Portfolio

[Be Here Now]

My current portfolio:

   

My yield hurdle is 5% which is shown in green. If I were to buy more of any of these it would be at a minimum yield of 5%.

[Kerim]

Wow -- that looks like an impressive and aggressive portfolio. A lot of names there that I don't know much about, though, so I can't judge. Do you feel like there is a lot of risk with the high-yielders you've got there? High volatility? Or are you pretty comfortable?

[Dividend Watcher]

Great job! Very readable.

I echo Kerim's comments although I understand you're in retirement and the income is more important for you now. If you know what you're invested in, then I think you should be comfortable with any perceived risk. For myself, I still don't feel comfortable with some of those but that's because I'm ignorant of them.

[hendi_alex]

IMO, very high risk as we head nearer to a rising rate environment. Not a criticism of Be Here Now but way too many interest rate sensitive issues for me. If an investor understands the risks and the portfolio matches his/her risk appetite, then the holdings represent a good fit.

[Be Here Now]

Are there really interest rate risks? I think this is highly debatable. I have looked into all of these companies in depth and would love to discuss them with everyone.

The midstream MLPs are for the most part like toll roads. They have contracts with production companies to transport liquids at fixed rates that have built in escalator clauses and are for the most part take-or-pay. The recent bashing of Kinder Morgan by HedgeEye and Barron's were ill-conceived and ill-researched and simply gave us some profitable buying opportunities.

The production MLPs are more speculative in that they are dependent on commodity prices, but not totally because they hedge most or all of their production at advantageous prices.

The mortgage REITs make their profits on the spread between short and long rates, and hedge their portfolios to a certain extent. As long as this spread exists they will make money and pay a dividend. For those who doubt this I invite you to look at a long term chart of NLY and compare it with the dynamic yield curve. Here is the NLY chart: http://bigcharts.marketwatch.com/advchar...e&state=11

Here is the dynamic yield curve: http://stockcharts.com/freecharts/yieldcurve.php

The NLY dividend dropped as the yield curve was approaching a negative slope in 2005, but even when the yield curve went negative in 2006, NLY continued to pay a dividend. Remarkable.

The equity REITs underwent a significant selloff starting in May of last year, but they continued to pay their dividends, and none of them failed to raise their dividend in a timely manner. Future interest rate increases will affect each differently depending on when their various funding sources mature and what refunding rates will be at those times. Blanket generalizations are essentially worthless.

Many authors and commenters on SA have assumed that BDCs will be negatively impacted by rising rates. I have looked at the 10-Ks and 10-Qs of those I own, and none of them will actually be negatively impacted. The reason is that they lend based on LIBOR, so that when rates rise, so does their interest income. Once again, without detailed knowledge of how these companies are funded and how they invest, blanket generalizations are worthless.

Finally there are the tobacco companies. Love 'em! Mighty MO and its offspring, PM!

[hendi_alex]

I have invested in and followed mReits since 2002 and have seen first hand what often happens to these weak financial businesses, businesses which always project themselves as being virtually immune to rate changes. The following list is pulled from a seeking alpha article. How many S&P500 companies failed or collapsed to the same extent during the period? I don't know the percentage, but this list has to represent a huge portion of all sector participants. The same thing happened during the financial crisis in 2000-2001. Several of these in the list below we're considered the best of the breed.

Thornburg Mortgage
New Century Financial
Apex Mortgage
Fieldstone Investment
Sunset Financial
Capital Trust
Ashford Hospitality Trust
ECC Capital
Gramercy Capital Corp
Novastar
Carlyle Capital

[Be Here Now]

Yes, I have seen that list. However, none of them was an agency mortgage REIT, which is a critical difference. The ones I own are either pure agency or hybrid agency, and they all survived from before the 2008-09 crash, which to my mind makes them much more than 'weak financial businesses'.

BTW, Ashford did not go under, it is alive and thriving under the symbol AHT. Makes me wonder what other errors are lurking in that list.

[Be Here Now]

One other comment on AHT. It is not a mortgage REIT. It is an equity REIT. Yet another reason to doubt that list.

