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

[Slow But Steady]

I just took a small bite of KCC at $29.35. So far the low for the day is showing $29.39, but my order filled immediately through Schwab. Who knows?

So now I own KCC, CVB, AHT-D, CNTHP, GWSVP, and EYMXP. (Edit: and CHSCO.)

Edit: I also took a small bite of CHSCO. I did enter an order to sell the EYMXP at $27. At the moment, ask is $26.80.

[Mulligan]

Quote:

Originally Posted by Slow But Steady I just took a small bite of KCC at $29.35. So far the low for the day is showing $29.39, but my order filled immediately through Schwab. Who knows? So now I own KCC, CVB, AHT-D, CNTHP, GWSVP, and EYMXP. Edit: I did enter an order to sell the EYMXP at $27. At the moment, ask is $26.80.

Congrats Slow, You have a nice little bit of diversity there. Try to keep an eye on GWSVP a bit. It is the darnedest little company I have attempted to study. It dutifully has paid this debt issue for many years.
It makes money before interest and depreciation is added in then shows yearly losses. Common stock has like a NEGATIVE $25 a share book value...Most of it non cash charges, but still some sort of recapitalization will be needed at some point. But the company is real...They have a water machine in a local store I frequent.


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[Texas Proud]

Just bought my last batch... BGLEN... 101.25... cheaper than my first batch...

So, as of now my weighted avg ratings is just a bit better than BB+... but rounding is to BB+ so that is it... avg yield on cost is 7.20%... only one CCC issue, but will keep track of JCP and bail if needed...

BTW, there are a few issues that do not have a rating.... I put a B on them even though one probably is a BB...

[Mulligan]

Quote:

Originally Posted by Texas Proud Just bought my last batch... BGLEN... 101.25... cheaper than my first batch... So, as of now my weighted avg ratings is just a bit better than BB+... but rounding is to BB+ so that is it... avg yield on cost is 7.20%... only one CCC issue, but will keep track of JCP and bail if needed... BTW, there are a few issues that do not have a rating.... I put a B on them even though one probably is a BB...

To get a decent idea all you have to do if is find the ratings on their senior bonds and drop it a few pegs. That is all the ratings agencies do anyways. They have a trickle down formula. A non rated issue is neither good or bad. Issuing company didn't want to pay to have them rated. Also when buying some insurance issues A.M. BEST will have them rated if you dig online a bit if Moodys, Fitch, or S&P didnt.


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[Slow But Steady]

Quote:

Originally Posted by Texas Proud Just bought my last batch... BGLEN... 101.25... cheaper than my first batch...

I have an order in for BGLEN at 101.21, which hasn't filled yet.

Edit: the order was actually at $101.13, and at that price I picked off 2/3 of what I asked for.

[Mulligan]

This was a 3 day ordeal but finally consummated transaction...an incredibly crazy process. Probably will provide a second post as transaction was very interesting and learned a lot about an illiquid trade.
Snagged 500 shares of CTWSO at $15.95 today. Already have almost 500 from recent previous transactions from $14.50-$15... An extremely illiquid issue. I now own almost 7% of the entire float... About a 5% yielder so why buy? 1) Diversification...The only water utility company in market that offers a preferred still 2) Very safe..Parent has given 47 consecutive years of common stock dividends and bonds are "A" rated. 3) Paid every quarter since 1956 inception 4) If ever called has a juicy $21 call price. Water industry very fragmented and if bought these will be called.
This issue is a perfect example of why utility preferreds are becoming very rare (and valued in my opinion). In 1980 preferreds represented 13% of Connecticut Water Service capitalization...Today their preferreds are 0.001% of capitalization. Most utilities do not issue anymore. They just call. 5) Im (like the past 3 years) in the "lower for longer" yield camp... I am not going to chase yield ( most of the time).


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[Mulligan]

