Today is the big day. No, not because it is the first day of the two-day FOMC meeting. Seriously, wake me when it’s over.
No, Tuesday is the big day for Excelsior Capital Partners because five of our Big Six holdings pay dividends and interest. The Tellurian Senior Notes (TELZ) that we own (a lot of TELZ, including in my personal account) pay quarterly today, and the preferreds issued by the Gladstone family of companies, Gladstone Commercial (GOODO) , (GOODN) and Gladstone Land (LANDO) , (LANDM) make their regular monthly payments today.
Really, the only one of ExCap’s Big Six fixed-income instruments that hasn’t paid us today is CorEnergy Infrastructure REIT, (CORR-A) which pays its next quarterly payment on February 28. Lest you think Elon Musk has the monopoly on strong January performance, CORR-A has risen 31% thus far in January.
So what I do with these payments is, for damn sure, to reinvest them. That’s how this game works. It’s the power of compounding.
The Fed, in my opinion, has once again unwittingly unleashed that power of compounding on the maleets. Money is not free anymore. You can get a guaranteed 4.67% return by buying and holding a 12-month UST note today. You think Tesla (TSLA) is going to rise 60% again in February, although it still sits 45% below where it was a year-ago today? Have at it. But that 1-year Treasury is an attractive alternative.
Go ahead, overpay for an asset. Just remember how much it hurt when Tesla went from a valuation of $1.2 trillion to below $400 billion. You had best be damn sure that everyone else is doing what you are doing and will continue to do so.
We don’t roll that way at ExCap. Is Exxon (XOM) a hot stock now? Blazing. Is Chevron (CVX) incredibly en fuego? Si! Have I sold a single share of either for my clients? Oh, God no.
You can see because XOM and CVX are increasing dividends and increasing share repurchase authorizations, the cash flow is there to back the strong share price performance. Tesla has never paid a dividend nor bought back a single share.
As my firm’s motto states, cash flow never lies. You would have to be a true myope — or Cathie Wood — not to see the extraordinary cash flows being generated by the major integrated oil producers. But when it comes to the smaller names, like my beloved Big Six, it takes a hell of a lot more research than just saying “gee, a $75 billion share repurchase, as CVX did, is pretty damn impressive.” It is.
But the joy is in uncovering the smaller ones and beating the hell out of the big boys and big talkers (as of third-quarter 2022 data, Cathie Wood’s (ARKK) was only the 44th-largest holder of TSLA.)
At ExCap we believe not in conversation, but action. Since we have a steady stream of cash flows from our investments — like today, for instance — we always have the capital to act on our recommendations.