by Travis Johnson, Stock Gumshoe | October 18, 2019 6:20 pm
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I thought OPI’s dividend was for close on 10/28 vs. 10/25 – so just posting this as a consideration. If I’m incorrect please let me know. Thanks for all your effort.
I believe 10/28 is the record date, but 10/25 is the day that it begins trading without rights to that next dividend (after you buy a stock, it takes a couple days for you to actually become the owner of record). The money actually hits your account a few weeks later.
Travis, any updates on IIPR?
Nothing new this week that changed my thinking.
Just wanted to say thanks for the heads up on WGO — I’ve enjoyed the short-term pop on that one.
Just a question related to opi or any larger div bases stock in general and moving out of your position. Do you typically take into account the xdiv date in liquidating the position? Or.. Is it basically not relevant as it would be factored in out of the original value/price you targeted. Thanks for the education..
I do keep an eye on it if I consider a stock to be “in play” to buy or sell for my portfolio, just because the stock should drop by the amount of the dividend on the ex-div day… though I try not to overthink that point, because with sustainable dividends (I’d put OPI into that category), the drop is usually recovered within a few days (sometimes immediately).
Earnings dates are generally more important to me when judging the risk of buying or selling in the near term, since what the company says about current operations and their forecast has a much larger impact on the share price than any quarter’s given dividend payment.
NOK tanks in Europe, biggest drop since 1991 🙁
Trade Note: Taking Losses
Rough day today in the Real Money Portfolio, as shockingly weak forecasts from Nokia took 20%+ out of that stock and my hedged short in Tesla ran almost as far against me. Both are being cleared from the portfolio today as I take losses, with the primary consolation being that at least these are both held in taxable accounts so the losses won’t be entirely wasted.
I’m not shocked at Tesla, it’s a sentiment-driven story and sentiment turned dramatically positive because they posted a surprise profit and Elon Musk hasn’t done anything destructive lately — the chance that it could rise 20-30% overnight at any given moment is why I hedged that short position instead of just counting on a “stop loss” for the short, and the hedge did its job and kept my overall loss on the position at a little under 20%.
I am shocked at Nokia. This is a company that showed every sign — including through last quarter — of being in an upswing in earnings, with 5G investment by telecoms bringing a boost to high-margin new-product revenues late in 2019 and throughout 2020 and into the future, and with most of the other “infrastructure” players in this sector (Ericsson and Crown Castle recently) consistently reiterating their optimism about order flow. The announcement made this morning, however, was a return to the “old Nokia” of cost overruns, margin pressures, a lack of visibility on earnings despite tight customer relationships, and a need to invest more heavily than they thought into building that 5G business.
The numbers are dramatic, considering that the company was reiterating its guidance just a few months ago — they have reduced their 2019 earnings guidance by at least 20% (new range is 18-24 euro cents in earnings per share, had been 25-29 cents), and, perhaps more importantly, they dramatically cut their guidance for 2020 (guiding for 20-30 euro cents, down from 37-42 cents, so that’s almost a 40% cut in expectations at the middle of the range).
And as a final nail in the coffin, they also sent a terrible signal of distress by canceling (“suspending”, they say) the dividend for the rest of the year. European companies do not consider the steady/rising dividend as sacrosanct as US companies typically do, but Nokia had spent the past year telegraphing that the dividend was a priority and that they were determined to grow the dividend. That turnaround signals to me that they’re actually worried about being in a cash crunch. The valuation is obviously more appealing now, if they hit the midrange of their 2020 forecast that’s US$0.28 in earnings so the forward PE at $4 a share would be only about 14… but it’s hard to have any confidence at all in this company after that abrupt change. I’ll keep an eye on things at Nokia, but from the sideline now.
I’ll go into both of these decisions a bit more thoroughly tomorrow, but I sold Nokia this morning and closed my hedged short position in Tesla, with an average loss of a little over 20% for the two names.
Scary but Nok hopefully is a better takeover candidate now.
I can’t imagine that the Finnish government would allow Nokia to be taken over, but you never know.
I’ve been working as a contractor for Nokia for the past 3 years plus on the Honolulu Rail project, They are taking a beating on this one and probably losing a ton of money. Management is constantly changing and each change causes new setbacks both on the customer side and the Nokia side. They have downsized the staff moved to new facilities with less space, tossing a ton of equipment ( mostly outdated) in the trash. Its seems very disorganized in everything they attempt to do.
Travis, your exit of the NOK position would suggest you see further weakness in their stock, even after this 24% drop from today. Can you share those reasoning in tomorrows write up? I’m also 20+% in the red with NOK, but am thinking of riding it out and see that 20+% to recover hopefully within a year time. So I’m really interested in your thoughts if further weakness is presumed from their guidance today.
My assessment of the risk that they won’t meet their forecast (even their dramatically reduced forecast) has certainly changed. Will follow up with some more detail tomorrow.
Be interesting to see, in light of their reiteration of guidance a while ago, if any officers unloaded shares.
It seems that I’m in good company with NOK. In at $5.34 in April, Sold 3/4 of position at $3.90 this morning. I’ll hold onto the remaining 1/4 position in case they can turn things around in a year or two.
I’ve read Travis’s brief analysis and think I will sell, as recovery is now uncertain. Also the dividend is gone.
There are many tech stocks that are growing at a fast pace, yet have fallen recently by 25% or more because of overvaluation. Large telecoms manufacturers have been in trouble before, and share prices often stabilised after initial drops, only to keep on dropping as bad news kept appearing.
I don’t own Nokia (but I do Ericsson) yet I think there is more juice in it: 5G spectrum licenses haven’t been awarded in Europe and EU’s cybersecurity risk assessment (released on OCT-9th) is emphasizing the security risks and their salience in making 5G related decisions and, given that there are only two non-chinese global vendors left…also, companies that could fill in the gaps in network security would be clear winners
https://ec.europa.eu/digital-single-market/en/news/eu-wide-coordinated-risk-assessment-5g-networks-security
This is a tough one – as I see it Nokia has two very good businesses, Software and licensing, and one really bad business, network/telecom equipment, which has always been a bad business. The hope would be as 5G margins lift it eventually becomes a merely mediocre business. I think the stock is roughly worth the software and licensing businesses alone and you get the crappy equipment business for free. I do worry though that software and equipment are linked at the hip, so to speak, so that it’s a mistake to view them independently. Also not sure how lumpy software might end up being.
I don’t agree Travis with your comment around liquidity, unless I’m missing something. They indicated they would finish the year with net cash of $1.5 bil roughly, they have an overfunded pension, and they expect to generate cash next year. My take is that given some of the horrible business cycles in the past, they are just very conservative around the balance sheet. But maybe I’m missing something – what are you seeing aside from the dividend cut that would suggest balance sheet concerns?
I wouldn’t think that they should have serious balance sheet concerns, but the abrupt cessation of the dividend signals a cash problem and a lack of confidence in the future cash flow. You might be right that this is just warranted conservatism, but shifting from aggressive “we’re planning to grow the dividend” posturing to a conservative “dividend is suspended” alert in the course of a couple quarters is a red flag. I didn’t mean to suggest they’re going bankrupt or have to raise cash, that’s not the case, just that they signaled a cash problem and more tough times ahead (whether they meant to or not).