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1. Combining Technicals with Fundamentals @ Frank Voisin.
2. Rethinking the Basic Emergency Fund @ The Dividend Pig.
3. 5 Signs You Need To Take the Yuan Seriously @ Get Money Energy.
4. The Beginners Investing Guide @ Buy Like Buffet.
5. Paying The Bills As a Blogger @ PIN.
6. Your Personal Rate of Inflation @ Oblivious Investor.
7. Non-Buy Follow-Ups @ Barel Karsan.
8. Covidien (COV) Dividend Stock Analysis @ Dividend Monk.
9. 10 Higher Yield Dividend Stocks @ Dividends Value.
10. How Warren Buffett Invests @ Investor Junkie.
Sunday, February 13, 2011
Nuveen Build America Bond Fund: A Good IRA Holding
This is one of a series of articles on specific municipal bond closed-end funds. I have already written several reports describing tax-exempt funds. But for this report, I’ve selected Nuveen Build America Bond Fund (NBB), which is a taxable municipal bond fund.
NBB is a national fund that primarily invests in high quality taxable municipal bond holdings issued as part of the Build America Bonds (BAB) program. The BAB program began in April, 2009. The interest income from BAB bonds is taxable at the Federal level, but a tax benefit of 35% of coupons paid goes to the issuers who receive a subsidy from the federal government.
The BAB program ended on December 31, 2010. There is still a fairly large secondary market of issued BABs worth about $200 million, but unless there is new legislation, no more new BABs will be issued. As existing bonds mature or are called, there may eventually develop an extra scarcity value for the existing BAB bonds.
I will be discussing the same 14 factors that I use to evaluate other municipal bond closed-end funds.
Factor #1: What is the distribution rate?
NBB is a high quality fund and currently has a distribution yield of 7.84%. It pays a regular monthly dividend of $0.117 per share or an annual distribution of $1.404.
For someone in a 28% tax bracket or higher, the after-tax yield for NBB is less than for leveraged tax exempt bond funds with equivalent risk levels like NPM. For example, the after-tax yield for NBB is 5.64% for someone in the 28% tax bracket, and only 5.10% if you are in the 35% tax bracket.
But in an IRA, or for those in lower tax brackets or for tax exempt investors like non-profit charities or foundations, NBB can be a good holding.
Factor #2: What is the likelihood the fund can raise its monthly dividend?
To determine this, I look at the Average Earnings/Current Dividend Ratio. This ratio tells you whether or not a fund is earning its current dividend. If the value is well above 100%, it means the fund can easily afford to raise its distribution rate.
For NBB, the average earnings over the last three months is $0.1138, so the Average Earnings/Current Dividend ratio= 97.3%.
Normally this factor would be somewhat of a red flag for NBB. But there is a positive value for “Undistributed Net Investment Income” or UNII of +0.0437 which is not bad for a new fund like NBB that launched less than a year ago in April 2010.
Factor #3: What is the expense ratio?
I look at the baseline expense ratio which does not include leverage costs. NBB has a baseline expense ratio of 0.88% which is below average for Nuveen funds. This is a positive factor for NBB. Since there will be no new issuance of BAB bonds, I expect the turnover ratio for NBB to be quite low which should reduce trading expenses.
Factor #4: What is the discount to NAV?
NBB is currently selling at a 2.0% discount to NAV which compares to a 6 month average premium of 0.6%. There is no one year Z-Statistic available, since NBB was only launched nine months ago. The maximum discount for NBB since it was issued has been as high as 6%, so it may be worthwhile to wait for the NBB discount to widen a bit before purchasing it.
Factor #5: How much leverage is used, and what is the preferred share asset coverage?
NBB currently uses 24.73% effective leverage. The preferred asset coverage ratio is currently 367% which provides a large margin of safety. I would not be concerned unless this ratio dips below 225%. The average cost of leverage is 0.78% which is pretty cheap.
Factor #6: What is the AMT exposure?
Since NBB is a taxable fund, this factor is not applicable.
Factor #7: What is the credit quality?
I look at the breakdown of AAA, AA, A, BBB, Below BBB & Unrated.
This is the ratings breakdown for NBB:
NBB is a very solid fund with an average credit rating around AA-. I like to see the lowest rating category below 10%, and NBB qualifies easily. NBB does not hold any pre-refunded bonds.
Factor #8: What is the interest rate exposure?
NPM has an average duration of 12.98 years. This is above average, and I would prefer a somewhat lower duration below ten years. If the overall interest rates rise by 1%, the price of NBB would fall by about 13%. The leverage adjusted duration is 10.7 years which would apply if the fund used no leverage.
Factor #9: What is the call exposure?
Here is a table with the call dates for bonds in NBB:
NBB has little call risk over the next ten years. Because most bonds have been recently issued, the average bond price is 99.76.
Factor #10: For a national fund, what is the breakdown by state?
The fund did not report a portfolio breakdown by state. I took a look at the top portfolio holdings, and the fund seemed to be well diversified. The six largest holdings were from- Louisiana, Tennessee, Michigan, California, Texas and New York.
Factor #11: How good is the trading liquidity?
NBB has an average daily volume of 169,400 shares, and an average dollar volume of $3.0 million. You should be able to buy $100,000 of NBB in one day fairly easily without a major impact on the price.
Factor #12: What percent of the portfolio is in Housing-Multifamily bonds?
I did not see any housing bonds in the portfolio. There were very small amounts invested in tobacco bonds (0.32%) and in the commercial bank sector (1.63%).
