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

[MooreBonds]

Moorebonds, I also use TDA and they do not charge anything for a call. Talk to their Customer Service, they should waive the charge. Are you an APEX client? If so, make sure you kick up a fuss......

Ah, thanks for refreshing my memory....I actually had another call on Monday 8/31 (the actual redemption, not the announcement) of CSBQP. Looking at it, they actually didn't charge commission to call away the preferred stock. But I do recall them charging commission on some kind "corporate action" in the past...maybe it was a stock buy-out or something.

 

[Coolius]

Ah, thanks for refreshing my memory....I actually had another call on Monday 8/31 (the actual redemption, not the announcement) of CSBQP. Looking at it, they actually didn't charge commission to call away the preferred stock. But I do recall them charging commission on some kind "corporate action" in the past...maybe it was a stock buy-out or something.

They charge commission on option assignments and exercises, purchases of certain foreign stocks/bonds, and on some kinds of "corporate actions" but I do not recall what types.

 

[Mulligan]

Thought I would update and see if anyone has been rooting around in this area lately. Been picking around on the edges last couple months, but prices are starting to get too high and I need a dip soon, as more cash will be coming soon.
Coolius and I got in on some dump that went on in Baltimore Gas preferreds. 1)Did some quick trades and stole some easy pocket change money and now have settled in for a 7% investment grade yield and daring them to call. 2) Bought some more CNTHP at $52.20 and will lock them and their 6.28% yield away in the vault. Unless of course I throw out a high ask price and some fool buys it. 3) Bought some preferred from a Warren Buffet utility. Nice to know he cant get a penny until he give me mine. 4) Bought some KTBA a few weeks ago that is inessence an ATT bond. Yield about 6.4% bought has already jumped before I can get more. 5) Trying unsuccessfully to get an term dated ETD preferred. In essence a 6% 12 year investment bond. Only got two partial fills for 100 shares. I am wanting 500 but it isnt coming easy.
Preferreds have done very well again this year. People arent buying the "rate hike" scare I guess. I wish they would.

 

[jim584672]

I am looking at some of these preferred issues and a lot are trading over the call price. Buy and hope no call happens? Seems like a Russian roulette method of investing.

 

[capjak]

They seem high right now, can not buy anymore as the prices have elevated in that last couple months. Glad to see AILL dividend.

 

[Coolius]

Jim584672,

You are correct in that buying a Preferred stock over par assumes risk of a call that vaporizes the over-par premium.

However, there are some things one can do to minimize ( but not eliminate ) that risk.

Most callers provide a 30 day advance notice; this accrued interest is payable together with the par value on the day of redemption. I include that amount into my calculations in considering whether or not to buy an above-par issue.

Also, one needs to add the number of days after the most recent payment date to that 30 days; that adds more to the received amount.

External events such as a pending merger/acquisition, restructuring, etc could indicate the company has higher priorities elsewhere and less likely to call. There is also cost associated with a call, and underwriting cost if they issue a new series to replace it - if they are strapped for cash that might put a call on the back burner.

By combining all these, one is in a better position to determine if call risk is worth the purchase.

 

[Mulligan]

I am looking at some of these preferred issues and a lot are trading over the call price. Buy and hope no call happens? Seems like a Russian roulette method of investing.

Depends on what you buy... KTBA cant be called until end of 21st century.... One utility preferred I recently bought was issued in 1975 and is "non callable". The BGLEI (Baltimore Gas) firesale have now been owned long enough that a call still leaves Coolius and I in the black. So there is no Russian roulette method for me. But then again I rarely buy anything over one dividend above call. I did this spring one issue $8 over par, past call. But it is a twice bought out issue with a voluntary call 10 years ago. Only 4% of issue left. Not worth their time to call and the 7.2% investment grade yield is juicy. Already have $6 of it back in the fold, so I am about home free there also.


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[Mulligan]

They seem high right now, can not buy anymore as the prices have elevated in that last couple months. Glad to see AILL dividend.

Yes that was a rather sweet dividend dump today as I own 2 of their issues. I must admit Cap, I dumped close to 500 of them as some one was willing to pay $27 for them...I still own over 1500 of them and if the price ever drops back to a more normal level I will rebuy them.


