Yieldpig

Here’s How Blackberries SHOULD be sold…

2012-01-25T23:19:00.002-05:00

I use an older, hand cranked, coal fired Blackberry. I’m loyal to it. Sometimes, when I fiddle with my son’s iPhone, I feel dirty, like some old, shriveled college professor trying to shtup a nubile coed. And I get mad as hell at Research in Motion for blowing the lead they had initially in smartphones.

This week when the company announced it’s management shuffle, the marketplace didn’t necessarily do back flips. The founders were replaced by an insider with a multi-national, bureaucratic pedigree. Doesn’t exactly scream “innovation”. So I’ll pretend I’m an ad guy pitching the company on how to sell Blackberries like a boss.

First, I’d hit the fact that one of the company’s biggest customers is the U.S. government. Sure, it’s a risky strategy. No one really thinks “Yeah! Department of Agriculture! Badass!”. But that’s not who we’re trying to reach. RIMM’s position was that it had the most secure network and OS out there. Then the system goes down because it gets hacked. News flash: everyone’s been hacked, is getting hacked, or will be hacked in the very near future. It’s the world we live in. It’s still a pretty secure platform. The President of the United States, who has NEVER been allowed to have a cell phone for security reasons, has a Blackberry.

Second, functionality. The Blackberry’s internet ability, especially on older handsets, sucks. So what? I screw off on the internet enough at the office.. There are a couple of sites that have a decent mobile app for Blackberry and I can get what I need. Is it iPhone awesome? Not even close. But I don’t particularly want or need that. I dig on Twitter and, frankly, Twitter for Blackberry is just fine for what it is. E-mail and texting still rock like the Who on “Who’s Next”. Ever wondered why the text is so intuitive on an iPhone or an Android device? It’s because touch screens, as magical and amazing (the most over used word of the decade) as they are, aren’t really worth a shit when you’re trying to do real, grown up work. And that’s what they’re used for: work.

Lastly, integrity. RIMM has had difficulty getting a decent foothold in emerging markets. The main reason is that most emerging market governments are at least a wee bit oppressive and typically demand access to the Research in Motion network. Why? So they can spy on their citizens. The company typically doesn’t oblige. Apple doesn’t give a shit about an iPhone users privacy and Google seems to sliding down the same slope. RIMM hasn’t gone their or, seemingly, not as overtly. That says something.

Yes. I like my Blackberry. They’re not for everyone. They’re not cute. They’re not particularly fun. But they work well. And there’s your tag line, Mr. Client: “Blackberry: Work well” That one’s on the house.

The Trend Is Not Your Friend

2012-01-18T23:08:00.002-05:00

Think about all of the trends you’d like to forget: leisure suits, shoulder pads, disco, rollerblading. The fallout typically involves photographs that find their way to the internet 20 years later, possibly injury, or even the regrettable one night stand that haunts us every time you hear Spandau Ballet’s “True”. Trends can also come back to haunt us as investors.

I’ve never been a momentum guy or technical guy, and certainly not a trend guy. I’m just too uncoordinated. Besides, it seems that once everyone starts jumping on a trend, it’s done for the most part. If you follow the rest of the lemmings, you will soon have your rear end handed to you in a Ziploc bag with your name written on it with a Sharpie.

The cloud. Energy MLP’s. Treasuries. Oh, and gold…the mega trend of the decade. Did you finally break down and go long GLD in September 2011 because EVERYONE said the shiny, yellow metal was going to $45,000 an ounce because a huge, cataclysmic collapse was coming? Congratulations, you’ve given back 12% of your money. But it’s OK. You’re still getting a dividend, right? My bad, GLD or Krugerands buried in Ron Paul’s back yard don’t pay a dividend. But you can always trade it for some ammunition or water at the displaced persons camp underneath the interstate after the huge upheaval.

Look folks, I’m sure there’re many of you reading this who did make money on commodity trends or surfing other investment waves. God bless you. But I’m also willing to bet that a lot of you didn’t. Let’s remember Einstein’s definition of insanity: doing the same thing over and over expecting different results. If you’ve been chasing investment trends since the tech boom of the late 90’s and you’re still working with the same $10,000 in your Ameritrade account, but down the crack pipe and get help. It’s not working.

What works? A process. Look at Benjamin Graham. Look at Warren Buffett. Look at Mario Gabelli. Look at John Calamos. Why are they the greatest of the great? They have or had a definitive, disciplined process. Were they correct 100% of the time? No. But, they’re more successful on a consistent basis because of their process. Warren Buffett didn’t just throw a wad of money at IBM because he figured that Berkshire (BRKA) needed some tech exposure and he kinda new the name. He, and the rest of the big brains at Berkshire, used their process and came to the conclusion that IBM would be a good addition to Berkshire’s portfolio because of the different criteria that Berkshire looks for in a holding; strong cash flow generation, high quality, well known franchise, excellent management. If Buffet had just wanted some tech exposure, he could’ve just bought a tech ETF. Of course, as soon as the talking heads caught wind of that trade, the ETF share price would’ve spiked like Stephen Tyler’s blood alcohol level after falling off of the wagon. And what would happen? The lemmings would jump on the trend.

Even the stodgy, boring Dow Jones Utilities went through a bit of a trendy phase last year returning an astounding 19%. If you put new money in that space are you paying too much? Maybe. So, avoid the trend trap. Find a big name with decent fundamentals that’s cheaper. Southern Company (SO) trades at 18 times earnings (expensive for a utility) and yields 4.2%. Exelon (EXC) trades at around 10 times and yields 5.3%. An 80% discount in P/E and a pickup of 130 basis points in yield makes more sense and may protect you from the market handing you the aforementioned Ziploc bag.

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Yieldpig, Copyright © 2012 All rights reserved. No statement or expression of opinion, or any other matter herein, directly or indirectly, is an offer or the solicitation of an offer to buy or sell the securities or financial instruments mentioned. While we believe the sources of information to be reliable, we in no way represent or guarantee the accuracy of the statements made herein. Yieldpig does not provide individual investment counseling, act as an investment advisor, or individually advocate the purchase or sale of any security or investment Communications from Yieldpig are intended solely for informational purposes. Statements made by various authors, advertisers, sponsors and other contributors do not necessarily reflect the opinions of Yieldpig, and should not be construed as an endorsement by Yieldpig, either expressed or implied. Yieldpig is not responsible for typographic errors or other inaccuracies in the content. We believe the information contained herein to be accurate and reliable. However, errors may occasionally occur. Therefore, all information and materials are provided "AS IS" without any warranty of any kind. Past results are not indicative of future results. s should not view this publication as offering personalized legal or investment counseling. Investments recommended in this publication should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company in question

2012 Stock Market Predictions!!!

2011-12-28T21:48:00.005-05:00

OK. I’ll admit it. I used the cheesy headline to get lots (dozens and dozens) of hits. Everyone’s constantly hunting, scouring the information universe to see what gurus and pundits think about the forthcoming year. In 2009, I wrote a “prediction” piece that was a little more longer horizon. How’d I do? I didn’t pick any individual stocks, per se. More macro stuff than anything. You can go back and read it if you like

http://www.thestreet.com/story/10653348/1/go-long-bottled-water-twenty-teens-predictions.html

I think we did OK. We skipped writing a prediction for 2011 and judging from this year’s action, it’s just as well. It would have been a complete exercise in futility.

I will make a forecast for 2012, though. I predict, at best, the markets will be unpredictable. They always are. Could anyone predict the enormous, maybe bigger than ours, monetary crisis in Europe? I’m sure there are a lot of naysayers who may be proven somewhat right who doubted the viability of the Euro all along. But on this magnitude? Probably not. It’s always that way. I’m currently reading Reinhart and Rogoff’s “This Time Is Different” on the Kindle (thank to my wise and thoughtful sister for the gift card!). If you’re serious about investing and economics, I mean TRULY serious about really learning about it, red this book. It’s tough. It’s like going to school. But that’s what it takes.

Anyway, so, agreeing that markets are as unpredictable as Charlie Sheen and a stolen prescription pad, what do you do? I’m sticking with the strategy, yet to be named, I’ve been using for the past few years. As far as stocks are concerned, own big, cheap, well run, well known names that pay you something. What do I mean by cheap? A good place to start is the forward P/E ratio. The S&P 500 currently has a P/E of around 12 or 13. So, good stocks with a P/E less than that of the index are probably a smart move. Stocks like International Paper (IP) trading at 9.6 times 2012 earnings yielding 3.5%, Eli Lilly (LLY) at 9.5 times 2012 earnings with a 4.7% yield, and Intel (INTC) at 10.32 times 2012 earnings and yielding 3.4% are probably good ideas. I know. I’ve talked about these names before. I still like them. They’re great companies. Their multiples are reasonable to just down right cheap. And they pay you more than a ten year treasury for your risk.

Incidentally, had you owned those three names this year, your return just from capital appreciation would have been a little better than 15%. Throw in dividends and you’d be flirting with 20%. Not bad considering the S&P 500 has returned…oh…almost nothing this year? Did I mention I’ve written about these names in the recent past?

As far as bonds go, caution is probably the operative word. I’d stay away from government stuff. Hell, I haven’t bought a government bond for a client since 1997. Yeah, I’ve missed some run up. But I’ve always been taught that bonds are for income. They should pay you something. I’ve always gravitated toward corporate bonds. I guess it’s the equity background. I still hold the same belief. Again, use the same philosophy for corporates that you would for stocks. Big, cheap, liquid, well known names. Don’t pay too much (par or less…NEVER pay a premium for a bond) and get some yield. Don’t be afraid to dabble in the upper end (“B” rated or better) of the junk bond world. Don’t go out too far on the curve (10 years…tops!) and trade ‘em if you can. Yes…trade bonds. If you buy it at 96 and it goes to 110 and paid you 6% in the process, that’s a 20.5% total return. At the end of the day, the bond is really only worth 100. Let someone else pay 110.
Also, some financial company bonds are floating around out there that look attractive from a price standpoint. Worth a look, but be choosy and expect the worst while you hold it. Also, plan on trading those as well.

2011 was weird. 2012? Who knows? But judging from the past few years, at least some weirdness is guaranteed.

Yieldpig, Copyright © 2011 All rights reserved. No statement or expression of opinion, or any other matter herein, directly or indirectly, is an offer or the solicitation of an offer to buy or sell the securities or financial instruments mentioned. While we believe the sources of information to be reliable, we in no way represent or guarantee the accuracy of the statements made herein. Yieldpig does not provide individual investment counseling, act as an investment advisor, or individually advocate the purchase or sale of any security or investment Communications from Yieldpig are intended solely for informational purposes. Statements made by various authors, advertisers, sponsors and other contributors do not necessarily reflect the opinions of Yieldpig, and should not be construed as an endorsement by Yieldpig, either expressed or implied. Yieldpig is not responsible for typographic errors or other inaccuracies in the content. We believe the information contained herein to be accurate and reliable. However, errors may occasionally occur. Therefore, all information and materials are provided "AS IS" without any warranty of any kind. Past results are not indicative of future results. s should not view this publication as offering personalized legal or investment counseling. Investments recommended in this publication should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company in question

Blame The Euro Crisis on Charlemagne

2011-12-21T22:51:00.004-05:00

It all goes back to the 700 and 800’s to the brother of a hunchback and the son of Pepin the Short.

It’s easy to hang the albatross of blame for the shitstorm in Europe on the French and the Germans. After all, they’re the economic Alpha males of the continent and, let’s face it, the Euro was just a way to ensure their continued dominance. Not like they haven’t been running the joint since the Romans left.

No, the real culprit was a guy by the name of Charlemagne. If you took Western Civ in 9th grade, you remember him. A Frankish (French) king, Charlemagne was crowned Holy Roman Emperor by Pope Leo the Third in 800. But what did Charlemagne do?

The Roman Empire as everyone knew it had long since gone teats up. Greater Europe was basically a tribal bouillabaisse: the Franks in France, the Saxons over in most of Germany, the Moors and the Basques over in Spain. Charlemagne became the first Pan European badass and pulled all of it together. He converted the Saxons to Christianity, kicked the Lombards out of Italy, and basically, backed the Roman Catholic church as the premiere “spiritual” and political force on the continent. Charlemagne was the muscle. When all was said and done, His Holy Roman Empire stretched as far east as Czechoslovakia, Serbia and Croatia, as far south as Barcelona and Rome and as far north as the Danish border. Yep. Pretty much all of Europe. Oh, and there was a common currency known as the Livre Carolinienne backed by a silver standard.

Ironically, Charlemagne was probably born somewhere in Belgium but is identified more as a Frankish or French guy. However, his favored capital was in Aachen with the throne residing in Aachen Cathedral. Where is Aachen? Oh yeah…in Germany although France has held the deed to the town a couple of times. So, the quick version is that once all of the different, indigenous European tribes kicked out the Romans and did their own thing for a century or two, a Franco-Germanic dude decides it would be a better idea if everyone was united under his terms, of course. He mixed it up semi-successfully with the Moors. Never conquered them but worked out a couple of alliances that he eventually hosed them on.

