As previously written, MSB is still a compelling investment in these hard times. The Fed has cut rates to a pathetic 1% and there is future evidence in the fed fund rate futures of a further cut. Barron's indicated this weekend that MSB is yielding 21% and if you look at past insider buys you will see that in the last two weeks there have been been buys at these levels. Mesabi just paid out $1.25 and has been increasing its distribution each quarter at a fast clip.
October 16 - $1.25 vs .48
July 18 - $1 vs .31
April 11 - .12 vs .045
January 11 - 515 vs .315
If you looks at CLF (whom is a very large buyer of Mesabi's Iron Ore) and plot it against MSB over the past 4 months you will see how these distributions are a form of protection against the aggressive market sell off. MSB is still up over 32% against CLF which goes to show how yield rich investment don't necessarily mean that the company is a higher risk investment. In an environment of negative real interest rates id put my cash in such an investment any day over a 1 - 2% gov't bond.
Sunday, November 2, 2008
Saturday, October 18, 2008
MSB - In Yield we Trust.
In this time of increasing uncertainty investors are flocking to quality high yielding stocks to lock in some form of income as equities around the world plunge. In the face of severe volatility in which certain sectors are in favor one day and out of favor the next all pundits, whether on CNBC or you advisor, agree that equities with this attribute are worth putting money into. All last week Jim Cramer professed that high quality high yielding stocks was a good place to be because quality stocks have gotten beaten down along with market to where they now have unbelievable yields. MSB at $15.18 is yielding 19%. It currently declared a $1.25 dividend on top of a $1 distribution 7/18/2008. This is a company that has been increasing its distributions in an environment where many firms are either cutting or all together halting payouts. Year over year it increased its pay out by 60% and its prospects still bright. Here is a breakdown of its pay outs quarter to quarter year over year.
October 16 - $1.25 vs .48
July 18 - $1 vs .31
April 11 - .12 vs .045
January 11 - .515 vs .315
Beaten down to $10.50 in the recent market havoc MSB has recovered 50% so far and is still paying out 19%. With an all time high of $31.7, the potential upside is huge!!! Even if it levels off and trades at these levels a 19% yield in this environment with a growing distribution is not too shabby.
October 16 - $1.25 vs .48
July 18 - $1 vs .31
April 11 - .12 vs .045
January 11 - .515 vs .315
Beaten down to $10.50 in the recent market havoc MSB has recovered 50% so far and is still paying out 19%. With an all time high of $31.7, the potential upside is huge!!! Even if it levels off and trades at these levels a 19% yield in this environment with a growing distribution is not too shabby.
Sunday, April 13, 2008
Picks and Shovels - 5N Plus (VNP-T)
Who makes the money? They guys who sell the picks and shovels? Or the ones that use that go out and use them? The guys who sell them do.
This past week an interesting article came out on Seeking Alpha which highlighted the story of a relatively underfollowed Canadian company: 5N Plus (VNP.TO).
http://seekingalpha.com/article/71942-the-tellurium-supernova-has-erupted?source=yahoo
VNP has a monopolistic hold on the Tellurium metals market and are the largest supplier of the refined metal to FLSR. Some worries brought up in the article are whether there is sufficient supply of this material available to FSLR and other users of it this is yet to be seen. VNP is slated to open an additional manufacturing facility by the end of July in Germany to further provide for their customers because the demand is so great. Jim Cramer, despite his antics, is very bullish on the FSLR play. He fully endorsed FSLR two weeks ago on CNBC and that he would continue to talk about out it (pump it) throughout the year. To come out and make such a bold statement would require some serious homework of which would uncover whether FSLR has sufficient supply of Tellurium or not. Analysts on the street have probed both management teams of FSLR and VNP and have been reassured not to worry on shortage or supply issues of the material to meet demand and production. If the analysts cannot come up with any dirt (and they have the brains and the resources to get as much information possible) and if Cramer has done his homework (which I believe is safe to say in this case, YES) then the dynamics for VNP (with its monopolistic position as FSLR affiliation) are exceptionally bullish. Also, they just reported record 3Q earnings, and a second round of bought financing (4 million shrs @ $11.55 CDN) which was pitched to both U.S. and Canadian investors. It would not take much for this stock to start FLYING if it only got some exposure in the media. As the author recommends, check out 5N Plus' prospectus, it has to be one of the hottest solar stories out there. Oh, and they are and have been profitable for a while. How many solar plays do you know turning a profit?
