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Category: Portfolio Management

Non urgent $ reads – May 31, 2020

Non urgent $ reads – May 31, 2020

Note: These are no more than a week old, but some are older than normally posted

RY: Royal Bank of Canada (RY) CEO David McKay on Q2 2020 Results – Earnings Call Transcript

Academic look at C-19 economic impacts – jobs

Academic look at C-19 economic impacts – jobs

This working whitepaper is about 1 month old (from the data used) but holds a couple of interesting take-aways.

Source: https://bfi.uchicago.edu/wp-content/uploads/BFI_WP_202059.pdf

I have to give credit to the authors for their attempt to use data and academic rigor to articulating a possible post c-19 jobs picture. It’s not an easy read, and I came away with two key points to help my portfolio management.

First, the post c-19 recovery is probably going to take longer than current equity prices assume. This article suggests 2H ’21 the earliest GDP could return to pre C-19 levels; but that does not suggest nor imply same levels of employment, revenue and profit – currently unknowable?

Second, a number of 77% of lost jobs are assumed to be either kept, returned or relocated. That leaves 23% lost until economic growth creates them … sometime AFTER 2H ’21 based on above. The absolute numbers are less important than the levels (~20% lost jobs) and one can easily do the math.

If the authors analysis and assumptions hold, then consumption driven activity will be reduced by some number close relative to that 20% – and, higher government support for unemployed, underemployed … discretionary spending will take a hit almost certain and local governments will be further stressed.

C-19 death rates change senior housing investing risks

C-19 death rates change senior housing investing risks

Early on the C-19 days, even before US had acted, I predicted that senior housing and the companies that provide those services were going to be challenged in the longer term. The business model future was questioned in my mind. Hence, I sold all my shares in REITs holding those properties, e.g., WELL and LTC. (disclosure, I did NOT sell at the top and ignored my intuition; i sold later at profit, but with less than possible).

Some data on C-19 deaths and ‘where’ they occurred supports the thesis that this business model will be challenged moving forward. Will folks stop using long term senior care facilities … NO! Will people use them less or consider more options (opening up new business models) before signing that lease / agreement, YES!

The business model will be challenged, but the how, when and who remains open. That level of ‘unknown’ is just beyond my portfolio risk tolerance given all else going on … Eventhough, the LTC management is absolutely top-notch, and under most circumstances I would take the risk w/ them … but C-19 is different.

Infographic: High COVID-19 Mortality Rate Linked To U.S. Care Facilities | Statista

Source: https://www.statista.com/chart/21824/covid-19-deaths-in-us-long-term-care-facilities/

A balanced view on C-19 impact to investing – Dale Roberts

A balanced view on C-19 impact to investing – Dale Roberts

One of my always read authors posted a good balanced view on C-19 impact to economy and investing. Dale helped me a couple of years ago in taking solid positions in 10yr bonds that have proven out so far, e.g., MSFT, AAPL, BRK, KR, etc. The majority of voices at the time were calling a bottom on yields and putting fear into bonds … I took the plunge in part based on Dale’s analysis.

My portfolio strategy remains anchored in risk mitigation is foremost; don’t worry about ‘beating the market’ and resist any and all temptation to succumb to FOMO. My capital can remain very conservatively placed until I have confidence in investable value with commensurate risks. – Not much in it today, imho.

His closing is worth the full text, quote:

So yes, there’s hope

That said, even given the best possible miracle outcome and timing, it’s quite likely that economically, the damage will have already been done. And it will be a challenge for a rushed vaccine to change our already ingrained new normal behaviours. It may take a while for most of us to leave the fear at the door.

We have been asked to be too scared for too long, and that was for our own good. And mostly for the good and health of healthcare workers and the at-risk populations.

But I certainly hope that we begin that economic rebuild as quickly and safely as possible. To protect the health of workers, the vulnerable and the healthcare workers we will need to do this economic restart in very slow and measured fashion. If we step on the accelerator too hard the virus will take us into oncoming traffic.

