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

[Mulligan]

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

Makd, now I will explain my thoughts on buying the yield chasing way above par purchases...Take the bank TRUP I mentioned a few posts ago concerning the problems they are having in dealing with a call. Yes they said they would nit do anything in immediate future...But does that mean 6 months? I bought a week ago and it has appreciated $1 already... Its getting close if it appreciates much more I will bail...Why? Well I can collect almost 6 months of divi in say 2 weeks and then reinvest money in something else... Why not just stay and collect the 9% plus yield?
Well lets say I get 2 divis and then they call it... I didnt make $1.25 on the deal...I lost 30 cents holding it 6 months and getting a call. So take the profits and run, and if it drops again reenter... Now if it heads south I stay and collect as I have nothing to lose if it sunk near par.....keep it and collect the 9%... This is how I operate to sneak in higher yields and not get caught with my pants down on a call chasing yield... Now take BGLEN... It got it so close to par on the fire sale, I am holding for awhile and seeing what they do. I feel my risk/reward is better served holding it as I dont really have a place to unload $75,000 on at this time..And it is as safe as can be and a 6.4% yielder, call risk aside... But I will take the call risk as I will not lose money on this endeavor.

Preferreds are like woman... There are certain ones you only date and only a certain few that are marriage material.

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[Coolius]

Preferreds are like woman... There are certain ones you only date and only a certain few that are marriage material.

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Mulligan, I sure hope your GF does not read this thread - you might get a call of the type you don't want!

My $0.02 FWIW, is that if I buy at or below call value, I will not lose so long as I do not sell in desperation. I regard stocks like CNTHO and HAWEL in this way - I have enough resources in other places to hope that I will never need to sell these in a downturn. Makd's description of heads I win, tails I dont lose is correct - IF I am prepared to hold during times when the stock price is beaten down. So the 2 alternatives for losing the stock is (1) when it is called/matured or ( 2 ) if I sell it for a gain.

My outlook is several more years of low interest rates - the "lower for longer" scenario - with Brexit giving it more likelihood over the next 2 years at a minimum. In such a scenario, these stocks will serve one well.

I was pounding the table a few months back on WFC-PL; at that time everyone was anticipating interest rate rises, and fear was all over the place. Look at it now. And if interest rates remain low, WFC-L will remain around this present price for a long time. Congrats to those who bought at $1,160-$1,170.

 

[Htown Harry]

For those interested in a bit more understanding of the thought process into calling a preferred, I thought I would give an example... On many occasions it isn't just "the yield is too high" or "it can be financed cheaper". With REIT preferreds the above is pretty much the reason, as interest reduction goes straight to the bottom line. But in utilities and banks it isnt so clear and thus where higher yield opportunities arise.
Take PVTBP, a trust preferred from Private Bank...

Looks like you have a new scenario to evaluate, Mulligan:
CIBC agrees to purchase PrivateBancorp for $3.8 billion - MarketWatch

 

[Mulligan]

Looks like you have a new scenario to evaluate, Mulligan:
CIBC agrees to purchase PrivateBancorp for $3.8 billion - MarketWatch

I caught wind of that this morning. Nothing to evaluate, Harry. Its time to move on! Probably 1.80 in accretive payments left before merger and closing of issue. Not hanging around for that and the $25 call price slapped on with the accretion.


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[Mulligan]

Looks like you have a new scenario to evaluate, Mulligan:
CIBC agrees to purchase PrivateBancorp for $3.8 billion - MarketWatch

Harry, I got out at $27.40... A quick $400 profit for the HSA owning it about a week... I love those quick profits! Pays to wake up early in the morning!


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[Coolius]

I got out of PVTBP as well - at a lower price than Mulligan, a very modest ST Cap gain for holding only 6 days.

But as my good friend says - "taking a little profit is better than a sharp stick in the gonads".

In the wonderful world of investing, there will be highs & lows - I'll take any high I get, no matter how tiny - since I have been associated with lows far more often, it seems.

So, as the Lone Ranger rides off into the sunset, leaving the battered remains of his PVTBP stock in the dust behind - time for rest & reflection, and a new day will dawn tomorrow......

 

[Mulligan]

I got out of PVTBP as well - at a lower price than Mulligan, a very modest ST Cap gain for holding only 6 days.

But as my good friend says - "taking a little profit is better than a sharp stick in the gonads".

In the wonderful world of investing, there will be highs & lows - I'll take any high I get, no matter how tiny - since I have been associated with lows far more often, it seems.

