Brook Reef

Yesterday, my shares of  AT&T spun out 0.24 shares of WBD for every T share I held. I wrote an estimate of the adjusted cost basis using a logical approach - basically assuming the spinco value on Day 1 reduced my cost basis of AT&T.  (I'd purchased AT&T at $24.06 - so assumed by cost basis was 76% of that, or $17.80. The remaining $6.26 of cost-basis was applied to WBD and scaled up for the share count difference.) I learned today, after all of the dust settled and WBD shares are trading "regular way", that the cost basis of WBD is $0.00 - and my cost basis of T is unchanged. This has pretty important implications for my decision making on what to do with WBD shares. Long story short, I'm not selling in taxable accounts but plan to sell in non-taxable accounts and roll the proceeds back into AT&T. My debate on this platform is: 1) Do I treat the account as taxable? 2) Do I treat the account as non-taxable? 3) Do I continue with my adjusted cost-basis ...

I've been reading about the AT&T spin-off of their Warner Media business -- which is set to merge with Discovery. T owners will get 0.24 shares of the new "Warner Media Group" for each share of T. I believe the new company will be priced based on DISCA - which closed at $27.69 yesterday. If true, then the value of remaining AT&T is this: Price Dividend Yield T today 24.55 2.05 8.4% 0.24 DISCA shares 6.65 0.00 0.0% T - new 17.90 1.11 6.2% But what if new AT&T traded at the same dividend yield as Verizon, the closest comparison? Verizon has a 4.76% yield today. And not to give too much value to Warner/Discovery - so reducing that value by 20%. By these two somewhat offsetting adjustments, T is worth $28.64 today! A really enticing 16.6% upside!  Price Dividend Yield T - new 23.32 1.11 4.8% DISCA @ 80% 5.32 0.00 0.0% T today 28.64 2.05 7.2% Upside 16.6%

My wife came up with a plan to give herself 9 goals this month that she had to achieve each day. As is wont to happen with wives and goals, I got roped into doing 9 goals of my own. One of my goals is to write an article or blog post OR create a video on on of my YouTube channels. That's why I'm writing about such wide ranging things as how I make coffee and rental properties. My other website is a family blog, so those topics really don't fit. This is an investing blog, so only the coffee article is out of place.  Don't worry! I plan to get back to writing about stock investment ideas sometime! It's been a hectic few months. And RV internet service isn't ideal. I've also said a few hundred S&P points ago that I think stocks are overvalued. So I'm not exactly making investments behind the scenes right now.  Speaking of stock analysis - Brookfield Infrastructure Partners has agreed to buy Interpipeline Group for just over $10 billion dollars. The larg...

In the town we just moved away from, our hometown, owning rental properties never made sense to me. I couldn't make the math work. If you need to make 6-10% on an investment, I couldn't get there. Property taxes were too high. In rental real estate there's the "1% rule" which says you should be able to rent a property for 1% of its value on a monthly basis. So if you buy a $150,000 property then it should rent for $1,500 per month or more. The next "rule" is that expenses are about 0.5% per month. So that same property should see expenses of $750 per month. These expenses include property taxes and repairs. And this is where the problem came. Property taxes in our town would be about $6,000+ per year on a $150,000 property. That's $500+/month. So that would leave only $250/month for repairs and other expenses. Throw in vacancy and it's tough to break even. And in our old town, you can't get bailed out by higher property values. Our house sold...

We investors need a morning pick me up. The days of using hard drugs on Wall Street are mostly over, so the typical investor drinks a caffeinated beverage. I prefer coffee. I've gone through a litany of ways to make it and have come across the absolute best way to make a cup. Let me explain: 1) Most folks begin their coffee journey with "drip" coffee.  It's an easy way to make it! You put in the proper amount of ground beans, pour coffee into the thing, press a button, and in a few minutes you'll have a pot of joe to share. The ease of this method is unquestionable. I make it from time to time when I want a large quantity and don't care about maximizing flavor. But the downside is that flavor is not maximized. 2) Instant coffee: yuck.  Hot water and crystals that dissolve. No thanks. 3) Keurig/Nespresso: makes a decent cup, but is expensive and has so much plastic waste.  I find it too watery, overall, but not bad. I'd rather make drip coffee. 4) Espresso ...

At my prior 2 jobs, I had big restrictions on my personal trading/investing. And had to disclose all positions when I started the roles. They had ongoing surveillance of our accounts. We had to get trade approval before trading. And had a slew of rules regarding holding period and types of companies we could buy. My new job has no restrictions. No disclosure requirements. Nothing.  Because it's not at a financial institution, and I'm not doing anything with financial markets, I can invest in anything and everything! I'm quite excited to be able to invest in stuff I know well, with a paycheck, and write about it here. I've been circling around on the California utilities. They used to be the creme de la creme. Lowest yields in the utility space. Now, you can buy EIX with a 3.5-4.0% yield! That's crazy to me. Sempra is still a top pick. Even PCG looks very appealing. NEE is a tough one as well. It's probably the best positioned and best run company. But trades wit...

