Anthony Speciale Stock Market Analyst

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Your Weekly Watchlist for July 26th

Speaker 1 (00:00):

Hi everyone. I’m Tim Melvin. And we’re back again with a better way to wealth. Now, yesterday, I talked to you about the day dangers of buying stocks that are not earning their dividends. You know, high dividend could be fantastic idea. I love dividends as much as anybody you’ll ever meet in your lifetime, but if a company is not covering its dividend, they’re actually destroying wealth. They’re sending valuable assets back to you without generating enough cash to justify the payments usually leads to very poor long-term stock returns. So today I’m going to give you a couple of picks that right now are just not earning their dividend. This first one almost makes me sad to tell you about, because you know, it’s this Apollo commercial real estate financing. It’s a real estate investment trust that does commercial real estate mortgages. And it’s managed by an affiliate of Pollo.

Speaker 1 (00:56):

One of the leading private equity and real estate investors in the world. I have owned this before. It’s been very kind to me to say the least, and it’s sitting there and it’s paying a very attractive 9% dividend who wouldn’t like that in this environment. The problem is we are, oh no, that’s commercial. Real estates has been kind of pushed around by the COVID 19 pandemic. And certain segments have been slower to come back than others. Apollo has huge exposure to both the hotel and the office markets. And we still don’t know what the office market is going look like. Cause we’re just at the very early stages of people coming back to work in the major cities across the United States. So they’re not going to cover the dividend with earnings this year and it’s going to be really close next year. If in fact we do get any sort of disruption from the current little mini explosion in COVID cases, we’re seeing that could get worse and you’ll have a second year of not covering the dividends.

Speaker 1 (02:02):

And at that point, they’re either going to have to continue destroying value in the portfolio, which I find it really hard, hard to believe that Apollo is going to do since they have such a great value creation track record, that folks will mean they’re going to have to cut the dividend. And as we talked about, if you cut the dividend on a REIT, that’s heavily owned by retail investors, the stock is going to get absolutely bland. So until they start earning that dividend again, you have to stay away from what used to be one of my favorite words. That’s Apollo commercial real estate. The symbol, there is ARR no iron mountain is another REIT. The symbol here is I R M and this company has a moral lock on the long-term storage of paper documents. They have document storage centers all over well, the United States, they have a massive market share, which creates a massive that paper storage market.

Speaker 1 (03:01):

They’re not going to grow that business very fast. It’s going to be stable, but it’s going to start to decline because guess what? We don’t use paper anymore, right? Everything’s online. It’s in the cloud and iron mountain is trying to transfer. They’re opening some data, some data centers to provide cloud storage and in cloud computing to their customers. But they’re way, way behind. There’s no way in the short term, they’re going to grow fast enough to generate substantial growth in the cash flows coming through the companies. Now look, the dividend per shares, $2 and 47 cents cashflow right now for this region only a dollar 64 cents a share. So the question is, where’s it coming from? It’s coming by kind of sending us our own money back. It’s destroying the value of the corporation. And frankly, I don’t think that it’s very sustainable unless they all of a sudden explode in the data center business.

Speaker 1 (03:59):

And I don’t know if you’ve noticed folks, but everybody and their brothers in the data center business right now. And there’s other rates that are way ahead of them. I think that this is a solid rate. I think they’ll get it all figured out, but until they start earning their dividend or cut the dividend iron mountain, I will say that is one that if they cut the dividend to below a dollar 64 cents a share in the resulting aftermath and carnage, that will almost surely happen with the stock price. I would probably be a buyer because that they are going to eventually get the data center business, right. And that long-term paper storage business. It’s going to decline, but it’s going to decline very slowly. They will generate cash for a long time. Can’t buy into a dividend cut though. So that’s iron mountain IRM. Now this next one, NVC, this one just doesn’t really.

Speaker 1 (04:50):

You make any sense to me at all? Let me just check something here. Real quick this morning to see the price of this thing, what has been done? Okay. MBE corporations train up rest $76 a share. Now that makes something called Spintronics and they use electron spin to acquire a store and transmit information, kind of a cool company, I guess it’s used in robotics. It helps you know, control units, talk with robots in the factory and different parts of the automated factory. It’s used in to communicate with implanted medical devices. So they’ve got a cool products, all kinds of usage could be fairly good growing market, right? However, there $4 a share annual dividend, real nice 5% dividend. You guys, they haven’t ever earned $4 and then you will cash flow. It’s a cash flows, you know, substantially less than that.

Speaker 1 (05:53):

So I think they’re paying this out to attract investors. I don’t really, but at some point you’d have to recognize they’ve been destroying the value of the equity. And in fact, the equity value since 2015 has gone from 108 million down to just 70 million. And it’s a lot of it is fat. They’re paying out cash. They’re not bringing in, in the form of dividends. Again, you gotta, it’s a, it’s a cool story. Some people seem to like the stock as they’ve been building it up this year. Eventually you have to recognize they’re destroying value by paying out cash. That’s not coming in or they have to cut the dividend. So again, NVE corporation, symbols and VEC. You just simply have to stay away from it because they’re not earning the cash to pay the dividend. Anyway, that’s just three examples that you can look at right now of companies that are not earning their dividend.

