Market Overview:
Alright, we are seeing a bit of a bumpy start today. The Dow is down about 155 points, S&P 500 off by nearly a full percentage point, and the Nasdaq is down about 1.7%. But hey, do not panic. We have been riding easy since that Fed rate cut, so a little backing and filling is normal.
Now, there is a lot of noise out there about the port strikes on the East Coast and Gulf of Mexico. Yeah, it is a big deal, affecting everything from your fruits and veggies to car parts. But here is the thing – do not make any knee-jerk portfolio moves because of this. The time to position for this kind of stuff was weeks and months ago, and it had nothing to do with port difficulties. It is all about the quality of the businesses we are buying.
Energy Sector: Our Favorite Plays
Let us talk energy. With the Middle East tensions, crude oil is spiking a bit. But look at the chart, folks. It is still in a downtrend. Natural gas, though? That is where the real action is. The demand picture is crazy strong, and one of these days, we are going to see a breakout that does not fail.
This is fantastic for our big energy positions. Take Coterra Energy and Devon Energy. These guys are trading at bargain basement prices with fantastic shareholder return policies. We are talking dividends, buybacks, paying down debt – everything you want to see a company do with cash flows. With Coterra at 7.5 times earnings and Devon at 9 times anticipated earnings, plus those juicy dividends? That is the kind of setup we love.
Let us roll up our sleeves and really dig into these three companies that I think deserve a spot in your portfolio. Remember, we are all about value, dividends, and sleeping well at night.
Ladder Capital (LADR)
Alright, let us start with Ladder Capital. This is a commercial real estate investment trust (REIT) that has been flying under the radar, and that is exactly where we like them.
Key Points:
Dividend Yield: We are looking at an 8.1% dividend yield. That is not just high, it is sustainable.
Valuation: Trading below book value. That is like buying dollar bills for 80 cents.
Portfolio Composition:
17% in office properties (I know, I know, but hang on)
65% loan-to-value ratio
71% Class A properties
64% new acquisition deals to well-financed borrowers
Why We Love It:
Ladder has been smart, guys. They have been building liquidity and decreasing leverage. It is like they are the guy at the party who stayed sober – now they are in prime position to drive everyone home and be the hero.
They have extended loan maturities to about a year and a half across the portfolio. No construction loans – that is key. And their property portfolio? It is mostly triple net lease, single-tenant stuff. We are talking Walgreens, BJ’s Warehouse, Dollar General. Sleep-tight, collect-the-rent kind of tenants.
Franklin BSP Realty Trust (FBRT)
Next up, Franklin BSP. This is another REIT, but with a different flavor.
Key Points:
Dividend Yield: Hold onto your hats – 11.07% dividend yield.
Portfolio Focus: 75% in multifamily loans. This is huge.
Loan Quality: 63.4% average loan-to-value. That is conservative, folks.
Why We Are Bullish:
Multifamily is where it is at. Everyone was scared about overbuilding, but guess what? Everything filled up. You have got a whole generation that cannot afford houses, so they are renting.
Franklin BSP is primarily a lender, and that is a sweet spot right now. They are in a position to provide debt capital when others cannot or will not. And with the way things are going in real estate, being a lender with cash is like being the only guy with an umbrella when it starts to rain.
Western Union (WU)
Last but not least, let us talk about Western Union. Yeah, I know, sounds as exciting as watching paint dry, right? But boring can be beautiful in investing.
Key Points:
Dividend Yield: 8.1% dividend yield, easily covered by profits and cash flows.
Valuation: Trading at 7.5 times free cash flow. That is cheap, folks.
Market Position: Best network of payment facilities and locations globally.
Why It Is a Buy:
Western Union is like that old truck that just keeps running. Everyone is talking about fancy new fintech, but guess what? Immigrants all over the world still use Western Union to send money home.
The company is begging to be taken over. Less than $4 billion in market cap, over $4 billion in revenues. It is dirt cheap. Until something happens – whether it is a takeover or a turnaround – we are happy to collect that fat dividend.
Bottom Line
Here is the deal, guys. These companies are not sexy. They are not going to be the talk of your next cocktail party. But they are solid businesses, trading at bargain prices, paying us handsomely while we wait for the market to wake up.
Remember, we are not looking for home runs here. We are looking for steady singles and doubles that add up over time. Keep collecting those dividends, and before you know it, you will be the one smiling at the bank.
Have a fantastic week, guys. We will talk again soon.