Warren’s Letter

Falling in the dead of winter between the end of football season and baseball’s opening day, the most anticipated spectator sport is upon us.  Berkshire’s annual letter.  There will likely be hundreds of articles parsing Warren’s every word between now and the annual meeting and mine is not the first.  But – as always – there are nuggets of wisdom to be gleaned from his experience.

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Recent Buy – PJT

pjt

I added to my position in PJT Partners this morning at $27.62. My initial position was obtained via Blackstone’s 40:1 spinoff back on October 1st.  Since then I’ve watched as they’ve grown the business to the point of declaring their first dividend (.05 payable 23 Mar, record date 9 Mar).

PJT Partners is not an MLP despite their name.  They are a consulting group who have been adding clients like crazy.  Recent announcements have included:

  • Windland Energieerzeugungs GmbH / Blackstone (wind farm sale)
  • Kenya Airlines (capital raising)
  • Yahoo (strategic alternatives)
  • Viacom (sale of Paramount Pictures stake)

If this isn’t enough to consider a company with no dividend history and a recent quarterly loss, how about the fact that they also have a client list of distressed energy companies.  They provided advice to Magnum Hunter through their bankruptcy and by all accounts, this should be a growth market this year.

I do consider this purchase speculative (primarily due to lack of history) and as such accounts for less than 1% of my portfolio.

Oil Patch Lenders

In his recent Chatter Around The World post, Roadmap2Retire presented a snapshot detailing banks exposure to the energy sector.  A timely piece with the spring borrowing base redeterminations around the corner.  It was a little bit of a rude awakening since a nice chunk of my portfolio is posted in full color.  Although I did comment on the minimal issues I had, like any good article it got me to consider multiple questions.  Has the thesis changed since purchase.  Am I losing any sleep?  Is my investment at risk?  Is the landscape different?  What are my real issues with the master list?   Can I quantify the risks?  Let’s try to figure it out …

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The Bear Rolls On

I heard a term used by Jim Cramer the other morning on CNBC.  He claimed (several times) that we were in the midst of a Rolling Bear Market.  I can’t claim to have familiarity with the term so I embarked on a little research.  The earliest reference I found was an article by Bob Carlson which defines the term.  Essentially the argument is that there as now an ebb and flow to the markets, like a wave, that is rolling in on sectors.  Like energy, then materials, then financials and so on.

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Dividends: Stock vs Cash

There are companies that as a normal course of operation pay a portion of their dividends in stock (sometimes referred to as script). I’m not referring to companies that lack the cash to pay the dividend either, as a number of these companies are resident on the CCC list maintained by David Fish. Some of these pay a stock dividend irregularly while others pay a stock dividend annually. So the ultimate question is which is better for the investor? Let’s dive into a real example to get the answer.

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The Market Is Really Weird

ConocoPhillips (COP) announced a 66% dividend cut this morning.  Probably not a major surprise to anyone.  Even D4L, who published an analysis on Feb 2, was cautious in his outlook.  At least the markets’ reaction was normal – giving the stock about a 8.5% haircut, although I’m sure this is little solace to the roughly 70 members of the DGI community that hold it.

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