Category: Investing

Processing…stand by

Yesterday’s post included more internecine Methodist data than I usually share, but it was clarifying and therapeutic for me to tell the story and to connect the dots with our larger landscape.

I need time to process what’s going on externally (war in Europe, political craziness in the US, church secessions) and internally (family and friends’ medical situations, new opportunities to give and serve, deciding among some attractive dividend stocks, planning a camping trip). So, for today:

Three question-prompting, yet-to-be-processed notes from a men’s retreat last weekend:

“I heard this love story (of God’s unconditional grace) in a transactional time (when Christianity focused on saying and doing things considered correct by the prevailing culture).”

“We’re all in recovery from things that don’t work anymore.”

“Sanctification isn’t a status to be achieved, but rather the process of being made whole.”

From “Sen. Mike Lee’s tweets against ‘democracy,’ explained,” by Zack Beauchamp, Vox, October 8, 2020

No sad sack

In 1942, George Baker (1915-1975) created the Sad Sack comic strip, beginning with the inaugural edition of Yank, a US Army magazine. Sadly, one definition of sad sack is “an inept blundering person.” I want to embrace my sadness, and the world’s sadness, without becoming a “sad sack.”

This means recognizing sadness is part of life without dwelling on it. Whether chronic or occasional, humans need an escape (or at least a diversion) from sadness. Cartoons can be a diversion. For me, the stock market has been a diversionary hobby and a stress reliever.

I enjoy studying companies, such as WP Carey (NYSE:WPC), a US real estate investment trust (REIT) founded as an alternative investment company by William P. (Bill) Carey (1930-2012). Quarterly earnings calls provide snapshots of our complex, inter-connected planet. CEO Jason Fox described WPC’s recent purchase of 26 Spanish mortuary properties whose tenant, a funeral service provider in Spain and Portugal, is owned by Canada’s Ontario Teachers Pension Plan. Fox said, “It’s a stable business.”

From “George Baker and the Sad Sack,” by R.C. Harvey, The Comics Journal, December 20, 2013

Outside the spotlight

Al Jazeera is a Qatari government-funded Arabic-language news channel based in Doha. As I search the Internet for news about the war in Ukraine, Al Jazeera is among the most timely and most impartial media sources. I’ll let you know if my assessment changes. One reason for their timeliness may be Qatar’s time-zone proximity to Ukraine. Doha is one hour ahead of Kiev.

To speed my news search, AI Jazeera’s “Russia-Ukraine War” newsfeed is one of my browser tabs. A March 17 story, “Russia says it transferred bond payment to avoid default,” included three sentences about the “mechanics” of the transaction:

Another source said JPMorgan, Russia’s correspondent bank, had processed the cash sent by the government and credited it to the paying agent, Citi. It would be checked and then distributed to various bondholders, the source said. Citi declined to comment.

This news tidbit, outside the spotlight of war and human suffering, reveals the relationship of US money-center banks, sovereign states, international corporate finance and investors. Russia is trying to avoid default because bond vigilantes have long memories and Russia’s debt will be growing.

From “Russian Corporate Bond Markets: Braced for Default?” by Peter Zangari, Morgan Stanley Capital Ingteernational (MSCI), March 9, 2022

The market

I haven’t written about the stock market lately. It has been my hobby since February, 1982. The market has given me a window into the world and a doorway to meet friends I might otherwise never know. At various times over these four decades, it has provided a diversion, from things like the war in Ukraine.

My stock universe is small compared to thousands of companies worldwide. When employed, I kept up with 20 or 25 companies. Now, there are 37 dividend-paying companies in my retirement portfolio and a few more on my watchlist. Every day I’m grateful to those who’ve taught me about the market.

We’re in a volatile time as the economy is being weaned off artificially low interest rates, as we struggle with a global pandemic, as we suffer from polarization at home and as a war rages in Europe. The economy and the market have held up amazingly well, but volatility reflects some potential headwinds.