We cannot afford a failed restart. This is the most dangerous economic experiment in human history.

Be safe. Be well. Be generous.

In summary I’d suggest we have a scared consumer, scared business owners, businesses that are going away; businesses that won’t be able to survive the new normal. There is that ceiling on how much we can fight back economically. All while the virus attempts to make things worse and more challenging at every stage.

There are many headwinds that will make a V-shaped recovery more than unlikely.

Non urgent $ reads – 5-21-20

Non urgent $ reads – 5-21-20

Non-urgent $ reads – 5-12-20

Non-urgent $ reads – 5-12-20

Note: There were several days w/out bicycle time (too nice outdoors, so biked in the sunshine); this is a collection that is at least 1 week old.

Non-urgent $ reads – 4-30-2020

Non-urgent $ reads – 4-30-2020

  • Household Debt: The Anchor Dragging Economic Recovery
    • —not actionable for me
    • but did point out interesting demographic in younger consumers and their absence of mortgage – which means their disposable is tapped and insecurity just spiked
  • The Facade Of Financialized Demand
    • — CSCO was example from 2000 – I thought a great thought exercise and commented
    • Comment: A good thought exercise – another example – CSP sell elastic capacity – as new companies and existing companies reduce their demand the infrastructure to support elastic demand was in place – somebody now owns a under utilized capital asset(unless demand elsewhere surfaces) … who owns that capital asset? They are holding the risk without elastic demand staying even or positive. Enterprise corporates own less and less of those assets vs yr 2000. But somebody has those assets on their books
Non-urgent $ reads – 4-25-20

Non-urgent $ reads – 4-25-20

NOTE: These were read over a couple of sessions, but posted together

*Session 4-24*

Most important read:

— read 2x – incredible deep and important but the immediate actions are not obvious, but this will prompt several deeper dives, starting with historical assets price trends 1933 thru 1950

BAC: Big Bank Comparison: Bank Of America, Wells Fargo, And Chase

— thro out WFC – BAC cheaper but JPM higher yield and better management. Next step for me is to combine BAC, JMP, BMO and RY as to which 2 deserve new capital. Ideally, 1 US & 1 CA

Southern Company Is A Powerhouse Among Utilities

— average value solid dividend – good view in valuing doc quality but nothing on their markets just a numbers in the book review – necessary but not sufficient

Alphabet Proves Why Cash Is King

— not actionable for me; with that said, however, i am seriously evaluating GOOG for a 2H investment after marketing spends are re-normalized

Tons Of Insider Buying Lately – Is That A Bullish Indicator? You Might Be Surprised

— basically don’t trust insiders any more than u trust analysts

The Buying Opportunity Of A Lifetime? Think Again

— uses history to refute and dies not seem to see the near term lows- yet

Coronavirus Sparked Healthcare ETFs In General, But Ultimately, We Really Do Need To Pick And Choose

—- all etf – not actionable for me

Inflation Expectations Are Way Underpriced

—not actionable for me

The Risk Of A Lost Decade For Stocks

—interesting but not actionable for me

***Session 4-25***

POR: Portland General Electric Company (POR) CEO Maria Pope on Q1 2020 Results – Earnings Call Transcript

— simple straight forward – happy new shareholder – increase position as opportunity surfaces. $43 is next buy target after nibbling at $45.

ERIC: Telefonaktiebolaget LM Ericsson (ERIC) CEO Börje Ekholm on Q1 2020 Results – Earnings Call Transcript

— no material change to strategy – q2 will be risk as expected C-19 and seasonally – comfortable with design win, momentum. Stock price may / may no fall further as Q2 unfolds, but additional capital should wait those results – better line of sight to 5G spends globally (delays).

Divergence In REIT Valuations Creates Opportunity

— favs include MPW, FPI & pref too, STAG; I am not a fan of any of them but for different reasons. I am staying with DOC within REIT common.