Let’s see. A Franco-Germanic power consolidator who makes war and forces conversion on to peripheral peoples. Hmmmmm? Anyone see a pattern here? Anyone? Bueller? Three centuries later, Frederic Barbarossa continued to piss off the Italians and everyone else. Then Napoleon, Kaiser Wilhelm, Hitler. But it all goes back to Charlemagne. And it never really seems to work at least not long term. It’s Einstein’s classic definition of insanity: doing the same thing over and over while expecting different results. It’s been 1200 years, France and Germany. Time to let go.

The Karate Kid

2011-11-30T22:56:00.002-05:00

If you listen to the financial television news yappers long enough, especially around mid-day (I’ve got a big ass flat screen..not my idea..outside of my office so…unfortunately…I don’t have much of a choice), they start sounding like Ralph Macchio’s mentor, Mr. Miyagi (played by Pat Morita in his biggest role since Arnold on “Happy Days”). Only instead of the zen like “wax on…wax off” it’s “risk on…risk off”. I’ve been in this racket long enough to collect a few buzz phrases and, by far, “risk on…risk off” is one of the most moronic. Enough already.

Newsflash: all investing is “risk on”. Stocks go up and down. Bonds are subject to fluctuations in interest rates and credit ratings. Currencies are at the mercy of their sovereign issuers and the court of world confidence. And commodities? If a butterfly in Brazil bats its wings on Tuesday, a flood in Missouri on Thursday can guarantee financial ruin by Friday. Translation: you’ll lose an assload of money on your soybean trade.

Risk still ticks deep within the bowels of the perceived “no lose” bank certificate of deposit. You could get caught with a shitty, low rate if rates decide to go up. If the issuing bank fails and you’re insured up to the FDIC limit, you’ll get your money back. However, it could take a while based on how screwed up the failing institution is. Risk is everywhere. It doesn’t care what you think. Deal with it.

Honestly, Daniel San was pretty much an enormous pussy whose ass got kicked on a regular basis. Then he stepped up, got some mad skills, started doing the ass kicking himself, and won the love of Elisabeth Shue. Granted, Daniel San would’ve probably been happier if it was the nasty, “Leaving Las Vegas” Elisabeth Shue, but we’re talking about a character played by Ralph Macchio so he was lucky to get ANYTHING.

Investors should take a cue and stone up. Who knows where this whole thing is going? However, I think it’s probably one of the better times in history to buy awesome stocks cheap. Keep in mind they’re NOT going to go up 167% in a week. But, with huge names, and again, I’m beating the same drum I’ve been beating for months, like International Paper (IP), Eli Lilly (LLY), or Intel (INTC) at 20% or better discounts to the S&P 500’s P/E and beating it’s dividend yield by 120 basis points or better, why wouldn’t you make a fist and go long. You’re probably going to do OK.

You’ll also probably do OK takin’ a look at this week’s three lil’ piggies…

“Nice Assets…”

Federated Investors (FII)
Recent Price: 15.87
P/E: 10.59
Current Yield: 6.04%

The Skinny
We’ve probably oinked about this one before…so…what the hell…we’ll oink again. FII is an asset manager…mutual funds…managed accounts..pension plans…etc. It been smacked about like most financials. The difference is that this one may be worth holding. Stock’s cheap at 10x’s forward earnings. Average ROE over the last five years has been around 39%. Pretty strong. The yield is especially compelling for a financial name and a non-bank financial at that. Analyst estimates have also been relatively stable compared to FII’s peer group.

The Danger
With the market up 300 one day down 278 the next…who wants to own ANY type of investment? That’s the challenge FII and every other money manager faces: outflows by scardey investors. And, despite the fundamentals, psychology will probably keep a lid on financial stock prices for a while. Growth’s pretty anemic as well. And although it looks like the world fired the money bazooka at the Eurozone problem, it’s not going away anytime soon. Financials aren’t for the lilied of livers.

“Better homes and dividends…”

Meredith Corp (MDP)
Recent Price: 29.00
P/E: 11.09
Current Yield: 5.27%

The Skinny
Good franchise here. Company publishes 80 titles with it’s flagship brand being Better Homes and Gardens. Branded online media grabs an average 22 million visitors monthly. Stock’s cheap at 11x’s forward earnings. Low debt to capital at only 15%. Makes you feel OK with the 5+% dividend. MDP has also done a good job of licensing the brands, again mainly Better Homes and Gardens, through smart deals with the retail Leviathan Wal Mart (WMT).

The Danger
Print media has that jaundiced, walking around with an oxygen tank look. Better Homes is a great brand and will probably do OK in the post print, tablet world. But what sleepers like ”Diabetic Living” and “Quilts and More”? Don’t see those burning up the ol’ iPad, huh?

“United we log on…”

United Online (UNTD)
Recent Price: 5.28
P/E: 6.60
Current Yield: 8.2%

The Skinny
Another Yieldpig repeater here. Starting out as Juno Online, a Johnny Comelately dial up service, UNTD has evolved into an interesting amalgamation of social media sites that include classmates.com, memorylane.com, and their strongest brand, FTD.com (yes…the flower thing). Classic deep value metrics: 0.5 times sales, 96% of book value, and a $1.27 in cash per share. It’s no Groupon. Oh yeah…they’re actually making some money AND giving it to shareholders.

The Danger
While UNTD’s properties are in the “hot” social media sector, they don’t exactly possess the heft of a Facebook. Year over year revenue growth is also a little soft giving up about 5%. Long term debt is a little concerning, too: about $260 million on a market cap of $470 million. Odd in a space that typically doesn’t have a whole lot of debt. And although FTD.com is a known quantity, it’s definitely a consumer discretionary. Might be more classic value trap than classic value.

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Yieldpig, Copyright © 2011 All rights reserved. No statement or expression of opinion, or any other matter herein, directly or indirectly, is an offer or the solicitation of an offer to buy or sell the securities or financial instruments mentioned. While we believe the sources of information to be reliable, we in no way represent or guarantee the accuracy of the statements made herein. Yieldpig does not provide individual investment counseling, act as an investment advisor, or individually advocate the purchase or sale of any security or investment Communications from Yieldpig are intended solely for informational purposes. Statements made by various authors, advertisers, sponsors and other contributors do not necessarily reflect the opinions of Yieldpig, and should not be construed as an endorsement by Yieldpig, either expressed or implied. Yieldpig is not responsible for typographic errors or other inaccuracies in the content. We believe the information contained herein to be accurate and reliable. However, errors may occasionally occur. Therefore, all information and materials are provided "AS IS" without any warranty of any kind. Past results are not indicative of future results. s should not view this publication as offering personalized legal or investment counseling. Investments recommended in this publication should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company in question

Let 'Em Dangle*

2011-11-16T22:23:00.002-05:00

On Halloween, we got a visit from the ghost of markets past. MF Global, a major, global financial derivatives broker run by Goldman Sachs, U.S. Senate and New Jersey Governor’s Mansion alumni John Corzine, filed for what is now the 8th largest bankruptcy in U.S. history. No surprise that the S&P 500 gave up nearly 2.5% on that day as investors had flashbacks of the Lehman Brothers failure in fall of 2008.

Immediately, there was pulling of hair and gnashing of teeth comparing MF’s flop to Lehman’s. There are similarities and differences (some of which I debated with Fox Business News’ Charlie Gasparino via Twitter that morning). The major difference was the size and scope. While certainly newsworthy, MF’s (kinda makes me laugh writing “MF”) failure was nowhere near the size and scope of Lehman’s. Lehman was like the class skank who gave the entire football team herpes; they had sold EVERYONE their shitty mortgage backed products and everyone had bought tons of what would eventually become Lehman’s shitty bonds. No wonder Hank Paulson was so pissed! They helped infect the whole system. MF Global affected an already gun shy market mostly psychologically.

The main similarity is how both MF and Lehman blew themselves up (and Bear Stearns and Wachovia and Long Term Capital Management): some kind of derivative. There’s a reason Warren Buffett called them “financial weapons of mass destruction”. If used incorrectly, they almost guarantee wrecked markets and firms who dabble with them. You’d think that eventually, these guys would learn. Apparently, they don’t.

When institutions fail due to their own stupidity, I have very little sympathy. Wachovia was an awful bank. I had a checking account with them because I had to open one with a home equity line we had with them. It was an awful bank. I’m sure many people are glad it’s dead. Although, while firms like MF Global and Lehman and Bear Stearns were arrogant. Wachovia was more dumpy and pitiful. Good riddance.

There’s enough blame for where we are to go around. However, what really makes me angry is that the “bank runs” that created chaos and failure in 2008 and today, mostly in Europe are all institutionally driven. It had everything and nothing to do with how you and I as individuals invest our money. And we feel powerless. To steal from Chris Rock, I don’t agree with Occupy Wall Street but I understand them. Apparently they don’t have a cohesive issue. I think I have one for them.

*”Let ‘Em Dangle” is an awesome, creepy Elvis Costello song about a conviction and execution by hanging. It’s on the album “Spike”. If anyone has seen my copy, please return it.

Well…enough darkness…maybe this week’s three lil’ piggies can brighten things up…

“You might get some in your stocking…”

Oxford Resource Partners (OXF)
Recent Price: 16.32
P/E: NA
Current Yield: 10.72%

The Skinny
I haven’t been real piggish on energy MLP’s for a while. Mainly because everyone wanted them. Now that they’ve gotten clobbered, I’m changing my tune a bit. OXF fits that bill as units currently trade at a 40% discount to the 52 week high thus bumping the yield way up there. The numbers are encouraging. 2001 EPS will come in at a loss of around 45 cents. The forecast for next year is $1.17...a possible 300%+ increase. Despite the loss, things aren’t all bad. Assets (the stuff in the ground) have increased by 18% over the year and since the U.S. is the Saudi Arabia of coal, if regulatory attitudes change for the better, OXF could be an interesting position.

The Danger
Coal, like just about all commodities (except for oil…WTF?) have been beaten like a rented mule. In fact, some of the punditry talks of the commodity trade being dead. Finis. Maybe. Maybe not. While OXF units look cheap, a buyer could be walking into a classic value trap. Also, no one really has to rehash the current, hostile regulatory environment. The jury’s still out on a global slowdown. If there is one on the horizon, rest assured coal exports will slow.

“Hey now…you’re an all star…”

BlackRock Enhanced Dividend Achievers (BDJ)
Recent Price: 7.15
P/E: NA
Current Yield: 9.51%

The Skinny
If dividend stocks are all the rage (you’re reading this…aren’t you?), this closed end fund is on steroids. Historically, the fund chose stocks based on the Dividend Achievers Index, although that has changed (more in the next paragraph). In addition to selecting companies who have been growing their dividends consistently, the fund uses a covered call option writing strategy to enhance the yield. The fund does this rather than employing leverage which is a plus. Shares trade at a 10% discount to NAV which is a pretty good bargain. All in all, not a bad lookin’ little CEF.

The Danger
The fund changed managers and strategies last year. Apparently, it wasn’t a smooth transition. The fund gave up 10% last year and is off the same this year. Thank God for the huge yield, eh? Speaking of the yield, it seems a little high. Hopefully they can keep it up, but as yields on everything continue to shrink, prepare for a cut. Lastly, covered call options are an awesome protective, income tool, but, you always cap your upside.

“Go fly a kite…”

Kite Realty Group Trust (KRG)
Recent Price: 4.10
P/E: NA
Current Yield: 5.85%

The Skinny
KRG is a smallish ($265 million market cap) Midwestern retail REIT . The firm is vertically integrated with about 9.3 million square feet in it’s portfolio. Their current FFO (funds from operation) trend is good growing at a decent 6.3% clip which ain‘t bad considering that commercial real-estate is basically in a bonafide depression. Shares trade at 22% discount to their book value and the low, single digit share price is tempting if you’re still trying to bottom fish REIT reef.

The Danger
Commercial real estate still sucks and will continue to suck for a few years. Be prepared to wait. While KRG has some great, big box anchor tenants (Publix), it does manage a lot of smaller space geared towards small businesses. Again…depression conditions. Small shop occupancy declined last quarter by 60 bps. And for a deeply discounted security, the yield actually feels a little chincy. There are higher yielding REIT’s out there.

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Yieldpig, Copyright © 2011 All rights reserved. No statement or expression of opinion, or any other matter herein, directly or indirectly, is an offer or the solicitation of an offer to buy or sell the securities or financial instruments mentioned. While we believe the sources of information to be reliable, we in no way represent or guarantee the accuracy of the statements made herein. Yieldpig does not provide individual investment counseling, act as an investment advisor, or individually advocate the purchase or sale of any security or investment Communications from Yieldpig are intended solely for informational purposes. Statements made by various authors, advertisers, sponsors and other contributors do not necessarily reflect the opinions of Yieldpig, and should not be construed as an endorsement by Yieldpig, either expressed or implied. Yieldpig is not responsible for typographic errors or other inaccuracies in the content. We believe the information contained herein to be accurate and reliable. However, errors may occasionally occur. Therefore, all information and materials are provided "AS IS" without any warranty of any kind. Past results are not indicative of future results. s should not view this publication as offering personalized legal or investment counseling. Investments recommended in this publication should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company in question

Toga! Toga! Toga!

