Preferred Stock Investing-The Good , The Bad and The In Between 2015 - 2020

[Mulligan]

Ken, unless you got it at a very special price, GWSVP has pretty much been a negative YTC for years on end.

 

[brokrken]

Ken, unless you got it at a very special price, GWSVP has pretty much been a negative YTC for years on end.

Good point, it was callable 10 years before I bought it. And no my price isn't so special. I'm in at $26.40

 

[Mulligan]

Yes, you are like me now Ken...A negative YTC holder! See its not so painful is it? Provided it doesnt get called, lol...

 

[Mulligan]

Got ahold of Vanguard rep to exercise my rights to GDL-C today...Sold off half my NSS at 25.42...Something isnt right here with NS as the preferreds and common are just trading horribly. NSS has been holding pretty strong and I sold at a profit. But if there is something wrong NSS could tumble more also due to ultimately its relative thin extra layer of protections
over the preferreds.

 

[bobandsherry]

I had seen NSS dropping today by 1%, seemed to be just re-calibrating based on it's recent run-up. I then looked at NS which dropped by over 2%. Then saw that NS preferred's and saw A and B was down by over 4% and C was near 3%. Had me wondering what's up as well. News on NS rating affirmed as BB, but outlook downgraded to Negative due to liquidity concerns probably sent people running for the doors. I was considering what to do, I'm up still from purchase and pocketed a div along the way so a good return for my holding period. Maybe roll over part into ALLY-A, only concern there is getting a call with the premium paid. I'll sleep on it tonight and see where the markets at tomorrow on these issues.

 

[Mulligan]

Preferred Stock Investing-The Good , The Bad and The In Between

Bob its worse...The preferreds and NSS a couple weeks ago were downgraded to B1 and negative watch... I wouldnt watch the bonds as there is a clear huge line between their actual bonds and subordinated debt/preferreds. The bonds must be safely covered but the rest is in danger. But this was out a few weeks ago, something has happened since...Dont know...Maybe another soul crushing preferred to be issued? This would not be good S&P has already went on record saying they will not even count all preferreds as equity now because they have too much of it. There just hasnt been any good news in a long time. Just management blather and unfulfilled promises. I decided to forgo some credit risk and do what I like to do more...Take on call risk. Bought 500shares of MER-P at $26.38 today. The 47 cent interest payment will go ex and be paid off all in about a weeks time from today. Then it becomes stare them down on a call and collect relatively safe BAC 7% plus debt or look for a flip out in a few weeks.
Also bought a couple hundred shares of Exxon when it hits 2 year low yesterday just to get my feet wet.

 

[bobandsherry]

NSS downgrade seemed like stale news, so must be something recent. Maybe just have some big investor moving out. I think that MER-P is safe from call in the short term. Hold that guy until and it becomes floating

 

[Mulligan]

NSS downgrade seemed like stale news, so must be something recent. Maybe just have some big investor moving out. I think that MER-P is safe from call in the short term. Hold that guy until and it becomes floating

And snag that Libor plus 1.67 adjustable in 2062? You may have to do me a favor and spend the interest payments for me, as Im expecting to be deep into an under the dirt nap slumber by then!
The disturbing thing about NS preferreds today as they all went down. Usually a seller isnt in all of them and volume appeared heavy in all preferreds while NSS was on average volume down less at 1%. But it is still in its trading range, while the preferreds are rocks being thrown in the pond trying to swim.
This is where dumpster divers would like to enter as yields are hugging 10%. Im not a dumpster diver, so its not suitable for me to dive in.

 

[Freedom56]

And snag that Libor plus 1.67 adjustable in 2062? You may have to do me a favor and spend the interest payments for me, as Im expecting to be deep into an under the dirt nap slumber by then!
The disturbing thing about NS preferreds today as they all went down. Usually a seller isnt in all of them and volume appeared heavy in all preferreds while NSS was on average volume down less at 1%. But it is still in its trading range, while the preferreds are rocks being thrown in the pond trying to swim.
This is where dumpster divers would like to enter as yields are hugging 10%. Im not a dumpster diver, so its not suitable for me to dive in.

Mulligan - The sell-off of the preferred stock may have to do with the re-financing of $350M debt on April 15. The market hasn't been too kind to MLPs over the last few years and more recently. Nustar Energy cut its distribution recently which can't be helping. This article was one of the first to warn about MLPs and was right on:

https://www.barrons.com/articles/why-the-mlp-business-model-may-be-a-goner-1443476002

MLPs started the year strong, but then reverted back to its downward trend started back in 2014.

