Money and Investing Thoughts

A couple of weeks ago I decided to take a sabbatical from writing on this site. I could not take the negative news and falling markets and still try to write posts of a positive nature. Since then (March 11) things have turned pretty positive. The stock market bottomed (this time) two days before my last post and the Dow Jones Industrials have risen 1,100 points since then.

On the real estate front, sales have remained strong in the markets I watch: Sacramento and Las Vegas, but the median prices keep sliding. This report from Southern California is the first in many month where the median did not fall, month to month: Southland home sales off bottom. I have long said the housing market will recover rapidly once prices bottom. We shall see.

I have been doing a little more writing at my new blog; The Shipping Stocks Blog. It is an interesting sector and I enjoy the research. Check it out.

I make a personal trade buying Aircastle, Ltd. (AYR: 13.85 -0.09 -0.65%) at a little over $3.00 per share. They declared a dime dividend and this company mints cash. I am pleased so far.

I have several projects going on and they leave little time to write here. I have a significant number of email and RSS subscribers so I wanted to put a little bit of news up.

Jeff over at A Dash of Insight has published a couple of articles concerning finding a bottom to the market. I think Jeff takes a very insightful, analytic approach to the subjects he writes about and these hit the button for me. I have been trying to understand why the markets continue to discount bad economic news in the face of the inevitable economic recovery. If there is not a recovery, all discussion of markets and economics is pointless anyway. So here are the articles, read and learn:

Why-there-is-no-bottom-economic-forecasts

Why-there-is-no-bottom-politics

According to the website these are the first of 4 articles on this topic. I look forward to what the next pair will bring.

Each week I recap the results of the WilderHill New Energy Global Innovation Index, symbol NEX, and published by New Energy Finance Ltd. The index consists of approximately 90 stocks from 22 countries. The NEX is the tracking index for the PowerShares Global Clean Energy Portfolio ETF (PBD: 9.26 +0.14 +1.54%). For reference, the NEX has a 52 week high of 436.21 and closed 2008 at 177.99.

For the week ending at market close on Monday the NEX fell 7.1%, finishing at 137.91. The NASDAQ and S&P 500 declined 4.7% and 5.7% for the same period. To save you the trouble of doing the math, the NEX is off 22.5% for the year.

The solar sector led the way down as the sector with the biggest decline, losing 9.2%. The other big sector of the index, wind energy fell by 6.6%.

Energy conversion and energy efficiency sectors were the relatively strongest, dropping 4.6% and 4.8% respectively. Top stock on the gainer’s list, Climate Exchange, rallied on the Obama administration’s signal that a U.S. based cap-and-trade system is in the plans.

Here are the best and worst performing stocks from the NEX for the period:

NEX top gainers since 24/02/09
Climate Exchange CLE + 68.6%
Gushan Environmental GU + 13.7%
GS Yuasa 6674 + 7.7%
Sharp 6753 + 7.1%
Meidensha Corp 6508 + 5.9%

NEX top losers since 24/02/09
Theolia 18481 - 29.1%
Power-One PWER - 23.7%
Solon SOO1 - 23.1%
Suntech Power STP – 21.5%
Energy Conversion Devices ENER - 19.5%

I just went through the quarterly conference call for Atlas Pipeline Partners (APL: 37.54 +0.14 +0.37%) and the news is encouraging. First, I will state that the current market mentality does not reward companies that are able to continue to prosper or are working to improve their results in the current economic environment. I am really at a loss to understand why there is not more positive stock price results for those companies that are still doing OK despite the overall economic situation.

From the APL conference call I pulled two major ideas that I believe are positive for the company:

1. The 38¢ dividend declared for the 4th quarter had 1.5 times coverage in distributable cash flow. Prices and margins have improved in the first quarter and management declared that the new dividend was set at a (hopefully) sustainable rate. The stock currently yields 26%.
2. The company is in end-stage negotiations to sell part or all of 3 different assets. The proceeds from these sales will be used to pay down debt and deleverage the company. Completion of these deals could happen in just a few weeks.

APL has been one of the hardest hit of the midstream natural gas companies down over 90% from last summers 52 week high. Atlas Pipeline Partners seems to have survived the 4th quarter energy price collapse and is still able to generate free cash flow. It make take another quarter or two if increasingly better numbers for the market to like this stock again, but at the current share price I think long term investors will be well rewarded.

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

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I have a tough time swallowing the current share price of Aircastle Ltd (AYR: 13.85 -0.09 -0.65%). From the year end earnings release these facts point to a stock that should have a much higher value.

• Cash flow (adjusted earnings plus depreciation) was $4.53 per share. 1.4 times the share price! The cash flow for the 4th quarter was a very strong $1.24.
• The entire portfolio of aircraft is covered by long term financing. There are now worries about acquiring additional debt.
• The fleet of 130 aircraft have a 98% leased rate with only 2 aircraft needing to be released in 2009.
• The company has a diverse customer base by country and company. The largest customer, KLM, is only 8% of the portfolio.
• The current dividend gives a 12% yield.

I am surprised that someone has not figured out they could buy the company for $250 million and put that amount of money in their pocket for the next 5 years then sell the fleet for half a billion. I think this stock is a steal!