There has been a lot of press lately on FSLR and I believe it speaks volumes on VNP’s potential.
http://seekingalpha.com/article/72029-the-state-of-the-thin-film-photovoltaic-industry
http://online.barrons.com/article/SB120796071412009549.html?mod=yahoobarrons&ru=yahoo
Both articles are extremely bullish on FSLR. Once could treat VNP as a call option on FSLR!!! FSLR May $270 Call Option went out at $29.20 Friday where VNP went out at $12.
With FSLR you area paying up the rear for volatility, I mean this stock can have a $20 trading range in a day no problem. At the end of the day, they take on the risk of performing and managing expenses. Any hit to earnings for this play and you could see a rapid deterioration in the stock price. With VNP you are betting on a relatively unknown company with a monopoly in the market place. Rapidly expanding, just completed a round of bought financing to fuel that growth, and the management has not sold out.
You really need to look into this company to understand what a great play it is.
VNP is a company with a real story, profitable, experienced management team, diversified, with the dominant position in the Tellurium market.
This past week an interesting article came out on Seeking Alpha which highlighted the story of a relatively underfollowed Canadian company: 5N Plus (VNP.TO).
http://seekingalpha.com/article/71942-the-tellurium-supernova-has-erupted?source=yahoo
VNP has a monopolistic hold on the Tellurium metals market and are the largest supplier of the refined metal to FLSR. Some worries brought up in the article are whether there is sufficient supply of this material available to FSLR and other users of it this is yet to be seen. VNP is slated to open an additional manufacturing facility by the end of July in Germany to further provide for their customers because the demand is so great. Jim Cramer, despite his antics, is very bullish on the FSLR play. He fully endorsed FSLR two weeks ago on CNBC and that he would continue to talk about out it (pump it) throughout the year. To come out and make such a bold statement would require some serious homework of which would uncover whether FSLR has sufficient supply of Tellurium or not. Analysts on the street have probed both management teams of FSLR and VNP and have been reassured not to worry on shortage or supply issues of the material to meet demand and production. If the analysts cannot come up with any dirt (and they have the brains and the resources to get as much information possible) and if Cramer has done his homework (which I believe is safe to say in this case, YES) then the dynamics for VNP (with its monopolistic position as FSLR affiliation) are exceptionally bullish. Also, they just reported record 3Q earnings, and a second round of bought financing (4 million shrs @ $11.55 CDN) which was pitched to both U.S. and Canadian investors. It would not take much for this stock to start FLYING if it only got some exposure in the media. As the author recommends, check out 5N Plus' prospectus, it has to be one of the hottest solar stories out there. Oh, and they are and have been profitable for a while. How many solar plays do you know turning a profit?
There has been a lot of press lately on FSLR and I believe it speaks volumes on VNP’s potential.
http://seekingalpha.com/article/72029-the-state-of-the-thin-film-photovoltaic-industry
http://online.barrons.com/article/SB120796071412009549.html?mod=yahoobarrons&ru=yahoo
Both articles are extremely bullish on FSLR. Once could treat VNP as a call option on FSLR!!! FSLR May $270 Call Option went out at $29.20 Friday where VNP went out at $12.
With FSLR you area paying up the rear for volatility, I mean this stock can have a $20 trading range in a day no problem. At the end of the day, they take on the risk of performing and managing expenses. Any hit to earnings for this play and you could see a rapid deterioration in the stock price. With VNP you are betting on a relatively unknown company with a monopoly in the market place. Rapidly expanding, just completed a round of bought financing to fuel that growth, and the management has not sold out.
You really need to look into this company to understand what a great play it is.
VNP is a company with a real story, profitable, experienced management team, diversified, with the dominant position in the Tellurium market.
Tuesday, February 12, 2008
Terra Nitrogen - Strongest Fundamentals
Well, Monsanto came out today and upped their guidance for the year attributable to a robust global Ag market! It is a Demand driven phenomenon which international superstar investor Jim Rogers has preached for the past 8 years. These days great news from one Ag/Fertilizer company usually bodes well for the others in the sector. They are to a great degree interrelated just as we are painfully finding out with U.S. Sub Prime mess is to the rest of the world. These Ag/Fert Co’s have performed strongly despite a slowing U.S. economy and may be the only sector that could be said to have decoupled. MON stated “the higher commodity prices mean farmers are willing to spend more money on biotechnology seeds and agricultural chemicals since their crops are worth more money”.