Factor #13: Fund management
NBB is co-managed by Daniel J. Close and John Miller. Daniel joined Nuveen in 2000 and has earned the CFA designation. He received his B.S. in Business from Miami University and his M.B.A. from Northwestern University’s Kellogg School of Management.
John is Chief Investment Officer of Nuveen Asset Management and joined Nuveen in 1996 and has also earned the CFA designation. He has a B.A. in Economics and Political Science from Duke University, an MA in economics from Northwestern University and an MBA with honors in Finance from the University of Chicago.
Factor #14: Other analyst coverage
NBB is covered by the Merrill Lynch closed-end fund team and is rated as a buy.
Based on the above 14 factors, I believe that NBB is a good holding in IRA or other tax deferred ot tax exempt accounts. A good time to buy NBB is when the discount to NAV is 5% or more.
Disclosure: I am long NBB.
NBB is a national fund that primarily invests in high quality taxable municipal bond holdings issued as part of the Build America Bonds (BAB) program. The BAB program began in April, 2009. The interest income from BAB bonds is taxable at the Federal level, but a tax benefit of 35% of coupons paid goes to the issuers who receive a subsidy from the federal government.
The BAB program ended on December 31, 2010. There is still a fairly large secondary market of issued BABs worth about $200 million, but unless there is new legislation, no more new BABs will be issued. As existing bonds mature or are called, there may eventually develop an extra scarcity value for the existing BAB bonds.
I will be discussing the same 14 factors that I use to evaluate other municipal bond closed-end funds.
Factor #1: What is the distribution rate?
NBB is a high quality fund and currently has a distribution yield of 7.84%. It pays a regular monthly dividend of $0.117 per share or an annual distribution of $1.404.
For someone in a 28% tax bracket or higher, the after-tax yield for NBB is less than for leveraged tax exempt bond funds with equivalent risk levels like NPM. For example, the after-tax yield for NBB is 5.64% for someone in the 28% tax bracket, and only 5.10% if you are in the 35% tax bracket.
But in an IRA, or for those in lower tax brackets or for tax exempt investors like non-profit charities or foundations, NBB can be a good holding.
Factor #2: What is the likelihood the fund can raise its monthly dividend?
To determine this, I look at the Average Earnings/Current Dividend Ratio. This ratio tells you whether or not a fund is earning its current dividend. If the value is well above 100%, it means the fund can easily afford to raise its distribution rate.
For NBB, the average earnings over the last three months is $0.1138, so the Average Earnings/Current Dividend ratio= 97.3%.
Normally this factor would be somewhat of a red flag for NBB. But there is a positive value for “Undistributed Net Investment Income” or UNII of +0.0437 which is not bad for a new fund like NBB that launched less than a year ago in April 2010.
Factor #3: What is the expense ratio?
I look at the baseline expense ratio which does not include leverage costs. NBB has a baseline expense ratio of 0.88% which is below average for Nuveen funds. This is a positive factor for NBB. Since there will be no new issuance of BAB bonds, I expect the turnover ratio for NBB to be quite low which should reduce trading expenses.
Factor #4: What is the discount to NAV?
NBB is currently selling at a 2.0% discount to NAV which compares to a 6 month average premium of 0.6%. There is no one year Z-Statistic available, since NBB was only launched nine months ago. The maximum discount for NBB since it was issued has been as high as 6%, so it may be worthwhile to wait for the NBB discount to widen a bit before purchasing it.
Factor #5: How much leverage is used, and what is the preferred share asset coverage?
NBB currently uses 24.73% effective leverage. The preferred asset coverage ratio is currently 367% which provides a large margin of safety. I would not be concerned unless this ratio dips below 225%. The average cost of leverage is 0.78% which is pretty cheap.
Factor #6: What is the AMT exposure?
Since NBB is a taxable fund, this factor is not applicable.
Factor #7: What is the credit quality?
I look at the breakdown of AAA, AA, A, BBB, Below BBB & Unrated.
This is the ratings breakdown for NBB:
| AAA | 10.5% | |
| AA | 56.0% | |
| A | 27.8% | |
| BBB | 4.4% | |
| BB & Below | 1.2% | Includes unrated. |
Factor #8: What is the interest rate exposure?
NPM has an average duration of 12.98 years. This is above average, and I would prefer a somewhat lower duration below ten years. If the overall interest rates rise by 1%, the price of NBB would fall by about 13%. The leverage adjusted duration is 10.7 years which would apply if the fund used no leverage.
Factor #9: What is the call exposure?
Here is a table with the call dates for bonds in NBB:
| Non callable | 62.0% |
| 1-5 years | 0.2% |
| 6-10 years | 2.0% |
| 11-15 years | 35.9% |
Factor #10: For a national fund, what is the breakdown by state?
The fund did not report a portfolio breakdown by state. I took a look at the top portfolio holdings, and the fund seemed to be well diversified. The six largest holdings were from- Louisiana, Tennessee, Michigan, California, Texas and New York.
Factor #11: How good is the trading liquidity?
NBB has an average daily volume of 169,400 shares, and an average dollar volume of $3.0 million. You should be able to buy $100,000 of NBB in one day fairly easily without a major impact on the price.
Factor #12: What percent of the portfolio is in Housing-Multifamily bonds?
I did not see any housing bonds in the portfolio. There were very small amounts invested in tobacco bonds (0.32%) and in the commercial bank sector (1.63%).