2011-11-02T22:51:00.003-04:00

It finally dawned on me. The very best analogy for the whole European mess would be the basic plot line of the classic comedy “Animal House”.

Greece is the party hardy Delta house. Failing grades, dilapidated facilities, garbage everywhere thanks to a general strike. Germany and France are the combined evil forces of the snooty Omega house and Dean Wormer. I’m not sure who’s who. Nevertheless, they conspire to assert control over the mythical Faber College, forcing everyone to conform and do it their way.

The austerity measures being dictated to Greece sound a lot like Dean Wormer’s “double secret probation”. Nobody is really sure what the hell it is and, in the back of their minds, they know it probably won’t reign in the rogue Greeks anyway.

Greece’s attitude, especially now with their threatened referendum on the bailout totally reminds me of Otter’s speech after they’ve completely trashed Flounder’s brother’s Lincoln. Here’s the clip:

http://youtu.be/zOXtWxhlsUg

In the end, the Delta’s get expelled. But, as a last hurrah, they cause complete chaos and completely dismantle the homecoming parade.

http://youtu.be/pX71mALOPKs

I genuinely hope that a Greek expulsion or withdrawal doesn’t cause create chaos in Europe. Unfortunately, it probably will and rest assured we’ll get a dose over here as well. But I’m afraid everyone is following the script fairly accurately.

Well, it wasn’t over when the Germans bombed Pearl Harbor and it’s not over till we meet this week’s three lil’ piggies.

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Abandon All Hope...and Go Long

2011-10-19T22:54:00.002-04:00

Giving up is a new beginning. Letting go. Flushing it out. Or just, simply, shrugging and walking away from it. It could be a job, a crappy relationship, a business, a sports team, a government leader, or an investment. Investors are probably a little past that point now. Stifel Nicolaus macro strategist (and all round neat guy) Barry Bannister poses that bear markets end and bull markets begin with investor disdain for equities.

I spent a few days last week meeting with fund managers, analysts, and other gurus. This was the takeaway from listening to a handful of money managers was this: “Bonds…bonds…not Treasury bonds…but corporate…high yield..some emerging market debt…and…oh…I don’t know…gosh…it make me nervous but..umm…OK…stocks…maybe…but only if they pay dividends.” The rhetoric doesn’t get more chickenshit than that.

I listen to an impassioned Dr. David Kelly, J.P. Morgan’s chief U.S. strategist tell a room full of the doubtful hopeful that investors just need to grow up and buy some dividend paying stocks. There was also a general consensus among the parade of experts that leadership in Washington at both the executive and legislative level was ineffective and absolutely useless. No faith whatsoever. And that’s a great sign. It is. Honestly.

So where do we go and what do we do? The S&P 500 sits at around 1210 give or take, about 3.7% down YTD. Not bad considering the smacking about it’s received since mid-year. My Spidey sense tells me we finish the year flat to slightly up. Things are just too weird (Europe, Washington, Europe…yes…so fucked up you have to say it twice) to let us bust completely loose. Don’t worry. Engine pressure is building and we will see some, as the reformed Broker author Joshua Brown would say, “face ripping” rallies in American stock markets. This is just too good of a place for good things not to happen.

So, Mr. or Ms. Investor, how do we position ourselves going into all of this? Again, the rational fear of uncertainty (in good times there’s an irrational lack of fear) still grips the mood, so the mega cap, blue chips that PAY YOU SOMETHING make the most sense. Still lovin’ my industrial trifecta of Dow Chemical (DOW), International Paper (IP) and DuPont (DD). Big technology ex- Apple (AAPL), Amazon (AMZN), and Google (GOOG) is intriguing with Microsoft (MSFT) trading so darn cheaply with so much cash. Intel (INTC) has bucked the trend and rocked like Keef Richards before his visit to the Swiss clinic of late. Speaking of drugs, Eli Lilly (LLY) and Glaxo Smith Kline (GSK) look pretty groovy. And from the oil patch (yes…a commodity) Conoco Phillips (COP) is the safety choice while Total (TOT) is a good play on the emerging and frontier markets.

The best part? All of these names pay you 3% or better just for showing up and signing in. These are huge companies with solid earnings. And they’re cheap. They won’t stay that way for long.

2011-10-06T07:37:00.002-04:00

I won't pile on or try to stand out in the "Me Too" chorus about Steve Jobs. What can you say that hasn't been?

I've written my share of what the fanboys would consider Apple "hater" posts. Most of those weren't directed at Steve Jobs personally. My beef is mainly most of Apple's hardware products. They're brilliant and liberating, but only for a select few who can truly afford them. Seriously, at the end of the day, the $400 Toshiba laptop does the same exact thing (basically) as the $1400 Macbook.

Now, my position is different on the iPod concept. Jobs was a late period, northern California hippie. Price points were reasonable on the two thirds of the iPods and 99 cents a download is completely democratic. I have a hunch that was by desgin and directed, like just about everything else at Apple, by Jobs.

Jobs was a complex human like all of us. Beneath the hippie persona lurked a ruthless, textbook corporate giant. Early on, he hosed partner Steve Wozniak at of part of their "Break Out" bonus at Atari. Woz stuck with him. The rest of the story is filled with accounts of control freakiness, brutal dismissals and humiliating dressing downs for failure.

However, Jobs was the closest thing our period of American history will have to a genuine Thomas Edison. Certifiable, inventor genius. Edison was complex and ruthless, too. Look it up. But outside of those traits, that spirit of innovation and commercialism is what sets America apart, makes us great, and will continue to make us great.

Jobs helped shape media and changed the way we access and consume it. Was it all him? At huge companies, it's usually a group effort (See "Steve Wozniak"). But he sure as hell inspired it and put his stamp on it. 56 is young. Who knows what he could've done with another 10 or 20 years. But look at what he did with the time he had.

The Kindle is more important than the iPad…you just don’t know it yet

2011-09-29T00:35:00.002-04:00

My kids are responsible. For my birthday four years ago, it was a tiny, itty bitty iPod Shuffle. Bigger than a chicklet, smaller than a boom box, it said you could fit 250 songs on it but I goosed mine to 290 (the one minute Ramones songs created the additional space). Last Hanukkah/Christmas, we’re one of THOSE households, it was the basic Kindle. I was surprised and delighted by both. However the Kindle inspires to historical proportions.
The bottom line is that at the end of the day the written word is a bazillion times more important than recorded sound. Gutenberg’s printing press preceded Edison’s phonograph by 438 years. That’s just the historical perspective.

Now, with the Kindle Fire, Amazon has unveiled its answer to the iPad. The event is much more than the business move of one big content distributor trying to compete with another big content distributor by unveiling a piece of hardware that makes accessing content easier. It’s a bold, cultural explanation that, hopefully in time, will make us a smart people again. Digital music democratized the music industry. Anyone with a song, a microphone, and a computer, can be the Beatles. The same is happening in the print publishing business. A twenty something girl made a million bucks self publishing her own, teen vampire novels. That’s democratization and Amazon is storming the ramparts.

It’s all about price. The iPad, while technologically amazing (the MOST overused word of the last couple of years), is prohibitively expensive. Yes. $600 to $700 is a lot of money for a shiny toy to read on although it makes you look very cool at the airport or on the subway and would probably get you laid at some Starbucks. Fewer and fewer Americans can comfortably consume that price point. However, at $199 on the high end to $79 for the basic reader, Amazon’s Kindle products are tiny, digital bookmobiles, coming to our neighborhoods and helping us fall in love with reading again. If you’ve been forced to go to Wal Mart on a Friday evening or have been stuck in line at the cable company office, you know firsthand that, as a society, we’re not quite the intellectual powerhouse that invented things like the telephone or accomplished feats like putting a man on the moon. We need to read more. A LOT more.

Program cutting happy, Tea Party congressmen have had a hard on to get rid of the Department of Education for decades. Here’s their chance. Deep six it and its $70 billion annual discretionary budget. Now, buy a basic Kindle for half of the American population, roughly 150 million mouth breathers. It would run Uncle Sam about $11.85 billion (probably less…Amazon would probably give the government some kind of bulk for a savings of $58 billion. It’s a start. But it would accomplish two things. By killing an entire Federal bureaucracy, it would throw the Teabaggers a bone. The second result would be more people reading which would eventually translate into a smarter population. And just think of what that kind of revenue bump would do to Amazon’s earnings.

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Singles Going Steady

2011-09-15T00:05:00.003-04:00

“My assets froze while yours have dropped. Now is that? Is that?”
“Is That Love?”- as recorded by Squeeze by Chris Difford/Glenn Tilbrook

Last month, we published a note examining well known, large cap names with single digit P/E’s and dividend yields of 4% or higher. A month later we’ll reiterate that call. For investors with a longer term horizon, there’s gotta be a pony in here somewhere.

The S&P 500 is basically where it was when we posted the previous piece. So what’s changed? Not much except for the situation in Europe has gone from “bad” to “even worse”. Granted, there was a zero growth jobs report for the U.S. somewhere in the mix. But that’s not nearly as exciting as sovereign default.

Nevertheless, most of the names we profiled (COP, IP, INTC, LLY) are priced about where they were a month ago. The appetite for risk assets (aka “stocks”) wasn’t that great in August. It’s probably even weaker now. So Its difficult to step up to the counter and order with conviction. It will be even more difficult with the names we are about to look at as most of them deal with either U.S. industrial recovery or, cue ominous, scary music, a return of confidence in financial companies. All have forward P/E’s of 9.5 or lower and yield at least 3.5%.

Dow Chemical Co. (DOW)
Eaton Corp (ETN)
AFLAC Inc. (AFL)
EI DuPont de Nemours and Co. (DDD)

Adding those names to our previous suggestions would help you build out quite the blue chip portfolio.

The question is still “are we there yet?” And the answer is still “I don’t know.” However, here is another handful of large company stocks with single digit forward multiples and respectable dividend yields. The good news is that markets are still quite volatile. Yes. That’s a good thing in that opportunities to buy high quality at good prices will be created thanks to fear and stupidity. Art Cashin, an NYSE veteran floor guy suggests that in times like these, investors should “turn their baskets” in order to catch some bargains they may want. The market may turn or not. Either way, there are worse stocks you could be stuck with.

Is that love or this week’s three lil’ piggies?

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Yieldpig, Copyright © 2011 All rights reserved. No statement or expression of opinion, or any other matter herein, directly or indirectly, is an offer or the solicitation of an offer to buy or sell the securities or financial instruments mentioned. While we believe the sources of information to be reliable, we in no way represent or guarantee the accuracy of the statements made herein. Yieldpig does not provide individual investment counseling, act as an investment advisor, or individually advocate the purchase or sale of any security or investment Communications from Yieldpig are intended solely for informational purposes. Statements made by various authors, advertisers, sponsors and other contributors do not necessarily reflect the opinions of Yieldpig, and should not be construed as an endorsement by Yieldpig, either expressed or implied. Yieldpig is not responsible for typographic errors or other inaccuracies in the content. We believe the information contained herein to be accurate and reliable. However, errors may occasionally occur. Therefore, all information and materials are provided "AS IS" without any warranty of any kind. Past results are not indicative of future results. s should not view this publication as offering personalized legal or investment counseling. Investments recommended in this publication should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company in question

Greek Lightning

2011-08-31T22:43:00.003-04:00

There’s been a coup in Greece and I have been anointed “Generalissimo”. It was bloodless affair since the army was on strike and too busy hanging out on the beach with gorgeous Greek women. Work, which mainly involves cleaning up our financial mess, will begin after a splendid lunch of souvlaki and grape leaves followed by some Zorba like dancing.

Before I make my first official, major policy decision, I’m going to make a phone call. I’m not gonna tell many people, if any, about it. I’m calling some of the guys at the University of Chicago, put them on retainer, and have them on standby. Now, I’m poised to shake things up.

The Finns (seriously…the Finns?), thanks to their resurgent right wing government, are, get this, actually demanding collateral for their portion of the bailout. I really do appreciate their help in the past, but that was then and this is now. My back and the backs of my fellow Greeks are against the wall. The continent’s favorite autocracies, Germany and France, are hemhawing and craw fishing on the Eurobond deal.. However, while they’re farting around, Greece is dying by a thousand paper cuts. It’s time to make the first tough phone call.

I dial the number and listen to the tell tale little European ring. Some one picks up. Terse and French. “Allo.”

“Nick, it’s the new Generalissimo. How’re you?”

“Ah, bon jour. Yes, I heard. A bloodless coup, no? Always for the best.”

“Of course. Look, I’ll be quick. Our rear end is in a sling. We owe everyone a buttload of money.”

“Yes. It is quite a lot.”

“Yeah, and, well, you know how we do business, all of the under the table deals and what not. Hard to tax that.”

“Yes. Yes. What is your point?”

“Yeah, well, at the rate things are going, we won’t be able to pay that back in…well…forever. So, it’s been fun, but I think, as does the rest of my country, that we’re ready to go back to the drachma.”

“Pardon?”