Last week, THN reported their 4Q and FY 2007 earnings and blew the estimates away. It is still the sexiest fertilizer story out there with the strongest fundamentals across the board.
-TNH is almost the only fertilizer stock with NO debt. The avg debt of the big three (POT, AGU, MOS) is $1 Billion! Even its parent company TRA has $340 million in debt.
-It is the only fertilizer with a distribution. This quarter they paid out $4.45 a share. More later...
-Highest quarterly Revenue gain in percentage terms (see IBD Mon Feb 11 2008 pg.A20).
-Highest Return on Equity of the Ag/Fertilizer (see IBD Mon Feb 11 2008 pg.A20).
-Highest pretax margin of the Ag/Fertilizer sector (see IBD Mon Feb 11 2008 pg.A20).
-The lowest PE ratio of any fertilizer or Ag stock out there!
-It takes 5 years to open a new plant and have all its production in the heart of the corn-belt like TNH.
-Seeing how it has the highest distribution (some may call it a yield/dividend) of any fertilizer stock in a low interest rate environment, TNH will still provide for a higher return than any or bond could.
-The stock along with the sector is off its highs going into a year where fertilizer demand will be just as robust as last year, makes TNH look ever cheaper.
-Also, with heavy importing of Liquid Natural Gas (LNG) expected this year, TNH stands to recognize lower Natural Gas expense. Nitrogen fertilizer companies largest expense is natural gas and TNH is no different, this is very bullish for the companies margins.-With the U.S. heading into a recession or slow down or whatever you want to call it, Natural gas prices will fall. Natural gas was 1/3 of its current price during the last recession.
-Even during a recession people still need to eat even in an environment with low grain stocks worldwide, high grain prices, a robust global market for nitrogen, and high food demand, TNH stands to benefit.
Distribution
Now in terms of the distribution (TNH is still the only one that has one) the pay out structure is about to change if TNH stands to pay out more than $2.45 in next quarter. It will go from paying out unit holders 99% to paying out 50% of the value (You can refer to their 3Q 10-Q for the latest payout structure seeing how their 4Q 10-Q and 10-K is not available yet). Now at first this may seem bearish, but you have to consider where THN has been, where it is, and where it can go.
1)TNH will always have a minimum payment to unit holders of 0.605 per unit.
2)The split only reaches the 50/50 threshold when the company makes a significant amount of money (take into consideration that the Ag and fertilizer stocks are hitting new highs and will continue to be reflected in the coming quarters. Just look at the double, triple, and quadruple in upcoming quarterly earning projections. See IBD Mon Feb 11 2008 pg.A20).
3)If the company makes $16 per unit in 2008 (conservative estimate) the worst case scenario would be a payment of $8 to unit holders. Considering that the stock hit $168 in the early part of 2008 and using $8 per unit as the worst case scenario makes TNH is undervalued at its current levels (Earnings per unit were $10.90 for FY 2007, if earnings grow only 50% that would be $16.35 earnings per unit. Half of that is $8.175). I say this is a conservative estimate because earnings per unit from 2006 to 2007 grew by over 3X!!!
4)Understand the conservative estimate, earning growth projections of its peers, low interest rate environment, good chance of lower natural gas costs, and a booming agricultural phenomenon around the globe.Bottom LineEven if TNH had no distribution (hard to believe since you will still receive the 0.605 per unit minimum) it would still be the cheapest ag stock with the lowest PE and best fundamentals in the industry.
A Bonus - Short SQUEEEZZZZEEEE!
-The float is 25% of outstanding, of which 9.3% of that is held by institutions, and 3% shorted. That makes for an extremely thin float.-Every Quarter, the shorts have to pay out the distribution, making it painfully expensive to be short this stock.-It is a hard stock to borrow for the above mentioned reasons, and you are charged a high borrowing fee.-My broker told me to transfer all my shares from my Margin account to my Cash account. This will make it nearly impossible to short the stock further and will result in the short stock out there being called in.
Bottom Line
Even if TNH had no distribution (hard to believe since you will still receive the 0.605 per unit minimum) it would still be the cheapest ag stock with the lowest PE and best fundamentals in the industry. Hey why not benefit from this Ag BULL market and ride the short squeeze along the way.
