Ranking/Rating My Holdings

Ranking/Rating My Holdings

Sometimes I find it helpful to think about the stocks that you own.  I like a simple ranking system that Jim Cramer described. 

• 1 = buy more at today's prices
• 2 = buy more on a drop
• 3 = sell on a pop and 
• 4 = why do I own this stock?

With each stock, I also write up a short blurb about why I bought and what I view as the catalyst.  This could get lengthy, but it is a rainy spring weekend.

This is a total off the cuff ramble.  Please, please, please do your own analysis as I could (and am likely) wrong on a number of points.

AMGN - This is an MFI stock.  It is very large, so perceived as safer.  They do have a ton of cash, $32b.  But they also have $33b in LT debt, so call it a wash.  They are a cash flow machine, cranking out $2.5b to $3.0b a quarter. They pay a 3% dividend.  Rank: 2.

AMID - this is a battleground MLP.  They have dropped a bunch in value in past year, from over $14 to $11.15.  They have had one acquisition and in process of completing a 2nd (SXE).  They have a great dividend yield, 14.8% - but there is concern that they may have to cut dividend.  They did just announce earnings this week, and I felt they were solid. Arclight is a major backer/owner - some see that as a positive, others as a negative. I think they are cheap. Rank: 2.

CAAP - this is an operator of Latin America airport concessions.  So gives investor exposure to fast growing economies.  This does come with risk, as in Argentina inflation is very high.  But they are so cheap.  They went public earlier this year at $18 and now they are $11.25.  Their first public quarter of reporting was solid (financially), but they are rough around the edges on how to present and logistics. They do have a large risk in Buenos Aires contract is coming up soon. They may lose it or get less favorable terms.  But at current price, very reasonable.  Rank: 1.

CPLP - an unsexy shipper that yields 10%.  I thought earnings were good and they do have some exposure to container markets, which is a catalyst.  but they have held distribution constant and their price will likely remain a function of distribution.  If they go fro 32 cents to 36 cents a year, the price will likely move towards $3.60.  They seem very conservative.  So a safish and unsexy stock with a nice yield.  Rank = 2.

DDR - this is a REIT in the retail space, much hated of late.    They were around $10 last September and then sold off with other retail REITSs to $7.50 in December.  They then announced ambitions plan to split company into two parts and have begun selling assets in the "bad company" part.  They stock jumped on that news to over $9 and then slid back towards $7 as investors today have attention span of a fruit fly. They yield 10.4% and have had very large insider buying.  They will be having a 1:2 split later in May and should spinoff "bad company" assets in this summer. To me DDR seems proactive compared to a bunch of other retail REITs.  Insider buying, plus spike in price when strategic plan was announced gives my comfort considering I bought near $7.  Rank =2.

EVG - this is a closed end fund I bought in August to provide a decent yield 6.5% that would not be impacted too much by rate changes, as EVG is focused on short duration.  While I have been disappointed with their performance, the market seems to be over-reacting. They trade at a 11.7% discount to their NAV versus a 8.5% norm.  Translation, they are relatively cheap.  Rank =1.

FDEU - another closed end fund that focuses on Europe.  It now yields 8.3% and trades at a 6.9% discount to NAV.  I like exposure to other areas of world. Rank =2.

FUNC - this is a small Maryland bank.  Hard to believe it is a top 30 holding.  I bought as they seem like a very likely buyout candidate (another small MD bank, BYBK was bought out for me and was virtually a double).  I am up 18% and have potential 2nd catalyst of them being added to Russell 3000.  If that happened, I'd be a seller.  I guess that means Rank = 3.

GILD - MFI biotech stock.  They yield 3.3%.  They have $26b in cash without much debt.  They have a hepatitis franchise that is being eroded.  They do have other drugs in pipeline and they bought KITE for cancer drugs.  So in a bit of a transitional period.  I think they'll be fine and they have plenty of cash for another big purchase.  I think they sold off way too much on last earnings. Rank = 1.

GLOP-PB - doesn't get more boring than this one.  This a a preferred stock with a floating yield (that was the draw.  Par was $25 and they trade at $26.09 and yield 8% at that price.  The floating part starts 3/15/23 and is 6.31% + 3 month LIBOR.  The 3 month LIBOR rate right now is 2.34%, so that would be 8.6% if enforced today.  I believe by 2023, a LIBOR of 4 or 5% is pretty reasonable.  Either way, my yield floats, so I have protection with rising rates (assuming they don't rise TOO fast).  Rank =2.