“We’re done. We’re out of the Euro. Hey! You were gonna kick us out any way. I figure we saved you the trouble.”

“Is this legal?”

“I guess so.There’s no real central authority. So who’s gonna enforce it? Some one in the Hague? Bring it on beotch!”

“You’re leaving the Euro?”

“Looks that way, huh?”

“But this will create chaos!“

“If you kick us out its chaos. If we pull out its chaos. If you write down some of the debt…”

“Yes, chaos.”

“Correctomundo. I’m sorry about all of this. I know everyone really wanted this to work out. But, that’s how the baklava bounces. Oh, don’t tell Angie. I’m calling her next.”

“Merde.”

Nick slams down the phone and the line goes dead. The conversation with Angie goes about as well, save for the unintelligible angry German rants. Thank God it was over the phone. I could just imagine all of the saliva.

The next day, we pick up the Chicago Boys at the Athens airport and come back to the office. We toast the memory of Milton Friedman with a little Sambucca and get to work restructuring everything: new currency, redenominated debt, monetary policy, everything. It’s just like Chile or Argentina but with bouzoukis instead of gauchos and castanets. We hit the reset button. All things Euro: gone. Adio’! Global financial markets go bananas not in a good way. Sorry about that. But we’re talking about the welfare of my people and as Generalissimo, it’s my duty to bring that.

What little foreign investment that was here in Greece has fled. It would have left eventually anyway. But now, thanks to a cheap currency and an exotic, Mediterranean locale, Greece is the number one vacation spot in Europe. Why go to the French Riviera and pay out the wazoo? Oh and the foreign investment that left? When you’re a rockin’ travel destination, a funny thing happens. People come from all over to build resorts and other ancillary infrastructure. They’ll need people to work. Wow! Throwing off the shackles of the Euro and putting the country back to work all in the first year? Can you say “Generalissimo for life”?

Fiat currency. It’s a beautiful thing.

Know what else is beautiful? This week’s three lil’ piggies…

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Train In Vain

2011-08-17T21:58:00.004-04:00

“…so alone I’ll keep the wolves at bay.” - The Clash

Since the financial crisis of 2008, many investors have played the part of the forlorn character in the most awesome Clash song “Train In Vain”: standing, waiting, and hoping for interest rates to go up while opportunity speeds away down the railroad tracks. How do we know this? Fed Chairman, Ben Bernanke told us.

When the banking system and the credit markets locked up, the Fed opened up the monetary floodgates and saturated the money supply with liquidity of biblical proportions. Bond yields and other interest rates cratered. The consensus, from CNBC to the barber shop, was that rates would skyrocket in lockstep with the onset of the coming hyperinflation. An investor needs income, however, he’s too chicken to go out too far on the curve (which isn’t even THAT great). He keeps it close in and earns precisely bubkus, Richard, nil. And as rates continue to NOT go up, income investors complain about the lack of income.

So what should they do? Well, first of all, they need to accept the reality that rates are going to stay miserably low for at least the next two years. See, all of that money needs some velocity meaning that people have to want the money and the people with the money (banks) must be willing to lend it. That’s not happening and as the economy continues to bumble along, it won’t happen any time soon. You will earn very little money in conservative, fixed income investments. Accept it and if you want to earn any money, you are going to have to do something different. Yes, that may translate into owning some equities.

The smart thing to do would be to find sectors that will continue to perform decently in a low interest rate environment. One of the best and possibly most conservative places to look would be at utilities. Utilities as a group have under performed the broader market mostly due to the misplaced fear that interest rates are going up. Historically, utilities don’t do too well in rising rate environments. That’s not going to happen. The 10 year Treasury is yielding 2.21%, Yes. 2.21%. It’s not going to kill you to add a couple of big, regulated electric utilities to the mix. Duke Energy (DUK) is huge, well run and has a 5.6% dividend yield. The company is in the process of acquiring Progress Energy (PGN). The combined entity will be the largest regulated electrical utility in the U.S. of A. PGN is trading at a slight discount to the acquisition price so that might be a cheap way to buy some DUK. PGN yields 5.5%. Southern Company (SO) is a perennial favorite. The 4.8% dividend is a little thin in our opinion and the valuation is at the upper level of its range. But, it’s an incredibly well run business that you could be comfortable holding for the longer haul.

Mortgage REIT’s should also do well in the suppressed rate environment. When you can borrow at damn near zero, as long as you halfway know what you’re doing, the math should work in your favor. Our favorite idea, no surprise, in that space is Annaly Capital Management (NLY). Valuations are ridiculously, single digit low and the sick dividend yield of 14.5% make it worth a peek.

Still convinced that rates are about to scream up? Your wait may be in vain. You might want to make sure your Kindle is charged up. It’s gonna be a while before the inflation express comes barreling down track number nine. Don’t believe me? Call a retiree in Japan and ask how their fixed income choices are working out for them. Think their higher interest rate train has pulled into the station?

Well…some things you can’t explain away…like this week’s three lil’ piggies…

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Yieldpig, Copyright © 2011 All rights reserved. No statement or expression of opinion, or any other matter herein, directly or indirectly, is an offer or the solicitation of an offer to buy or sell the securities or financial instruments mentioned. While we believe the sources of information to be reliable, we in no way represent or guarantee the accuracy of the statements made herein. Yieldpig does not provide individual investment counseling, act as an investment advisor, or individually advocate the purchase or sale of any security or investment Communications from Yieldpig are intended solely for informational purposes. Statements made by various authors, advertisers, sponsors and other contributors do not necessarily reflect the opinions of Yieldpig, and should not be construed as an endorsement by Yieldpig, either expressed or implied. Yieldpig is not responsible for typographic errors or other inaccuracies in the content. We believe the information contained herein to be accurate and reliable. However, errors may occasionally occur. Therefore, all information and materials are provided "AS IS" without any warranty of any kind. Past results are not indicative of future results. s should not view this publication as offering personalized legal or investment counseling. Investments recommended in this publication should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company in question

Big Cap Bargain Bin

2011-08-10T22:07:00.003-04:00

Like the gutless, cowards they are, S&P downgraded the credit rating of U.S. Treasury bonds last Friday afternoon, after the market close, to AA+ from their historical gold standard of AAA. Keep in mind, these are the same geniuses who gave AAA ratings to mortgage backed securities that were brimming with toxic assets and who kept an A rating on Lehman Brothers up till the Friday of their weekend failure back in early fall 2008. Meanwhile the other two agencies, Fitch and Moody’s , reaffirmed AAA’s all around. Now with the scarlet letter of a AA+ rating, America gets to sit in the penalty box with the likes of General Electric (GE) and Berkshire Hathaway (BRKA, BRKB). There’s worse company to keep.

Was the downgrade the real reason for this seemingly brutal sell off? I don’t think so. The downgrade was just the cherry on top of the double crap sundae of an obvious, slowing U.S. economy and the mounting debt crisis in Europe which, is basically the fourth or fifth inning of the experimental baseball game known as the Euro. Please. Couldn’t you come up with a better name? Anyway, there’s lots of hand wringing, and tooth gnashing and round the clock CNBC coverage. Is the market getting hammered? You bet. It’s being beaten like a rented mule. Naturally, comparisons to the trauma of 2008 are being thrown about. Don’t believe it. Not for a second.

Sure, the economy does suck on ice. However, the financial system is much healthier than in the dark days of 2008. Thanks to the banks not lending the money they got from the Fed, they have plenty of liquidity. That was the danger in 2008. The credit markets locked up. GE couldn’t roll over its commercial paper. G-FRIGGIN’-E!!! The company Thomas Edison started. You know, the guy who invented the light bulb? Things were downright frightening in 2008. You had cooler heads like PIMCO’s Mohammed El Arian telling their wives to run to the ATM to take out as much cash as they could. That’s scary. No food in the grocery stores, Mad Max scary. We’re not there yet and I don’t think we will be (of course, anything is possible). Europe’s a different story. Their Lehman moment is approaching. It will be eurostyle fugly. It will affect our markets but we should have enough cushion to hang in there OK.

In 2008-2009, you could buy big, industrial names like General Electric (GE), Dow Chemical (DOW), International Paper (IP), and Alcoa (AA) at single digit prices. That may have been a once in a lifetime type of opportunity. But that doesn’t mean that there aren’t some bargains currently floating around out there.

Here’s a handful of big, liquid names that now have single digit, forward P/E ratios and have dividend yields of 4% or better.

Conoco Phillips (COP)

International Paper (IP)

Intel (INTC)

Exelon Corp (EXC)

Eli Lilly and Co. (LLY)

These are all top shelf, well run, big companies. The yield on the 10 year treasury is a miserly 2.13% and, according to Fed chairman Ben Bernanke, it’s not going up anytime soon. Depending on whose number you look at, the forward P/E of the S&P 500 is in the low teens. I’m not the smartest guy in the room, but something tells me that half the P/E and twice the yield is a bargain for a known quantity.

If it’s time to buy or not, nobody really knows. But it never hurts to make a shopping list. Get your pencil out.

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Yieldpig, Copyright © 2011 All rights reserved. No statement or expression of opinion, or any other matter herein, directly or indirectly, is an offer or the solicitation of an offer to buy or sell the securities or financial instruments mentioned. While we believe the sources of information to be reliable, we in no way represent or guarantee the accuracy of the statements made herein. Yieldpig does not provide individual investment counseling, act as an investment advisor, or individually advocate the purchase or sale of any security or investment Communications from Yieldpig are intended solely for informational purposes. Statements made by various authors, advertisers, sponsors and other contributors do not necessarily reflect the opinions of Yieldpig, and should not be construed as an endorsement by Yieldpig, either expressed or implied. Yieldpig is not responsible for typographic errors or other inaccuracies in the content. We believe the information contained herein to be accurate and reliable. However, errors may occasionally occur. Therefore, all information and materials are provided "AS IS" without any warranty of any kind. Past results are not indicative of future results. s should not view this publication as offering personalized legal or investment counseling. Investments recommended in this publication should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company in question

These Things Take Time

2011-08-03T22:50:00.005-04:00

I had a fraternity brother who was, perhaps, the biggest Smiths fan (remember…this is circa 1986) ever. If I hadn’t known him better, his room would have resembled a creepy, stalker shrine to the band’s front man, Morrissey…aka…Steven Morrissey…aka…Steve the Nutter. What always amazed me is that my fraternity brother was from a tiny, rural, farming community. Talk about a collision of outliers! The mopeyist of mopey Britpop meets an obsessed fan from an isolated area of the rural south. Before the internet. Before smart phones. Three years later, the Smiths broke up and Morrissey was making mediocre solo records. I’m sure at the time other people were “discovering” the Smiths, but it was too late. It wasn’t relevant. However, it took a little while for the word to spread.

It’s no surprise that financial markets and crappy economies (yes…our economy IS crappy…don’t let anyone tell you differently) take time to realize things: prices are too high and they need to come down, prices are too low and its time to buy. This sector is done, this one’s about to pop, interest rates, everything.

This week the market has been expressing its opinion on a lot of things. Some observers may say it has to do with the bicameral circus debate on the debt ceiling. I don’t buy it. The smart people knew it was bullshit kabuki, political theatre. It was already baked into the cake. Two of the ratings agencies have reaffirmed the T-bond’s AAA rating. If the other downgrades? BFD. Those guys lost just about every ounce of credibility thanks to their brilliant calls on mortgage backed securities and Lehman Brothers.

No. Parts of the market are starting to realize that the Eurozone is a big, fiscal hot mess and that their unified currency is whistling past the graveyard. Face it. The Euro is DOA. It’s just that no one has accepted that fact yet. Well, not everyone. Basically, a major, world currency is going to die a slow, agonizing death. It will take time. And as the Euro and all around it gasp and writhe slowly but surely, it will affect U.S. markets and the economy. Where is Milton Friedman when you need him? Fiscal shock therapy stat! But this storm has been brewing for a couple of years but now the market is starting to wake up.

It’s taken a while for the market to realize that rates aren’t going higher any time soon so utility stocks make some sense. Never mind that most pay dividends that exceed the Ten Year and that, as a group, they outperformed the broader market during the hell of Q4 2008 – Q1 2009 and have underperformed since then. The utility average is just starting to show some signs of life. Yes. I am saying that utility stocks are a good place to be as we stare into the face of uncertainty. But, then again, when do we NOT do that on a daily basis?

Yes, dear reader, these things take time. How soon is now?

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Enough Blame to Go Around

2011-07-20T22:21:00.004-04:00

It’s the banksters. It was the Bush. It was Obama. It was Reagan. It was the people who couldn’t afford a house and borrowed more than they should have. It’s the unwed welfare mothers who get paid more to have more illegitimate children. As usual, post modern America is too busy yelling and trying to assign blame for the current pickle we are collectively in rather than solve the problem. I’m going to point my finger and I’ll only have to do it twice.

There are two completely different groups who are mostly responsible for the mess. They’re not necessarily directly responsible rather their seemingly incurable addiction to government sponsored entitlement. You can probably figure out who they are: the very poor and the very rich (this includes corporations which are legal entities and are viewed as an individual being). They’re an enormous drain on the system and they’re clobbering everyone in the middle. Personally, I’m sick of it and I really wish someone in Washington would get a clue. Oh wait, my bad. Washington basically represents these two groups almost exclusively.