When I left my job at a major global bank at the end of 2016, I'd planned to retire. Possibly forever. I never thought I'd get back into the financial world - I thought I'd become a handyman, Realtor, or *maybe* a financial advisor.  We had an RV adventure. My wife went back to teaching, and I was the stay-at-home parent. For 3, nearly 4, years! With covid, we've rethunk a lot of our life choices and setups. We obviously sold our house, which meant my teacher wife had to quit her job. And she's burnt out. So it's my turn to get back to work for the family. When I started looking at job postings, the ones that caught my attention were financial, investing, and in the utilities and infrastructure world. Basically, something related to what I'd been doing before as an equity analyst, focusing personally on utilities, for a listed infrastructure mutual fund. Somewhere along the way, I decided to join a company, not a money manager. That way, my work would be mor...

 Hello and happy 2021. I've hinted at a lot of changes coming - and many of them have occurred. So let's recap: Sold house in Northern Illinois. Drove to Florida to get RV from storage. Now living in RV full-time. It might not sound like your dream, but living in an RV in Florida in the winter is pretty amazing! To be clear, I'm not destitute and out living in an RV to save money. There are big plans coming later this year - the RV just happens to be a great, non-permanent, and flexible way to fill in the next 7-10 months. I plan to get back to writing weekly notes and company deep-dives in time. For now, I'm getting settled in the RV, fixing some minor issues, and enjoying the warm sunshine in January. Hope all is well with you and you continue to chase your dreams too!

I'm thinking of ending this blog.  I've been writing every single stock market day for 7 months now. I've taken a day or two off along the way - but finding charts, sharing comments, and also providing commentary on daily news has been both fun and exhausting! I haven't performed all that well either in that time.  I fought the biggest stock market rally ever...and lost. Badly. I am down 20-30% this year in my personal account. My performance on this website - about flat since May - is pretty illustrative of my real-world performance in that time. Basically, I took the brunt of the March selloff, sold out, and missed the rally.  I am re-evaluating what to do, frankly. I've never felt this wrong. I don't think that I am wrong - and that's a problem. Look... I'm a serial starter of things like this. I've started 5+ blogs over the years. I've started a few YouTube channels and let them subside. Besides my family blog that I started in 2016 and is st...

Remember a few weeks ago when news broke that Duke Energy (DUK) rejected a takeover offer from NextEra Energy (NEE)? Well, NEE isn't going to let their overpriced stock go to waste! News came out today that NEE has approached Evergy (EVRG) about a merger. EVRG was formed in 2017-ish when Great Plains (GXP) merged with Westar (WR). The renamed the combined entity "Evergy" and changed the ticker. It's basically a pure-play Kansas utility. Mostly electric, though it does have some gas customers. It would be a great place to get a foothold and build more wind power and transmission lines - and continue to cut costs. The Kansas regulators took a pound of flesh in the WR/GXP deal and would love to get another cut in any coming deal too. NEE has one of the most expensive utility valuations and using that currency is completely logical. I took a small a position in EVRG on the news - and am surprised the stock didn't react more today. It might be a good one to buy calls o...

So I quit my Wall Street job at the end of 2016 and have been trading my own portfolio and being a stay-at-home dad since then. The volatility in March lead to me become reinvigorated with reading economic data, digging through company financials, and navigating the markets as a professional instead of a retail type. That in turn lead me to start looking for jobs. I applied to a job earlier this week at a firm that seems a little bit different from a typical, large, modern Wall Street firm. The way they describe their investing process is pretty intriguing, especially for someone like me. Let me explain. At my last stop on Wall Street, we had been moving more and more towards macro data driving all of our decisions in a systematic way. It required us analysts to build very detailed, interconnected models - with links to live data assumptions that could really swing our price targets. I fought it a bit both explicitly with the portfolio managers and implicitly in the way I built my mode...

I just listened to an amazing interview with a hedge fund manager who uses long-dated options to create "non-linear leverage" on his portfolio. He spends about 6% of his book on option premiums and has 75 positions at the moment. He expects to about break-even on the trades in a base-case scenario and win 1/10 trades - so the winners should be 10x winners to offset the losers. But if things go right, those options trades become hugely profitable for his investors. The lesson here is to use long-dated options to add juice to your book. You can buy out-of-the-money calls and puts for next to nothing. I bought some options on TLT with a $225 strike expiring in January of 2022 for $1.45 while listening to the interview. If we go to zero rates or lower, TLT will move exponentially higher. It's at $161 today - so it would need to move 40% higher in the next 15 months. And before you tell me that's crazy, TLT traded at $180 during the craziness of March. I'd guess if TLT...