Factor #13: Fund management
NBB is co-managed by Daniel J. Close and John Miller. Daniel joined Nuveen in 2000 and has earned the CFA designation. He received his B.S. in Business from Miami University and his M.B.A. from Northwestern University’s Kellogg School of Management.
John is Chief Investment Officer of Nuveen Asset Management and joined Nuveen in 1996 and has also earned the CFA designation. He has a B.A. in Economics and Political Science from Duke University, an MA in economics from Northwestern University and an MBA with honors in Finance from the University of Chicago.
Factor #14: Other analyst coverage
NBB is covered by the Merrill Lynch closed-end fund team and is rated as a buy.
Based on the above 14 factors, I believe that NBB is a good holding in IRA or other tax deferred ot tax exempt accounts. A good time to buy NBB is when the discount to NAV is 5% or more.
Disclosure: I am long NBB.
Blackrock Health Sciences (BME): Safe haven in a 'healthly' ETF Closed End Fund
"The current market volatility makes us want to run for shelter, a safe haven," notes Richard Lehmann, editor of The ETF Investor. One such haven he sees is health science, and offers an ETF for the sector.
"Other than Treasury bonds, which have their own risks, cash is certainly the safest. One might think of gold or natural resources as a safe haven, but once economies slow down, demand there will fall as well. Either way these safe havens are likely to be volatile in the near future.
"The health care sector is not as dependent on the overall economy and may be a safe harbor for now. There are a number of ETF's and closed end funds that cover this sector.
"The one we find most compelling is the Blackrock Health Sciences Trust (NYSE: BME) mainly because it captures the value in volatility by writing options on their holdings. The option writing activity moderates price swings and adds income to the fund.
"It invests in healthcare providers, healthcare equipment, pharmaceuticals and biotech companies. The fund is currently trading at $27.80 a –6.84% discount from its net asset value. The yield is 5.53%, which helps as an additional cushion. The expense ratio is high at 1.13%, but is somewhat offset by the –6.84% discount from net asset value."
The BlackRock Health Sciences Trust, BME, is a perpetual closed-end equity fund. BME commenced operations in March 2005 with the investment objective of providing total return through a combination of current income and capital appreciation. Under normal market conditions, the Trust will invest at least 80% of its total assets in equity securities of companies engaged in the health sciences and related industries and equity derivatives with exposure to the health sciences industry. Companies in the health sciences industry include health care providers as well as businesses involved in researching, developing, producing, distributing or delivering medical, dental, optical, pharmaceutical or biotechnology products, supplies, equipment or services or that provide support services to these companies. Equity securities in which the Trust anticipates investing include common stocks, preferred stocks, convertible securities, warrants, depository receipts and equity interests in real estate investment trusts that own hospitals.
Disclosure I am long BME shares and purchasing more shares next week.
 |
| Notice The Awesome Dividend History Above |
"Other than Treasury bonds, which have their own risks, cash is certainly the safest. One might think of gold or natural resources as a safe haven, but once economies slow down, demand there will fall as well. Either way these safe havens are likely to be volatile in the near future.
"The health care sector is not as dependent on the overall economy and may be a safe harbor for now. There are a number of ETF's and closed end funds that cover this sector.
"The one we find most compelling is the Blackrock Health Sciences Trust (NYSE: BME) mainly because it captures the value in volatility by writing options on their holdings. The option writing activity moderates price swings and adds income to the fund.
 |
| For the love of GOD I can see a thing Wrong with this track record!~! |
Strategy & Objective
The BlackRock Health Sciences Trust, BME, is a perpetual closed-end equity fund. BME commenced operations in March 2005 with the investment objective of providing total return through a combination of current income and capital appreciation. Under normal market conditions, the Trust will invest at least 80% of its total assets in equity securities of companies engaged in the health sciences and related industries and equity derivatives with exposure to the health sciences industry. Companies in the health sciences industry include health care providers as well as businesses involved in researching, developing, producing, distributing or delivering medical, dental, optical, pharmaceutical or biotechnology products, supplies, equipment or services or that provide support services to these companies. Equity securities in which the Trust anticipates investing include common stocks, preferred stocks, convertible securities, warrants, depository receipts and equity interests in real estate investment trusts that own hospitals.
Disclosure I am long BME shares and purchasing more shares next week.
Silver ETFs: Catch ‘Em on the Rebound
For three straight trading days, silver prices have closed above $30 and it’s got some analysts thinking that the metal and silver exchange traded funds (ETFs) could be gearing up to gain big again.
Here’s the case:
Global X Silver Miners (NYSEArca: SIL) are an option if you’re more into equities, though they don’t offer the same safe-haven benefits. The good thing here, though, is that when prices are high, profit margins tend to be pretty nice, too.
Disclosure I am long SLV shares.
Here’s the case:
- Silver is less than $1 away from its recent nominal highs of $31.2375, reports Tyler Durden for Silver Hedge.
- Mark Thomas for Commodity Online reports that silver is undervalued right now and the physical market is tight, creating a recipe for some possible moves.
- According to CoinNews, the renewed concerns about inflation and a weaker U.S. dollar are still playing on investors need for safer haven investments. With quantitative easing also a huge factor, the precious metals could be in a solid position.
Global X Silver Miners (NYSEArca: SIL) are an option if you’re more into equities, though they don’t offer the same safe-haven benefits. The good thing here, though, is that when prices are high, profit margins tend to be pretty nice, too.
Disclosure I am long SLV shares.
