Some investors believe the market has rallied back too far, too quickly, and that we’re due for another significant pullback. And now with share prices starting to trade lower in recent sessions, fear is creeping back into investors’ minds. It is this fear and volatility that can increase the upfront premium income available in the options market, and give investors another chance to pick up attractive shares at lower prices. This report shares an income-generating options trade on a highly attractive long-term BDC investment. We believe it’s an attractive trade to place today potentially over the next few trading sessions, as long as the underlying stock price doesn’t move too dramatically before then.
CareTrust: Financially Strong, Despite the Pandemic
For years, investors have chased healthcare REITs with tenants funded by “private pay” because they feared ongoing government pressure on reimbursement rates. However, in this pandemic, it turns out they had it all wrong. CareTrust (CTRE) is a “mostly skilled nursing facilities” healthcare REIT, and it has benefited from generous government support during this pandemic. And on top of that, the CEO claims COVID hasn’t been as economically devastating as narratives suggest. This article reviews the health of the business, valuation, risks, dividend safety (it yields around 4.8%), and concludes with our opinion on investing.
Oaktree BDC: Disproportionate Sell-Off Provides a Window of Opportunity
This particular Oaktree BDC invests primarily in high-yield, first lien, liquid, middle-market debt. And even though its share price has been hit hard by the COVID-19 pandemic (as most BDCs have been), Oaktree has been positioning the portfolio and balance sheet conservatively for multiple years in anticipation of stressed market conditions (such as the current market environment), so it can not only weather the storm, but also so it has the financial wherewithal to be opportunistic when other BDCs cannot. This is also a big part of the reason OCSI recently proactively reduced its dividend—a smart thing for new investors, in our view. This report reviews the business, COVID-19 impacts, dividend prospects, valuation and risks. We conclude with our opinion about the attractiveness of this 8.0% yield BDC.
New Options Trade: Upfront Income, Frothy "Forever Stock"
There are certain blue chip stocks that are basic staples in many investors’ portfolios. These are often safe dividend payers that can be trusted to earn income (and pay dividends) throughout the market’s ups and downs. However, from time-to-time, these stocks can get a bit frothy, and the near-term upside can seem limited. This is our view on the stock covered in this report, and we are sharing an options trade that generates upfront income and adds discipline to your sell decisions. We current own these shares, and we believe this is an attractive trade to place today (and potentially over the next few trading days) as long as the price doesn’t move too dramatically before then.
Where Are the Best Opportunities Now? (Holdings and Performance Review)
In case you’ve been living under a rock, the market has been volatile this year, and income investments have performed extraordinarily poorly. To some, this is an exciting opportunity to look for undervalued gems to add to your portfolio (and we’ll share a variety of attractive opportunities in this report). But it’s also a good time to consider the dramatic ongoing changes to the way businesses operate, and to take a long hard look at where you’re going to invest your nest egg to generate the best income to support your needs going forward.
Owl Rock’s 10% Dividend: Different Than Other BDCs
The negative impacts of COVID-19 have been particularly pronounced for many Business Development Companies (“BDCs”). Owl Rock Capital Corp (ORCC) is one example where the share price has been pushed lower and the dividend yield has mathematically risen to over 10% (over 12.5% if you count the recently declared special dividend). Owl Rock’s strong liquidity position will help it whether the current storm and take on attractive new opportunities once it has addressed the most pressing liquidity needs of its existing portfolio companies. This article reviews the health of Owl Rock’s business, valuation, risks, dividend safety, and concludes with our opinion about why it may be worth considering if you are a long-term income-focused investor.
New Options Trade: High Upfront Income, Property REIT Fear
The coronavirus has created major challenges for some sectors more than others, and property REITs have been hit hard. Uncertainty has lead to fear, dramatically lower market prices, and high upfront premium income available in the options market. This report shares an attractive options trade on a compelling big-dividend REIT. We believe the this is an attractive trade to place today, and into early next week, so long as the underlying stock price doesn’t move dramatically before then.
Gladstone: Danger Ahead for this Popular 9.0% Yield BDC
If you count the recently declared ordinary and supplemental dividends, popular Business Development Company (“BDC”) Gladstone Investment Corp (GAIN) yields approximately 9.0%. And this is tempting to a lot of investors considering it pays monthly, the price is still down, and it appears to be in a strong liquidity position. However, GAIN’s portfolio of middle market companies is at risk of being negatively impacted by the coronavirus—more so than other BDCs. In this report, we analyze Gladstone’s business model, the coronavirus impacts, valuation, dividend safety and additional risks. We conclude with our opinion about investing.
Portfolio Tracker Tool Note
Forget FAANG: Top 12 Big Dividends
Some investors cannot handle the volatility and lack of income from FAANG stocks, and the Fed's near-zero interest rate policy creates challenges to income-focused investors too. Popular growth stocks are near all-time highs, while value and dividend stocks are down significantly. This report shares our Top 12 big dividends, selected from REITs, BDCs and Preferred Stocks.