Last week, THN reported their 4Q and FY 2007 earnings and blew the estimates away. It is still the sexiest fertilizer story out there with the strongest fundamentals across the board.
-TNH is almost the only fertilizer stock with NO debt. The avg debt of the big three (POT, AGU, MOS) is $1 Billion! Even its parent company TRA has $340 million in debt.
-It is the only fertilizer with a distribution. This quarter they paid out $4.45 a share. More later...
-Highest quarterly Revenue gain in percentage terms (see IBD Mon Feb 11 2008 pg.A20).
-Highest Return on Equity of the Ag/Fertilizer (see IBD Mon Feb 11 2008 pg.A20).
-Highest pretax margin of the Ag/Fertilizer sector (see IBD Mon Feb 11 2008 pg.A20).
-The lowest PE ratio of any fertilizer or Ag stock out there!
-It takes 5 years to open a new plant and have all its production in the heart of the corn-belt like TNH.
-Seeing how it has the highest distribution (some may call it a yield/dividend) of any fertilizer stock in a low interest rate environment, TNH will still provide for a higher return than any or bond could.
-The stock along with the sector is off its highs going into a year where fertilizer demand will be just as robust as last year, makes TNH look ever cheaper.
-Also, with heavy importing of Liquid Natural Gas (LNG) expected this year, TNH stands to recognize lower Natural Gas expense. Nitrogen fertilizer companies largest expense is natural gas and TNH is no different, this is very bullish for the companies margins.-With the U.S. heading into a recession or slow down or whatever you want to call it, Natural gas prices will fall. Natural gas was 1/3 of its current price during the last recession.
-Even during a recession people still need to eat even in an environment with low grain stocks worldwide, high grain prices, a robust global market for nitrogen, and high food demand, TNH stands to benefit.
Distribution
Now in terms of the distribution (TNH is still the only one that has one) the pay out structure is about to change if TNH stands to pay out more than $2.45 in next quarter. It will go from paying out unit holders 99% to paying out 50% of the value (You can refer to their 3Q 10-Q for the latest payout structure seeing how their 4Q 10-Q and 10-K is not available yet). Now at first this may seem bearish, but you have to consider where THN has been, where it is, and where it can go.
1)TNH will always have a minimum payment to unit holders of 0.605 per unit.
2)The split only reaches the 50/50 threshold when the company makes a significant amount of money (take into consideration that the Ag and fertilizer stocks are hitting new highs and will continue to be reflected in the coming quarters. Just look at the double, triple, and quadruple in upcoming quarterly earning projections. See IBD Mon Feb 11 2008 pg.A20).
3)If the company makes $16 per unit in 2008 (conservative estimate) the worst case scenario would be a payment of $8 to unit holders. Considering that the stock hit $168 in the early part of 2008 and using $8 per unit as the worst case scenario makes TNH is undervalued at its current levels (Earnings per unit were $10.90 for FY 2007, if earnings grow only 50% that would be $16.35 earnings per unit. Half of that is $8.175). I say this is a conservative estimate because earnings per unit from 2006 to 2007 grew by over 3X!!!
4)Understand the conservative estimate, earning growth projections of its peers, low interest rate environment, good chance of lower natural gas costs, and a booming agricultural phenomenon around the globe.Bottom LineEven if TNH had no distribution (hard to believe since you will still receive the 0.605 per unit minimum) it would still be the cheapest ag stock with the lowest PE and best fundamentals in the industry.
A Bonus - Short SQUEEEZZZZEEEE!
-The float is 25% of outstanding, of which 9.3% of that is held by institutions, and 3% shorted. That makes for an extremely thin float.-Every Quarter, the shorts have to pay out the distribution, making it painfully expensive to be short this stock.-It is a hard stock to borrow for the above mentioned reasons, and you are charged a high borrowing fee.-My broker told me to transfer all my shares from my Margin account to my Cash account. This will make it nearly impossible to short the stock further and will result in the short stock out there being called in.
Bottom Line
Even if TNH had no distribution (hard to believe since you will still receive the 0.605 per unit minimum) it would still be the cheapest ag stock with the lowest PE and best fundamentals in the industry. Hey why not benefit from this Ag BULL market and ride the short squeeze along the way.
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