This is an awesome chart on the income sources of the very top of the American income scale I pulled from Business Insider. Look at the squiggles on the far left and then the far right. A century ago, the very wealthy vaulted America full bore into the industrial age. They built big, successful business. The businesses represented their wealth and value. Bottom line: they created stuff. The far right tells a different story. The uppermost of the uppermost have evolved from a class of creators and innovators into a bunch of overpaid assholes who create very little if anything.

So the upper end’s first crime is ceasing to create value. The second offense is there powerful grip on government entitlement. They, individuals and corporations, have the money to flex political muscle in order to influence legislation. Whether it’s farm subsidies to grow or not grow certain crops, tax breaks, government contracts, whatever. My favorite example and I’m not screaming “It’s the Bush administration’s fault!” was the fact that the VPOTUS, Dick Cheney was formerly the CEO of oil services behemoth Halliburton (HAL). Throughout the wars in Iraq and Afghanistan, Halliburton and its various subsidiaries such as KBR, received lucrative, no bid contracts worth billions of our tax dollars. I can’t understand how that’s legal and why more people weren’t absolutely blinded by anger. I can feel my blood pressure spiking right now.

I don’t have any charts about the lower end, but with stats like 14% of all Americans using food stamps, why go there? That’s a harrowing statistic. Don’t get me wrong, no one should be hungry in America. No one. But we’re seeing multi generational dependence accessing government assistance. There’s something terribly wrong with that. The next generation should do better. Sure, Uncle Sam’s helping hand is there as a safety net. It’s not designed to be a way of life. It’s not a skill you should teach your children.

The problem is entitlements and the rate at which we pay or don’t pay for them. Should a guy who make $400,000 a year pay into social security at basically the same rate that his assistant who makes $30,000? C’mon. That’s not a class warfare question, its common sense. The answer is a simple no. Just like the question as to whether or not unwed mothers on government assistance should receive more assistance as they produce more children. Again, the answer, as cruel as it sounds, is “no”.

The top gets heavier. The bottom grows. And the middle continues to get squeezed. I don’t know about you, but I’m tired of it.

OK…stepping off of the soapbox and over to this week’s three ill’ piggies…

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The Language of Letting Go

2011-07-06T22:01:00.006-04:00

There’s no gentle way to say this. The real estate market sucks. It will continue to suck for quite some time. It may never return to the stupid levels it saw at its peak in some people’s lifetime. More people will lose their homes and many will remain upside down. There are enough houses in the nation’s inventory to last nearly a decade. So, theoretically, no more houses need to be built for ten years. This isn’t opinion. It’s fact.

Now, do me a favor. Go back and read the first paragraph out loud. Finished? Good. If you’re not feelin’ it, do it again. Do it as many times as you need to in order to accept those facts. Because the sooner we all do this collectively, the sooner the dead, smelly albatross known as the housing market will fall from our collective neck and allow us to move forward. Once the rest of the national financial psyche decouples from the real estate market, things will get better.

Check out this awesome chart of housing starts during various recessions.

Yes. The current squiggle (ours) is the worst. Is there good news? Yes. It’s bumping along the bottom. It might not be going up. But it’s not going down as quickly as it did at the onset. Here’s a chart on housing permits.

Still pretty freakin’ dismal. But so what? We know these things. But unless you can fly around the earth like Superman and make it spin backwards, thus turning back time, just let it go. James Altucher, one of the greatest bloggers out there PERIOD (check him out at http://jamesaltucher.com), put it this way: “There’s $15 trillion dollars in our economy, recession or no recession. Its falling like snow. Reach out with your tongue and taste it.” True dat.

Read more: http://www.businessinsider.com/the-easiest-way-to-succeed-as-an-entrepreneur-2011-4#ixzz1RNeXx3PM

Let’s reach out and grab a hold of this week’s three lil’ piggies shall we?

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IPOMania Two!!

2011-06-22T23:50:00.002-04:00

Remember back in the heyday (if there ever actually was one) of professional wrestling…or “wrasslin’ “ as we say down south…there was some huge event billed as “Wrestlemania”? I really was never into wrestling but I seem to remember it was some sort of all star, good guys versus bad guys, pay per view, cage match, knock down drag out type of event. “Wrestlemania” was followed by “Wrestlemania 2”. Didn’t see that one, either but I’m pretty sure it was the same crappy event as the first “Wrestlemania”. Something similar is currently going on in the capital markets. It happened over a decade ago and was called “Stupid Internet IPO mania”. The sequel is happening now and it’s just as dumb as before.

At the end of the 20th century, there was no shortage of bonehead stupid, internet IPO’s. No earnings. No revenue models. Very vague concepts. No surprise that things ended badly. The internet has grown up considerably since then and many internet oriented companies have figured out how to actually make money. However, the recent crop of offerings feels very retro. The maniacal pricing in the secondary market is back with a Ric Flair style vengeance. Professional social networker, Linked In (LNKD) was instantly rewarded with a ridiculous valuation. Pandora (P) had a lot of money thrown at it for a hot, oversubscribed IPO despite analyst doubts about the company’s ability to make money. After all of the hype, the price fizzled quickly.

Money can be made on a big scale on the internet by public companies. Ebay (although it’s probably seen it’s day), Google and Amazon seemed to have done pretty well. I’m sure there’re others. However, a lot of these newer companies strike me as businesses that would be more successful if they remained private. With a publicly traded structure comes much more accountability as you’re dealing with lots of other people’s money. Individuals, institutions and research scrutiny change the way these loosey-goosey outfits work.

I can understand how Pandora could eventually make money. I’m a user of the free version and a big fan. It’s the poor man’s XM. The ads aren’t too intrusive yet and even if they got to the point at which they were, most people still wouldn’t mind. Plus, there’s probably some kind of per subscriber deal between Pandora and the wireless provider much like in the cable television industry.

But for the life of me, I can’t figure out how Linkedin or even the mighty Facebook can or will do it. I’m sure they will. Just don’t see it in the here and now and with a bazillion dollars raised publicly, that doesn’t really fly.

These companies are much better suited to be private entities. There’s no shortage of private capital willing to throw money at ideas like these and a lot of times private money is much more patient. It makes more sense. These businesses can stay private and then eventually, maybe a larger, traditional media company will waste it’s money. See: News Corp and Myspace.

But, just like pro wrestling, the internet IPO mania will continue. As long as there are enough idiots to look at it, they’ll keep doing it.

Well…let’s try to wrassle this week’s three lil’ piggies…

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Strange Currencies

2011-06-08T21:35:00.003-04:00

“I need a chance, a second chance, a third chance, a fourth chance…” – REM

I’m really not sure when we all of us became so freaking obsessed with the way currencies interact and affect the economy and various financial markets. But judging by the seemingly incessant “TRADE FOREX NOWWWWW!!!” commercials on CNBC and other financial porn channels, I have to think that there’s some sort of demand for the product. My favorite is the woman at the coffee cart talking about how “size does matter”. Somehow, I just can’t picture her shorting the yen on her iPhone during the soccer game or the dance recital.
I guess my main questions are does Jane and Joe Investor need this access and do they have any business playing with this particular hand grenade?

My guess is “No”. When they hear the pretty (and not so pretty) people on the T.V. yammering about how “…investors are selling their dollars” what does that mean? Sure, they could be shorting the greenback via futures contracts (something huge institutions do all the time to hedge their investments against currency risk). Or they could be lightening up their positions in dollar denominated assets like treasuries, or dollar denominated corporate bonds, or even U.S. equities.

The message they’re sending is pretty simple, they have less confidence in America’s ability to grow the business versus other places around the world.Now the inverse can happen as well. A weaker currency makes your country’s exports cheaper. People can buy the snot out of your products. Your citizens work like crazy and earn more of your weak currency and things hum along hunky dory in the vicious cycle of a debauched currency. But the nuances of trading those kinds of scenarios are highly, highly, black box, super math complex and I’m just not sure that small investors, hell or even advisors at the individual investor level need to worry about it. Sure, they need to be aware of it and have a basic understanding about how it affects an investment program.

However, the incessant ad blitz that bombards the herd with the notion that they can successfully execute a spread between the rupee and the loonie is a awful hard for the herd to resist (see: “Stuart Ameritrade tells you how to make zillions of dollars day trading tech stocks on line” 1999). So if you absolutely have to drink that Kool Aid, how do you do it? For starters, own multinationals. They always deal with multiple currency risks. It can and does affect their earnings thereby affecting the price of the stock. Coke (KO), Yum Brand (YUM), Caterpillar (CAT) are a few names to start with. Still hate the dollar? Own a decent global bond fund or maybe a good closed end (not an ETF) fund that’s a foreign currency pure play like the Aberdeen Australia Equity Fund (IAF). You’re paying those guys to manage the currency risk and take advantage of opportunities. It’s not as sexy as trading it on the bus from your iPad, but oh well.

“TRADING FOREX NOWWWW!!!” is just a bad idea. To get a little uppity and morally indignant, the financial media are should be a bit more responsible and the online forex trading firms are on par with the boiler rooms and bucket shops. Intelligent individual investors should know as much.

I’ve often envisioned a bank kind of place where a guy walks in wearing overalls with a laundry basket full of one dollar bills, dumps them on the counter and says “How much kin I git fer these?” Always good for a laugh but it really doesn’t work that way. Unless you’re some kind of megamind, currency trading genius that has the knowin’ power to go up against the likes of George Soros, don’t run in that field. You’re gonna step in something and, most likely, you will leave your money behind in it.

Well…let’s try to make a good trade into this edition’s three lil’ piggies…

“Mail of the species…”

Pitney Bowes, Inc. (PBI)
Recent Price: 22.80
P/E: 15.64
Current Yield: 6.48%

The Skinny
Yes….this is a rerun. PBI is probably one our perennial favorites hear at Yieldpig. Whenever the stock pulls back to where it yields better than 6%, it’s a good opportunity. While regular mail may be viewed as the buggy whip of communication, PBI is still the biggest and baddest in the mail sorting and machine bidness. They’re also focusing their efforts on Volly, their new cloud product. It only makes sense that they can capitalize on the penetration they’ve established. Stock looks cheap at 15.6x’s trailing earnings and 10.01x’s forward.

The Danger
Q1 earnings were a bit soft due to moderation in their recurring revenue stream (supplies, financing, etc.). The company also experienced a fire at one of its largest pre-sort facilities in Dallas, Texas which didn’t help. And, of course, looking at the bigger picture, do you really want to own shares of the best buggy whip company in the business. Just sayin’.

“It’s still a mythical beast…”

Chimera Investment (CIM)
Recent Price: 3.44
P/E: 5.55
Current Yield: 16.27%

The Skinny
Again…another repeat. But, the value looks compelling. CIM is a REIT that invests in residential mortgage backed securities and other real estate related financial instruments. The stock trades right at about book (1.06x’s) value. Strong 20% ROE. Granted, while the current environment seems like the absolute worst time to invest in anything mortgage related, it’s probably the best. The assets REIT’s like CIM are looking for are priced at deep discounts. That opportunity will flow through to the stock. And as the residential mortgage market becomes more privatized (less government backed lending thanks to a hobbled Fannie and Freddie), yields on the MBS (mortgage backed securities) will be more attractive.

The Danger
Did you see the Shiller chart last week? In a word: “fugly”. Whatever the housing market is doing, it’s safe to say, it’s not improving. As long as it stays week, mortgage backed securities will remain a dicey proposition. CIM took a $19 million writedown on it’s non-agency securities Q1 2011. That’s not good. And if the housing market continues to suck wind, expect more. This one is only for the bold.

“No…not the “Takin’ Care of Business” band…”

John Hancock Bank and Thrift Opportunity Fund (BTO)
Recent Price: 15.85
P/E: NA
Current Yield: 6.02%

The Skinny
Are we insane? Yeah. Probably. But that doesn’t mean there’s not some kind of opportunity in the bank space no matter how dreadful it looks. This was a pretty rock-n-rollin’ closed end fund when regional banks were getting fat, dumb and happy and buying each other every 15 minutes. Now, the environment’s totally different. BTO trades at a 17% discount to NAV. Not bad. And the yield is about a bazillion times better than just about any bank stock out there (if said bank stock even has a dividend). Eventually, the financial sector will turn, BTO will be there to catch that pitch.

The Danger
The share price of BTO got so ugly during the financial crisis that a 1 to 4 reverse split was engineered to boost it. That would put the current share price at around $3.95. Reverse splits are like a crappy report card in 5th grade. You don’t want to tack it up on the refrigerator. Although things have improved, the banking sector is still a minefield. TARP needs to be repaid and, bottom line, banks need to relearn how to make money again. Hey! Here’s a great idea! Lend money to…well…people! But seriously, until there’s some velocity in the money supply, the banking sector will lie there like a soggy taco and BTO’s chart will continue to resemble the EEG of a cinder block.