I monitor each stock’s price relative to its 52-week price range. As of Friday, 11 of 37 were at least 20% below their 52-week high. Some might see a buying opportunity; others might see a reason to avoid stocks entirely. I’m not recommending anything, but simply illustrating today’s market volatility.

The number indicates the relationship to its 52-week high: Leggett & Platt (-37%); Artisan Partners (-32%); Intel (-31%); AT&T (-31%); 3M (-29%); Air Products & Chemicals (-27%); Unilever (-27%); BlackRock (-24%); Cummins (-24%); Simon Property Group (-24%); and STORE Capital (-21%).

From “What’s behind the current stock market volatility?” by Amna Nawaz, PBS NewsHour, January 24, 2022 (The link will take you to a transcript of this report and a video of an interview with Dana Patterson)

A look behind the counter

Companies can give us a glimpse of the future. From Walgreens’ 10/4/2021 Investor Day transcript, a peek into future pharmacy from VP John Standley, hastened by Amazon and COVID:

To free up capacity, reduce both our cost to fill existing prescriptions and our incremental cost to fill new prescriptions and also reduce inventory, we are building a nationwide network of micro fulfillment sites using cutting-edge automation technology from iA, a company we recently made a majority investment in, that will leverage our existing AmerisourceBergen distribution network to efficiently fill prescriptions and quickly get them to our pharmacies.

Today, we have 2 micro fulfillment centers … serving over 1,000 pharmacies in the Phoenix and Dallas areas. We’ll have an additional 9 centers … by the end of fiscal year ’22, bringing the number of pharmacies served to around 3,900. And by 2024, we will have 22 facilities serving over 8,500 pharmacies. … we are also expanding our centralized services capabilities to free up even more time for our pharmacy teams.

Further, we are building a new pharmacy dispensing platform that will make it easier for our pharmacists to fill prescriptions, manage inventory and provide additional clinical interactions. Components of the new dispensing platform have already begun rolling out …. These investments … provide us the capacity and clinical tools we need to grow our prescription business as well as provide additional health care services.”

From “Walgreens plans 9 more micro-fulfillment centers for prescription delivery,” by Edwin Lopez, HealthcareDive, July 7, 2021

Delivering positive energy

When I study companies I run across some engaging people, such as Wes Edens, 60, an investor with a long history of money management with Lehman Brothers and BlackRock prior to founding Fortress Investment Group in 1998. He may be best known as co-owner of the NBA’s Milwaukee Bucks.

In 2014, Edens founded New Fortress Energy, which is “Powered by Positive Energy.” NFE’s mission statement is “We want to light the world,” driven by an awareness that “Billions of people around the planet lack access to affordable power. Electricity should not be a luxury good.” NFE is a liquefied natural gas (LNG) company.

They build LNG delivery systems both small and large in places like Jamaica and Puerto Rico. They recently launched new ventures in Sri Lanka and Brazil.

I’m just beginning my study. It’s a unique utility with a low dividend yield and a low B+ S&P credit rating, but I’m intrigued by Eden’s “change the world” spirit. I think solar is the key to our energy future, but Eden sees an important role for LNG and hydrogen. It’s a fascinating human interest, environmental and sustainability story,

From “Zeroing in on zero-emission hydrogen,” Q&A with Wes Edens, from the NFE website

Debt matters

Bloomberg’s Tom Keene is an economist disguised as a broadcaster. He understands sovereign debt, which he calls “full faith and credit,” a term that reminds us of the promise behind a nation’s debt.

A late night Monopoly lesson from my dad was a debt signal. He was ready to call it quits when he began to mortgage his property. He received a little cash but he received less rental income. It turned the tide my way, which made me happy. It hastened the end of the game, which made him happy.

In a September 30 article, financial analyst Ross Hendricks wrote a helpful article sub-titled, “The speculative excess in today’s market shares no precedent.” Debt matters, whether it’s an over-leveraged investor or a nation that can “print money” to pay for its prior expenditures.