Coronavirus Harms Supply Chains: Prof. Ted Stank

—pretty high level but aligns with my views – supply chain will become more expensive eventually; not because of fundamental producer changes, but stocks within flows that today do not exist as everybody was working on J-in-T-I without any stocks.

https://pplweb.mediaroom.com/2020-04-16-2019-Sustainability-Report-highlights-how-PPL-Corporation-is-moving-energy-forward-for-our-community-customers-and-shareowners

— really PR collateral, but I applaud them for publishing and it only confirms my selection

The Fed Versus Reality

SH is an interesting idea – seems at face value better than SPY puts

Weekly High Frequency Indicators: The Decisions Made By A Few Will Determine Vastly Different Economic Outcomes

— no material changes and a tough exercise when data changes so materially

Bank of Nova Scotia Provides Opportunity For Safety And Growth

— Div as safe as BMO, Mexico weak link – consumer still has high risk – too early – pacific strategy is sound but C-19 risks outweigh the entry point … after Q2 for me when better direction visible, especially vis-à-vis BMO and RY that I already hold

Rocky Start To REIT Earnings Season

— still bullish on home building – seems 1q too early for me – numbers will get worse before uptrend

S&P 500 Weekly Update: Staring At The Crossroads

— not actionable for me

INTC: Intel Headed For An Extended Downturn

—sky is falling, but it’s really the old story imho – INTC is leaning in to servers, but CSP grow with lower margins and enterprise shrinks – so simple to see / evaluate. Until enterprise or non CSP server volume picks back up, margins will suffer

Non-urgent $ reads 4-22-20

Non-urgent $ reads 4-22-20

TSM Taiwan Semiconductor Manufacturing Company Losing Its Process Leadership To Intel by Arne Verheyde

—solid update on process tech but nothing about products

RFI The Best And Worst-Performing CEFs YTD, And 5 To Buy Now: April 2020 by BOOX Research

— RFI best idea in REIT land – what are nibble prices and triggers?  An overlay of big holding earnings

RFI Healthcare REITs: Back On Life Support by Hoya Capital Real Estate

— an excellent overview – validated my approach to storage, industrials and cloud with MoB too – only MOB is Common stock all else cum pref

“Greater Fool” Bonds: Turning Portfolio Management On Its Head

— not actionable for me

10 Dividend Stocks On My Buy List When The Market Turns Negative by Mark Roussin

— his list is interesting but what the commentators are missing is his view of a tough q2 earnings- I think that will show where blood is flowing in the streets as well as where it is temporary and where it’s not discernible – too early for me to place big bets

Important Message To All REIT Investors by Jussi Askola

— the message is good imho – its just that the examples are tough to evaluate yet – for younger higher risk tolerant investors makes sense tho

The New Era: It’s Being Led By Tech And Health

— not actionable for me

Deflation And/Or Inflation by WWS Swiss Financial Consulting SA

— not actionable for me

Did Rent Get Paid? Previewing REIT Earnings Season

— not actionable for me

Non-urgent $ Reads – 4-21-20

Non-urgent $ Reads – 4-21-20

MacroView: This Time Might Be Different

—not actionable for me

TU: Telus: This 5%-Yielding Stock Should Continue To Grow Its Dividend By 7%-10% Through 2023

— the article was a bit shallow, but there was 1 comment that is important, quote: 

“You should have added a section analysing there balance sheet. The amount of long term debt they have taken over the years is too much. They went from 11B$ in 2015 to 17B$ in 2019 (+50% increase), while there operating cash flow has stayed relatively constant. It’s the same accross the industry, they are lucky to have Canadian government blocking competitors from entering the Canadian market.”

Sentiment Speaks: Can The Bears Come Back Roaring

—not actionable for me

Market Rallies Into The ‘Resistance Zone’

— echo chamber caution as his thoughts reflect most of mine at this point.  Here is key point: 

“This doesn’t mean we aren’t long equities. We are, but we are also carrying a much heavier exposure to cash, and have reduced exposure to fixed income. We continue to be selective buyers of quality companies opportunistically and will continue to prudently build our portfolios.”