Speaker 1 (06:49):

Anytime somebody pitches you a dividend story, you need to go back. Look at the last couple of years of financial statements. That’s really easy to do today with the internet. There’s that information’s everywhere. And just take a look. Are they earning the dividend? Is it a temporary situation where maybe they’ll start earning the dividend again? If the answer to these questions is no guys, I don’t care how good the story is, how high the dividend is. You simply cannot buy the stock. So anyway, I’m Tim Melvin, that’s, today’s better way to wealth. And I will talk to you later. Thanks for watching

Speaker 2 (07:23):

Tight, very tight. Very good. You kept the eye on the camera. Very good, John. The the the, the mystery is that he couldn’t get out of a meeting. He says, let me see if I can wrap it up very quickly so we can either talk about tray recipes or if you did have a list. Yeah, yeah. Let’s do it. Okay. let me get you, and when you’re ready.

Speaker 1 (08:04):

Hi guys, I’m Tim Melvin, welcome back to a better way for wealth. And today I’m going to give you an idea of some of the stocks I’m watching that could have some big news or events breaking that could move the stock to the point where we either want to sell it or buy it one or the other. I think we’ve got some very cool stocks to look at this week. The first one is equity Commonwealth. Now this is a read it’s real estate investment trust that when I first got involved in it, you know, years ago, I think 2014 or 15 they were very poorly managed real estate investment trusts, and they had office properties all over the United States, primarily in suburban office markets. Now, some activists got involved and said, look, you guys aren’t generating anywhere near as much cash as you should.

Speaker 1 (08:48):

The properties that you have are not great, but your share price doesn’t even reflect that lower value. They bought, they forced out the board. It was a cashless takeover. Basically they won the vote, got all their nominees elected at the reach annual meeting. And they brought in Sam Zell and his team to run equity Commonwealth. Now, Zell is a brilliant investor. Okay. He’s made a fortune in real estate. He’s a billionaire Zell and his team came in and they have since then liquidated all but eight of the properties that equity Commonwealth owns, they’re sitting there. They’ve used the cash. They paid us some special dividends. They bought back a lot of stock, but guys, they still have about $3 billion in cash on the books. They recently made an offer for Monmouth real estate, symbols, M N R. Now Monmouth folks owns warehouses.

Speaker 1 (09:44):

They own freestanding industrial properties, their tenant, let us this FedEx it’s Coca-Cola home Depot, Alta beauty. They’re all using these as regional distribution centers beam Suntory the makers of Jim beam and maker’s mark also is a big user intended to there. So at least I’m helping the company develop some cashflow in my own small way. That Coca-Cola is a customer. So it’s properties all over the United States, but with a concentration in the Southeast markets, because they quite correctly determined a few years ago that once the Panama canal was widened, there would be a lot more need for warehouses and storage space in the lower end of the east coast. They’ve got a lot of properties there. Now. Zillow has made an offer to buy Monmouth real estate. His offer is 1842 in stock. I love the fact that he’s making a stock offer from Monmouth, and I’ll get to that a little bit more in second, but Barry, Sternlicht the Starwood capital. Also a wildly successful real estate investor has come in and made an all cash offer for $19 and 51 cents. And they’re pushing star wood to accept it. [inaudible]

Speaker 1 (10:58):

As well as needs for you to cut it. Don’t cut it out, man. If mom was bored except Starwood’s offer, okay, I’ll congratulate very sternly, but I’ll probably, you know, tripping him the next time I seen him at one of the Reed investment conferences or something because I really want the Zelle offer to go through. The reason is we’ve got a portfolio here that’s a 121 fully leased properties generating about a hundred million dollars a year in cashflow. Add that in. Remember, Zell’s going to buy this for stock, not history, billion dollars in cash. He’s still gonna have the $3 billion of cash, which he can probably lever safely 10 times to buy more real estate. And he’s got that a hundred million of cashflow coming in the door to also help grow the company. And he’s going to expand it in those key industrial real estate markets.

Speaker 1 (11:54):

Now remember industrial real estate. Real estate is e-commerce is supply chain. It’s going to be a rapidly growing segment of the real estate market. And Monmouth is already a fantastic collection of assets. But if we get this with Zelle and all that other cash to keep expanding this thing, this is going to be a home run of a real estate investment trust. So watching that, looking to see what happens with the offer, if they do not take Starwood’s offer, probably going to suggest to our paid subscribers, that they immediately jump in and get involved in Monmouth real estate. Again, symbol here is MNR. Now there’s a really cool spinoff happening this this next week. XPO logistics is very large logistics and trucking company. And the problem is they’re really good at both aspects of this business, but it’s hard to add all that up and figure out exactly what it’s worth.