As we go through an unnecessarily juvenile season of political posturing over our national government’s financial integrity, I refuse to think of it as a “good guys” vs “bad guys” polarization, but rather a group of “blind guys” trying to repair a transmission while refusing to help each other.

From “The Most Dangerous Stock Market Ever,” by Ross Hendricks, The Ross Report, September 30, 2021 (The article, along with 800+ comments, is available at Seeking Alpha.)

I recommend the thimble or top hat

Quick, can you name the six original Monopoly tokens? My two favs are the Thimble and the Top Hat, primarily because they’re easy to pick up. My education about money began with Monopoly games with my Dad. I learned from him that it’s better to be the banker, especially if there’s no audit.

When I see an eye-popping medical bill with a very small amount due by the patient, I think, “It’s just Monopoly money.” Medical providers charge an amount they will never receive. It is adjusted downward by what the insurer “allows,” and the patient’s cost may be a fraction of that amount. The provider’s loss helps on taxes, as does the reasonable payment received from the insurer, who also earns a fee. The patient shrugs and says, “It’s all Greek to me.”

A similar process is unfolding now in Washington as Congress debates the “debt ceiling.” The recipe is two parts economics and three parts theater. Underneath the noise and drama are serious issues that deserve, but do not receive, much serious debate. If you’d like a crash course, or if you have insomnia, I recommend Lyn Alden Schwartzer’s recent article that explains debt ceiling economics without drama.

From “Sovereign Default, the Debt Ceiling, and the $1 Trillion Coin,” by Lyn Alden at lynalden.com, October 2021

Who knows?

Howard Marks, a seasoned investor with Oaktree Capital, has an eye for undervalued companies. He writes an occasional “Memo” that is readily available from Oaktree and reprinted in several other venues.

His 8/1/2021 Memo is “Thinking About Macro.” His Big Picture view is laced with common sense, such as this quote from Amos Tversky (1937-1996): “It’s frightening to think that you might not know something, but more frightening to think that, by and large, the world is run by people who have faith that they know exactly what’s going on.”

And this uncannily timely quote from Mark Twain (1835-1910): “It ain’t what you don’t know that gets you into trouble. It’s what you know for sure that just ain’t so.”

Marks focuses on individual companies rather than macro themes. He wrote: “It may be hard to admit–to yourself or to others–that you don’t know what the macro future holds, but in areas entailing great uncertainty, agnosticism is probably wiser than self-delusion.”

The stock market’s deep plunge in March 2020 was a scary time, with most stocks bottoming on 3/23/20. I found a profound 3/19/20 article by Marks at Madison Wealth Management entitled, “Legendary Investor, Howard Marks, on the Coronavirus.” The photo below is from that article.

The “T” in SWOT

About once a week I write a brief “SWOT” article about a dividend-paying company for a friend in Milwaukee, a happy Bucks fan, who’s a RIA (Registered Investment Adviser). A few days afterward, I submit the article to Seeking Alpha, for circulation to a wider audience of investors. These articles generate a little income and they keep my mind active. The best part is what I learn from interaction with readers in the “comment” section that follows each article.

“SWOT” stands for the four parts of the article, which highlight a company’s Strengths, Weaknesses, Opportunities and Threats. Some of what I learned about Illinois Tool Works made it into a recent blog post, “The 80/20 Rule.”

When I consider threats faced by companies, some themes emerge, such as the destructive impact of climate change and threats from terrorism, cyberattacks and geopolitical instability. These risks take different forms for different companies, of course, but they are huge threats to our well-being.

I plan to write a SWOT article about the economy and/or the stock market as a whole. The SWOT outline can be applied to any endeavor. A quick Internet search revealed many SWOTs, such as “SWOT Analysis: An In-Depth Analysis of Regional Strengths, Weaknesses, Opportunities and Threats,” by the U.S. Economic Development Administration.

Tomorrow: The economic risks from anti-vaxxers.

From OliverWyman, published by the World Economic Forum