WASHINGTON, September 28, 2017 –After being encouraged by recent turnarounds in our Apple (symbol: AAPL) and Allergan preferred (AGN/PRA) positions, we find both stocks once again slipping off the cliff today.
Energy is better, as crude oil prices remain near their 2017 highs. Happiness also abounds in at least some banks and other financial issues. Most other sectors, however, remain stultifyingly uninvestible, however, unless our ability to read Q4 tea leaves improves dramatically.
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An added worry for today and tomorrow: We are experiencing the usual end-of-quarter trading nonsense and window dressing. Hedge funds and their pals are dumping their bad positions so they don’t have to show them in their next quarterly report. This may, in large part, be why we’re witnessing selling in multiple sectors, particularly on the heels of the GOP’s relatively well-received tax-cut framework Wednesday.
Continuing to rework our portfolio, we got rid of our remaining shares of First Energy (FE). The high yielding but generally flat-trading shares of this Akron, Ohio-based mega-utility have performed poorly for years from a financial point of view. That’s because, at least in part, many of its Rust Belt plants understandably have continued to be fueled by the region’s endless supply of coal.
But FE eventually became yet another corporate and employment casualty of the viciously business-hostile Obama Administration, a situation made worse by Obama’s personal and undying hatred of all fossil fuels, including coal, most of all.
FE has been systematically shuttering coal-fired plants as a result, performing expensive gas conversions for others, which has ultimately increased its costs vs. profitability. Generally hostile rate commissions in Ohio and elsewhere haven’t helped the bottom line either.
Even worse, one of its subsidiaries in the competitive energy area may very likely file for bankruptcy this year or next. Even though this won’t weigh terribly on the company on the whole, we think that’s what’s been causing the relentless selling in these shares recently. It’s for that reason that we decided to take our lumps and get out.
Once again, if we as investors see that the gods have chosen to damage one of our companies, it’s best to get out of the way and sell. If you feel there’s no way for your company to gain realistic control of a bad situation in the short or intermediate term, it’s just time to exit, lest you or your portfolio get clobbered along with the company itself. We may be back some day as soon as the (clean) smoke clears. But right now is not that time.
Coming late to the recent boost in transportation issues, we’ve decided to take a small gamble on the container shipping business by buying shares in two Bermuda-based container trading and leasing companies, Textainer Group Holdings (TGH) and Triton International (TRTN).
We opened positions in both Wednesday when the stocks were down, and are please to see that they’re gaining nicely today. However, we wouldn’t mind one or two more downdrafts in these issues as we’d like to pick up more decently-priced shares before we’re done.
We also started a position in Louisiana Pacific (LPX), a longtime lumber company that’s bound to be doing land-office business in the coming months as Houston, a great deal of Florida and the Keys, and the U.S. territories of Puerto Rico and the Virgin Islands begin the long and arduous task of rebuilding homes, commercial buildings and numerous other structures.
This will likely take a lot of LPX wood, along with a lot of other stuff from our other pair of hot retails stocks, Home Depot (HD) and Lowe’s (LOW).
No, we’re not ghouls. But if you’re investing in stocks, you have to be open to opportunities. Most unfortunate Americans who’ve suffered damage or loss to their homes and businesses from our veritable plethora of recent hurricanes will have to rebuild, and the aforementioned companies will be supplying an awful lot of what either they or their contractors will need.
Thankfully, the most foresightful of these Americans will be helped out in this effort, at least in part, by their insurance companies. Others may benefit via subsidized government loans.
But from an investment standpoint, at least for the next two or three quarters, building and building material suppliers and related companies will be getting a big influx of almost mandatory business, so we’d rather be investing there than elsewhere.