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Yieldpig, Copyright © 2011 All rights reserved. No statement or expression of opinion, or any other matter herein, directly or indirectly, is an offer or the solicitation of an offer to buy or sell the securities or financial instruments mentioned. While we believe the sources of information to be reliable, we in no way represent or guarantee the accuracy of the statements made herein. Yieldpig does not provide individual investment counseling, act as an investment advisor, or individually advocate the purchase or sale of any security or investment Communications from Yieldpig are intended solely for informational purposes. Statements made by various authors, advertisers, sponsors and other contributors do not necessarily reflect the opinions of Yieldpig, and should not be construed as an endorsement by Yieldpig, either expressed or implied. Yieldpig is not responsible for typographic errors or other inaccuracies in the content. We believe the information contained herein to be accurate and reliable. However, errors may occasionally occur. Therefore, all information and materials are provided "AS IS" without any warranty of any kind. Past results are not indicative of future results. s should not view this publication as offering personalized legal or investment counseling. Investments recommended in this publication should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company in question

When Markets Jump The Shark

2011-05-25T23:04:00.004-04:00

One of the best pop culture idioms of the last 30 years would definitely be “jumped the shark” which, of course, references the 1977 season premiere of “Happy Days”. The episode’s climax featured the Fonz performing a water ski jump over a shark. The series pretty much went downhill from there. Although, I think the series went downhill when Al Molinaro replaced Pat Morita as the proprietor of Mel’s Drive In, but that‘s one man‘s opinion. That being said, markets and a lot of conditions that affect them have jumped the shark.

The whole “OH GOD INFLATION’S COMIN’ AND IT’S GONNA BE LIKE GERMANY IN THE 20’S…..AIEEEEEE!!!” argument has made the leap. Inflation’s happened and it sucks. But it’s far from Weimar Republic style (which was really Germany just hitting the reset button). A gallon of gas used to be $2.50. Now it’s $4.00. That’s a 60% bump. OK mysterious cabal that manipulates prices…you’ve made your point. Take your 60% profit and go buy an island where you can hunt humans. The potential for deflation is way scarier.

The “HOLY CRAP! INTEREST RATES ARE GOING TO GO UP! THE HORROR! THE HORROR!” schtick has lost its luster. This time last year, the 10 year Treasury was yielding around 3.30%. Today it’s around 3.12%. I’m no math whiz but that’s lower. The five year is at 1.78% which is absolutely useless. It was at 2.09%. That’s almost 15% lower. OK before you start yelling “Nuh uh…nuh uh..QE2...QE2!!” ..granted that’s played a big part. But what else helps rates go up? Velocity of which there is none or, at least not much. People have to want it and banks have to want to give it out. There’s more of that then there has been but not enough to make 90 day LIBOR go from 26 basis points to 25%. Now THAT’S a buttload of velocity.

The “THE STOCK MARKET’S RIGGED SO YOU CAN’T WIN AND IT’S PROBABLY OBAMA’S FAULT! “victim mentality is old. Stop it and embrace a new day in America. Have you seen your access to markets? For seven bucks you can get two shares of Apple Computer (AAPL) from your iPhone while you drink a latte at the McDonald’s of coffee. Wait a second, McDonlad’s is now the McDonald’s of coffee. Before Chuck Schwab and the internet, you had to call a guy at Merrill who called the order room who called the floor trader who walked over to the specialist at his trading post. Markets have been democratized like a Tunisian supermarket. How is that kind of access rigged against you? Sure. There are other forces out there who stuff on a larger scale and if you try to fight the tape they control, they will mop the floor with you. So don’t. Do what you know other than an index fund. Don’t try to beat Goldman’s algorithmic black box. You can make money in the market. You just have to work at it which is why they call it “work”.

Right now, a handful of sectors have jumped the shark: energy, precious metals, softs, Jim Rogers. AKA…”the Inflation Trade”. Investors are doing a crazy new dance called “the Rotation”. It involves grooving into consumer staples, healthcare, utilities, anything that pays you to participate (also known as a dividend).

Some of the big pharma names are OK: Lilly (LLY) for deep value, Abbott Labs (ABT) for dependability. Some of the herd has already bid Kraft (KFT) up a bit. Maybe take a look at Unilever (UL) or an outlier like B&G Foods (BGS). If you’re snooping around the big, regulated, electric utilities, Duke (DUK) and Exelon (EXC) are always worth the time. Still a bit early to party with the financials. They need to learn how to make money the old fashioned way. However, a few of the asset managers like AllianceBernstein (AB) and Federated (FII) might deserve at least a look. Oh and expect great things from big tech: Intel (INTC) and, yes, even Microsoft (MSFT) and Cisco (CSCO). Give Apple (AAPL) a rest. Build some new infrastructure. Stop playing with the toys for a bit.

But the scary trade mantra doesn’t work anymore. The more real return and hard asset funds the mutual fund companies crank out the better normal, non-commodity linked stuff looks. Time to buy normal and tell the gold hucksters and the slicky boys in the Chicago pits to “Sit On It”.

Well…this week’s three lil’ piggies seem pretty cool…

“Reading is still fundamental…”

Educational Development (EDUC)
Recent Price: 5.30
P/E: 9.43
Current Yield: 9.05%

The Skinny
EDUC was one of the first stocks we covered back in 2009 so, out of sheer laziness, we’re revisiting it. The company markets children’s books, mostly in the U.S. and the U.K. through a multi level sales organization of independent reps as well as specialty retail stores and the internet. Shares trade at 1.06x’s book and comes with $1.20 per share in cash. Significant when we’re talking about a $5 stock. The company earned 50 cents per share last year and is at 30 cents so far this year. We will see. An interesting, under the radar idea.

The Danger
Over the last five years, revenues have slid from $31.79 million to $28.67 million. That’s a 2% compounded annual earnings shrinkage rate. Wrong direction. Hasn’t affected the dividend payout ratio yet at 44%, but it bears watching. Of course the usual micro cap caveats: $22 million market cap companies are thinly traded, liquidity is an issue, etc.

“Hong Kong Phooey…”

HSBC Holdings Plc (HBC)
Recent Price: 50.89
P/E: 14
Current Yield: 4.41%

The Skinny
It’s big. It’s a bank. It’s a big bank. Freakin’ huge. How huge? 8,800 offices in over 88 countries. Total assets…this is per S&P…$2.36 trillion…yes…bigger than the current U.S. budget deficit. Analysts forecast 7% revenue growth for 2011. The company focuses more on Asia than any other developing market, so, HBC shares are an idea if you’re looking for some cheap emerging markets exposure. Shares are 16% off of a 52 week high and have a forward P/E of 11.3x’s. Not bad. Plus, it’s pretty tough to find a big bank paying a 4% or better dividend. Hell, it’s hard to find a big bank PAYING a dividend.

The Danger
It’s a bank. It’s a big bank. It’s a big foreign bank with a lot of exposure to places like..oh..China. During what the consensus says was the secular low of 2009 shares got as low as $22.89 down from highs of nearly a $100 during the market peak of 2007. HBC also was very active in the American subprime business via its consumer finance arm. It’s well discussed in Michael Lewis’ awesome book The Big Short. It’s not a flattering profile. I don’t need to devote a lot of space to the risks. You’re all big girls and boys.

“A Duck!!!”

Aflac Inc. (AFL)
Recent Price: 49.30
P/E: 11.08
Current Yield: 2.43%

The Skinny
Who doesn’t know this brand? America’s favorite waterfowl will likely join the Golden Arches and the red and white whatever it is on the Coke can. This stock is incredibly cheap. 7.9 times forward earnings. Great cashflow. Not the highest yielder, but the growth is the attraction although 2.43% is a helleluva lot better than what some money markets or even the S&P 500 is yielding collectively. Shares got battered after the Japanese earthquake (75% of revenues come from the Land of The Rising Sun) and subsequent nuclear emergencies, recovered, and then have gotten smacked down again. Around $10 off of the 52 week high. Looking long term, the company’s affordable supplemental insurance products will help fill gaps in America’s dysfunctional healthcare system. The need is there and AFL can satisfy it. It’s a good opportunity and the price ain’t bad.

The Danger
Well, 75% of their revenue, as stated above, comes from Japan which is an absolute mess now and will be for a bit. That will impact earnings. Also, insurance companies also have lots of real estate related stuff lying around: mortgage back securities, commercial real estate loans, even the properties themselves. That’s definitely spooked some folks with good reason. The company has cleaned up a lot of that stuff, but it still bears watching.

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Yieldpig, Copyright © 2011 All rights reserved. No statement or expression of opinion, or any other matter herein, directly or indirectly, is an offer or the solicitation of an offer to buy or sell the securities or financial instruments mentioned. While we believe the sources of information to be reliable, we in no way represent or guarantee the accuracy of the statements made herein. Yieldpig does not provide individual investment counseling, act as an investment advisor, or individually advocate the purchase or sale of any security or investment Communications from Yieldpig are intended solely for informational purposes. Statements made by various authors, advertisers, sponsors and other contributors do not necessarily reflect the opinions of Yieldpig, and should not be construed as an endorsement by Yieldpig, either expressed or implied. Yieldpig is not responsible for typographic errors or other inaccuracies in the content. We believe the information contained herein to be accurate and reliable. However, errors may occasionally occur. Therefore, all information and materials are provided "AS IS" without any warranty of any kind. Past results are not indicative of future results. s should not view this publication as offering personalized legal or investment counseling. Investments recommended in this publication should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company in question

Within Without Steve: What Happens to Apple after Steve Jobs?

2011-05-18T22:09:00.003-04:00

I haven’t hated on Apple in a while so I felt like I was a bit overdue. Actually, I’m sort of joking. I respect the hell out of Steve Jobs, Colonel Kurtz style genius and how Apple has translated his vision in to mind blowing products that have literally reshaped media culture. But what else would you expect from a guy who was whacked out on LSD, listening to the Beatles “White Album” when he cam up with the name for his invention? Charles Manson was doing the same thing but thank God Jobs’ execution of his vision didn’t involve mass murder or carving a swastika on your forehead.

I’m not trying to be grim and I wish nothing but good health to Steve Jobs. However, he has had a liver transplant and is currently on his third medical leave and judging from the recent profile of the company in Fortune, Jobs’ DNA is ingrained in just about every millimeter of plastic chrome and glass. What will Apple, both the company and the stock, look like post Steve? It’s the question everyone asks. Here’re my thoughts.

1. Let’s get the discussion about the stock out of the way first. If Steve’s gone, maybe Apple can put a crowbar in it’s wallet and pay a dividend. They’ve got $26 billion dollars lying around. Suppose the stock gets hammered 30% when Jobs either retires or dies (my money is on the grim reaper). Not out of the realm of possibility given that emotionally unstable humans are involved in the investment process. That brings it down to around $242. If they paid just half of the cash out that would be a 0.57% yield. Better than the current yield of zero. They could split the stock but I seriously doubt they would want to dilute it. The Steve magic will be gone. The company will need to do something initially to keep investors interested.

2. More content. Fewer gadgets. This shift evolves daily. Without a doubt, Jobs is the driving force behind Apple’s tradition of inventing edgy hardware. Even Pixar was kind of hardware like (they did create super computers to run the animation software). Disney was responsible for the content side. ITunes has become a significant revenue driver for the company although Apple is a bit tight lipped when it comes to sharing information about exactly how much. That contribution will continue to grow. And looking forward, Apple has something much larger up its black, clingy sleeve. The huge Costco sized data warehouses in North Carolina’s Research Triangle that the company is working on but not talking about has more to do with what we watch and listen to on those shiny toys than the actual shiny toys themselves.

3. Hell, maybe they’ll create even better stuff. Apple’s culture is famous for Jobs’ notorious, Dr. Evil like , low tolerance for failure. Great things come out of failure. The less we fear it, the more we try and the better we get. Some bold stuff could come from Cuppertino. Yes. Bolder than the iPod, Pad, or Phone.

Don’t get me wrong. I’m not trying to handicap Steve Jobs’s mortality. I think it would be great if he lived to a ripe old age and stayed at the helm of Apple’s thousand year Reich. But it’s ok to be a realist and the market will react to his passing and all of that will affect Apple fundamentally. But knowing Steve Jobs, he’s probably planning to be cryogenically frozen and his DNA has been embedded in some software that will intuitively continue to run the company like the iTunes feature that anticipates what you listen to based on your patterns. Far fetched? Remember, we're talking about Apple Computer.

Hate To Say "I Told You So"

2011-05-11T23:19:00.000-04:00

The Hives are an awesome band. They’re one of the best Swedish exports since Absolut Vodka and porn. I discovered them during the Garage Rock Renaissance a few years back led by the White Stripes and The Strokes. My kids (11 and 8) heard them on Cartoon Network. We heard them on XM in the car and all three of us said “The Hives!” out loud. I had no idea. Being the rock-n-roll equivalent of a jock sniffer, if there’s a band I like, I learn all about their gear (yeah..I’m a goober that way). The Hives’ guitarist has a homemade telecaster copy. Nothing fancy. No $9,000 vintage Les Paul and a boutique amp. Maybe it’s his Scandinavian sensibility. Maybe he doesn’t know any better. But obviously, the stuff that goes into making the product, i.e. the music, isn’t the focus. It’s the product that’s important. “Hate to Say ‘I Told You So’ “ is probably their finest tune and if last week’s commodities rout should have a theme song, that would be it.

