The Market’s Mistaken View on Fed Rate Hikes

The consensus view of the financial markets suggests that the FOMC will next raise its target Fed Funds rate in December (by a quarter point).  Currently, the target range is 1.00%-1.25%. Fed Funds futures currently suggest (as of July 13) a 97% probability that the Fed Funds target rate will remain unchanged at its upcoming meeting on July 26. The current probability of the target rate remaining unchanged stays high until December, when the probability of a quarter-point increase rises to 49% and a half-point increase rises to 8.4%. Thus, the Fed Funds futures market does not see a better than 50% probability of any increase until December.  Most economists and market strategists echo the view of the futures market. Continue reading

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Baker Hughes Will Likely Reinstate Its Dividend

Baker Hughes and General Electric completed their merger on July 3, 2017.  Baker Hughes shareholders received $17.50 in cash and one share of new Baker Hughes stock (BHGE). Continue reading

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Five Star Senior Living Struggles to Regain Profitability

Shares of Five Star Senior Living (FVE) have performed poorly over the past two years, even underperforming FVE’s peer group, which has significantly underperformed both the health care sector and the broader market.  The industry is suffering from a slow but steady decline in occupancy due to the increasing supply of communities and slowing demand growth (for demographic, lifestyle and affordability reasons).  Investors are also concerned about the long-term impact of proposed cuts to Medicaid funding under new federal health care legislation.  FVE has struggled with declining occupancy and high lease costs under its contracts with its affiliate, Senior Housing Properties Trust (SNH).  Although management is taking decisive steps to improve the company’s competitive position and boost revenues, it is unlikely that those efforts will be sufficient near-term to reverse FVE’s operating losses. Continue reading

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An Update on National Bank of Greece (NBG)

Loan loss provisions are down sharply. Liquidity and capital measures are strong. NBG is positioned well to provide support Greece’s economic recovery. Yet, the stock trades at less than five times my estimate of pro forma EPS. Continue reading

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A Brief Update on Greece

Although the Greek economy looked like it was beginning to achieve liftoff in late 2014, its progress was set back in early 2015 by the newly-installed Tsipras administration’s effort to obtain major changes to the country’s bailout program. Greece’s compliance with the key provisions of that program was slipping even before the election, but the new administration reversed course on many reforms during renegotiations with its EU creditors. Continue reading

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Unit Corp Returns to Growth Mode

Unit Corporation is a diversified oil & gas company based in Tulsa, OK.  Founded in 1963, the company was originally a contract driller.  Over the years, it expanded into oil & gas exploration and production and mid-stream services (i.e. gathering, processing, treating and sometimes buying and selling natural gas). Continue reading

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A Quick Look at Tidewater’s Chapter 11 Plan

Tidewater, the largest publicly-traded operator of offshore vessels and marine support services for the offshore oil & gas industry filed for Chapter 11 bankruptcy proceedings on May 17, one week after announcing that it had reached agreement with creditors on a pre-packaged plan. The company provided a rough outline of the terms of the agreement in a press release, which makes it possible to glean some insights into what value it ascribed to its business and how it has allocated that value to the various claims and interests. Continue reading

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Growth vs. Value: The Story of the Market

There are many ways to slice and dice the market to gain insights into its recent performance, but perhaps the simplest and sometimes the most effective way is to look at growth vs. value. Continue reading

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Market Update–April 30, 2017

The major equity averages closed out the month of April with respectable gains ranging from 1.1%-1.4%, with the exception of the Nasdaq Composite, which rallied 2.9%. Year-to-date, the major indexes are up 6.0%-6.5%, which translates into an annualized gain of 19%. If sustained, that would be the strongest performance since 2013. Continue reading

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PSEG Dances to Stay Fit

Public Service Enterprise Group (PSEG) is a public utility holding company whose principal direct operating subsidiaries include Public Service Electric & Gas (PSE&G), which serves 2.2 million electric customers and 1.8 million gas customers along a northeast to southwest swath of the state of New Jersey. PSEG Power LLC (Power) is merchant power producer and wholesale marketer of electricity and natural gas. Continue reading

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