effective 11/15/2014. It was determined that the "Highly Speculative Picks" as a group were significantly underperforming the "Microcap Equity Picks" and "Panick Value 10" picks despite higher levels of risk, volatility and trading turnover.

Important Disclosures

All investing and trading involves risk. Many of the high yield and microcap issues covered in the Panick Value Research Report are risky and may not be suitable for your individual circumstances. This report is recommended as a starting point for conducting your own due diligence or consulting your financial adviser to make an independent decision as to what investments are suitable for you. All investors are urged to diversify their portfolio and use appropriate position sizes for their individual circumstances. The author may answer individual questions regarding the research presented in this newsletter, but can't answer questions regarding your individual financial circumstances or what investments may be appropriate for you.

Most issues covered have market capitalizations of less than $100 million and some may have market capitalizations of less than $25 million. Investors are advised to use limit orders when trading these securities and to be aware of the limited liquidity in these issues when determining an appropriate position size. Some of these issues may trade on the pink sheets, grey market or bulletin board markets which may further limit liquidity. Pink sheet issues as well as some other smaller market capitalization issues have less stringent disclosure requirements than larger market capitalization issues.

Issues covered by the Panick Value Research Report may be concentrated in some market sectors such as regional banking, shipping and energy. A balanced portfolio should include investments in a variety of market sectors including some conservative, low risk issues which are not covered in this report. The "Panick Value 10" is not intended to represent a balanced portfolio.

The author is an active trader and investor in many of the covered issues. The author does NOT receive any payment (other than paid subscriptions) in exchange for providing coverage of a specific issue. The author also receives payments from Seeking Alpha for published articles based on their standard rates. Subscribers may suggest issues which the author will review and cover if found to meet Panick Value Research Report criteria.

The author's opinions are subject to change as new information becomes available and market conditions change. All subscribers will receive alerts as new information becomes available. The author discusses some of the issues covered in public online forums such as yahoo stock message boards and Seeking Alpha. The author intends to make the Panick Value Research Report and subscriber email alerts the best source for reading his opinions, more in depth research and trading alerts on covered issues.

The author makes every effort to provide accurate information in the Panick Value Research Report. However, the report is not guaranteed to be free of mistakes. Investors should do their own due diligence to verify all information prior to investing or trading. Daily alerts are often sent quickly as time critical news breaks and are therefore more likely to contain errors.

The author pledges not to sell or otherwise share your email address or other contact information.

About The Author

Richard Lejeune is currently an Independent Trader and Consultant focused on microcap equities and high yield issues with a market capitalization of under $ 100 million. The author recently worked as a Senior Investment Analyst and Trader in Wilmington, Delaware. Responsibilities included researching equities and high yield bonds for a portfolio valued at several million dollars for a private group of wealthy investors. The author has also worked in the Information Technology field as Director of Computer Operations for the St. John's University Staten Island Campus and as an Adjunct Professor. The author can be reached via email at richard@panickreport.com or cell phone at 570-242-0756. There is also a Panick Value Research Report Facebook page and free Seeking Alpha following, but the author intends to provide Panick Report subscribers with the most timely and complete information.

Subscription Information

All subscribers to the Panick Value Research Report will receive advance drafts of Seeking Alpha articles, a monthly newsletter and supporting Excel model. Subscribers will also receive daily alerts as news breaks and potential trades develop. The author is available for individual subscriber questions on the research presented and there is also an active subscriber only "chat board". The Panick Value Research Report is now #1 in the Dividends section of the Seeking Alpha Marketplace.

seekingalpha.com/pages/premium_authors?c...

Additional disclosure: The author is long and / or actively trading numerous issues covered in this report. The Panick Value Research Report is now #1 in the Dividends section of the Seeking Alpha Marketplace