Commodities, especially silver had its rear end handed to it in a zip loc bag last week. Why? Because the smart money that picked up SLV at 18 last year had the basic, mouth breathing wisdom to punch out 48. There’re lots of other reasons, too. Margin requirements on silver and oil have been adjusted. That’ll keep things from getting too full tilt boogie. But, like we talked about a couple of weeks ago as we disputed Jeremy Grantham’s “New Paradigm” claim, prices come down eventually. Just gonna happen.

Here’re some fun facts we stumbled on. According to data from the Credit Suisse Global Investment Returns Yearbook 2011, the annualized return for stocks from 1900 to 2010 has been 9.4%. Bonds got you 4.8% for the same time period. Commodities? How about a whopping 2.6% annualized for over one hundred years. With inflation at 3.1%, an inflation sensitive “investment” couldn’t even keep pace. Hell, you would’ve gotten 3.9% if you’d stayed in cash. But, then again, after 110 years, you’d be too dead to spend it.

Yeah, commodities have snapped back. But what doesn’t after getting hammered big time in a short period? I’m sure Enron popped on the open at least once or twice. But it’s probably the last stand. From Cairo, Egypt to Athens, Georgia, consumers are sick and tired of paying too much whether it’s gasoline or a loaf of bread. They’re the market and the market is a voting mechanism. Looks like higher commodity prices have had term limits imposed.

Judging by the return data we discussed, stocks are a better deal over the long haul. The VERY long haul. Short haul, too. Like the rock-n-roll, the ingredients, while necessary, aren’t nearly as important as the end product.

Hate to say I told you..but here are our three lil’ piggies….

“Take the skinheads bowling…”

Bowl America Class A (BWL’A)
Recent Price: 13.20
P/E: NA
Current Yield: 4.84%

The Skinny
Growing up, a friend of mine’s family owned one of the larger bowling alleys in town. The entire family worked liked Trojans at the business but they were very successful. They fit the historical, mom-n-pop profile of that business. Eventually, AMF decided to roll up a mom-n-pop business on a national level (my pal’s family did quite well thanks to AMF’s delusion of grandeur). Didn’t work out so well. However, that doesn’t mean it can’t work on a smaller scale. BWL’A seems to be doing OK. The company operates 19 bowling centers in Washington, D.C., Florida. Virginia and Maryland. Tiny little $46 million market cap. But, sometimes those pay off big. The company has actually been around since 1958 and has consistently turned in revenue of $27 to $30 million annually over the last five years. The company is debt free and raised the dividend at the end of last year. Not bad considering the current environment.

The Danger
BWL’A’s numbers have been slipping a little lately. 2010 EPS came in at 36 cents versus 60 cents for the previous year. Revenue has also shrunk 8.85 percent YOY. Cash seems to be tightening too. Last year, operating cash flow was around $3.5 million, down from $4.78 million for the prior year. That’s a concern. BWL’A looks like an interesting idea. Be careful though, the potential is there for a gutter ball.

“Take Another Look at the Book…”

Courier Corp (CRRC)
Recent Price: 11.66
P/E: NA
Current Yield: 7.20%

The Skinny
CRCC is another Yieldpig repeater. We covered it July 23 of last year. The price then was around 14. It’s on sale and the yield has bumped up thanks to that. Still the nation’s third largest book manufacturer, CRRC cranks out over 100 million books annually. The stock now trades around book value. Last year, operating cash flow jumped from $18.3 million to $27 million. Sales did grow by about $10 million. Not bad. There may be some value there.

The Danger
I’m late to the party. But I freakin’ love my Kindle. No more reading glasses. The wife doesn’t kvetch at me for stacking books up on the night stand. That’s a Cat 5 headwind. They also posted a Q2 2011 loss of 40 cents a share. Throw in the fact that 2010 EPS came in at 60 cents when four years ago they were at $2.25.
Volume is also a concern. Yesterday, around 24,600 shares traded hands. I’ve seen less liquid but that’s a mighty skinny number. Be careful with this one.

“Trust the preferreds…”

Bank of America Capital Trust IV Preferred 5.875% (BAC-PU)
Recent Price: 23.27
P/E: NA
Current Yield: 6.3%

The Skinny
It’s hard to drive through the suburbs and not realize the power of Bank of America’s (BAC) franchise, warts and all. There are plenty of their trust preferreds out there. This particular one trades at a discount to par ($25) and sports half of an investment grade rating (BB+/Baa3). Remember, the Collins Amendment in Dodd Frank stipulates that banks with more than $15 billion must begin phasing out trust preferreds as part of their Tier 1 capital structure in 2013. They’ll have three years to do so. Most will probably call them in at par. That’s a 7.4% upside in addition to the yield. Not bad for a well known name.

The Danger
Since the financial crisis of 2008, B of A, at times, reminds me of an enormous train wreck where they are constantly pulling out bodies. A lot of junk in the basement to be cleaned out. BAC-PU only has half of an investment grade rating. Not impressive for an institution of that size. Interest rates are also a factor. When they rise, BAC-PU could be smacked a bit due to its lowish original coupon (5.86%). There’s also a chance that BAC converts it into a straight preferred thanks to its low coupon.

Following us on the Twitter? What’re you waiting for? An invitation? Chop. Chop. @Yieldpig.

Yieldpig, Copyright © 2011 All rights reserved. No statement or expression of opinion, or any other matter herein, directly or indirectly, is an offer or the solicitation of an offer to buy or sell the securities or financial instruments mentioned. While we believe the sources of information to be reliable, we in no way represent or guarantee the accuracy of the statements made herein. Yieldpig does not provide individual investment counseling, act as an investment advisor, or individually advocate the purchase or sale of any security or investment Communications from Yieldpig are intended solely for informational purposes. Statements made by various authors, advertisers, sponsors and other contributors do not necessarily reflect the opinions of Yieldpig, and should not be construed as an endorsement by Yieldpig, either expressed or implied. Yieldpig is not responsible for typographic errors or other inaccuracies in the content. We believe the information contained herein to be accurate and reliable. However, errors may occasionally occur. Therefore, all information and materials are provided "AS IS" without any warranty of any kind. Past results are not indicative of future results. s should not view this publication as offering personalized legal or investment counseling. Investments recommended in this publication should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company in question

Shift Happens

2011-04-28T00:03:00.003-04:00

The other day I saw a chart published by permabear, value guy Jeremy Grantham titled “The Great Paradigm Shift”. The chart tracks the rise and fall of commodity prices since World War One. Apparently, commodity prices have been in a multi-decade decline and have now turned painfully upward for the next who knows how many decades. I don’t buy it.

In my experience and being a student of history, whenever a large group of smart people loudly proclaim a new, permanent paradigm has emerged, it typically hasn’t. The rise of computing and the Internet was hailed as a paradigm shift and it was to some extent. However, while that technology changed how we do stuff it didn’t change the stuff we do. We still communicate with each other. We still buy and sell things. We just go about it a lot differently.

Now, it appears that commodity prices: food, precious metals, energy, are all going to be much higher permanently. “We’re running out of food!” the headlines scream. “We’re not farming like we used to!”. Um…I live in the South. I can drive thirty minutes in just about any direction and see cows and rows of crops. Newsflash folks: there’s plenty of farmland. We can make more.

Humans, even going back to when we drew on cave walls since we didn’t have TiVo, have always, always adapted to food scarcity. Sure, sometimes we jack up the price or conserve or ration or form angry mobs in order to overthrow a corrupt monarchy. But most of the times, we just make more. And usually, it ends up being more than we need at the time.

Are food commodity prices rising? Duh. Will they go up forever? Again, duh. For argument sake, let’s say wheat goes away. It’s too expensive or is blighted out somehow. What would happen? Potato flour. Rice flour. Rye. Barley. What if those weren’t available? Yeah…I know and if my aunt had…well..you get the picture.

Yes. Commodity prices are high. They may go higher. But they’re gonna come down sooner than later. A “New Paradigm” has been declared by the smart people complete with charts. Look at the spike where they wrote “Great Paradigm Shift”. Prepare for bargains at the Food King.

Well…let’s shift over here and meet this week’s three lil’ piggies…

“Hit rewind…again…”

Kohlberg Capital Corp (KCAP)
Recent Price: 7.40
P/E: NA
Current Yield: 9.31%

The Skinny
We talked about business development company KCAP quite a while back. We decided to revisit and take another looksee. At the time of our first discussion, KCAP was having a couple of problems. Mainly with their lenders and auditors. That mess seems to be straightened out and everything seems fairly hunky dory. Numbers look OK. Q4 earnings were a little better than expected thanks to some higher earning assets and some asset sales. They paid down some debt in one area which improved credit quality and did a convertible bond offering that raised some cash which will be used for new investment. Shares trade a bit below a book value of $8.21. Interesting looking value and yield for an improved story.

The Danger
The convertible bond offering raised some investment capital for KCAP. However, the interest is a bit high at 8.75%. BDC’s make money sort of like banks: on the spread. Even at the higher rates they typically charge borrowers, KCAP’s high rate will put some pressure on their moneymaking ability. Also, the company lost some ground during the workout. Wrangling with your creditors and firing your auditor can take your eye off of the ball. Lastly, KCAP’s portfolio has shrunk some which can also put pressure on the BDC business as well.

“The power of imagination…AND yield!”

CORTS TR General Electric Capital 6% Pfd (KVR)
Recent Price: 24.98
P/E: NA
Current Yield: 6.01%

The Skinny
If you were coordinated enough to buy GE bonds at a deep discount during the
Panic of 2008, you’ve go a tidy profit on your hands. If your bond is trading at
108 or 109, keep in mind that at the end of the day it’s only worth 100. A swap
Into KVR might make some sense. Same GE credit quality (AA+/AA2) and you’ll
probably pick up 50 to 100 bps in yield. Keep your limit order tight and you may
pick it up at a slight discount.

The Danger
KVR is a hybrid preferred composed of a trust holding a particular GE bond and
then busted up into smaller parts. The stated maturity date is 3/15/32. Long time
from now. It’s also callable at anytime at its par price of $25 per share. So, the
risk of buying KVR right at about par and then having it called away quickly is
fairly healthy. Don’t get too attached. Also remember that GE Capital is GE’s
financial arm. Not immune from turmoil during any future (most likely) financial
crises.

“Do you have protection?”

Protective Life Corp. (PL)
Recent Price: 26.52
P/E: 8.99
Current Yield: 2.09%

The Skinny
When I started working on this week’s post, I had originally intended to profile
Protective’s preferred shares PL-PB. Naturally, we do work on the issuer itself
and, as I looked closer at the numbers, I kind of liked the common stock better.
Granted, the yield at barely 2% is somewhat paltry. But the valuations are what
grabbed me. Shares trade with a single digit P/E and just 0.86 times book value. I like that kind of value. Earnings have improved a bit thanks to increased annuity sales (Have you tried to open a checking account at a bank lately? If you drive by a branch with your window open, they’ll throw an annuity in your car). Mortgages in the PL’s investment portfolio are improving as well with delinquencies falling 66% quarter over quarter. The company still has some work to do, but for the deep value buyer who can wait, a pleasant surprise may be had whether through turnaround or acquisition.

The Danger
Although earnings improved, Q4 was still a disappointment. Higher mortality expenses have also put the pressure on margins. And, being an insurance company with a lot of cash to put to work in 2005-2007, PL has it’s fair share of crappy commercial real estate on the books. Gonna take a while for that stuff to shake loose. If you’re sort of interested but don’t have the time, patience or you don’t like 2.09% dividend, then check out the preferred which trades a small discount to par. The yield’s better, but keep in mind the upside is very limited.

Disclosures: None

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Health Care Quarantined

2011-04-13T22:38:00.003-04:00

Last week, we talked a little about prices relative to the average P/E of the S&P 500and what would be considered “cheap” or not and threw out a couple of companion names. Naturally, since we were looking for value, a healthcare name (LLY) invariably popped up. LLY is just one in particular that we’re fond of. There’re plenty of others. Investors are treating healthcare as if it had leprosy or a rotavirus. Have you ever changed the diaper of a 9 month old with that stuff? If so, you deserve a medal.

According to Standard and Poor’s Equity Research, year to date, Health Care is the worst performing sector in the S&P 500 with having turned in a whopping 0.7% return last year. It’s also the cheapest based on 2011 estimates with a P/E of 11.8 times earnings. Performance is a little better this year with 5.7% YTD, slightly outperforming Financials, the ultimate market leper.

Pretty sick company. But why? The legislative beast known as “Obamacare”? Granted, there’s plenty of event risk lurking in the bowels of that thing. But, correct me if I’m wrong, didn’t the pharmaceutical companies make out fairly well on that deal…like…being able to control prices with their biggest customer. How is that event risk? Maybe if it doesn’t happen, I guess. That would be non-event risk.

