Customer orientation

A recent article which I am assuming is accurate at least at the root highlighted a view of ‘Orientation’ by companies.

https://www.cbsnews.com/news/kroger-threatens-to-ban-visa-cards/

Now … I find the ‘corporate profit orientation’ above that of the customer.  Would not a retailer want to provide convenient and customer choice modes of payment?  I get it the op costs could be higher with different vendors, but would you rather have happy, loyal customers?

Swings: WELL & HBAN = looking long; UA = short again

Three stocks floated across my desk this weekend for possible actions next week

  1. WELL (Welltower)
    • I lost 200 shares this month due to an open Call sell at $60.  Still own more than that, but …
    • The senior healthcare housing market is a tough segment right now
    • WELL is my top selection amongst the group – above OHI and VTR for sure imho
    • Earnings call was interesting – especially the specific questions (in the QA) and management’s characterization of ‘bouncing around the bottom’
    • The situation appears as if management is positive looking forward (tough times, we’re bouncing at the bottom and we’re making the right plans), but analysts are highly skeptical
    • If stock drops below $60 without a varying narrative, I will look to add more
    • Earnings call https://seekingalpha.com/article/4191416 
  2. UA (Under Armour)
  3. HBAN (Huntington Bancshares)
    • I owned Oct 15 calls – sold most of them
    • There were some interesting points management brought out in the earnings call and this post highlights them well
    • This could be a decent EOY ’18 swing trade, but i would like an entry point below $15.25 – if the current breakout above RL2 continues — too late (want a short pullback before opening additional positions)
    • https://seekingalpha.com/article/4191622

Accounting Gotchas in Canada Weed

https://seekingalpha.com/article/4185105-understanding-cannabis-industry-gain-biologicals

This is a great article (the comments criticize as expected but are still worth reading).  For me, i have not even tried to value weed stocks w/ any due diligence / discipline.  It’s always been a speculative trading vehicle and focused on the 3 bigs:  CGC, APHQF,  & ACBFF.  Speculative positions that by pure luck made enough profit to sit on very small positions in all w/ earned capital.  If they make it big, great.  If they crash, oh well … it was fun.

While the exercise of valuing those companies is something people are going to do and it will help us who will not … i think 2019 is the earliest we get anything to make investment decisions on … the big money (tobacco and alcohol have yet to really show their hands)

OHI – My Problem Child REIT

OHI is in trouble both, i believe, as a business and as a stock.  My total position is small relative to my historical holdings at <350 shares.  Two posts in the last 24-48 hours suggest that i am not the only one with this problem child.

Both of these articles are well researched and detailed about OHI and the market segment challenges and opportunities.  I have NOT changed my mind, however.  LTC will remain my REIT in this segment.  WRT OHI, i am just trying to figure out the right exit … and how much risk i will assume to minimize the loss to the exit.  The political, labor and ‘old people preferences’ headwinds even out into 2020-25 are just too strong in my opinion to carry OHI risk / reward.

I will look to exit by EOY ’17.

Low cost Toronto Weed Stocks

I bought a couple Toronto weed stocks last month and am looking to expand positions as entry points allow … TWMJF, APHQF and ACBFF were the target set.  I have small positions in TWMJF and APHQF (after reducing both by 50% after >25% gains in last 30 days).

I looked at APHQF and ACBFF as possibles due to the lower prices … i took Yahoo Finance numbers for annual financials … looking at these numbers at face value there is only 1 choice … next step is to verify these numbers with deep dives into different sources … then decision about additional investments (speculation?).

Variable

ACBFF

APHQF

Price

3.14

6.72

Assets

248,463

233,930

Liabilities

79,884

31,170

Tangible

112,995

200,472

Op Cash Flow

-8,090

3,942

Rev

12,363

12,806

Op Income

-8,618

-1,030

Net Income

-9,985

3,108

More Q3 Quarterly 2017 Reviews

Last night i read thru 3 earnings conference call transcripts:  HASI, FIT and BEP

  • HASI … debt strategy and their willingness to take on that strategy was positive and well articulated.  No change to my positions (mid-point positions in both taxable and non-taxed portfolios) … will, however, add to positions if entry point lowers
  • FIT … seemed to me there was a bunch of hand waving (old corporate saying for we do not have much positive news to talk about so we’ll wave our hands enough to distract everybody) … the one key thing that surfaced in their prepared remarks was alarming (but maybe this was a transcription error)
    • “G&A spend increased 48% year-over-year to $35 million. Research and development spend was up 1% year-over-year to $71 million, and sales and marketing declined 4% year-over-year to $74 million” …
    • they are spending more on Sales / Marketing than R&D? … way, way, way bizarre imho
    • I have VERY small position in FIT and will exit if price hits $5.50 with a 10% loss
  • BEP … this one is getting way interesting and another executive team that seems like they really know what they are talking about and how to talk to investors.  I will be looking to add to this position in non-taxed account as entry point opportunities surface

UMPQ Q3 2017 Quarterly Review

UMPQ is ~3% of my taxable portfolio, with a cost basis around $12.  Their recent quarterly report, conference call and slides can be found here.