Speaker 1 (12:50):

So they are spinning off their GXO division is going to be the biggest pure play logistics company in the United States. They’re going to bring AI automation to, to factories and just supply chain to make it more efficient to your try, hopefully to avoid some of the issues we had in 2020 with the supply chain that are still being very slow to heal. I might add they’re going to build digital warehouses and their process of doing this already. That they’re going to run in conjunction with their partners, being the tenants as almost think tanks for future development and automation of the United States supply chain. So they’re going to be spinning off that division. You look, this is all about moving stuff from point a to point B, but if you use food, e-commerce you know, distilled products, brewers, electronics, you buy stuff at airport retailers, you interact with this company almost every day without realizing it.

Speaker 1 (13:54):

Now it’s going to be spun off. It’s going to start trading on the 2nd of August. So just about everything that is shipped, it’s not from Amazon. If you’re doing business with Nike Disney, Pepsi, apple, any of these big corporations, it’s being routed along the supply chain by GXL, there’s a chance that it’s going be in a truck owned by what’s left of XPO, because they’re now going to be the LAR third largest LTL pure-play truck trucking company in the United States. When we see spin-offs either the parent or the spun off a new child of a corporation, we’ll often see retail and institutional selling, wherever part of that company doesn’t fit in with their original purchase. Reason is probably going to see some selling. I like both, both halves of this, one of themselves off, down to a decent price. We’re probably going to be buyers.

Speaker 1 (14:52):

We’re really excited about the spinoff. And at some point we’re really hoping GXO just gets absolutely blasted because we want to come in and buy stock. So anyway, symbols XPO, the spin off should be GXO and that should be happening later this week, really interested in this, in this spinoff, as I said, the next one up is an old friend territorial bank Corp. Yeah, TB and K, they’re going to go ahead and report earnings on Chu. Tuesday analyst are expecting 43 cents a share. Now here’s my inner vulture coming out, really hoping territorial misses earnings. And we see some selling to push the stock low. Now, why would I wish that on anybody? Well, ah, it’s currently trading at about 96% of book value and I by the bank at under 90%, no book value. So I just needed to fall from 26 down to under 22 on some panicky earnings related selling, and I’ll get my chance to do that.

Speaker 1 (15:52):

And here’s how I want to do that. There’s only eight banks in Hawaiian. Territorial is one of them. They’re the fifth largest 274 branches and about $2 billion in assets, territorial bank Corp, as it sits right now is a very tempting take over target for any bank that wants to be active in the Hawaiian markets. We just had a Hawaiian bank take it over earlier this year by a Los Angeles based bank that wanted to be in the market. There’s lots of west coast banks that would love to be into the very strong Hawaiian banking market. And territorial is going to be a fantastic target for them. So I’m watching this very closely because I have great hopes that TBN K will miss earnings. We’ll see some selling and I’ll be able to buy shares of the bank at the price I want to pay. I know a little bit of altruistic, but that’s just

Speaker 3 (16:46):

How it goes.

Speaker 1 (16:48):

Now. We’ve also got what’s known as an unlock coming up, and that means to sheriffs that were held by insiders and an IPO. And now I’m going to be available to tray and Bumble. BNB L is a dating app and it’s a unique dating app because contact can only be initiated by women. So they’re much more comfortable with this app than they are with some of the other ones I’m told it’s a Blackstone portfolio company. So they’ve got an exploration of 71% of the stock. The lockup was 71% of the stock. We could see some Sally coming into this stock later in the week, that’s about 137 million shares that are now going to be available for sale. Not sure we’ll get a lot of selling, but if we do keep your eyes out guys, because Blackstone is still the largest shareholder in this company, highly unlikely.

Speaker 1 (17:42):

They’re going to be selling into the lockup. They need the price of this stock a lot higher than it is now, so they can sell it down the road in another offering and collect 80% of all the games in the stock. So they obviously don’t have an interest in selling at this point. We’re going to be watching it carefully. If we get a selling wave, we could be interested in picking up shares and investing in this dating app, right alongside one of the most successful private equity firms in history. And that’s excellent. Finally, the symbol here is a F I B acutus medical, Oregon MedAdvisor [inaudible] is an investment firm that specializes in medical stocks and they just came in and bought another $14.9 million of this stock this week company mixed tools for catheter based surgeries, stance, imaging, capsules, and they also supply all the algorithms and software that make these products work.

Speaker 1 (18:37):

Now, order Matt already owns about 5 million shares of this next for them to come in and put a whole bunch more money into the stock at $14, a share is a very bullish statement about what they expect to see going down the road, right? Anytime we see these large purchases of far smaller cap, medical supply companies, medical technology companies, or even biotech companies, we get real interested. They know more about the future of the company that we do. And if there’s some sort of breakthrough or big contract, this stock could leap a lot higher. So we’re going to be keeping an eye on acutus medical as well. Well, this insider buying could turn out to be quite bullish for the stock. We’ll see how it plays out. So there’s a few things that I’m looking at going into the week. We’re going to keep our eye on those. If there’s something happens that makes us want to buy or sell any of these will we get that right? It would have to paid subscribers just as quickly as possible, but you might want to keep your eye on them as well. No, I’m from Melbourne. That’s a better way for wealth. Thank you for watching.