So, as the Lone Ranger rides off into the sunset, leaving the battered remains of his PVTBP stock in the dust behind - time for rest & reflection, and a new day will dawn tomorrow......

If this panic dump keeps occuring it may be a buy again... If one assumes it is called at closing which isnt until spring 2017. There now is some meat back on the bone again at $26.15


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[Coolius]

If this panic dump keeps occuring it may be a buy again... If one assumes it is called at closing which isnt until spring 2017. There now is some meat back on the bone again at $26.15


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very true....each dividend is 62.5 cents. Next ex-div is in September, I believe.

I might buy some if it gets below par+1 Div = $25.625.

Edit: Wow....did you see WFC-L? Up by another $14 !! $1,274. Sorely tempted to sell.....but gotta resist.....

 

[Mulligan]

Unless you have something to buy, it is hard to let "L" go I imagine. It has been over $1300 before.


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[Texas Proud]

If this panic dump keeps occuring it may be a buy again... If one assumes it is called at closing which isnt until spring 2017. There now is some meat back on the bone again at $26.15


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Wow... I was looking at buying some of this issue when I sold off something else....

But, unless someone has seen something saying that the pref will be called, I see 3 possibilities...

1> PrivateBank calls the issue prior to the closing to get rid of it (not likely IMO)

2> The deal closes and then the issue is called... now, the date of the call is up in the air... they will have other things to do and this might not get on their radar anytime soon....

OR, for the people who want to take a flyer...

3> The issue is NOT called at all... even if CIBC owns the bank, the bank still has to abide by the US laws for capital... so either they keep this issue outstanding or they put in some other capital from some place else...


If the price goes down enough, I might buy... kinda a short term issue if #2 happens, but still a good return with little risk....

 

[Mulligan]

Tier 1 cap can be managed in several different ways.. They already said Tier 1 would be over 10% after closing anyways... When I bought last week at $26.60 the scenerio was different. I got out at $27.40... Risk/reward ratio horrible at that point... Take the money and run... Now, reentry is a modest positive risk/reward ratio... Remember there is absolutely NO Trup on market within shouting distance of 10% . One must proceed with logical assumption its called in spring of 2017 at closing.. This leaves about $1.80 left on the bone... Is it worth paying $25.80 to make possibly $1.00 for 9 months? Possible if one is so inclined. Personally I would want under next divi to reenter. And remember I was the one willing to buy almost 3 divi above par past call to begin with.


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[makd]

Makd, now I will explain my thoughts on buying the yield chasing way above par purchases...Take the bank TRUP I mentioned a few posts ago concerning the problems they are having in dealing with a call. Yes they said they would nit do anything in immediate future...But does that mean 6 months? I bought a week ago and it has appreciated $1 already... Its getting close if it appreciates much more I will bail...Why? Well I can collect almost 6 months of divi in say 2 weeks and then reinvest money in something else... Why not just stay and collect the 9% plus yield?
Well lets say I get 2 divis and then they call it... I didnt make $1.25 on the deal...I lost 30 cents holding it 6 months and getting a call. So take the profits and run, and if it drops again reenter... Now if it heads south I stay and collect as I have nothing to lose if it sunk near par.....keep it and collect the 9%... This is how I operate to sneak in higher yields and not get caught with my pants down on a call chasing yield... Now take BGLEN... It got it so close to par on the fire sale, I am holding for awhile and seeing what they do. I feel my risk/reward is better served holding it as I dont really have a place to unload $75,000 on at this time..And it is as safe as can be and a 6.4% yielder, call risk aside... But I will take the call risk as I will not lose money on this endeavor.

Preferreds are like woman... There are certain ones you only date and only a certain few that are marriage material.

Mulligan - thanks again for explaining!

As for the woman, I think it'd be easier to find a solid 10% return, but that's probably a topic for another thread ;-)

 

[Mulligan]

Mulligan - thanks again for explaining!

As for the woman, I think it'd be easier to find a solid 10% return, but that's probably a topic for another thread ;-)

I got lucky Makd...I have had same GF for 10 years with separate nearby residences... I get reminded often from my married friends... Even my 86 year old long married neighbor, ha!
Ok, humor aside and back to matters at hand...Did you follow the overnight happenings of PVTBP? Sometimes out of the blue things such as a merger occurs...This is great if you own the commons...Horrible if you own over par preferred issues! I am so glad I turned down an invitation to golf today, and also thankful Coolius tipped me off this morning about the merger, so I could put in my premarket sell order. Thanks Coolius!!! That was an $800 dollar swing.