I will give this a shot... CTWSO is what they term a "Grey Market" security. This is a level below the Pink Sheets... A lot of trash floating in this area. But Connecticut Water Service is a top line highly rated profitable company. The only reason it is in Grey Market is the total lack of liquidity due to its $200,000 issue float issued in 1956, so its largely dead. A nice person who is an online member of another forum alerted me to him wanting to sell, and I was looking to add more to my collection.
When you put in a buy order it just gets routed to the brokerages market maker. Since there is no true market (no bid or ask quotes available) maker for grey sheets the order will just sit in that "store" forever if none are available.
After finding where he sent them I alerted my brokerage to send my bid there since no action was occurring at present location. I knew a sell order was out there at $15.95 and I bid 15 cents above to "catch the attention". Well that brokerage idiot starts "digging" and basically accused me of trying to "manipulate" market. He said you cant buy someone else's shares directly. I said I am not buying them directly, I am paying you to buy them or anyone else's for me. I am for free doing your job to find the shares that I want that you aren't getting for me..I could care less whose I get as long as I get my order. Well somebody there then decided they would limit my purchase to 20 shares and wanted to snag back the last 30 I got the day before because it "exceeded 40% of 30 day daily volume of issue". What a joke a peon like me moving a market over 30 shares? Who in the hell wants to buy 20 shares of a $16 stock? I got mad and raised holy hell, so I kept my 30 but they limited me to 20 share purchase. I told them no thanks and went to next brokerage my HSA one... This one could care less how many I asked for and sent it to maker who had them...Except for one thing...Nothing ever happened for 2 days...So I go to my final one broker that has always been the worst and I gave it no shot... Well they made a call for me and not only got my 300, but found 200 more in less than a minute... Like the previous brokerage I could have asked for 10,000 shares and they would have been happy to at least enter the order for me. Transaction on phone took less than 5 minutes, but the 3 days before that was frustrating and worthless....


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[Coolius]

Quote:

Originally Posted by Mulligan After finding where he sent them I alerted my brokerage to send my bid there since no action was occurring at present location. I knew a sell order was out there at $15.95 and I bid 15 cents above to "catch the attention". Well that brokerage idiot starts "digging" and basically accused me of trying to "manipulate" market. He said you cant buy someone else's shares directly. I said I am not buying them directly, I am paying you to buy them or anyone else's for me. Well somebody there then decided they would limit my purchase to 20 shares and wanted to snag back the last 30 I got the day before because it "exceeded 40% of 30 day daily volume of issue". What a joke a peon like me moving a market over 30 shares? Who in the hell wants to buy 20 shares of a $16 stock? I got mad and raised holy hell, so I kept my 30 but they limited me to 20 share purchase. Sent from my iPad using Tapatalk

Sounds like you should be walking away from that brokerage at once, if not sooner. Wonder if they were trying to snag your shares for their own inventory?

I have not experienced anything like what you went thru, but my Vanguard broker usually makes it difficult to enter orders to buy Preferred issues - because they are "not well understood" by the foolish public. Guess they are labeling their entire customer base as "foolish".

I suspect my days with Vanguard are drawing to a close, their service has become slack and deteriorating for the past few years, IMO.

[Texas Proud]

Quote:

Originally Posted by Coolius Sounds like you should be walking away from that brokerage at once, if not sooner. Wonder if they were trying to snag your shares for their own inventory? I have not experienced anything like what you went thru, but my Vanguard broker usually makes it difficult to enter orders to buy Preferred issues - because they are "not well understood" by the foolish public. Guess they are labeling their entire customer base as "foolish". I suspect my days with Vanguard are drawing to a close, their service has become slack and deteriorating for the past few years, IMO.

I am surprised you are having problems.... I only had to call in for my first order and have not had to call in again...

That is 10 issues bought and 2 sold... with some of these me buying in two trades...

Maybe you are buying more exotic issues than me...


I doubt the brokerage was trying to snag these share for themselves... this is so small it is not even a rounding error for them... their computer must have spit something out... I do know there are rules about buying too much of a Treasury issue... I remember reading about a bank that had bought up a huge amount of one maturity that the Treasury was going to fine them or something.. seems that it became popular for some reason and nobody could buy them so the price went way up... that got the Treasury to look into the ownership and found the problem...

Also, I think there are reporting requirements if you own more than 5% of a stock.... but that might only be common.... so, maybe there was supposed to be a tender offer or something... could be the last broker just does not have the correct info and thought it was an OK trade since the total value was so low...

Something to look up!!!

[Slow But Steady]

What percentage of your investment portfolio is dedicated to preferred stocks?


With everything I've bought lately, I'm still only up to 3% or so. I still have too much cash (about 15%), and my allocation to fixed income including the preferreds is about 25%.

[Ronstar]

people


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[Mulligan]

Quote:

Originally Posted by Slow But Steady What percentage of your investment portfolio is dedicated to preferred stocks? With everything I've bought lately, I'm still only up to 3% or so. I still have too much cash (about 15%), and my allocation to fixed income including the preferreds is about 25%.

I am about 90% with most investment grade safe issues... I am just increasing "diversification" in my "total portfolio" as the vast majority of my money is my pension that is professionally managed with all the stuff I cannot buy or lack the funds too, ha!
If I was trying to live off a portfolio (I do not spend any of mine), I would not invest this way percentage wise. But with the complications of low rates begetting low rates, preferreds represent excellent opportunity I believe.
But "preferreds" is too generic of a term...It is like using the word food in a generic sense. Some is good and nutritious for you while some will eventually kill you.


