5/10/08

Sold RAI and OSG

Reynolds American (RAI), tobacco company best known for Camel cigarettes, had a terrible earnings report at the end of April. Cigarette volumes are down generally, and sales dwindled because consumers were trading down for cheaper brands. Smokeless tobacco (Conwood) did well, but not well enough to make me happy. As cigarette volumes are expected to continue to go down, and because consumers are buying cheaper cigarettes (or maybe they're just going over to Marlboro?), it doesn't look like Reynolds will be doing well in the near future. The dividend is great, but will it stay? I'm certain they won't raise it any time soon. I regret not selling when it was in the $70s. I sold my shares for around a 10% loss (it's actually less than that because of the dividends I've received).

Overseas Shipholding Group (OSG) also gave a crappy earnings report recently. While profits and revenues were up by very healthy amounts quarter over quarter, the company missed already lowered Wall Street estimates. The stock went up anyway, because a Jefferies analyst reiterated his buy rating, setting a price target of $125 a share. (Does Jefferies want to unload some shares or short them pretty soon?) This stock has been very volatile, and has seesawed between the $50s and $70s multiple times since last summer. Now that it's back in the $80s, I sold my shares for a gain of about 17%, excluding dividends. I think it's a great company with a bright future. They've been diversifying into the liquefied natural gas transport business, which I think will do very well in the future because of the growing demand for natural gas in places like the USA. There is usually a summer rally in oil transport stocks, but I don't want to see my gain diminished if that isn't true this year. I'm looking to buy the shares back later this year for a lower price.

In the meantime I'm going to use some of my sales proceeds to open a free business checking account at Sovereign Bank. They have an offer, expiring at the end of May, that's pretty sweet. Open a new free business checking account with a $500 deposit, and they give you a $150 bonus That's a 30% gain on no risk (since it's reported to the IRS as interest, your gain will be smaller if you have to pay taxes on it--however, it doesn't take long to open a bank account. Say it takes an hour, which is doubtful. $150 an hour is not bad). If you already have a business, I suggest you check this out. If you don't have a business, it's probably not worth it, as incorporation fees will probably be higher than the bonus.