ICHR - a stock that I feel should be MFI, so I own in 2 MFI tranches.  They supply subsystems for semiconductor manufacturers. They make a lot of money, but you have the risk of just a few customers.    So they tend to be pretty volatile, catching a cold (as they say) when TSM or AMAT sneezes.  But they are investing their profits in diversification.  And they are so cheap. Their pre tax income last quarter was $17m.  They are growing and have a $625m market cap.  I just think you don't want too much due to limited customer base.  Rank =2.

ISBC - another smaller regional bank in New Jersey.  They yield  2.7%, but the real reason for owning is 1.32 price to book ratio.  They trade at 17x earnings, so cheap by p/b but fair by earnings.  They seem to be a potential m and a target and in meantime, not that much downside and a 2.7% yield.  Also, should be beneficiary of lower taxes. One could wait a long time for catalyst here. Rank = 3.

JQC - this is my 3rd closed end fund.  Like EVG, they also have recently cut dividend :(.  So they yield 6.1%. They trade at a 11.8% discount to NAV (average is 9.4%).  I find it pretty hard to get excited about a 6.1% yield that has been reduced.  Rank =3.

KCLI - man, oh man, has this been a disappointing stock. Proof that buying just for cheap price to book ratio may not be enough.  They are just OTC, very lightly traded.  They yield 2.7% and have a book value of around $73.  You read that correctly BV of $73 and a price of $40!  Companies like PRU, MET and LNC trade at 80 to 90% of book value.  So KCLI should be in $60 to $65 range.  Like ISBC, one could wait a long time for catalyst... but get paid 2.7% and theoretically BV will be growing, albeit a bit slowly right now.  This would be a buy at $40 if I didn't have so much.  Rank 1.

KNOP - I guess I could just tell you to read CPLP section.  Dull, but relatively secure shipping stock yielding 10.3%.  Little more focused on one area than CPLP, so there is always risk of additional competition.  But they have LT contracts and I don't see major changes.  Rank = 2.

LADR - this is a mortgage REIT that yields 8.2%.  They were trading around 13.75 in January when their largest owner put in an unsolicited bid of $15 for them. This bid got the heisman as consensus was this was best of breed management and LADR was worth more in $17 to $18 range (they have done a good job and dividend has been steadily increasing).  The bid was rescinded and the stock (strangely to me as the bid was never serious) fell sharply from $15 to under $14.  I made one of my rare smart moves and doubled down at $14.  They stock has since totally rebounded and is now $15.41.  I think good chance another offer is made, in meantime, I am very happy at safe-ish 8.2%. Rank = 2.

MAC - this is another retail REIT that has all the earmarks of a buyout.  There were a bunch of rumors late last year that they might go private.  Contracts were changed with SR management to incentivize such a move.  And recently the CEO announced he would step down by end of the year.  The stock popped from $54 to $64 on the first round of news.  Then fell back.  In then popped again (but less) on CEO news and has fallen back. So basically a round trip since November and we're sitting at $54.84 with a yield of 5.4%.  I would not own this stock if I didn't think a buyout was reasonably likely.  Starboard (which has had some active success... but also some failures) has doubled down.  But 3rd Point has gotten tired of waiting.  I will wait a bit longer (say another quarter), but then sell or I would sell on a 10% move up.  Rank = 3.

MTG - this is a company that offers mortgage insurance.  I love this business right now as (1) the underwriting and rates post 2009 have been terrific, (2) I think there is growth for next year or two as higher rates will perversely encourage people to buy now, (3) not many competitors in this space and (4) they are full beneficiaries of tax reform.  They are insanely cheap, trading at 1.22 x book value and 10x earnings. They have sold off for poor reasons in 2018 and besides having great runway in front of them, I think they are a very tempting target for a company like MKL or Fairfax to buy.  Rank =1.

