A Brief Update on StoneMor

StoneMor Partners, L.P. has passed a few milestones since my previous update in late September.  These accomplishments have advanced its turnaround, but more is needed including a significant rebound in its profitability before the effort can be declared a success.

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NJR Adjusts to Meet Its Challenges and Opportunities

Under new CEO Steve Westhoven, the business portfolio of New Jersey Resources (NJR) has evolved as it typically does in response to changes in its operating environment.  Its regulated utility operations, New Jersey Natural Gas (NJNG) and its Midstream segment, are increasing their contribution to NJR’s total earnings through expanded investment.  NJNG is benefiting from continued infrastructure investment and modest customer growth.  The Midstream segment is growing through acquisitions, including the pending acquisitions of Leaf River Energy Center and the Adelphia Gateway.  Growth in the regulated operations is replacing expected declining profits from New Jersey Clean Energy Ventures, which is anticipating a decline in state and federal tax benefits for renewable energy projects.

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Brightcove’s Prospects Look Brighter

A key change at Brightcove since my last post has been the turnover at the top.  In August 2017, after three consecutive quarters of earnings misses, Dave Mendels, who had served as CEO for more than four years, agreed with the Board to step down.  Andrew Feinberg, Brightcove’s COO, stepped in as interim CEO.

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Homebuilder Stocks Fall as Optimism About Global Economic Growth Rises

Homebuilding stocks have been the best performing of the 150-odd sectors in the Dow Jones U.S. Total Market Index, up 44.4% over the past 12 months as of November 8. Last year, they declined sharply in the face of Federal Reserve rate increases; but they began to show signs of a bottom in late November, just ahead of the Fed’s decision to reverse course on interest rates.

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Notes and Analysis from HPE’s 2019 Securities Analyst Meeting

At its 2019 Securities Analyst meeting (SAM) held in New York City on October 23, the senior management of Hewlett Packard Enterprise (HPE) said that the company was poised to enter the third phase of its evolution: pivoting to sustainable, profitable growth.

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SNH Still Seems Behind Goal on Asset Sales

SNH has set a goal of $900 million in announced or closed asset sales in 2019.  With more than nine months of the year gone, it has completed only $119.1 million in asset sales and has an estimated $125 million of pending sales.  Thus, total announced or closed asset sales to date are roughly $244 million, which means that the Trust must announce another $654 million of asset sales in the remaining ten weeks of the year in order to reach its target.  (If the $99 million in net proceeds that SNH received from the sale of RMR shares in July is counted toward the $900 million objective, it would have to sign up for $555 million of asset sales by the end of the year to reach its target.)

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Eliminating the RMR Discount

The five publicly-traded REITs that are managed by the RMR Group, Inc. (RMR), a Newton, Mass.-based property manager, have often traded at significant discounts to their peers. The discount has been attributed to the nature of the relationship between RMR and the REITs. RMR is an external REIT manager, which some claim raises potential conflicts of interest because the external manager can benefit at the expense of the managed REIT. For that reason, many analysts and investors prefer REITs that are internally managed, which they say better aligns the interests of management and shareholders.

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NYT Magazine Article on the Boeing 737 Max

The cover story in this week’s Sunday New York Times Magazine is “What Really Caused the Deadly Crashes of the Boeing 737 Max?“. While acknowledging that malfunctions caused the crashes, it also documents in detail the errors made by the crews of Indonesia’s Lion Air Flight 610 and Ethiopian Airlines Flight 302 that might have prevented them. It describes Lion Air’s dismal safety record and culture of corruption. It discusses the weaknesses and failures of the Maneuvering Characteristics Augmentation System (MCAS) that was incorporated in the Max to address certain design problems that can cause the aircraft to stall during takeoff. It also describes the global decline in “airmanship” – the ability of pilots to adjust intuitively to changes in aircraft performance and flight conditions – which was a contributing factor to these crashes.

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StoneMor’s Rights Offering

This week, StoneMor Partners, L.P. (STON) announced that it has set a record date of September 26, 2019 for its upcoming rights offering. Soon thereafter, once the SEC declares the registration statement to be effective, the partnership will mail a joint proxy/prospectus to unitholders. STON anticipates that the rights offering will be completed early in the 2019 fourth quarter.

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A Review of the Markopolos Report on General Electric

On August 15, 2019, Harry Markopolos, who gained fame as the person who exposed the fraud perpetrated by Bernie Madoff, released a 175-page report entitled “General Electric, A Bigger Fraud Than Enron.” GE’s stock fell 11.3% on the day; but it has since regained all that it lost after GE, security analysts and the media criticized the analysis and conclusions of the report and questioned the motivations of Mr. Markopolos, who had entered into an agreement with an unnamed hedge fund to profit from a decline in GE’s share price. Although this tempest seems to have passed, I will offer some thoughts on the content of the Markopolos report and its potential implications for investors.

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