Money and Investing Thoughts

Star Bulk Announces Updated Employment Status of Star Beta – International Business Times -.

When I wrote about Star Bulk Shipping (SBLK: 1.17 0.00 0.00%) last month I said  that this was definitely a high risk stock as indicated by its 20% yield. The positive for the company was the fixed contracts for its dozen bulk carriers that promised stable revenue for the next couple of years. With the news release linked above the company announced one of their contractors has gone bankrupt and put in doubt the receipt of $110,000 per day of revenue. Losing $10 million in quarterly revenue is a big hit for a company this size. In the current shipping environment it would be impossible to release the ship at any where near the lost contract rate.

With this news I am “selling” the SBLK position from this site’s Opportunities Portfolio. The portfolios on this site are  a hypothetical way to track the stock positions I believe will provide superior long term returns.

Although the current stock market is very frustrating for those of us who look at a stocks fundamentals when making investment decisions, I find the recent actions of Aircastle Ltd (AYR: 14.14 0.00 0.00%) to probably be the most frustrating of the stocks I follow on this site.

I became interested in Aircastle last spring when then significantly reduced their dividend to retain cash in the tight financial market. Yet in June the market knocked half the value out of the stock on the fears that the company’s aircraft leasing customers would have problems with the record oil prices. As these fears proved unfounded, the stock worked its way back up to around $14 providing about a 7% yield.

The new and improved bear market is now taking down all sectors and AYR stock is again under $7. The stock yield is not back up to 12.5%. And this time the falling oil prices should benefit Aircastle’s customer base. AYR leases their aircraft primarily to international airlines with very little exposure to the U.S. airline market. I do not believe that international air travel will experience any significant fall off and the aircraft leases will continue to be paid on time.

I would like to point out the strong financial position of Aircastle. The company currently has free cash flow of  $1.10 per quarter (and growing), providing excellent coverage on the 25¢ dividend. That is free cash flow of over $4.40 per year on a $7.00 stock, unbelievable. Management seems to be doing a excellent job releasing the few aircraft coming off lease and they have been making profitable sales of their older aircraft. The aircraft fleet is undervalued on the books at $4 billion against $2.6 billion of debt. Market capitalization is currently only $560 million.

This is just another indicator how stupid the market has been recently in the indiscriminate dumping of stocks. I have written and given examples several times and will continue to be patient and collect dividends.

Note: AYR is a component of this site’s hypothetical Income Portfolio.

Each week I provide a recap of the previous week’s performance of the WilderHill New Energy Global Innovation Index, symbol NEX. This information is provided by New Energy Finance. This week the folks at New Energy Finance decided to provide the results though Monday, October 14 rather than the usual Friday wrap up day. This is quite understandable as the NEX was down 25% for the 5 day week and made up 80% of the loss on the 6th day. It will be interesting to see how they report this/next week’s results.

The NEX is the bogey index for the PowerShares Global Clean Energy Fund (PBD: 9.70 0.00 0.00%). The NEX currently consists of 88 stocks from over 20 countries, giving a truly global diversification to the fund.

For the week +1 the NEX lost 5.5%. The comparative benchmarks of the NASDAQ, S&P 500 and AMEX Oil lost 1%, 5.1% and 8%, respectively. At one point during the week the NEX was off 58% from where it started 2008. It has been a rough time for renewable energy investors.

Biofuels and biomass was the only sector to stay in positive territory, gaining 0.6%. The ‘renewable other’ sector was the worst performer, off 10.1%. Solar energy and wind energy, the two largest sectors in the index, were down 8.9% and 4.7%.

Here are the winners and losers from the index for the “week”:

NEX top gainers since 07 Oct 08
Aventine Renewable Energy Holdings AVR + 29.7%
Greentech Energy Systems GES + 23.4%
Plug Power PLUG + 20.8%
Centrotherm Photovoltaics CTN +19.6%
Capstone Turbine CPST + 15.3%

NEX top losers since 07 Oct 08
Brasil Ecodiesel Industria e Comercio de Bioc ECOD3 - 27.1%
Boralex BLX - 26.1%
Meidensha 6508 - 25.1%
Sharp 6753 – 23.8%
SunPower SPWR - 21.6%

Inergy, L.P. | Investor Relations | Press Release.

A small piece in the further evidence of the current insanity in the stock market. Inergy L.P. (NRGY: 18.04 0.00 0.00%) a nice, growing propane distribution company announced yesterday their 28th consecutive dividend increase. Yet the stock managed to lose 11¢. NRGY now yields a staggering 18.4%!

Inergy is a solid company that continues to grow by acquiring smaller local and regional propane companies. With over 3,000 independent propane retailers in business in the U.S. there is plenty of room for continued growth. NRGY has acquired over 30 companies over the last 3 years and is committed to investing $125 million per year in new acquisitions. Inergy also has a growing midstream natural gas business and strong expansion in their existing propane business.

I do not see any problems with this company and yet, like so many other good companies, the market has hammered the stock. The dividend plus a stock price return to a “normalized” 10% yield would provide a 100% return in a single year. NRGY is a component of this site’s Income Portfolio.

ReviewJournal.com – Business – HOUSING SECTOR: Economic woes hit home.

My title is about a accurate as the one from the LV Review Journal linked above. Existing single family home sales for September in Las Vegas were 2,783, which is a 280% increase from the 990 sold in September 2007. The economic woe is that average prices continue to fall. I would like to compares some pros and cons concerning the Las Vegas housing results for September.

PRO: Home sales figures continue to recover, increasing 8 out of 9 months this year.

CON: Existing home prices continue to fall, down over 31% from a year earlier.

PRO: Inventory as month’s supply continues to fall, now at a 7 months supply according to MLS data. This compares nicely with over 2 year supply one year ago.

CON: Prices continue to fall. Median single family home prices fell 7.5% from August to September. Median condo price fell 2.9%.

PRO: Buyers are aggressively going after bank owned properties:

…most bank-owned properties receive multiple offers. Buyers are frequently outbid even when a submitted offer is above list price…

CON: 2/3 of sales continue to be bank owned properties. I continue to believe that bank property dumpage continues to be the driving force in continued price declines.

The final paragraph of the LVRJ article does a pretty good job of echoing my beliefs on what these numbers tell us:

“The good news in the equation is sales are up and inventory is down,” Rick Brenkus of Keller Williams Realty said. “The third leg is prices need to stabilize, and unfortunately we haven’t seen that yet. We’re still burning through the foreclosures and bank-owned properties.”