NMM - another shipping play.  They are in the dry bulk and containers market (they own a chunk of NMCI, which may go public on NYSE this year).  Both these markets are in strong recovery mode, but this isn't being reflected in NMM price. J Mintzmeyer has their sum of the parts at about $3.50, yet they trade at $1.85.  I think the concern is the financial weakness of their parent (NM), which has a 92m market cap and 1.6b of debt.  So there is fear that there will be some sort of consolidation, where NMM shareholders get screwed. In the wacky world of shipping, nothing would surprise me. But they are so cheap, it is worth (what I view as low probability) risk.  Rank = 1.

NS - This is a MLP that focuses on storage.  They got over their skis with an acquisition and had to cut their distribution from $1.09 to 0.60 a quarter.  You know what?  Sometimes I think the best time to buy these shipping or MLP plays is right after they cut a distribution or have a secondary offering that drives price down.  The price got so beaten down, that even with the massive cut, the yield is still 10.5%.  I doubled down on the drop to $20.  I have a ways to go, my basis is $27.72 (price is 22.77), but I believe things were right-sized and we can all start making money now.  Rank = 2.

OMC - this is an MFI stock that is in the advertising business.  With google and facebook taking larger shares of advertising budgets, the OMCs of the world are being squeezed.  They yield 3.2%.  I frankly have trouble getting excited about this business or the price and just own as in my MFI Formula bucket.  Rank = 4.

OMER - well this is one exciting stock.  Started 2018 at $20.  Dropped under $10 in March from some SA hit pieces and struggling getting medicare reimbursement for their one drug on the market.  This lead to fears that they'd have to do another equity raise to get potential blockbuster drug to market. Fast forward to today, medicare agreed to start reimbursements again, FDA fast tracked blockbuster and OMER announced plans for OMS721.  Stock popped to $24 and is now $20... where it started the year.  But I'd argue in better shape than start of year, given acceleration of catalysts.  Luckily, I did not sell on the shakeout and I bought more around $14, which I sold at $20.  So back to holdings at start of year. I'd rank =2.

PSXP - an MLP associated with PSX.  Yields 5.7% and frankly not as exciting as other smaller pipeline plays like AMID.  But these guys just keep growing the distribution.  In three years from 41 cents to 71 cents.  Hey, that is pretty good!  It will likely start to taper off, but I am happy with the relative safety and steady growth.  Rank = 2.

SBRA - a healthcare REIT that yields 9.4%.  They just went through a major renegotiation with a major tenant in arrears, so that overhang is removed.  They are still digesting CCR acquisition.  So stock is in penalty box a bit.  But if management delivers on promises should start moving from current $19.14 price to $22 to $24. Rank = 2.

SIMO - they make storage products for smart phones, tablets computers etc.  They yield 2.4% and are growing steadily.  They are an MFI stock per my internal screen.  Rank = 2.

TGP - another shipping company, they are in the LNG space and have solid visibility on good/profitable growth.   They yield 3.1% and will likely increase distributions significantly when new ships start coming on line.  Some question on when this happens and how much they will increase versus paying down debt. But if market remains strong, this stock could go from $18 to $25 within a yield and be yielding 6 to 8%. Rank = 2.

TK - parent of TGP, I am less excited about them post earnings.  Part of their value is from owning parts of TGP, TOO and TNK, but part is from getting IDRs in good times.  I think that 2nd part may be limited as many companies are choosing to pay down debt (a sensible move as rates go higher) rather than be riskier and higher leveraged.  While that makes sense, in my view it takes away some of TK upside (but is good for TGP).  Rank = 3.

VIAB - this is an MFI stock and is in the news every day as merger with CBS is in heated discussion.  CBS is being dragged to altar by Shari Redstone, who owns controlling interests in both parties.  I guess if she wants the deal to happen, no matter what the cost (lawsuits by CBS shareholders and Moonves resigning), then it will.  My best guess (and a guess is all it is) is that the deal happens. But the exchange rate may get watered down => upside to VIAB likely limited, hopefully not a take-under!? Rank = 3.

WLFC - another weird holding for me.  A bit like KCLI, lightly traded and way under book value.  They trade at 85% of BV and they make solid coin, like $3 a share.  They are controlled by Charles Willis IV.  He is 68 and at some point, if he steps down he could decide to monetize his company... which could be worth $45 to $50 (trading at $33).  Rank = 1.