JNJ: JNJ Q1 Earnings Call Key Takeaways

— basically medical devices will be hit due to non-C-19 surgeries being postponed and equipment purchasing being delayed … unless hospitals get more funding from FEDS I am not sure this will quickly correct … hard to see others (unless some magical vaccine surfaces from JNJ) make up the loss – while not something to sell, not something to buy here either until things calm down; I trimmed off ~15% of my shares from DRIPs and am back to my original position.

Alibaba’s Game-Changing Role In China’s Digital Currency

— long rambling and mixed up set of information – C-19, BABA, etc … author knows their content and worth continuing to read, but not this article.  I am still a fan of BABA but am still leaning to ETF for the play – IEMG and EMQQ being my favorites tho I do not hold EMQQ at this time.

Business Interruption Claims From COVID-19 Could Bankrupt The Insurance Industry

— outside my interest space

Verizon: 3 Questions To Ask On Earnings Day

— not actionable for me; though did have a good idea in the comments about selling PUTS – I looked into May PUTS but I will only buy more <$50, and there’s no short term PUTS that gets me there

Straight From PIMCO: A Closer Look At Emerging Markets

— not actionable for me; key point was stick to dollar based debt from quality companies – duh!

CSCO: Cisco: Unjustifiably Cheap, Yet Well Positioned For 2021

— not actionable for me, but repeats my view that the next several quarters are buying opp

— specific to oil and ETF that hold oil contracts – it’s NOT a pretty picture

Non-urgent financial reads April 18, 2020

Non-urgent financial reads April 18, 2020

High level summary – nothing below that materially changes my current views, strategies or tactics

DOC: Physicians Realty Trust Is A Reliable REIT On Sale

— assumes biz model unchanged post C-19

IBM’s Second Chance At Cloud Computing Dominance

—in essence IBM needs to be a cloud connector and services provider which will tie them to the oldest slowest growing companies

Buying This Dip: Here Are 4 Cloud-Tech Names For Consideration

— not actionable for me

Hirst: If There’s One Place The Fed Has Your Back, It’s Money Markets

— not actionable for me

Our Five Favorite Positions Right Now

—not actionable for me

DGX: Quest Diagnostics: COVID-19 Testing Not Enough To Overcome Negative Effects

— not actionable beyond warning of revenue replacements at much lower levels – C-19 revs lower than traditional rev removed

Deutsche’s Kocic: The Last Two Months Show The Intrinsic Instability Of Our Entire Economic System

— hold on to your hats – implied is that fed balloon squeezing pushes risk and volatility into equities.  Overall system is very weak and consumer and biz level of liquidity is very, very small and when those fail, all tumbles down. THIS ONE IS IMPORTANT

The Wild World of Yield Chasing

— focused on longer durations – outside my current universe

CEFs: Two Utility Funds That Survived Through The Last Crisis Without Cuts

— outside my universe right now tho could be included in the XLU / FUTY research that has been suspended currently

When Too Much Is Not Enough

— not actionable for me

Weekly High Frequency Indicators: The Last Dominoes Fall

— stating the obvious with data

S&P 500 Weekly Update: ‘Balance’ – A Winning Strategy For Investors

— not actionable for me

A Grand Reopening? Winners And Losers Emerge

— summary recap – not actionable for me

Federal Reserve Watch: Here Comes The Money

— common narrative – short term deflation roughly 1 year then inflation

Kroger: Raise Prices, Print Money, Huge Upside

— if the narrative is either margins or MSS must increase, call me skeptical – I like my KR bonds, however

DGX: Quest Diagnostics: Stress On The Healthcare System Is A Bearish Sign

— echo of above piece on DGX – moving from my ‘watch’

—Q2 is kitchen sink for rev gro – thru earnings calls rev forecasts into Q3 & 4 are the tell – what’s the gro slope?  Goddess save us if lower than q2

— same story as above – key quote

Summary / conclusion: It’s pretty clear that Q2 ’20 is going to be the bottom for SP 500 earnings, but’s the rate or slope of the acceleration moving out of Q2 ’20 that will matter. The SP 500 earnings yield near 5% is always a red flag, but the environment makes this metric less useful.

