Common Stocks Take a Tumble While Income Issues Shine

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The DJIA and S&P took a bit of a tumble today, but they remain only 3% off of all time highs. Today the heavier industrial stocks accounted for a large share of the fall with large tech (MSFT in particular) contributing most of the rest.  With some shares such as Caterpiller off about 30% of their 52 week highs you have to wonder if it is a buying opportunity or if there is some more pain to come. We don’t have to wonder much whether they have based since we buy so few common stocks that while we look to them to maybe help forecast the future a bit we won’t be buying many of them.

Income issues performed perfectly today–I was pretty surprised that with a near 300 point down DOW day the REITs marched higher–the strength in this sector has been northing less than amazing.  With this amazing performance we will reduce holdings in 3 REIT issues in the 2014 Model Income – Blended Income portfolio. With this type of relative strength there is no reason to think they will turn lower (what goes up usually continues to go up), but it is prudent to sell 35% of our holdings in Stag Industrial (ticker:STAG), Physicians Medical Trust (ticker:DOC) and Hospital Trust of American (ticker:HTA). Each of these is up by over 30% in the last year so we will book some profits and remain exposed enough to capture some further gains if they occur.

MLP’s moved higher today as they seem to reaction to different whispers  (whisper–maybe the Saudi’s are going to cut). There is no fundamental reason for them to move higher now, but certainly rig counts are moving in the right direction (lower) as Bakken active rigs are down to 154 today which is 20% below a year ago. Additionally some ‘stripper’ wells are being shut in–many strippers produce so much salt water that the cost to dispose of the water far outweighs the revenue produced.  


BDC’s even held their own today–it’s about time! They have performed so poorly in the last year we began to question whether they are reasonable holdings for an income investor. Of course that is really what our models are about—finding out how variously sectors perform in differing markets. We hold a small amount of BDC’s in our personal accounts–and they have done lousy as well.

Preferreds and ETD did their normal up a little routine–then a little more and a little more–we can handle that type of slow drip up.

All models were positive today as were our personal accounts.

For tomorrow we will be anxious to see the weekly release of oil inventories–it will send the E&P’s either up or down we suspect. Also we note tonight that the Dow and S&P are barely reacting to the blow-out earnings from Apple late today, although as expected NASDAQ futures are up a bunch.  Certainly we will probably continue our exciting markets.


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Tim McPartland

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Tim McPartland
Tim McPartland is a private investor with over 45 years of investing experience. His analysis, research and writing is devoted to the hunt for income producing securities of all types, but in particular specializing in preferred stocks, exchange traded debt and Master Limited Partnerships.
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