What stocks are you shopping?

[GhostofTomJoad]

Quote:

Originally Posted by aja8888 I've had ET since it was $9. It's a long term hold for me and a huge pipeline company. Just remember it's an MLP with a different tax treatment when (if) you sell.

Yes, i got into it just over $11.00.

Can you give me a short version of that different tax treatment when it's sold, because it's an LP? My wife will most likely inherit it.

[aja8888]

Quote:

Originally Posted by GhostofTomJoad Yes, i got into it just over $11.00. Can you give me a short version of that different tax treatment when it's sold, because it's an LP? My wife will most likely inherit it.

Complicated:Here's an MLP tax guide.

https://www.simplysafedividends.com/...-mlp-tax-guide

Quote:

What if you never sell your units? Eventually you might be able to reduce your cost basis to zero, at which point all future distributions get taxed at long-term capital gains rates (effectively like qualified dividends). A substantial benefit to ROC is that when you die, your heirs can inherit your units (up to certain limits) tax-free. The cost basis steps up to the closing price on the day you died.

[Golden Mean]

STT (State Street Corp.). It's a bank. Don't confuse it with SST.

Sold puts to open (STO) for strike of 67.5 for $1.50 Oct 20.

[GhostofTomJoad]

I don't do shorts and strikes and calls and puts and striped pyjamas. Just plain L-O-N-G for me. If I buy one that's clearly a stinky poopy loser after a year, I sell and put the proceeds elsewhere. I'm talking about taxable. I'm pretty well set-up with the funds I hold in the IRA.

But until 2025, I fearlessly predict that the Market will suck like a Hoover. Patience, patience. I only buy stocks that pay a dividend of at least 3%. Getting paid to wait offers me SOME compensation for the "lost" opportunity-cost.

[copyright1997reloaded]

Took a very small starter position on RTX so that it shows up on my daily account data (vs. just on a watch list).

If I didn't own a bunch, I would add a starter on EW, again to watch and eventually leg into. This is a great company with great technology but is getting hammered because all of a sudden we will have magic drugs and no one will ever need heart surgery. Similar for things like Stryker (SYK) because some think no one will ever be fat very soon (and thus won't need new knee/hip/etc.)

[Koolau]

Quote:

Originally Posted by copyright1997reloaded Took a very small starter position on RTX so that it shows up on my daily account data (vs. just on a watch list). If I didn't own a bunch, I would add a starter on EW, again to watch and eventually leg into. This is a great company with great technology but is getting hammered because all of a sudden we will have magic drugs and no one will ever need heart surgery. Similar for things like Stryker (SYK) because some think no one will ever be fat very soon (and thus won't need new knee/hip/etc.)

Heh, heh, sounds like paradise on Earth. I hope most of these medical "break throughs" are successful. BUT there is an axiom in pharmaceutical science. "Show me a drug without side effects and I'll show you a drug without effect." IOW these powerful and effective new drugs will inevitably cause side effects - maybe even deaths. As usual, the doctor and patient must decide the risk vs benefit and proceed from there. YMMV

[Lawrencewendall]

When I get some dry powder, gonna dabble in ARI.

[GhostofTomJoad]

Re: ARI.
Careful.
https://www.stockrover.com/world/ins...ary/Quotes/ARI

[Lawrencewendall]

Pick #3: ARI – Yield 13.5%
Apollo Commercial Real Estate Finance (ARI) is a commercial mortgage REIT. ARI makes mortgages on commercial office properties, which it then holds and collects interest until it is paid off at maturity. Unlike many other mortgage originators, which generate the mortgage and then promptly sell it to someone else, ARI originates its own mortgages and holds them to maturity.

As a result, ARI gets all the economic benefits of making quality mortgages that are paid as agreed. It also carries the downside if a mortgage isn't paid off. In the news, you've probably heard a lot about, this or that commercial building defaulting on its mortgage. You don't have to look hard; a casual Google search will bring up headlines like this one:

Shorenstein Properties Defaults on $350M CMBS Loan Tied to 1407 Broadway

Headlines, which then lead many investors to search their portfolio for anything related to commercial real estate and click sell. This headline noted that it was a "CMBS" loan. That means "collateralized mortgage-backed security". CMBS loans are loans that are sold to investors in pieces. The originator of the mortgage might retain a very small piece but doesn't have a lot of skin in the game. The "servicer" is a company that is in charge of collecting the payment. The servicer collects a percentage of all payments made but doesn't actually own any of the loan. So when a CMBS defaults, the property is foreclosed on by the servicer and auctioned off ASAP. The parties involved in deciding to auction off the property have the least amount of skin in the game. The ones who realize the largest losses are the investors who bought the CMBS. This is why CMBS loans are notoriously difficult for borrowers to negotiate with the lender. The servicer simply doesn't care, and if a loan is "bad", it would rather get it off the books quickly and put efforts towards servicing a paying mortgage. The originator is writing off a small loss, and unless there are a lot of them, doesn't really have much incentive to learn from any underwriting mistakes. The investors with the most to lose, have no power to decide what happens.