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[Slow But Steady]

Quote:

Originally Posted by Mulligan But "preferreds" is too generic of a term...It is like using the word food in a generic sense. Some is good and nutritious for you while some will eventually kill you. Sent from my iPad using Tapatalk

Before I started reading this board, the only "preferreds" I ever bought were GM Baby Bonds and preferred shares of REITs in which I also owned common shares. I think these are the ones you mentioned that will kill you.

I did well on the REIT preferreds, bought below par, but I got killed on the GM issues. I had assumed that in bankruptcy, the debt holders would come out ahead of the pensioners, but I was wrong.

Since I've been reading here, I've bought the mostly kind that are really good for you.

[Mulligan]

Quote:

Originally Posted by Slow But Steady Before I started reading this board, the only "preferreds" I ever bought were GM Baby Bonds and preferred shares of REITs in which I also owned common shares. I think these are the ones you mentioned that will kill you. I did well on the REIT preferreds, bought below par, but I got killed on the GM issues. I had assumed that in bankruptcy, the debt holders would come out ahead of the pensioners, but I was wrong. Since I've been reading here, I've bought the mostly kind that are really good for you.

REIT preferreds are their own little sector. If a company such as Realty Income would issue a new preferred (the current one, O-F, is overpriced and will be called this coming winter, book it) the safety of the dividend would be unquestioned. But...there are also over leveraged REITS that focus on malls and office space rentals that may have extreme capital loss risk if economy sags again.
I personally don't see a problem in owning high quality Reit preferreds. I just have little tax free space, so I would get hammered paying 31% taxes on my dividends instead of 21% with 15% QDI issued ones that come from utilities.


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[Texas Proud]

Well guys, I just decided to look at the BGLEI call... I now notice the call..

all accrued and unpaid dividends on each share of each of the foregoing series of preference stock from July 1, 2016 up to, but not including, the Redemption Date

So, the issue is paying divis to the people who owned it on the ex divi date and if you hold it to the end you get 2 days of interest!!

[Slow But Steady]

Quote:

Originally Posted by Texas Proud Well guys, I just decided to look at the BGLEI call... I now notice the call.. all accrued and unpaid dividends on each share of each of the foregoing series of preference stock from July 1, 2016 up to, but not including, the Redemption Date So, the issue is paying divis to the people who owned it on the ex divi date and if you hold it to the end you get 2 days of interest!!

Don't spend it all in one place, as my dad used to say.

[Mulligan]

BGLEN is already dusting itself off and getting back on its feet.. Bidding up to $103 today already. Bought half of mine around 102 and change and already pocketed a coming $1.76 divi buying day before exD. The other half were averaged in at 101.30 buying after exD. A shoot fish in the barrel trade.


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[Slow But Steady]

Would anyone else be willing to share what portion of your overall portfolio is invested in the issues we're discussing here?

I think it would be appropriate for me to have 25% or so of my fixed income investments in these issues, if I can get them at a reasonable price. Would you agree or disagree?

Thanks!

Slow

[Mulligan]

Quote:

Originally Posted by Slow But Steady Would anyone else be willing to share what portion of your overall portfolio is invested in the issues we're discussing here? I think it would be appropriate for me to have 25% or so of my fixed income investments in these issues, if I can get them at a reasonable price. Would you agree or disagree? Thanks! Slow

Slow, The research I get from "Professional Money Managers" is a total portfolio should have no more than 10% and 15-20% for "aggressive portfolios" . But one must consider the context from where they are coming from...The "preferred universe" is largely almost 80% plus bank/insurance tier 1 capital requirements non cumulative preferreds. Another 15% or so I would guess is higher risk "junk equity/debt such as shipping preferreds Mreits, or quirky issues such as Glacier Water... So their assessment is largely based on the above info. Personally, I wouldnt put 10% of my money in those...
But a tiny segment does offer safer investment grade issues which have shown not only safety, but proven 50-70 year history of prompt consistent payments, ala, CNLPL.
So it depends on WHAT you are wanting to invest in... 20% of your portfolio in CNLPL, WFC-L, KTH, AILLI is MILES different than 20% in SSW-D, AHT-D, and NLY-D...
Yes they are all preferreds but miles different in safety of principal and dividend.. Of course the rewards if successful are more with the higher risk poorly capitalized or leveraged companies, but I do not play that game.


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[Texas Proud]

Quote:

Originally Posted by Slow But Steady Would anyone else be willing to share what portion of your overall portfolio is invested in the issues we're discussing here? I think it would be appropriate for me to have 25% or so of my fixed income investments in these issues, if I can get them at a reasonable price. Would you agree or disagree? Thanks! Slow

I am between 6% and 7%.... but, I consider this the HY part of my bond allocation... and it is safer than the HY funds.... at least IMO...