I am retired and take educated guesses on all things financial.

October 24, 2010

October 25, 2010: Five Overlooked Dividend-Rich Stocks

Investors are generally a creative lot. We yearn for our inner voice to approvingly utter the classic Indiana Jones line when the old knight tells Indiana Jones, upon selecting the correct chalice from the many pretenders, "You Have Chosen Wisely". But there is more to the passion for many. I enjoy reading old predictions from the likes of Barrons, Forbes, Fortune, The Wall Street Journal and Money print media - and in retrospect find humor in how most did not stand the test of time. I also enjoy a few bloggers and journalists such as Roger Nusbaum and Malcolm Berko, and brief moments of the talking heads on CNBC and the Fox Business Channel (much improved in recent months with the addition of Charles Gasparino). Financial opinions and chatter, for me, is therapeutic. Saturday,I read an article touting a long term retirement portfolio strategy. While I did not agree with the allocation and diversification model, five securities appealed to me for high income with growth potential. Perhaps you may find them worthwhile to explore. Here they are:

Copano Enerrgy LLC (CPNO):Yielding 8.10% and trading at $28.60, this $1.9b energy company provides a myriad of essential and value-added midstream services to natural gas producers. Copano's hard assets include 6,400 miles of natural gas gathering and transmission pipelines and seven natural gas processing plants. CPNO also operates over 300 miles of NGL and crude oil pipelines. The company operates in Oklahoma, Texas and the Rocky Mountain region.

Atlas Pipeline Partners LP (APL):Yielding 7% and trading at $20.07, this $1.1b energy company is a provider of natural gas gathering services in the Anadarko and Permian Basins. It owns and operates eight natural gas processing plants with a capacity of over 900 million cubic feet/day and a treating facility with approximately 200 million cubic feet/day. It partners with other companies such as Laurel Mountain to leverage interests.

TC Pipelines LP (TCLP):Yielding 6.20% and trading at $48.43, this $3.2b company was formed by TransCanada Corporation to manage energy infrastructure businesses in North America. TCLP earns revenue from the transportation of natural gas through investments in natural gas pipeline systems in the United States, Eastern Canada and Mexico. Partners include the aforementioned TransCanada and other such as ONEOK Partners and the Northern Border Pipeline Company. It owns Tuscora Gas Transmission Company and North Baja Pipeline.

Compass Diversified (CODI):Yielding 8.22% and trading at $16.55, this $691m company acquires controlling interests in businesses and actively manages them. CODI has six business segments, Compass AG Holdings, American Furniture Manufacturing, Fox Factory, Anodyne Medical Devices, HALO Branded Solutions, and CBS Personal Holdings.Recent acquisitions include Liberty Safe and Security Products and Circuit Express.

PennantPark (PNNT):Yielding 9.37% and trading at $11.10, this $351m company is a closed end, eternally managed non-diversified investment company. The investment objectives are to generate both current income and capital appreciation through debt and equity investments, primarily in the United States using such techniques as mezzanine debt, senior secured loans and equity investments.

October 11, 2010

October 11, 2010: Credit Suisse First Boston September Housing Survey: Ouch

Amongst the first to release valuable data and forward-looking prognostications on a comprehensive roster of nationwide real estate markets is CSFB. I have followed this report and have found it to be long on facts and observations from those with boots on the ground and short on political spin.

September results were released late last week, and they vividly present a toxic brew of falling sales, prices and a malaise present in buyers, sellers and intermediaries that is too ingrained to be wished away.

Real estate agents noticed a marked decline in prices at the end of the summer. With a score of "50" being average, the scale stood at "22". CSFB anticipates a continuing drift downwards as builders attempt to capture as much business as possible before the winter months. An already high (and rising) inventory is apt to worsen the situation. Look for increasing incentives and a lowering of prices, which is not good news for stockholders of big box builders such as D.R. Horton, NVR, Pulte and Beazer.

Although the overall home market was very weak, there was a slight monthly uptick in Washington D.C. and Phoenix. Worsening conditions prevailed in areas such as Dallas, Jacksonville and Southern California. No sign of a rebound is detected by CSFB nationwide.

Of increasing concern is decreased buyer traffic. The following is illustrative of the magnitude of this issue. With "50" being the norm, here is a bi-monthly sample:

January 2009: 36.5
March: 36.0
May: 45.4
July: 43.4
September: 44.8
November: 43.0
January 2010: 43.5
March: 43.1
May: 31.5
July: 19.1
September: 17.9

Here are comments from the field:

Atlanta - "Poor economic conditions and higher unemployment translates to terrible traffic."
Austin - "People have pre-election jitters. They want more clarity before they buy."
Charlotte - "The number of showings on my listing has dropped 60%. There is no motivation."
Chicago - "Buyers think there is still more downside to price."
Denver - "People are giving up hope because they don't think they can get financed."
Ft. Meyers - "Buyers keep mentioning the economy. They are concerned."
Las Vegas - "My clients are waiting for the bottom. They don't think we are there yet."
Los Angeles - "Buyers are taking their time to make a decision because they have such as selection to choose from."
Minneapolis - "Economic uncertainty has been a major problem."
Washington D.C. -"Move up buyers can't sell."
Boston - "Economic uncertainty has people not even thinking about new homes."
San Francisco - "There is no urgency and consumer confidence is awful."

There has been recent chatter about the halting of foreclosures by financial institutions due to technical issues. Several of my mortgage banker friends have an interesting take on the action. In their view, there is such a backlog of foreclosed properties dead on the market, and so many in the pipeline, banks have concluded that it is better to keep people in a house than leave it to plethora of bad things that can occur if it is unattended. Under this scenario, banks are not stopping foreclosures for any reason other than to mitigate losses.