Down On The Farm: ETFs For Rising Food Prices
The story is pretty well known by now. Commodities prices have surged in 2010 and that includes agriculture commodities.
Sugar, wheat, corn, you name it, and it has probably seen some very bullish trade this year, but every pundit and his sister is forecasting higher food prices in 2011.
Farmers need to plant more crops to meet demand and that’s good news for fertilizer companies, so what are some solid ETF ideas for investors looking to profit from rising ag commodities in 2011. Here’s a list to get you started.
1) Market Vectors Agribusiness ETF (NYSE: MOO):
The aptly named MOO is the big kahuna of equities-based ETFs focused on the business of the farm. Top holdings include Deere (NYSE: DE), Monsanto (NYSE: MON), Mosaic (NYSE: MOS) and Potash (NYSE: POT), so MOO is literally an “all things farm” play.
2) Jefferies | TR/J CRB Global Agriculture Equity Index Fund (NYSE: CRBA):
An undiscovered rival to MOO, CRBA will have you involved in many of the same names, but if it’s volume you’re after, MOO remains the better option.
3) PowerShares DB Agriculture (NYSE: DBA):
Coffee, sugar, cocoa, cattle…oh my. DBA offers exposure to those and other commodities via rolling futures contracts. While DBA is a fine fund, the use of futures contracts runs up expenses and the expense ratio here is 0.85%, a tad high.
4) PowerShares DB Agriculture Double Long ETN (NYSE: DAG):
If you’re going to be involved with an ag ETF or ETN that is based on a variety of futures contracts, why not go leveraged? DAG is perhaps the best among leveraged ag ETNs and tracks an index composed of roughly equal percentages of corn, wheat, soybean, and sugar futures contracts.
Disclosure I am exploring the MOO at this time no plan to buy in the next 30 days.
Sugar, wheat, corn, you name it, and it has probably seen some very bullish trade this year, but every pundit and his sister is forecasting higher food prices in 2011.
Farmers need to plant more crops to meet demand and that’s good news for fertilizer companies, so what are some solid ETF ideas for investors looking to profit from rising ag commodities in 2011. Here’s a list to get you started.
1) Market Vectors Agribusiness ETF (NYSE: MOO):
The aptly named MOO is the big kahuna of equities-based ETFs focused on the business of the farm. Top holdings include Deere (NYSE: DE), Monsanto (NYSE: MON), Mosaic (NYSE: MOS) and Potash (NYSE: POT), so MOO is literally an “all things farm” play.
2) Jefferies | TR/J CRB Global Agriculture Equity Index Fund (NYSE: CRBA):
An undiscovered rival to MOO, CRBA will have you involved in many of the same names, but if it’s volume you’re after, MOO remains the better option.
3) PowerShares DB Agriculture (NYSE: DBA):
Coffee, sugar, cocoa, cattle…oh my. DBA offers exposure to those and other commodities via rolling futures contracts. While DBA is a fine fund, the use of futures contracts runs up expenses and the expense ratio here is 0.85%, a tad high.
4) PowerShares DB Agriculture Double Long ETN (NYSE: DAG):
If you’re going to be involved with an ag ETF or ETN that is based on a variety of futures contracts, why not go leveraged? DAG is perhaps the best among leveraged ag ETNs and tracks an index composed of roughly equal percentages of corn, wheat, soybean, and sugar futures contracts.
Disclosure I am exploring the MOO at this time no plan to buy in the next 30 days.
Commodities: The Other Market
There’s a huge amount of of interest in the fate of the New York Stock Exchange right now. That’s because so many Americans have retirements and savings invested in the stock market. Granted, as my Forbes colleague said yesterday, investors are actually little affected by a potential and (as I said) politically-sensitive merger between NYSE Euronext and Deutsche Börse. But nevertheless, the NYSE is a powerful symbol of investing.
It’s such a powerful symbol, in fact, that many Americans assume that all markets work like the stock market does, that you can buy a piece of anything including commodities, where prices are booming. Just today the WSJ reported that cotton prices flirted with a high. Investors — including doctors, lawyers, and pensioners, all used to investing in stocks — are pouring billions of dollars into commodities markets in an effort to own a piece of this.
But even as they’re dumping money into commodities, they fail to understand the fundamental ways in which these markets are different from the stock market. I tried to explain that in a story in this week’s Forbes.
Many of investors’ dollars meant for commodities end up in futures products traded on exchanges like CME Group and the IntercontinentalExchange. And futures were not built for investors, they were built for hedgers and speculators. Hedgers might be Kraft,which is feeling the pinch of rising prices, or Southwest Airlines or BP. Speculators can be professional traders, or amateurs with a futures broker.
Also, despite the cheeky headline on the commodities story I wrote, you don’t usually buy and own some of a commodity in the way you buy and own part of a company. It’s not easy to buy and sell physical commodities. Futures and other derivatives contracts are proxies, and they are temporary contracts that expire.
Because of all the differences, much of the conventional wisdom from the stock world doesn’t apply. In the stock world, it’s a good idea to buy an index fund because it’s a low-cost way to get a basket of investments. In the derivatives world, it’s often a bad idea to buy a passive index fund. People who do that routinely give away money to other players in the market.
So yes, the NYSE taught us to invest, and we love it for that. But other markets work differently. It pays – literally, pays – to understand that.
Disclosure I am long CFD shares.