Main Street Capital: Dividend Uncertain, Upside Clear
Income investors had grown to love Main Street Capital’s (MAIN) big, safe, monthly dividend so much that its share price had risen to a dramatic premium relative to its net asset value (“NAV”). Then the coronavirus hit. The share price plunged, once loved supplemental dividends have been suspended, and even the “sacred” regular dividend is now at risk. In this report, we analyze the company’s background, impacts of the coronavirus on its business, earnings power, the dividend, valuation and risks to understand whether now is the right time to establish or add to existing positions.
Ares 12% Yield: It Sticks Out Like A Sore Thumb
Ares Capital (ARCC) is a big-dividend business development company (“BDC”) that has sold off hard during the pandemic because of its exposure to small (“middle-market”) businesses (i.e. the business than have been hit particularly hard). In this article we review the business (including important sector exposures), the balance sheet liquidity (to deal with the crisis), dividend safety, valuation and risks, and then conclude with our opinion on why this particular BDC stands out like a sore thumb.
New Options Trade: High Upfront Income from International Trade Uncertainty
A lot of people believe the market is due for another leg down in the short-term. We acknowledge that risk is on the table, but no one can predict short-term market moves (if they tell you they can—just know they cannot). However, if you like generating big upfront income, that also gives you a chance to own an attractive big-dividend business at an even lower price, then you may want to consider this trade. We believe the trade highlighted in this article is an attractive one to place today, and potentially over the next few days, so long as the underlying stock price doesn’t move dramatically before then.
New Options Trade: High Upfront Income, Proactive Dividend Deferment, Saratoga Investment Corp
We are sharing a new options trade that generates high upfront premium income. Business Development Company (“BDC”) Saratoga Investment Corp (SAR) (they provide financing to small middle-market companies) was recently firing on all cylinders, but has decided to proactively defer dividend payments to shareholders as a result of the coronavirus. We believe the trade highlighted in this article is an attractive one to place today, and potentially over the next few days, so long as the underlying stock price doesn’t move dramatically before then.
Where Are The Best Opportunities Now? (Holdings and Performance Review)
If you are not exhausted from recent stock market swings—congratulations! You either have nerves of steel or you’ve been wisely “Rip-Van-Winkling” the sensationalist media pundits as a sage long-term investor should. As you can see in the chart—the market has been very volatile this year. This report highlights some of the best investment opportunities now. We also review our current holdings and recent portfolio performance.
Super Contango: Altera’s 11.9% Yield Preferred Shares to Benefit
The big yield preferred shares of Altera (formerly Teekay Offshore, until Brookfield renamed it) will benefit in the near to mid term from from oil price contango. More specifically, Altera's shuttle tanker business is enjoying significant but temporary tailwinds due to the surge in oil storage demand. Fixed term and fixed rate contracts with blue chip clients will also help protect the top line. Altera has a comfortable near-term debt maturity schedule and sufficient cash cushion to support the dividend. The broader market sell off has created an attractive buying opportunity.
Two (2) Preferred Stock CEFs: Big Monthly Income, On Sale
The preferred shares of many companies are now trading at attractively discounted prices as the COVID-19 pandemic has stoked fear among investors. And in many cases, this fear is unwarranted. One attractive way to play this opportunity is through closed-end funds (“CEFs”) that focus primarily on preferred stocks. This article highlights two compelling closed-end funds, offering big monthly income payments to investors (they yield 7.6% and 7.8%, respectively), and they’re currently trading at attractively discounted prices (thereby providing an opportunity for some price appreciation—in addition to big monthly income).
Triton Preferred Shares: Post-Pandemic Reality
Triton International (TRTN) is an intermodal shipping container company, and the big-yield common and preferred shares have been impacted dramatically by the worldwide COVID-19 pandemic. The company just released earnings, and gave us some important new insights. This report reviews the impacts of the economic slowdown on Triton’s business, its financial wherewithal (particularly cash), the competitive dynamics of the industry (and what might happen if Triton can weather the COVID-19 storm), valuation and risks. We conclude with our opinion about investing in the common (7% yield) and preferred (+9% yield) shares.
NuStar Preferreds Yield +15%: Real Risks, Big Rewards
NuStar Energy is a US based oil and natural gas midstream service provider. And despite the notion that its business is immune to energy price fluctuations (because of its long-term take or pay contracts) the recent crash in oil prices will inevitably have a significantly negative impact on NuStar because many of its customers are increasingly at risk of bankruptcy. In this report, we analyze the company’s business mix, income potential, its ability to meet financial obligations, and finally conclude with our opinion on whether the company’s common and preferred units offer an attractive balance between risks and rewards.
3 New Trades: New “Top Buys” Category Added to Portfolio Tracker Tool
We don’t trade often, however we’ve just placed three (3) new trades in our Blue Harbinger portfolios. We’ve also updated our Portfolio Tracker Tool to reflect a new “Buy Under” category called “Top Buys.” Both of these updates are based on current market conditions, and both are designed to help you manage your own investments. This report reviews the updates, including the trades and the current “Top Buys” within our existing portfolio holdings.