Non-urgent financial reads 4-16-20

Non-urgent financial reads 4-16-20

Note: I batch up different articles that I want to read, and then read / comment on them several times / week while riding the stationary bike. These are generally deeper analysis pieces that fit into strategy, portfolio management or economics.

This batch

Post‑Pandemic Interest Rates: Lower For Longer

— ny fed published recently a review of feds work around ww2 on rates and debt – learning from the past – start on short end and extend maturities naturally as fed releases hold on monetary control – risk this time is higher global interdependence – but totally worth a read for historical perspective on what was done before

Debt-Free Companies Of The S&P 500 – T. Rowe Price Group

— key take away: 1- how are companies with new debt (either from gov or market) spending new capital and 2- what did the company really use its old debt for? – the stock or the business. Same fallacy of strategy as investors – did you buy for the stock or did you buy for the company? (this could become a stand-alone post if investigation surfaces novel notions)

AY: Atlantica Yield: Renewable Energy YieldCo Offers 7% Yield For Clean Income

— interesting and positive on AY but the AQN story is more appealing to me. Posed a question in comments let’s see in answers – Author’s answer- “I figure AQN receives $71 million annually from AY distributions, or about $0.13 per AQN share”

Intel: It’s Go Time by Business Quant

— key here is ADSL EUV installs – lever for INTC future gains – my INTC position is about 15% of once upon a time. INTC has to win the data center, period.

T: AT&T: Expect Some Pain

— nothing new but the comments help separate wheat from chaff – the main engine will remain mobility – their challenge will be to competitive and focused to win there with complexity and challenges elsewhere – needs great leadership – do they have now?

A Complete Collapse

— marketing teaser – losing confidence in the author as this is becoming pattern. plan on sending author private note.

Factory Orders And PMI Data Suggest These Industries Are Bullish

— too general to make actionable

Utility ETFs: Boring, But Tasty In Their Own Way

— good view on XLU comparison to other ETF and deep compare to FUTY on same metrics published in the author’s comparison. I started this analysis today and did not get far before I realize better to buy utility directly – not ETF

Riskiest Dividend Yields In Today’s Turbulent Markets

— good look at true cash flow – D is a risk in this analysis but PPL is not – yet street adds risk premium to PPL – why?

Analyzing Which REITs To Buy In The Post COVID-19 World by Yield Strategist

— not relevant to my strategies

Non-urgent financial reads batch 4-14-20

Non-urgent financial reads batch 4-14-20

A short preamble. My portfolio management methodology is based in fundamental and traditional analysis – I am buying companies and as an owner have a responsibility to really know / understand the companies that I own. Recently, I have done a poor job of that — learn from failure and move on!

With that said, there is a principle to convey to help understand some of the comments below. It’s a market of stocks which are companies – there is no entity (in my financial head) ‘stock market’ (traders can have the market; investors will take the companies). As part of this, unless I can fully comprehend the business model (costs, margins, customers, risks, etc), it’s VERY hard to value a company. Without understanding the business, how can anybody value the company? Hence, we all take about the stock price being cheaper, rich, high, low, etc … until the clarity of structural changes are clearer, my valuations and stock purchases will be TRADES, not investments.

