Friday Edition- More Insiders

I was thinking about what I should write about this morning over my coffee. My core instinct was to send a two-word edition of eh Friday note that just said: "Do nothing."

Markets have rallied straight up since last March. The Fed's immediate intercession into the markets probably helped hold off a 1930s style depression, and stocks rallied very quickly in reasons. Jerome Powell compared the Fed's to the financial equivalent of the Dunkirk evacuation in World War II, and I think that's an appropriate analogy.

Stocks have gone on to rally to new highs based on the Fed's aggressive stance and accelerated when it became evident that we would have a vaccine by the end of 2020.

I am not a fan of chasing markets higher, but as Peter Cundill once reminded us, there is always something to do if you look hard enough.

After a quick refill of the go juice, I ran a simple screen (using the outstanding insider tools offered by good friend Jonathan Moreland at that looked for companies with solid insider buying in the past week that had dividend yields over 6%.

As one might expect, I did not find many names, but the ones I did find are really interesting. I would probably wait for some sort of pullback to be a buyer, but that just because I am pretty rigid about buying on down days.

BlackRock Science and Technology Trust II (BSTZ) is a closed-end fund that invests in the absolute hottest tech stocks. Top holdings include (TSLA), Square (SQ), Twilio (TWLO), and Snap (SNAP), and a bunch of other cutting-edge tech stocks.

The fund cans also put up to 15% into private companies hoping to ride on to an IPO wave. Right now, about 15% of the fund is invested in venture companies in all the hottest sectors like artificial intelligence, driverless cars, fintech, and EdTech.

They had one company make it to IPO status in the fourth quarter of 2020 as artificial intelligence company, Inc. (AI) had an IPO. The shares more than tripled from the IPO price before cooling down. BlackRock Science and Technology invested in the company as a venture investment in 20219, so the fund has enormous gains in the stock.

The fund was up over 90% last year but has cooled down a bit in 2021 as the shares are flat so far.

The funds popularity has faded, and it now trades at a 12.6% discount to the net asset value.

The fund managers are also selling options aggressively against the stocks.

Using option premiums and short-term gains, the fund pays a monthly dividend that is currently over 6%.

If you are super excited about tech stocks and venture capital investments in hot sectors, you should buy this fund right now. You get leading innovative tech stocks at more than 12% off the actual price, and you get paid cash every month that can be reinvested in more shares.

I am not a hot stocks guy, but this will move onto m,y "buy some when the market is crappy and everybody hates tech" list.

Here is a big story for you. It is almost "stop the presses" type stuff. Catherine Wood, the founder of Ark Investment and the poster person for the innovation-themed, valuation be damned tech stock cult bought shares of a company this week where she is a director.

It is not a tech company.

It is a commercial mortgage REIT.

Back in July of 2020, she was added to the board of NextPoint Real Estate Finance (NREF).

Earlier this week, she bought some more shares n the REIT for right around the current price.

NextPoint originates, structures, and invests in commercial real estate loans and multifamily housing mortgage-backed securities.

Right now, the portfolio is 100% in either single-family rental or multifamily loans.

The shares trade for a little less than book value and yield a little e over 10% right now. The dividend was just raised by over 18%.

100% of NextPoint's loans are current right now. Even if someone does fall behind, the loan to value ratio is less than 70%, so they should have no difficulty recouping all their cash in the unlikely event of a default.

The shares have recovered off the lows but are still below the January 2020 $19 IPO price.

The Queen of tech is investing in mortgages, and it could be a good idea for us to do the same.

I think you can be a buyer of NextPoint, but I am stubborn. Try to buy on a down day.

Posted to The Community Bank Investor… on Mar 26, 2021 — 1:03 PM
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