I stay away from anything to do with energy. The companies are not that same as they were decades ago. They have far too much debt now. This includes the majors such has Chevron and Exxon. I'm trying to figure our which one of the two, Chevron or Exxon is the next GE. Both are on a downtrend so I guess you can flip a coin.

 

[Mulligan]

Freedom their bonds have basically been fine. The 2027 maturity that is a yield of sub 6% is trading at $99. So the debt rollover doesnt appear to be a problem and has been in the forefront for some time. I have never had any interest in MLP commons so they arent a real concern its NuStar specifically and their situation is what has my ears to the ground...Remember NuStar is in no way considered your typical MLP. It has a lot of other moving parts like oil storage and Venezuela issues for example. And none of it is going very well.
I dont have enough money in Exxon to be stressed, but they will be ramping up cap ex. no doubt. Things looks fine at $60 a barrel and profitable at $40. Projected 3%-7% yearly divi increases during next projected earnings cycle. It wont build me a mansion, but the odds of Exxon being sliced to $35 in 2 years as is the equivalent of what happened to GE doesnt seem too probable.

 

[bobandsherry]

And snag that Libor plus 1.67 adjustable in 2062? You may have to do me a favor and spend the interest payments for me, as Im expecting to be deep into an under the dirt nap slumber by then!

Heh - I'll be there as well. Now that's what you call really long term planning

The disturbing thing about NS preferreds today as they all went down. Usually a seller isnt in all of them and volume appeared heavy in all preferreds while NSS was on average volume down less at 1%. But it is still in its trading range, while the preferreds are rocks being thrown in the pond trying to swim.
This is where dumpster divers would like to enter as yields are hugging 10%. Im not a dumpster diver, so its not suitable for me to dive in.

I thought I recall seeing large blocks all moving on one of the shares late yesterday so that's why I thought it may be investor pulling out (hopefully not someone with inside info ) and then the fleeing frenzy ensued. But you are probably right with your intuition.

 

[Mulligan]

Heh - I'll be there as well. Now that's what you call really long term planning





I thought I recall seeing large blocks all moving on one of the shares late yesterday so that's why I thought it may be investor pulling out (hopefully not someone with inside info ) and then the fleeing frenzy ensued. But you are probably right with your intuition.

You could be right also. They could bounce back today. But the charts have just been horrible for the preferreds and common though. And just nothing to hang my hat on to support NSS being an over exposed issue for me. I mean no news has been good at all for a long time. So I took some profits and ran off the table. Still got my hat in the ring though owning some.

I love that plus 7% yield of MER-P, but that trust preferred has some crazy long ass term features in it. I mean way out there. They really planned this trup for long term planning. Doesnt mean it wont be called tomorrow though.

 

[bobandsherry]

I stay away from anything to do with energy. The companies are not that same as they were decades ago. They have far too much debt now. This includes the majors such has Chevron and Exxon. I'm trying to figure our which one of the two, Chevron or Exxon is the next GE. Both are on a downtrend so I guess you can flip a coin.

After the barrel price dropped several years ago on the anticipation that prices would come up I dabbled in a couple oil company stocks in my play account. Those turned out to be dogs. And even with barrel price climbing Exxon is still down, a story to be found there.

 

[Mulligan]

Bob, I was just noticing on pre market trading a couple of the NS preferreds are being offered at prices below market close yesterday. That is highly unusual for issues that dont usually trade premarket. Usually no asks or rip off ask prices are offered in premarkets for illiquid type issues. So its possible they will sag some more...Even NSS is being offered a nickel below market close.

 

[bobandsherry]

I love that plus 7% yield of MER-P, but that trust preferred has some crazy long ass term features in it. I mean way out there. They really planned this trup for long term planning. Doesnt mean it wont be called tomorrow though.

Depending on where you are holding funds the BAC-I shares (CY of 6.4%) may be more attractive than the MER-P (7%). Both are now post call date, but the I shares are eligible for preferential income tax rate while P isn't. Also less premium at risk in a call. Both coming up on the EX date.

 

[bobandsherry]

Bob, I was just noticing on pre market trading a couple of the NS preferreds are being offered at prices below market close yesterday. That is highly unusual for issues that dont usually trade premarket. Usually no asks or rip off ask prices are offered in premarkets for illiquid type issues. So its possible they will sag some more...Even NSS is being offered a nickel below market close.