Here’s my reading from today (my comments follow the reading URL)

Qualcomm: 5G Wave Only Delayed

— weak- focused only on phones and Apple 5g phones – so much more to this story

This Chart Might Explain Why Berkshire Is Still Waiting On The Sidelines

— article didn’t really provide anything new but BRK is an interesting idea to look at salvage ops after this C-19 is thru

Even If The Fed Keeps Pumping Money, We May Still See Deflation

— primer nothing new

Inflation Is Coming

— a plausible scenario that needs to be considered but for me too early to claim one scenario

S&P 500 Valuation: When A Margin Of Safety Trumps Economic Fundamentals

— risk approach but at market level –  add to BRK article and it’s an echo chamber

Income Lab Ideas: Zero To Near-Zero Interest Rates

—take away is to look at calls within fixed income portfolio – ETF or CEF – seems obvious but I was not paying attention

http://fundamentalis.com/?p=10099  – same? Look At 2021 (And Forward Quarters) For A Better Read On Earnings

— key here is to not get bogged down in q1 or 2 numbers – use annual averages and estimates

‘Boomer Crisis’ – Crash Permanently Delays Retirement Plans

— nothing new but reminder to make sure daughter has sufficient fund

Consumer Prices Sharply Decline In March: Keep Your Eye On Wages

— watch wage growth go negative in sustained trend – very bad

Income Lab Ideas: Zero To Near-Zero Interest Rates by Nick Ackerman

— duplicate

Technically Speaking: The Reward Doesn’t Justify The Risk

— quote

With only a 6.7% advance available to achieve the 62.8% retracement, the “risk” required to achieve that gain is heavily offset by the 19% decline to retest the March 23rd lows.

In other words, for each $1 of capital you have exposed to equity risk currently, you are risking nearly $3 of loss. Such hardly seems to be a “rewarding proposition,” but those are odds any casino in Las Vegas would love to give you

Today’s Crisis And The Impact On The Real Estate Market by Jussi Askola

— fair analysis but imho overly optimistic – didn’t highlight different segments – disappointing from author as his posts are usually deeper analyzed

Non urgent financial reads – batch April 12

Non urgent financial reads – batch April 12

Disclaimer – just my observations – no recommendations

Coronavirus Roundtable – Still In The Early Innings

— nothing new

Mirror, Mirror On The Wall, Who Is (One Of) The Ugliest (Market) Of Them All?

— relative values by country markets – Korea surfaces as does UK as better values / cheaper based on current metrics (question their accuracy given stale earnings forecasts)

Weighing The Week Ahead: So Many Good Questions, So Many Poor Answers

— nothing new

LEVI: Levi Strauss & Co. (LEVI) CEO Chip Bergh on Q1 2020 Results – Earnings Call Transcript

— well articulated strategy and focus on recovery tactics – build position out

D: Dominion Energy: Nearly Decade-High Dividend Yield, But Wait For A Better Entry Point

— nothing new

SJR: Shaw Communications Inc. (SJR) CEO Bradley Shaw on Q2 2020 Results – Earnings Call Transcript

— impressive articulation of strategy and position – factual that ‘this quarter is dead and next q could be wrt new subs

The Case Against Treasury Bonds by Movement Capital

— key point is opportunity cost of cash is not enough to shoulder treasury real rate return

High-Yield Bonds: Not So Junk Anymore

— duplicate read from earlier

Dividend ETFs: Anomalies Are Great, So Long As They Aren’t Mirages

— common sense for newbies but nothing new

Beware Lazy Diversification In Preferreds

— key action – look for fixed + float to diversify current positions – could think same in bond space too – a good view on diversification

Bank Of Montreal: Comprehensive Analysis And Today’s Value Vs. The Great Recession

— positive view but did not dive into oil loan book; which seems like the largest risk area

The Frightening Economy On ‘The Other Side’ Of COVID-19

— L shaped recovery but some changed forever … not much confidence in V or short U recovery

AT&T: Brace For Impact by Business Quant

— nothing new

Key Takeaways From PIMCO’s Cyclical Outlook: From Hurting To Healing

— baseline U shape recovery – high quality debt longer durations and TIPS shorter

The U.S. Likely Faces A Deep, Hopefully Short Recession by PIMCO

— nothing new

Closed-End Funds: Bear Market ‘Buys’ by Nick Ackerman

—likes RNP at lower price at discount of >5% – hard to hold in volatile market but makes sense as leveraged diversification