Do you ever feel the urge to just trade? For not real reason other than to be active? I do. A lot. Rather than try to make real trades every single time, sometimes I trade just a share or two. Just to be active. Like today, I traded a few round trips on Tesla with one share. It's a good way to test a trade setup and your market read without risking much money. Like the odds of TSLA shooting up $10/share in a few minutes is pretty low. So worst-case, I lose $5-10. Best case, I make $5-10. But I gain knowledge and practice either way. So the next time I make a real money trade, I can have a bit more conviction - since I've been practicing the trade for a while.  Touching a certain stock every few days is also important just to follow it a bit. It helps me to sort of have a feel for how stocks trade throughout the day and week. So I also trade NVDA a few times a week in 1 share amounts. For practice.  It's fun and cheap and leads to knowledge. And my taxes will already be comp...

I'm sure you've noticed in the last few days, but I've begun to day trade a bit more. I think being able to have a feel for the market in real-time is supremely important. We can't lose sight of the big picture and the direction the market "should" go, but we also shouldn't lose touch of where the market is going  in both the medium and super-near term.  I missed the rally off of the March lows. My view for the long-term blinded me from the medium-term reality. I'm trying to better navigate the long-term, medium-term, and short-term. The spike in volatility in this selloff has created a lot of chop and stocks swing pretty widely within a day. That's an opportunity to trade! I like selling cash-secured puts as a way to bet the selloff is mostly over. It gives me downside protection while providing some sort of gain. It's safer than a short or a long. And the payoff is less because of that. I size these trades pretty big because the risk is lower...

The Nasdaq opened at a high and has since reversed. If we close down here at the lows of the day, that's called a "reversal day"...and these types of days typically signify weakness to come, not strength. We're currently at the closing levels from Friday, which should provide some support. Breaking below this level would likely mean weakness as well. However, getting back to the opening levels or higher would be bullish. The afternoon will be interesting today.

Back at my old job on Wall Street, there were lots of rules about our personal investments. We had to get approval before placing any trade. We had to use an approved broker that reported our holdings and transactions to our firm. And we had to hold any position for at least 30 days. I think that 30 day window explains why I trade so frequently now.  I got trapped in quite a few bad trades because of the 30-day period. Buy a small cap after an earnings miss, stock gets pummeled but claws it back in a few days. But I would be trapped and watch it slowly melt back down lower and lower. What should have been a great trade would often become unprofitable. Obviously, I learned how to operate within the parameters. I'd only buy stocks that I was comfortable holding "no matter what". And I learned to transact in a lot of different tickers - so that I always had something eligible to be sold and/or re-bought. We also couldn't buy back a stock after a sale for 30 days.  Even t...

At my first job, we ran some money in a separate account for an individual who had some very different investing philosophies than how we ran the mutual fund and hedge fund. We ran a pretty concentrated book at those strategies. Maxing out around 30 names in a universe of 250+. We were definitely not huggers of our benchmark. But this individual capped the number of holdings at 10 - but preferred to hold 6-8 names. We didn't care about benchmark weights or company size. We had an equal-weighting between the holdings. And the craziest thing happened: this "best ideas" portfolio outperformed our more marketable strategies! It goes to show that "diversification" is only important if you haven't done the work to be confident in your picks. But if you've done the work and have confidence, push those bets!

Just a note about Eastman Kodak (KODK) and their apparent deal to manufacture pharmaceuticals. I saw on Twitter - and verified on my trading platform - that shares of Kodak saw 30x daily volume THE DAY BEFORE the announcement that ultimately pushed shares to the moon. 30X THE DAY BEFORE If that doesn't make you livid, you're part of the problem. Clearly, someone knew the news AND ACTED before it was public. What a disgrace.

I was thinking about this in the shower today, so use that as reference for my state of mind. I've been re-reading some of my "Trade" posts. The rationale for buying or selling tends to be pretty weak. Some of the utility purchases have decent write-ups, but the rest are extremely generic and/or lacking any real insights. But that's about the amount of work most of us do in our own personal accounts. We know a few tidbits about the industry and/or company. We have a general sense for valuation. And we make a bet. Thankfully, we tend to make a lot of smaller bets. If you own 30 companies (like the Dow Jones Average) in equal weights, each one would be 3.33% of your portfolio. Even if one goes to zero, you're not going to the poor house. So long as you have a semi-diversified basket of stocks, the amount of diligence required isn't necessarily high. Especially if you don't have a benchmark or performance mandates. With all of that being said, I might ...

Back in 2017, I wrote a few articles over on SeekingAlpha.com. As it so happens, a few of them were on companies in the portfolio today: NWE:  https://seekingalpha.com/article/4036839-northwestern-corporation-growth-without-higher-bills AGR:  https://seekingalpha.com/article/4035988-avangrid-utility-renewable-power-kicker I have an article published on NiSource as well - a company I don't currently own but think very highly of. It's safe to say that I'm a buyer of NiSource at some point. I wrote the article calling NI fairly valued at $21-22..back in 2017. With shares back to $23-24, don't be surprised to see a purchase in the not-too-distant future. These articles are all pretty dated - written back in 2017. But they're still mostly relevant and are a good starting point for understanding the stories if you're new to these companies. Anything I've written on is fair to assume is a favorite company - if shares are cheap enough. Look, investing is...