What i liked:

  • less discussion on rearview mirror and more discussion of 3 year strategy and included 2 rate scenarios within the strategy
  • exiting the car loan business and rational reasons for doing so
  • talking about their employees and how the strategy evolution impacts them and what the company is doing about that

What i did not like:

  • no discussion of competition
  • analysts asking questions that focused on their ability to build a revised model rather than really digging into the strategy

Conclusion for me? …. somewhere between $18-19 i would consider adding more to my position … but will watch carefully for now

DSW Day Trade – warm weather

Ok … DSW … i traded this stock several times in the last 6 months, and i could not resist doing it again today … the stock dropped multiple times in last 5 days and this morning it dropped again(big) supposedly based on 1 analyst saying that warm weather decreased demand for boots, so DSW was downgraded.  You gotta be kidding me … right?

So i bought a very small position at $17.80, and sold it later for $18.50 … not much in dollar view, but a decent day’s work in % basis.

OHI 3 Quarter

Another bruising quarterly report for OHI who continues to struggle with operator profitability and the SNF industry in general (IMHO) … i was seriously considering rebuilding my position and was carefully reading the earnings report / conference call … here is my post to Seeking Alpha this morning connected to Brad Thomas’ post on OHI report https://seekingalpha.com/article/4118906-just-another-day-paradise-omega-healthcare

I was seriously thinking of adding to my OHI position which i have reduced to about 25% of its early 2017 size, but … in the earnings call transcript, there was a political comment that precludes my further investment and i will work my way out of the position.

Quote: “Finally, the resignation of industry-friendly Department of Health and Human Services Secretary, Tom Price, raises the question of whether his successor will continue the largely favorable treatment of SNF industry issues strongly supported by current CMS administrator, Seema Verma, a potential successor.”

What is this? Without a friendly HHS secretary OHI business is at risk (and how was Price helping stabilize funding for SNF market)? … weakens my confidence in OHI executive suite.

GE Commentary

Here is one of the better commentaries on GE that i have read recently.  While the actionable advise is no better / worse than others and the author comes clean on the … GE is big, messy and intentionally financially confusing, so ultimately investors are going to have to go w/ their gut … i agree

but i really liked the use of scenarios and the ability to talk thru assumptions and drivers in the model rather than just navel gazing at the same graphs and charts the company publishes and a thousand authors redress and publish

https://seekingalpha.com/article/4115450-ge-hold-fold-3rd-quarter-earnings-update

As far as my actions wrt GE … i am holding until November investor / strategy discussion

JNJ Quarterly Earnings

The Sources

Interesting Points

  • A $0.08 cent swing to earnings estimates from July based on currency valuations, especially Euro:  “If currency exchange rates for all of 2017 were to remain where they were as of last week that our reported adjusted EPS would be favorably impacted by $0.03 due to currency movements and this is an improvement from the negative impact of $0.05 in our previous guidance.”
  • The reported confidence in 2017 EOY is compelling, but assumes currency up-side:  “Therefore, we would be comfortable with our reported adjusted EPS ranging from $7.25 to $7.30 per share, an increase of $0.10 from our prior guidance and a growth rate of between 7.7% and 8.4%. So in closing, we are extremely pleased with the sales and earnings performance in the third quarter and our higher EPS guidance for 2017. In summary, we are maintaining our operational sales growth of 5.5% to 6% for the year, consistent with our goal of growing earnings faster than sales, our guidance for operational adjusted EPS growth remains strong in the range of 7% to 8% and our businesses continue to invest for the long-term while also delivering on near term priorities.”
  • Pharm area growing as anticipated:  “I think when we met in May 2017 on the occasion of the Pharmaceutical R&D review day, we anticipated that the performance of the Pharmaceutical group was going to accelerate during the second half of the year. And that’s precisely what you are seeing today.You are seeing the pharmaceutical group moving from low single-digit growth in the first half of the year to 6.7% in this third quarter. So clear acceleration of the sales of the pharmaceutical group.”

My Thoughts

  • Things are going as expected … currency values are helping bottom line
  • Does valuation, risk / reward change to drive either a) adding more shares or b) reducing?
    • 10yr FAST Graphs do not show that further investments at this time would make sense
    • With that said, however, i am not reducing shares either and will continue to DRIP shares as dividends arrive.

Small Trades

Two small trades surfaced this week … one i like and the other is like playing 1 hand of 21.  PEGI is the former and FIT is the latter.

  • PEGI announced that the recent natural disasters would impact their demand but committed to keeping distributions as promised.  The market dumped the stock as if this was some kind of BIG surprise.  Really? … i grabbed a bit in IRA as this is one of my favorite sustainable energy income plays (HASI and BEP the others with positions in both).  If i hold this for longer term, no big deal; if i earn 3-5% in intermediate term, i’ll take it.
  • FIT is just one of those things … Iconic may / may not be the fitness watch to win, but there are just too many people running around w/ Fitbit devices and they built a new R&D center in Romania – i know some of the SW team and they are top-notch … i’ll put 100 share investment bet on that SW team!