Some Weeks Simply Suck

Sometimes you have a week that simply sucks—the week where the nervous nellies sell the hell out of one of your holdings and a number of other issues you hold announce secondary offerings.  This has been one of those weeks.

1st off we hold Escalera Resources preferred shares (ticker:ESCRP). Escalera is a small natural gas company and has always been a dicey holding and as such we watch the financials very closely.  The company has shown large losses, but is cash flow positive.  As happens with companies like this it only takes 1 seller to whisper ‘dividend suspension’ and all the weak holders bail out.  We believe the fears are overblown based upon financials just released 6 days ago.  The company has generated $5.6 million dollars in free cash this year and $1.5 million last quarter and we believe there is little danger of dividend suspension–but who knows for absolute certainty.  We shall see as they normally announce the preferred dividend declaration around December 10th.  We will be holding this issue.

2nd we had 2 issues announced offerings.  Oxford Land Capital announced they were selling more shares of their 8.125% term preferred (ticker:OXLCN) and shares took a 50 cent hit today.  Additionally Independence Realty Trust (ticker:IRT)–our favorite little apartment REIT announced an offering of common shares.  It is guaranteed that these small, newer REITs will have a constant stream of offerings–they simply can’t generate enough FFO to be able to expand through building acquisition.  These shares took a 49 cent haircut today–a 5% decline.   Both of these holdings are significant portfolio positions so we lost a few dollars this week.  We have NO intention of selling these and we fully expect they will bounce back just fine in the weeks ahead.  There is no change in fundamentals in these companies (of any magnitude)–thus we hold.

These shares cost us about 3/10th of a percent in the portfolio–but this is minor in the big picture and we accept that these fluctuations will happen.