It’s such a powerful symbol, in fact, that many Americans assume that all markets work like the stock market does, that you can buy a piece of anything including commodities, where prices are booming. Just today the WSJ reported that cotton prices flirted with a high. Investors — including doctors, lawyers, and pensioners, all used to investing in stocks — are pouring billions of dollars into commodities markets in an effort to own a piece of this.
But even as they’re dumping money into commodities, they fail to understand the fundamental ways in which these markets are different from the stock market. I tried to explain that in a story in this week’s Forbes.
Many of investors’ dollars meant for commodities end up in futures products traded on exchanges like CME Group and the IntercontinentalExchange. And futures were not built for investors, they were built for hedgers and speculators. Hedgers might be Kraft,which is feeling the pinch of rising prices, or Southwest Airlines or BP. Speculators can be professional traders, or amateurs with a futures broker.
Also, despite the cheeky headline on the commodities story I wrote, you don’t usually buy and own some of a commodity in the way you buy and own part of a company. It’s not easy to buy and sell physical commodities. Futures and other derivatives contracts are proxies, and they are temporary contracts that expire.
Because of all the differences, much of the conventional wisdom from the stock world doesn’t apply. In the stock world, it’s a good idea to buy an index fund because it’s a low-cost way to get a basket of investments. In the derivatives world, it’s often a bad idea to buy a passive index fund. People who do that routinely give away money to other players in the market.
So yes, the NYSE taught us to invest, and we love it for that. But other markets work differently. It pays – literally, pays – to understand that.
Disclosure I am long CFD shares.
Vanguard Cuts VWO Cost To 0.22%
Vanguard Group, the No. 3 U.S. ETF firm whose Vanguard MSCI Emerging Markets ETF (NYSEArca: VWO) surpassed the iShares MSCI Emerging Markets Index Fund (NYSEArca: EEM) as the biggest U.S. emerging markets ETF last month, cut the annual expense ratio on the popular fund by 5 basis points to 0.22 percent to reflect the growing size of the fund.
VWO, now a $45.47 billion fund, became the biggest U.S. ETF on Jan. 18, largely because it is the cheaper of the two funds. EEM, the iShares fund, now costs investors 0.69 percent, having dropped its expense ratio from 0.72 percent at the start of 2001. iShares cut fees on EEM for the same reason, as the fund grew by more than $2 billion in 2010. Vanguard’s VWO, meanwhile, grew by almost $20 billion.
The lower price, plus better performance, had led many in the ETF industry to conclude for the better part of a year that it was only a matter of time before VWO overtook EEM. The iShares ETF is now a $39 billion fund. Emerging markets were immensely popular among investors in 2010, though civil unrest in Egypt has slowed the fund.
A Vanguard official told IndexUniverse.com about VWO’s latest fee cut this week on the sidelines of the “4th Annual Inside ETFs Conference” in Hollywood, Florida.
Disclosure I am long VWO shares.
VWO, now a $45.47 billion fund, became the biggest U.S. ETF on Jan. 18, largely because it is the cheaper of the two funds. EEM, the iShares fund, now costs investors 0.69 percent, having dropped its expense ratio from 0.72 percent at the start of 2001. iShares cut fees on EEM for the same reason, as the fund grew by more than $2 billion in 2010. Vanguard’s VWO, meanwhile, grew by almost $20 billion.
The lower price, plus better performance, had led many in the ETF industry to conclude for the better part of a year that it was only a matter of time before VWO overtook EEM. The iShares ETF is now a $39 billion fund. Emerging markets were immensely popular among investors in 2010, though civil unrest in Egypt has slowed the fund.
A Vanguard official told IndexUniverse.com about VWO’s latest fee cut this week on the sidelines of the “4th Annual Inside ETFs Conference” in Hollywood, Florida.
Disclosure I am long VWO shares.
NYSE-Listed ETFs Increase By 27% In 2010
The NYSE Euronext (NYX) today put out word that its U.S. and overseas exchanges had a very active year in 2010 launching new ETFs.
In the U.S., NYSE Arca listed 144 ETFs and 43 sister exchange-traded notes. That brought the total number of ETFs on NYSE Arca to 837 and 132 ETNs. Total ETF and related assets listed on the NYSE Arca was $980 billion, up 27% over 2009.
The Nasdaq OMX Group (NDAQ) no doubt also had a big year in terms of ETFs. But the NYSE is likely to remain the biggest exchange handling ETFs heading into a new year.
New issuers of exchange-traded products last year on the NYSE included: Pax World, RBS, Sprott Asset Management, Teucrium, U.S. One and Velocity Shares.
Disclosure None
In the U.S., NYSE Arca listed 144 ETFs and 43 sister exchange-traded notes. That brought the total number of ETFs on NYSE Arca to 837 and 132 ETNs. Total ETF and related assets listed on the NYSE Arca was $980 billion, up 27% over 2009.
The Nasdaq OMX Group (NDAQ) no doubt also had a big year in terms of ETFs. But the NYSE is likely to remain the biggest exchange handling ETFs heading into a new year.
New issuers of exchange-traded products last year on the NYSE included: Pax World, RBS, Sprott Asset Management, Teucrium, U.S. One and Velocity Shares.
Disclosure None
Sunday, January 30, 2011
9 Ways to Play the Agricultural Boom AGU / BG / BHP / CNH / DE / MON / MOS / POT / SANW / SQM
We all remember last year’s BHP Billiton (BHP) and Potash Corp (POT) drama. BHP’s takeover offer was $130/share. Potash rejected it on the grounds that they are worth more. After that, Potash’s stock price jumped to $150. Finally, the Canadian government blocked the bid after Potash pleaded.