Compare this structure to ARI, which is the originator, the servicer, and the primary investor all in one. ARI has a lot of incentive to have quality originations because poor underwriting will impact ARI directly. It has a lot of incentive to work with troubled borrowers to try to find a solution that is profitable for all parties. And if a solution can't be reached, ARI doesn't auction off the property for a poor price. It takes possession of the property and has the option to hold it until it can be sold at a fair price.

As a result, when a borrower defaults, ARI has the incentive to maximize the returns in a way that CMBS originators and servicers don't. It is a reality of lending that some borrowers won't pay as agreed. It is unavoidable, even with the highest quality of underwriting. Yet if the underwriting of a commercial property was good, then the odds are that the real estate is still valuable even when a borrower defaults. ARI has foreclosed on a few properties this year as borrowers struggled with rising interest rates. These properties are profitable to the tune of $7 million last quarter after depreciation expense. Source

Table
ARI Q2 2023 10-Q

If we exclude depreciation expense, which we would do for any equity REIT as a matter of course, the properties that ARI foreclosed on produced $9.2 million in positive cash flow last quarter.

The market sees "default", and they panic. And if you are a CMBS investor, there is good reason to panic because if the borrower defaults, your recovery is going to be poor. However, for ARI, it is a turbulence that they can overcome. These foreclosed properties are cash flow positive, and it is entirely possible that down the road, ARI can sell the properties at an amount that meets or even exceeds the original loan on the property.

There is an old saying, "follow the money", which really means look for who profits, to understand what is happening. When you follow the money in CMBS, it isn't hard to understand why they are so quick to default and so quick to be auctioned off. The interests of the originator and servicers are poorly aligned with the investors. With commercial mortgage REITs, the money is all flowing or not flowing to the REIT. Whether the loan is just originated, being paid off, distressed, or foreclosed on, it is the REIT that is experiencing the financial gain or loss. So when a borrower can't make payments, a REIT like ARI is able and willing to work with the borrower to reach a profitable deal. If one can't be reached, ARI can take the property, getting it unencumbered at a price of 35-50% off the price the last owner paid. Being unencumbered from a mortgage is often enough to make a property that is losing money into one that has positive cash flow.

This is why, despite a few defaults this year, ARI posted $0.46 in distributable earnings, covering its dividend by 130% in Q2. For the past four quarters, ARI has covered its dividend by approximately 130%. Source

Chart
ARI Q2 2023 Supplement

ARI is easily covering its dividend, and with interest rates staying higher for longer, earnings should remain high since most of these mortgages are floating-rate.

Book value is $14.47, and today, you can pick up shares in the market for a lot less, providing a lot of cushion if more borrowers do default. It is a tough market for commercial real estate, but when you follow the money, you'll find that it is flowing through ARI!

[Bigdawg]

Quote:

Originally Posted by Montecfo What is your strategy there BigDawg?

Buy and hold. Collect the div. HE was hovering around $40 for a long time. If it gets to half of that I will have doubled my $. HE ain't going anywhere and people will forgive and forget about the fires soon enough. I'm betting it's back to $30+ per share within 18 months. It's only 20K in my play account so just something fun to watch. All other dry powder and div's are going into my 5% CD.

[Bruno]

Put in an order for 100 shares of OBDC. EX date 9/28

[target2019]

Quote:

Sekera: Falling interest rates are positive for all assets, but the real estate area is one that we do think would do especially well. So, I spoke with our REIT analyst last week, Kevin Brown, and he highlighted a number of those, specifically those with long-leased assets with long-term financing are the ones that would benefit the most. Essentially, like a bond, you’re now discounting a future free cash flow stream at a lower interest rate, which of course increases your present value today. Now, having said all that, in the real estate space, my own personal opinion would be still to steer clear of urban office space.

https://www.morningstar.com/markets/...interest-rates

Goes on to mention O and PEAK as candidates.