[hendi_alex]

There is no reason to doubt that TMA, which was considered the best of the jumbo alt-a operations went down the tubes. Everything was fine with them, except mark to market caused loan covenants to get exercised. TMA had great clients with very low loan to values and had extremely low delinquency rates. Still went broke. New Century was considered very strong. NFI (novistar) had a huge cult of followers who believed all of the hype related to various scenarios and how NFI would do just great no matter what. They are still around, but are a different business and are still at very few pennies on the dollar to precrash values. IMH is not on the list, but it came close to going under and has come nowhere close to recovering. ACAS was considered the best of breed in the BDC area. They nearly went broke, and have come nowhere close to recovering precrash values. They as well got caught by mark to market and loan covenants. The business itself appeared sound.

I'm not really interested in engaging in a pissing contest, so will end further comments on this thread. We will just have to disagree, and I hope your portfolio of investments works out exactly as you plan. Good luck going forward.

Some info concerning my portfolio and strategies:
The portfolio is currently about 10% in property REITs, spread between CSG, HCP, O, and RYN. RYN is just a temporary covered call play.
The portfolio's main categories are as follows (approximate %): TECH (28%):AAPL CSCO INTC; Energy production (28%) BTU CCJ ECA; Insurance (5%) MCY OB ORI; energy delivery (12%) NAT PBA SPH TGP; Misc (21%) GE POT SSL T

CSG MCY O OB ORI PBA POT SSL TGP NAT HCP (15%) are all longer term positions. All other positions (85%) including most of NAT and 1/3 of HCP are temporary covered call plays, most originally going out about six months.

I'm sure that my portfolio with its high level of management (turnover) would give you just as much aversion as I would feel with heavy exposure to the REIT, MLP, BDC areas. It takes all kinds to make a market, and there are many right ways to go about this thing called investing.

P.S. - I recently wrote a piece, posted at this site, concerning NLY as best of the breed. http://dividendgrowthforum.com/showthrea...63#pid2163

[Be Here Now]

Alex,

I'm not interested in a pissing contest either. Vigorous debate is good for everyone.

I am not familiar with many of your symbols, but one category you like, Tech, is one I stay away from. Too much risk of obsolescence for my peace of mind.

Best of luck to you in your investments.

[hendi_alex]

Concur!!

[jcirafic]

(02-16-2014, 03:56 PM)hendi_alex Wrote: There is no reason to doubt that TMA, which was considered the best of the jumbo alt-a operations went down the tubes. Everything was fine with them, except mark to market caused loan covenants to get exercised. TMA had great clients with very low loan to values and had extremely low delinquency rates. Still went broke. New Century was considered very strong. NFI (novistar) had a huge cult of followers who believed all of the hype related to various scenarios and how NFI would do just great no matter what. They are still around, but are a different business and are still at very few pennies on the dollar to precrash values. IMH is not on the list, but it came close to going under and has come nowhere close to recovering. ACAS was considered the best of breed in the BDC area. They nearly went broke, and have come nowhere close to recovering precrash values. They as well got caught by mark to market and loan covenants. The business itself appeared sound.

I'm not really interested in engaging in a pissing contest, so will end further comments on this thread. We will just have to disagree, and I hope your portfolio of investments works out exactly as you plan. Good luck going forward.

Some info concerning my portfolio and strategies:
The portfolio is currently about 10% in property REITs, spread between CSG, HCP, O, and RYN. RYN is just a temporary covered call play.
The portfolio's main categories are as follows (approximate %): TECH (28%):AAPL CSCO INTC; Energy production (28%) BTU CCJ ECA; Insurance (5%) MCY OB ORI; energy delivery (12%) NAT PBA SPH TGP; Misc (21%) GE POT SSL T

CSG MCY O OB ORI PBA POT SSL TGP NAT HCP (15%) are all longer term positions. All other positions (85%) including most of NAT and 1/3 of HCP are temporary covered call plays, most originally going out about six months.

I'm sure that my portfolio with its high level of management (turnover) would give you just as much aversion as I would feel with heavy exposure to the REIT, MLP, BDC areas. It takes all kinds to make a market, and there are many right ways to go about this thing called investing.

P.S. - I recently wrote a piece, posted at this site, concerning NLY as best of the breed. http://dividendgrowthforum.com/showthrea...63#pid2163

(02-16-2014, 04:01 PM)Be Here Now Wrote: Alex,

I'm not interested in a pissing contest either. Vigorous debate is good for everyone.

I am not familiar with many of your symbols, but one category you like, Tech, is one I stay away from. Too much risk of obsolescence for my peace of mind.

Best of luck to you in your investments.

Eye opening. Good discussion. H_Alex, just wondering why no oil majors or well known mlp's (KMP, ETP etc) in your portfolio? Thanks for the discussion to both.