The point of this little flashback was that usually when a company rejects a takeover bid, the stock falls. Potash’s stock only modestly fell and then rose back to $150/share. The reason was that POT was worth more than its $130 target and its $2 billion buyback plan. Since this takeover, POT and its competitors soared, sending Potash Corp up 69%, Mosaic (MOS) up 72% and Agrium (AGU) up 66% (since 7/1/10), while the S&P 500 is only up 18% in that same time.
These companies have a resource that is in high demand right now: fertilizer. Agricultural commodities are booming right now, farmers need fertilizer to grow the crops. Potash Corp alone holds 20% of the world’s potash supply, giving it “large, low-cost, long-life, expandable, export-oriented, tier 1 assets” as BHP said.
However, there is another side to agriculture boom that you can profit from: equipment, seeds and pesticides.
Farming equipment maker, Deere (DE) outpaces the rest of its industry with a recently increased dividend, low P/E of 20, ROE of 33%, P/S 1.4, PEG 1.68. The company is a very good buy compared to its competitors. Deere is my choice for a farm equipment maker.
Seeds and pesticides: Monsanto (MON), Bunge Limited (BG), S&W Seed Co. (SANW). Monsanto is a larger cap play, Bunge and SANW are smaller cap play. Bunge and S&W are the growth stories in this industry and I would recommend them strongly.
Here is the recap:
Fertilizer: Potash Corp (POT), Mosaic (MOS), Agrium (AGU), SOCIEDAD QUIMICA MINERA DE C (SQM)
Equipment: Deere (DE), if you want something a little more speculative go with CNH Global (CNH)
Seeds and Pesticides: Monsanto (MON), Bunge Lim (BG), S&W Seed Co (SANW)
There are plenty more gains in the agriculture industry, and I have shown you some thriving areas and some decent plays to thrive on. It is important to do your own research to make sure the risk fits your own requirements. Some of the plays above are more speculative than others. Agriculture can be volatile at times, so it is important that you keep an eye out on earnings reports, agricultural prices, crop reports, etc.
Disclosure: I am long DE.
The point of this little flashback was that usually when a company rejects a takeover bid, the stock falls. Potash’s stock only modestly fell and then rose back to $150/share. The reason was that POT was worth more than its $130 target and its $2 billion buyback plan. Since this takeover, POT and its competitors soared, sending Potash Corp up 69%, Mosaic (MOS) up 72% and Agrium (AGU) up 66% (since 7/1/10), while the S&P 500 is only up 18% in that same time.
These companies have a resource that is in high demand right now: fertilizer. Agricultural commodities are booming right now, farmers need fertilizer to grow the crops. Potash Corp alone holds 20% of the world’s potash supply, giving it “large, low-cost, long-life, expandable, export-oriented, tier 1 assets” as BHP said.
However, there is another side to agriculture boom that you can profit from: equipment, seeds and pesticides.
Farming equipment maker, Deere (DE) outpaces the rest of its industry with a recently increased dividend, low P/E of 20, ROE of 33%, P/S 1.4, PEG 1.68. The company is a very good buy compared to its competitors. Deere is my choice for a farm equipment maker.
Seeds and pesticides: Monsanto (MON), Bunge Limited (BG), S&W Seed Co. (SANW). Monsanto is a larger cap play, Bunge and SANW are smaller cap play. Bunge and S&W are the growth stories in this industry and I would recommend them strongly.
Here is the recap:
Fertilizer: Potash Corp (POT), Mosaic (MOS), Agrium (AGU), SOCIEDAD QUIMICA MINERA DE C (SQM)
Equipment: Deere (DE), if you want something a little more speculative go with CNH Global (CNH)
Seeds and Pesticides: Monsanto (MON), Bunge Lim (BG), S&W Seed Co (SANW)
There are plenty more gains in the agriculture industry, and I have shown you some thriving areas and some decent plays to thrive on. It is important to do your own research to make sure the risk fits your own requirements. Some of the plays above are more speculative than others. Agriculture can be volatile at times, so it is important that you keep an eye out on earnings reports, agricultural prices, crop reports, etc.
Disclosure: I am long DE.
Eaton Corp Q4 Profit Beats View; Boosts Dividend; Announces 2-for-1 Split (ETN)
Diversified power management specialist Eaton Corporation (ETN) on Thursday posted better-than-expected fourth quarter earnings, raised its dividend payout by 17%, and announced a two-for-one stock split.
The Cleveland-based company reported fourth quarter net income of $280 million, or $1.63 per share, compared with $211 million, or $1.25 per share, in the year-ago period. Excluding items, adjusted profit was $1.69 per share.
On average, Wall Street analysts expected a smaller profit of $1.67 per share, on lower revenue of $3.63 billion. Looking ahead, the company said it expects full-year 2011 profit to range from $7.00 to $7.60 per share, while analysts currently expect $7.26 for the year.
Separately, the company boosted its quarterly dividend payout by 17%. The new dividend of 68 cents per share (up from 58 cents) will be paid on Feb. 25 to shareholders of record as of Feb. 7. Eaton also announced a two-for-one stock split, which will take place on Feb. 28 for shareholders of record as of Feb. 7. Eaton Corp shares rose 55 cents, or +0.5%, in premarket trading Thursday.