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[makd]

I got lucky Makd...I have had same GF for 10 years with separate nearby residences... I get reminded often from my married friends... Even my 86 year old long married neighbor, ha!
Ok, humor aside and back to matters at hand...Did you follow the overnight happenings of PVTBP? Sometimes out of the blue things such as a merger occurs...This is great if you own the commons...Horrible if you own over par preferred issues! I am so glad I turned down an invitation to golf today, and also thankful Coolius tipped me off this morning about the merger, so I could put in my premarket sell order. Thanks Coolius!!! That was an $800 dollar swing.

Yes, I saw. I'm seeing that one really has to be on the ball. Also, from what I see, you got out at the day high. Congrats!

 

[Mulligan]

Yes, I saw. I'm seeing that one really has to be on the ball. Also, from what I see, you got out at the day high. Congrats!

Thats funny, I never even checked. I was just so happy to get out right at the bell. I actually anticipated it dropping and put my sell order in at $27.10, but luckily there were a few buyers at the bell who did not know what was going on.


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[Mulligan]

Ok , Texas you win...I surrendered... Im back in again at 25.63. Only 400 shares this time but I am back in! Who knows... I can live with risk..May the debt does stay out there look at acquiring companies debt.
https://www.cibc.com/ca/pdf/investor/subord-indebt-en.pdf
Nothing else interests me, so lm doing it.


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[Coolius]

Ok , Texas you win...I surrendered... Im back in again at 25.63. Only 400 shares this time but I am back in!

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Wow, a death defying double back flip !! Worthy of Olympic high diving accolades !!

 

[Mulligan]

Wow, a death defying double back flip !! Worthy of Olympic high diving accolades !!

Hey we are back under a divi above call.. Love the risk... If I could part with any of my beloved preferreds, I would buy more!


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[Mulligan]

I read transcript of merger conference call of PrivateBank concerning PVTBP. Absolutely nothing mentioned on the debt or assumption of it. Just the cash and share offer to shareholders.
It isnt out of the realm of possibility the debt stays on the books after merger. But even a more realistic version still bears out good enough for me which is why I repurchased. A $1.87 is still probably left on the table before closing. Purchased at ave price of $25.65 for 600 shares leaves over a $1.20 on the table. So at worse we are talking about a 4.75% yield for 8 months or so... That is close to 6% annualized off top of my head for a near slam dunk.


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[Running_Man]

And now the Wells Fargo Preferred is @ 1300 and 5.75% yield. So there will be no capital gains in the long run from Wells Fargo if there were a huge stock run. Despite the stock market run, the market is expecting lower and perhaps even negative rates in the US

 

[Mulligan]

And now the Wells Fargo Preferred is @ 1300 and 5.75% yield. So there will be no capital gains in the long run from Wells Fargo if there were a huge stock run. Despite the stock market run, the market is expecting lower and perhaps even negative rates in the US

I have been in the "lower for longer" camp before there was such a term. Yet, being basically a preferred only investor, I cant totally commit to the concept in its entirety. So basically I am splitting my money in 3 groups 1) Higher yielding should be called but haven't and maybe wont 2) lower yielding ones near par ( concession to rate environment) 3) high yielders on their last legs bought under divi above par and ride them out until call. Option 3 gives me time to collect good yield and hope something swoons where I can buy at a better price point. But, I have so many self imposed rules I have a very narrow option of preferreds to choose from outside of the token flyer or two allowed that I have already used.


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[Coolius]

WFC-L at all time high -- $1,326. Up a whopping $26 today.

Not sure if it can hold this level - but then, there are few alternatives for a quality investment grade bank preferred, noncallable, QDI. And around 5.6%, is still a comparable yield versus the other WFC preferred stocks.

I might sell a portion, if it gets up any higher. Decisions, decisions.

 

[Mulligan]

I sold 200 of my ailll shares...at 27.20 provided opportunity to rebalance for more lower for longer
Bought 200 shares of cnthn which is going exd in a few days. Around 5%. Trying to balance call exposure some. Those would also include ctwso pfk, hawel, uepco

 

[jim584672]

WFC-L @ 1,338! Someone is taking crazy pills.

 

[Coolius]

WFC-L @ 1,338! Someone is taking crazy pills.

I could not resist, and sold off 20% of my position, at $1,332.00.

Can always buy back if it retraces a little. And I have 2 months to buy back without interrupting the dividend stream.

That thing has gone up like a rocket......and the volume today is quite big vs normal volumes. Wonder why the rush to buy?