Run for the hills! Thanks

 

[bobandsherry]

Seeing that 3,000 shares traded @ $25.10 pre-market on NSS at 20 cents lower than market close.

 

[Mulligan]

Depending on where you are holding funds the BAC-I shares (CY of 6.4%) may be more attractive than the MER-P (7%). Both are now post call date, but the I shares are eligible for preferential income tax rate while P isn't. Also less premium at risk in a call. Both coming up on the EX date.

Yes, I have this in my Roth, so I am grabbing the higher yield. BAC has just stepped up a preliminary prospectus for new preferred. It hinted it could be to retire an existing one.. Based on what it looked like, if one is retired, I suspect it would be a BAC one not a Merrill could be in the cross hairs.

 

[bobandsherry]

Yes, I have this in my Roth, so I am grabbing the higher yield. BAC has just stepped up a preliminary prospectus for new preferred. It hinted it could be to retire an existing one.. Based on what it looked like, if one is retired, I suspect it would be a BAC one not a Merrill could be in the cross hairs.

You are much closer to the preferred world than I, that's for sure. There's another BAC issue with similar yield as their own I, it's BML-I (another Merrill acquired issue). Just past it's EX date, but still 6.23% return and with preferential tax treatment. Not for you with ROTH. But considering one of those as place to put money if I unload NSS

 

[brokrken]

Bob, I was just noticing on pre market trading a couple of the NS preferreds are being offered at prices below market close yesterday. That is highly unusual for issues that dont usually trade premarket. Usually no asks or rip off ask prices are offered in premarkets for illiquid type issues. So its possible they will sag some more...Even NSS is being offered a nickel below market close.

I want to know who the guy was that bought (or sold) NSS at 24.58 this morning! Talk about a quick win. He could already roll back out over $25 probably.

 

[brokrken]

Also, I'm going to stick it out with NSS. It's a small holding of only 200 shares so I'm willing to gamble a bit.

 

[Coolius]

I sold my small position in NSS this morning, at $25.12.

Wondering if I should sell ARBN, but at current price I'd get more by simply holding until redemption.

 

[Freedom56]

Freedom their bonds have basically been fine. The 2027 maturity that is a yield of sub 6% is trading at $99. So the debt rollover doesnt appear to be a problem and has been in the forefront for some time. I have never had any interest in MLP commons so they arent a real concern its NuStar specifically and their situation is what has my ears to the ground...Remember NuStar is in no way considered your typical MLP. It has a lot of other moving parts like oil storage and Venezuela issues for example. And none of it is going very well.
I dont have enough money in Exxon to be stressed, but they will be ramping up cap ex. no doubt. Things looks fine at $60 a barrel and profitable at $40. Projected 3%-7% yearly divi increases during next projected earnings cycle. It wont build me a mansion, but the odds of Exxon being sliced to $35 in 2 years as is the equivalent of what happened to GE doesnt seem too probable.

You bought Exxon common You are breaking the rules!

I looked into MLPs back in 2014 for income. The story seemed too good to be true. Then I did some research and found it was too good to be true. Back in 2014, a financial planner that I know was getting his clients into AMLP up at $18-19 dollars. He was touting the distribution increases going forward. I know some of his clients. I told them to buy preferred CEFs such as PDT, FPF, or FFC if they didn't want to manage a portfolio of preferred stocks. That idea was shot down by the financial planner. He told his clients to dollar cost average all the way down. He has lost a lot of clients since then and appears to be drinking a lot these days.

I assume that your Exxon buy is for a trade on a bounce.

 

[Mulligan]

WIshed it was me...Everything seems to be stabilizing....What the hell just bought 400 at 25.08 a few minutes ago whike we are sitting on the clubhouse waiting to tee off.

 

[Mulligan]

You bought Exxon common You are breaking the rules!

I looked into MLPs back in 2014 for income. The story seemed too good to be true. Then I did some research and found it was too good to be true. Back in 2014, a financial planner that I know was getting his clients into AMLP up at $18-19 dollars. He was touting the distribution increases going forward. I know some of his clients. I told them to buy preferred CEFs such as PDT, FPF, or FFC if they didn't want to manage a portfolio of preferred stocks. That idea was shot down by the financial planner. He told his clients to dollar cost average all the way down. He has lost a lot of clients since then and appears to be drinking a lot these days.

I assume that your Exxon buy is for a trade on a bounce.

Freedom, probably so. Everything is on the trade block.