The Bottom Line
We have been recommending shares of Eaton Corp (ETN) since Nov.24, 2010, when the stock was trading at $95.81. The company will now have a 2.60% dividend yield, based on the higher dividend payout and last night’s closing stock price of $104.61.
Disclosure I am long ETN shares.
The Cleveland-based company reported fourth quarter net income of $280 million, or $1.63 per share, compared with $211 million, or $1.25 per share, in the year-ago period. Excluding items, adjusted profit was $1.69 per share.
Revenue rose 17% from last year to $3.66 billion.
On average, Wall Street analysts expected a smaller profit of $1.67 per share, on lower revenue of $3.63 billion. Looking ahead, the company said it expects full-year 2011 profit to range from $7.00 to $7.60 per share, while analysts currently expect $7.26 for the year.
Separately, the company boosted its quarterly dividend payout by 17%. The new dividend of 68 cents per share (up from 58 cents) will be paid on Feb. 25 to shareholders of record as of Feb. 7. Eaton also announced a two-for-one stock split, which will take place on Feb. 28 for shareholders of record as of Feb. 7. Eaton Corp shares rose 55 cents, or +0.5%, in premarket trading Thursday.
The Bottom Line
We have been recommending shares of Eaton Corp (ETN) since Nov.24, 2010, when the stock was trading at $95.81. The company will now have a 2.60% dividend yield, based on the higher dividend payout and last night’s closing stock price of $104.61.
Disclosure I am long ETN shares.
JM Smucker Lifts Quarterly Dividend 10%
J.M. Smucker Co. (SJM) boosted its dividend by 10% and added five million shares to its stock-buyback authorization as the food maker looks to disburse excess cash for shareholders' benefit.
The company, which makes jams, jellies and Jif peanut butter as well as Pillsbury products, raised its quarterly dividend to 44 cents from 40 cents, payable March 1 to shareholders of record on Feb. 11.
It also boosted its buyback authorization by five million shares. The company didn't say in a statement how many shares were left on its authorization, but it did note that it had repurchased about 3.7 million shares outstanding during the current fiscal quarter. The company has roughly 120 million shares outstanding.
Many companies have boosted their dividends or announced stock buybacks as the need to hoard cash has waned amid economic improvement.
"These actions indicate the confidence we have in our business and the strong cash flows it generates," said Co-Chief Executive Tim Smucker.
In November, Smucker said its fiscal second-quarter profit climbed 6.9%, helped by higher margins, as revenue was flat.
Disclosure I am Long SJM shares.
The company, which makes jams, jellies and Jif peanut butter as well as Pillsbury products, raised its quarterly dividend to 44 cents from 40 cents, payable March 1 to shareholders of record on Feb. 11.
It also boosted its buyback authorization by five million shares. The company didn't say in a statement how many shares were left on its authorization, but it did note that it had repurchased about 3.7 million shares outstanding during the current fiscal quarter. The company has roughly 120 million shares outstanding.
Many companies have boosted their dividends or announced stock buybacks as the need to hoard cash has waned amid economic improvement.
"These actions indicate the confidence we have in our business and the strong cash flows it generates," said Co-Chief Executive Tim Smucker.
In November, Smucker said its fiscal second-quarter profit climbed 6.9%, helped by higher margins, as revenue was flat.
Disclosure I am Long SJM shares.
7 Companies Increasing Dividends Last Week
It was another big week for income-oriented dividend stock investors, as a bevy of high-profile corporate names upped their payouts. Dividend stocks raising their yields include Intel (NASDAQ: INTC), Time Warner Cable Inc. (NYSE: TWC), Potash Corp. of Saskatchewan (NYSE: POT), Norfolk Southern Corp. (NYSE: NSC), Praxair Inc. (NYSE: PX), Parker Hannifin Corp. (NYSE: PH) and Limited Brands (NYSE: LTD).
Perhaps the biggest name on the list of dividend winners last week was semiconductor marker Intel (NASDAQ: INTC). The chipmaker and tech bellwether boosted its dividend payments by the largest amount in five years while also adding $10 billion to its stock buy-back plans. The company raised its quarterly dividend to 18.12 cents per share, a 15% increase from the previous quarter. The additional $10 billion for share repurchases brings the overall buyback authorization to $14.2 billion. Intel said the dividend is payable March 1 to shareholders of record as of Feb. 7.
In addition to the big tech sector dividend bump, we also saw a spike in dividends from the entertainment sector. Cable TV provider Time Warner Cable Inc. (NYSE: TWC) raised its dividend last week, declaring a quarterly payout of 48 cents per share. That figure represents a 20% increase over its prior dividend. News of the dividend boost came as Time Warner Cable reported better-than-expected fourth-quarter earnings. The new payout from the second-largest U.S. cable-television operator will be handed out on March 15 to shareholders of record on Feb. 26.
Agriculture stars also shined this week, as fertilizer and feed products provider Potash Corp. of Saskatchewan (NYSE: POT) announced that its board of directors had approved a three-for-one stock split of its outstanding common shares. Under the terms of the deal, shareholders will receive two additional shares for each share owned as of Feb. 16. Now, in addition to the split, Potash made the deal even more interesting by increasing their quarterly cash dividend to 21 cents a share from 10 cents a share on a pre-split basis. The company also declared a quarterly cash dividend of 7 cents per common share on a post-split basis, which is payable May 5 to shareholders of record on April 14.
The transportation sector also saw representation in the array of companies raising dividends last week.