P/E’s are ridiculous across the board for the sector. The aforementioned, perennial favorite LLY sports a trailing multiple of 7.83 times. Biotech giant, Amgen (AMGN) trades at 11.34 times. I’ve never seen AMGN’s P/E that low in my career and I’ve been doing this long enough to say “I’ve never seen the P/E that low in my career”. Generic colossus Teva (TEVA) is priced at 13.35 times; an 18.75% discount to the S&P 500’s P/E.

And whether they’re evil incarnate or not, the insurance companies are worth a look. My co pays increased 50%...seriously…this year so…I’m sort of in that camp. Nevertheless, a bargain’s a bargain, maybe. Cigna’s (CI) and Aetna’s P/E’s float like twins at a singular digit 8.9 times trailing. WellPoint (WLP) is a bit pricier at 10 times. Now, the insurance companies, despite the bazillions they’ve thrown at congress, do face some genuine event risk. However, if Congressman Paul Ryan gets his way (doubtful), CHACHING!!!

We’ve talked about healthcare before, mainly Big Pharma. Sure there’s uncertainty but where is there NOT uncertainty in pulling and investment trigger. The numbers speak for themselves. There’s some serious value in the group. Maybe it’s time for bold investors to put on their “Outbreak” suits and go shopping in the hot zone.

Well…let’s see what we can catch from this week’s three lil’ piggies…

“Hit rewind…”

Great Northern Iron Ore (GNI)

Recent Price: 101.50

P/E: 7.42

Current Yield: 12.3%

The Skinny

We profiled GNI back in December of 2009. It was around $90 when we looked at it and, subsequently, it ran nicely to close to $160. It’s come back recently and may be worth another look. GNI is an ancient (est. 1906) mineral royalty trust that owns and leases mineral and non-mineral land in the Mesabi iron ore range of Minnesota. Typically, mineral royalty trusts run out eventually. GNI as been cranking out iron ore for 105 years so, not quite there yet. Currently, the yield is superior (will chat about how that can all change in “the danger”) and the concept is pretty simple: they lease mining companies the right pull rocks out of the ground that get turned into steel… they get paid…you get paid. If you’re looking for some off the beaten path, hard asset exposure, this may be the ticket. Iron ore would definitely be considered a hard asset. A 35% discount to the 52 week high makes it attractive.

The Danger

What goes up WILL come down. The commodity trade is hotter than the pepper sprout Johnny Cash and June Carter sang about in the classic “Jackson”. That’s gonna end relatively soon. It’s got to. Just as GNI participated in the run up, it’ll fall with crowd as well. And while the yield is awfully sexy, it’s directly linked to the price of the rocks in the ground. Once the commodity price comes down, expect the yield to follow. Finally, although GNI has been paying shareholders for over a century, mineral trusts are designed to run dry. It’s just a question of when.

“Premium at a discount!”

Columbia Seligman Premium Technology Growth Fund (STK)

Recent Price: 19.69

P/E: NA

Current Yield: 9.39%

The Skinny

What do you get when you combine tech stocks, fat call option premium and cheap leverage? You get the STK closed end fund. The fund’s strategy is to own the stocks of technology and related companies and to write call options on the NASDAQ 100 or its related ETF. With GOOG, AAPL, and AMZN dominating that space, you can only imagine the size of the premiums. The head scratcher to us is that shares trade at a nice 6% discount to NAV. Granted, tech is actually an underperforming sector, but…to quote House Majority Leader Eric Cantor…”C’mon!” Since the fund’s 2009 inception, it’s averaged a more than decent 16.52% return on its NAV while a turning in a paltry 4.98% on its market price. Might be some nice inefficiencies there. Plus, the option writing aspect actually reduces some of the portfolio volatility. Growth AND Income! What a concept!

The Danger

The good news is the tech sector is under performing. The bad news is the tech sector is under performing. Might take a while to get any real movement. All depends on economic capex. STK throws off a LOT of income…so…not the most tax efficient vehicle out there. Lastly, we’ve said it before…we’ll say it again…leverage is like an umbrella that someone lends you when the sun is shining but they want it back when it starts to rain. Rates are low and, physically, they probably can’t go much lower. So…more than likely…they’ll head northerly sooner than later. That would put quite the whack on STK.

“Standing by the commonwealth…”

Commonwealth REIT Preferred Cumulative Convertible Series D Coupon 6.5% (CWH-PD)

Recent Price: 21.83

P/E: NA Current Yield: 7.44%

The Skinny

The issuer, Commonwealth (CWH), is an externally advised REIT that owns, get this, 64 million square feet of mostly office properties throughout the U.S. This is an interesting bird. CWH-PF trades at nice 12.68% discount to its par value of $25. It’s currently callable and it’s convertible into shares of the common. However, the common has enjoyed some recent analyst upgrades. The reasoning being that CWH has done a good job of shedding non-core assets, maintaining occupancy at around 87%, and made some smart, cheap purchases in 2009 and 2010 when the fire sales were happening. Also, their two biggest tenants are the healthcare industry and the U.S. Government, two sectors that will probably downsize some shortly. Thus the preferred. Common dividends get slashed before preferreds and CWH.D is cumulative. If suspended, dividends accrue and are then all paid once the payments resume. If times get tough, the preferred dividend offers a bit more protection than the common. Besides, the common yields around 7.6%, only 20 bps more. CWH.D makes more sense to me.

The Danger

As stated above, CWH’s two biggest tenants are healthcare companies and the Federal government. Makes you feel about as comfortable as you would have three years ago if you owned a shopping center anchored by Circuit City and Blockbuster. Although the company has maintained 87% occupancy, 13% of 64 million at say $20/sq ft is…well…a lot. Still a lot of economic risk there. Lastly, it’s a convert, their squirrely. Do your homework first. Do a LOT of homework.

Here comes Peter Cottontail…hoppin’ down the Bunny Trail and followin’ us on Twitter…@Yieldpig. Shouldn’t you do the same?

Yieldpig, Copyright © 2010 All rights reserved. No statement or expression of opinion, or any other matter herein, directly or indirectly, is an offer or the solicitation of an offer to buy or sell the securities or financial instruments mentioned. While we believe the sources of information to be reliable, we in no way represent or guarantee the accuracy of the statements made herein. Yieldpig does not provide individual investment counseling, act as an investment advisor, or individually advocate the purchase or sale of any security or investment Communications from Yieldpig are intended solely for informational purposes. Statements made by various authors, advertisers, sponsors and other contributors do not necessarily reflect the opinions of Yieldpig, and should not be construed as an endorsement by Yieldpig, either expressed or implied. Yieldpig is not responsible for typographic errors or other inaccuracies in the content. We believe the information contained herein to be accurate and reliable. However, errors may occasionally occur. Therefore, all information and materials are provided "AS IS" without any warranty of any kind. Past results are not indicative of future results. s should not view this publication as offering personalized legal or investment counseling. Investments recommended in this publication should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company in question

The Nice Price

2011-03-30T22:39:00.003-04:00

As a teenager in the early 1980‘s, just about every dime of any pocket money I had went towards either record albums (yes..the black…round things that hipsters are trying to bring back. Personally…I like where recorded music has gone. Try to put a double LP in the pocket of your cargo shorts.) or cassette tapes. Columbia/CBS records (now part of Sony) had a merchandising strategy called “The Nice Price”. The label priced albums from certain artists at attractive discount.

Lucky for me, all of the stuff I was into was priced nice: Elvis Costello, The Clash, The Boomtown Rats, great stuff at an affordable price. All of the stuff on Columbia that I didn’t want, like Loverboy or Billy Joel, usually wasn’t discounted. Didn’t matter. Didn’t want ‘em. So for a fair price, I built a decent record collection back in the day. It was all about the value. Back then, the P/E on the S&P 500 was about 7.5. I should’ve been buying stocks instead of The Clash’s London Calling or Elvis Costello’s This Year’s Model.

S&P 500’s P/E sits at 16.8 and the dividend yield sits at 1.95%. The 52 week high was 23.75 and the yield was 1.77%. That’s a 31% difference. Is it at the “Nice Price”? Hard to say. The 52 week low was 15.67 so, currently, we’re not to far off from that. Consider it in the context of the index’s P/E during the absolute, insane market top of 1999. Back in those frothy days, the P/E for the S&P 500 was a bargainly 33.52 and the dividend yield was 1.3. 16.8 times earnings doesn’t seem all that ridiculous. Of course, 7.5 times is a better deal, but again, hop in Mr. Peabody’s Wayback Machine and dial it back to 1982. The Reagan Revolution was in the blocks and waiting for the starting pistol to be fired.

What to do, what to do? My guess would be to look in the Nice Price bin and find decent stuff trading under 16.8 times trailing earnings. Thumb through some of the big pharma names like Eli Lilly (LLY) with a trailing P/E of 7.5 and a dividend yield of 5.68%. A big oiler (love ‘em or hate ‘em) like Conoco Phillips (COP) at 10.5 times trailing yielding 3.29% is probably okay as well. Maybe round it out with some crusty old tech/telecom. Chipster Intel (INTC) sports a late 70’s/early 80’s style P/E of 9.98 and a tech bubble uncool dividend yield of 3.54%. Round it with the soon to be a monopoly again AT&T (T) trading at 8.6 times trailing and paying 5.94%, just like it did when your grandmother owned it.

The index might be a good deal on a price basis compared to where it’s been. I think better deals can be found in cheaper, high quality names. Just like the Nice Price albums. I’d be willing to bet that more people still have their vinyl copy of This Year’s Model than Loverboy’s Get Lucky.

Well…maybe we can get lucky with this edition’s three lil’ piggies…

“HEY ABBOTTTTTTT!!!!!!!!”

Abbott Laboratories (ABT)

Recent Price: 48.40

P/E: 16.34

Current Yield: 3.96%

The Skinny

If ABT was a high school senior, it would probably be valedictorian. Beautiful company. $7.2 billion in cash flow. A dividend payout ratio of 59%. I could go on. Some quick forward numbers: the 2011 forecast calls for 8% revenue growth (huge for a company of that girth), 10% of sales ($3.5 billion) invested in R&D, and consistent, multi decade dividend growth. Most recently, they bumped their generosity up 11%. ABT knows how to execute and are spot on when it comes to delivering shareholder value.

The Danger

Believe it or not, straight “A” students can screw up. ABT has been on a bit of a shopping spree snapping up ophthalmic care company Advanced Medical Optics and, most recently, the pharma division of Belgium based Solvay SA. These are great and smart acquisitions, but mergers always bring unexpected surprises and integration challenges. Also, scientific research is all about trial and error. Pipeline setbacks are par for the course. Lastly, big pharma will always deal with legal and regulatory risk.

“That’s some profitable healthcare…eh?”

Medical Facilities Corporation (MFCSF.PK)

Recent Price: 13.01

P/E: NA

Current Yield: 8.67%

The Skinny

We’ll definitely put this one in our “outlier” file. MFCSF is a British Columbia corporation designed to similar to a Canadian Income Trust (there are/were a lot of these in the energy sector). Shares trade on the Pink Sheets as Income Participating Securities (although the company is seeking shareholder support to convert to a traditional common share structure). According to their website, the company owns 51%+ interest in four specialty surgical centers in South Dakota and Oklahoma and an ambulatory surgery center in California. Research was tough on this one (we’ll discuss in the “danger” section). What we could glean was that for Q4 2010, MFCSF had a 10.9% increase in facility service revenue, a 23.1% increase in operating income, and an 11% increase in operating margin. Not bad. Cash available for distribution increased 10.7%. I guess since Canada’s got one of those comuno-fascist-solcialist, single payer, healthcare system, MFCSF must realize that, for now, there’s money to be made in the U.S. healthcare space.

The Danger

As mentioned earlier, finding insightful info on this name was a challenge. It’s really not covered stateside (plenty of Canadian firms follow it, though). Reading the available info, it was hard to get a bead on their actual earnings. Also, volume isn’t in the millions of shares. Always…always use limit orders (hell…everyone should use limit orders for everything anyway). Chart looks a little toppy, too. Lastly, the company’s rationale of changing to a common share structure was to encourage more physician, equity ownership. There’s an old saying in the investment business: “When the doctors go long…you go short.”

“Wristband of brothers…”

Standard Register Co. (SR)

Recent Price: 3.30.

P/E: 33

Current Yield: 6.06%

The Skinny

We profiled SR last year and, while we try not to repeat ourselves, we thought the fact that they went earnings positive was significant. SR specializes in document management, especially in the healthcare industry. They’re one of the largest manufacturers of “patient identification solutions” which is fancy corpo-talk for “hospital wristbands”. Sadly, no shortage of sick people out there, so, business is good. Anyway, seems that SR’s earnings worm has turned. They earned 0.10 a share for 2010 after losing 0.43 per share in 2009. That’s a pretty good improvement. We’re encouraged. Business is in a good space, too.

The Danger

SR was a $34 stock 9 years ago. Now the market cap is under $100 million. The company has been in the commercial printing business since the Roaring 20’s. The printing business is shrinking rapidly and SR and their peers are scrambling to adapt digitally. On average, revenues have declined by 5.2% annually. The picture for SR is better, but it’s not yet in complete focus

Disclosure: None

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