Cash Is King

Cash Is King

I have mentioned several times this year how the "experts" seem to be focusing on the balance sheet and excess cash more than ever.  Definitely makes sense if you believe we're heading into turbulent times or materially higher interest rates.

I had made a list of MFI stocks that I felt were in a good cash position, thinking about this trend and my upcoming February 1st MFI Select tranche.

AGX
KLIC
SYX
IDCC
UTHR
EGOV
GILD
NLS
LPX
NVMI

I did realize that SYX was a head fake.  Their financial statements are from Q3, yet they paid a special $6.50 dividend in December.  So they no longer are cash rich.

Here is link to Barron's article this weekend identifying cash rich companies (

Low-Debt, High-Return Stocks for Your Portfolio).  Definitely some MFI names here. 

Bakers Dirty Dozen

With LRCX posting great earnings this past week (and WDC giving good guidance), my Baker's Dirty Dozen continues to streak upwards.  I only wish I had bet the farm on these 13 names. (also kind of wish I had a farm).

Stock	Start	Current	Dividend	Gain/Loss
AMCX	52.23	64.76	-	24.0%
AMAT	30.31	39.19	-	29.3%
DLX	37.11	47.24	-	27.3%
DXC	50.48	63.34	-	25.5%
KLAC	85.67	101.39	-	18.3%
LRCX	127.16	165.49	-	30.1%
MU	30.32	38.96	-	28.5%
SGH	28.75	23.82	-	-17.1%
WDC	35.90	43.16	-	20.2%
ECA	5.38	6.98	-	29.7%
GLNG	21.72	21.71	-	0.0%
T	28.31	30.66	0.51	10.1%
TGP	11.82	13.19	-	11.6%
Total				18.3%

Next MFI Select Tranche

Still wavering on what to do.  I will likely stay true to my past and pick five stocks.  But I may sprinkle in one or two from the >3b list I created yesterday (I like MAN).  But I am going to create a parallel portfolio using the parameters I described yesterday.  If it is kicking butt a quarter from now, I may reconsider.  stay tuned.

Stock I Am Watching Closely Monday

A stock I owned a while back, DLNG, announced Friday after the bell that they were slashing their dividend from $1.00 a year to 24 cents.  While it had seemed pretty clear to anyone reading the tea leaves that this was a highly likely outcome, the stock still traded down 25 to 30% after hours.

So first point is the mantra that bad news is very rarely ever priced in.  If some expert tells you it is priced in, call BS.  Although bad news like that is often a great buying opportunity.  Look at CJREF.  They slashed their dividend on June 26th (again, this was not a "surprise" to anyone paying attention). The stock dropped from $4.70 to $3.52 two days later (so more than 25%).  It continued to trickle down and hit a low of $2.81 in early September.

I did one of my few smart moves last year and bought 3 tranches: 

July 2nd at 3.90 (early)

August 15th at 3.08 (pretty near the bottom)

October 1st at 3.36.

It is now at $4.43 and has paid some dividends.  So my 3 positions are up an average of 33%.

Now back to the DLNG cut.  I am NOT saying to go buy DLNG.  It is a risky company and could certainly drop more than the 30% we saw after hours (it is at $4.02 and in my opinion will likely drop to between $2.00 and $2.50).

The interesting play (and the one I own) is the DLNG preferreds (DLNG-PB).  I guess there are two ways to think about them.  First the common dividend cut puts DLNG in a much stronger position and gives them the ability to pay down some debt coming up in the end of 2019.  Once that overhang is gone, assuming shipping rates haven't crashed, they should be in pretty darned good shape.  And the preferred should hypothetically not be affected, and actually is in better shape.

The second way to think about it was that DLNG had already cut their dividend in 2018 and had assured stockholders that they were now in good shape.  That turned out to be not true... some might say it was a lie.  So if management has lost credibility and people wonder what else they're perhaps not being forthright about, could cause contagion and everything associated with DLNG will crash tomorrow and next week.

I suspect DLNG-PB will drop tomorrow (8 to 10%?). I do think this is a buying opportunity, but definitely one with risk.  I already have shares (a $19.45 basis and currently at $21.91). I will not be adding, unless it is a freefall.

Here is a good article (Dynagas Preferred Is The Lowest Risk Way I Can Think Of To Make A 10% Yield).  Note in this article that Darren predicted the common dividend cut.

Have a great weekend everybody.