Railroad operator Norfolk Southern Corp. (NYSE: NSC) upped its quarterly dividend 11% to 40 cents a share from 36 a share. The dividend increase was the second since the transportation giant boosted its payout by 2 cents a share in July. This year’s dividend increase is nearly double the 6% dividend increase from Norfolk Southern in 2010. The increased dividend will be payable on March 10 to shareholders of record as of Feb. 4. One day after declaring the increased dividend, Norfolk Southern Corp. said its fourth quarter profit rose 31%. The strong performance of late in the railroad industry, including Norfolk Southern competitors CSX Corp. (NYSE: CSX) and Union Pacific Corp. (NYSE: UNP), bodes well for this traditionally strong dividend-paying sector.
Industrial gases firm Praxair Inc. (NYSE: PX) raised its dividend by 11% despite reporting fourth-quarter profit that fell 61% on tax charges. Charges aside, however, the company actually saw better-than-expected revenue from cost-cutting and growing sales in emerging markets. The global giant’s new dividend will be 50 cents per share, and it will be payable March 15 to shareholders of record as of March 7. Dividend increases are all too common for Praxair. The most recent bump is its 18th consecutive annual dividend increase.
Another global industrial powerhouse spreading the wealth to shareholders is Parker Hannifin Corp. (NYSE: PH). The company increased its quarterly cash dividend to 32 cents per share, payable on March 4 to shareholders of record as of Feb. 10. The new dividend represents a 10% increase over the previous quarterly dividend of 29 cents per common share. Although Parker Hannifin’s profit margins in the most recent quarter fell, the company — seen as a barometer for the entire global industrial segment — still managed to dish out the cash to investors.
Fashion retailer Limited Brands (NYSE: LTD) proved it can combine the concepts “sexy” and “dividends” with its latest announcement. The company, which operates intimate apparel specialty store Victoria’s Secret as well as the Bath & Body Works and La Senza retail chains, said it was increasing its annual dividend by 20 cents to 80 cents per share. The first quarterly payment at the new rate will take place on March 11 to shareholders of record on Feb. 25. Now income investors can slip into something a little more comfortable that includes a sweet quarterly cash bonus.
Disclosure I am long UNP, NSC, and INTC.
Perhaps the biggest name on the list of dividend winners last week was semiconductor marker Intel (NASDAQ: INTC). The chipmaker and tech bellwether boosted its dividend payments by the largest amount in five years while also adding $10 billion to its stock buy-back plans. The company raised its quarterly dividend to 18.12 cents per share, a 15% increase from the previous quarter. The additional $10 billion for share repurchases brings the overall buyback authorization to $14.2 billion. Intel said the dividend is payable March 1 to shareholders of record as of Feb. 7.
Agriculture stars also shined this week, as fertilizer and feed products provider Potash Corp. of Saskatchewan (NYSE: POT) announced that its board of directors had approved a three-for-one stock split of its outstanding common shares. Under the terms of the deal, shareholders will receive two additional shares for each share owned as of Feb. 16. Now, in addition to the split, Potash made the deal even more interesting by increasing their quarterly cash dividend to 21 cents a share from 10 cents a share on a pre-split basis. The company also declared a quarterly cash dividend of 7 cents per common share on a post-split basis, which is payable May 5 to shareholders of record on April 14.
The transportation sector also saw representation in the array of companies raising dividends last week.
Railroad operator Norfolk Southern Corp. (NYSE: NSC) upped its quarterly dividend 11% to 40 cents a share from 36 a share. The dividend increase was the second since the transportation giant boosted its payout by 2 cents a share in July. This year’s dividend increase is nearly double the 6% dividend increase from Norfolk Southern in 2010. The increased dividend will be payable on March 10 to shareholders of record as of Feb. 4. One day after declaring the increased dividend, Norfolk Southern Corp. said its fourth quarter profit rose 31%. The strong performance of late in the railroad industry, including Norfolk Southern competitors CSX Corp. (NYSE: CSX) and Union Pacific Corp. (NYSE: UNP), bodes well for this traditionally strong dividend-paying sector.
Industrial gases firm Praxair Inc. (NYSE: PX) raised its dividend by 11% despite reporting fourth-quarter profit that fell 61% on tax charges. Charges aside, however, the company actually saw better-than-expected revenue from cost-cutting and growing sales in emerging markets. The global giant’s new dividend will be 50 cents per share, and it will be payable March 15 to shareholders of record as of March 7. Dividend increases are all too common for Praxair. The most recent bump is its 18th consecutive annual dividend increase.
Another global industrial powerhouse spreading the wealth to shareholders is Parker Hannifin Corp. (NYSE: PH). The company increased its quarterly cash dividend to 32 cents per share, payable on March 4 to shareholders of record as of Feb. 10. The new dividend represents a 10% increase over the previous quarterly dividend of 29 cents per common share. Although Parker Hannifin’s profit margins in the most recent quarter fell, the company — seen as a barometer for the entire global industrial segment — still managed to dish out the cash to investors.
Fashion retailer Limited Brands (NYSE: LTD) proved it can combine the concepts “sexy” and “dividends” with its latest announcement. The company, which operates intimate apparel specialty store Victoria’s Secret as well as the Bath & Body Works and La Senza retail chains, said it was increasing its annual dividend by 20 cents to 80 cents per share. The first quarterly payment at the new rate will take place on March 11 to shareholders of record on Feb. 25. Now income investors can slip into something a little more comfortable that includes a sweet quarterly cash bonus.
Disclosure I am long UNP, NSC, and INTC.
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