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[RE2Boys]

Thought I would update and see if anyone has been rooting around in this area lately. Been picking around on the edges last couple months, but prices are starting to get too high and I need a dip soon, as more cash will be coming soon..

Thanks Mulligan for the info in this thread, it got me to investigating and attempting to buy these issues....adding more diversification to the portfolio. I have noticed that the prices have been creeping up lately.

Started out with CHSCM last fall shortly after issue, average purchase price near par (even got some below par). Also have some CNLPL at the call price. Attempting to add more CNLPL or CNTHP but haven't been very successful due to recent price increases.

 

[Coolius]

RE2Boys,

I have all of the issues you mentioned - they are good solid preferreds. Intending to keep them for a long time.

Perhaps, when December rolls around, rate fears will once again appear and income issues get slammed.....I have a little bit of dry powder and may add to those holdings.

 

[Mulligan]

Thanks Mulligan for the info in this thread, it got me to investigating and attempting to buy these issues....adding more diversification to the portfolio. I have noticed that the prices have been creeping up lately.

Started out with CHSCM last fall shortly after issue, average purchase price near par (even got some below par). Also have some CNLPL at the call price. Attempting to add more CNLPL or CNTHP but haven't been very successful due to recent price increases.

Your doing a good job of being disciplined RE! Congrats! Sometimes its hard, as my finger has been prone to get itchy for action occasionally. Take when the opportunity presents itself and be patient. What Coolius said is true. The trading patterns on some of these make no sense at all. Just a month ago many of these were in a safer buy range. The one exception is CNTHP which has had an institutional dump. The scraps were left to us and appear to be had at $52.20. Call price is $51.44. Next dividend has not been declared but is accruing... Its been callable since the 1970s so If there is any preferred to be risked buying above call its that issue. I snagged a 100 more this week.


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[Mulligan]

Thanks Mulligan for the info in this thread, it got me to investigating and attempting to buy these issues....adding more diversification to the portfolio. I have noticed that the prices have been creeping up lately.

Started out with CHSCM last fall shortly after issue, average purchase price near par (even got some below par). Also have some CNLPL at the call price. Attempting to add more CNLPL or CNTHP but haven't been very successful due to recent price increases.

Btw RE- Getting the CHSCM or CSHCL preferreds at par, were by far the layups of year. Thanks to some posters here who have owned CHS issues before I went in and bought a good chunk at par on presale with CHSCL. I would have backed the entire bus up and bought another bus and backed it up too if I truly had understood CHS at the time. Probably the quietest Fortune 100 company nobody has ever heard of.


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[Mulligan]

Also, anyone who does buy illiquid preferreds may like to use this site. After you type the ticker symbol in the little box, it will show you the date, price, and volume of the trade. Its very informative as some of the trades fall under 100 share lots. Something that some may not know is this...Whenever an issue trades under a 100 shares, it will not change the official quoted price of the stock. So what you buy at and what is officially listed may be different. I knew this would happen so it didn't bother me, but I once bought two under 100 lot purchases and took an immediate $6 hit in value. There is not enough float in issue to receive accurate price as it has been years since a 100 issue lot has traded.

http://quotes.freerealtime.com/dl/f...&Sales&SA=quotes&symbol=PRE.P.F&qm_page=84898




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[RE2Boys]

Wish I had bought more CHSCM but was just getting my feet wet in preferreds. About two years ago I let CHSCO get away in pre-issue trading as I set my limit about .10 too low....and it just went up from there. Was not as tight with CHSCM and picked up blocks a 25.50, 25.40, and 24.82 in Jan 2015. And wished I had gotten more. Just got some CNTHP at 52.20, had been trying at 52 for a week or so. Guess not as disciplined as I could have been but it is within one dividend payment of being ahead.

 

[jim584672]

I put in some lowish bids for some of these, now I hope for a flash crash.

 

[Mulligan]

Wish I had bought more CHSCM but was just getting my feet wet in preferreds. About two years ago I let CHSCO get away in pre-issue trading as I set my limit about .10 too low....and it just went up from there. Was not as tight with CHSCM and picked up blocks a 25.50, 25.40, and 24.82 in Jan 2015. And wished I had gotten more. Just got some CNTHP at 52.20, had been trying at 52 for a week or so. Guess not as disciplined as I could have been but it is within one dividend payment of being ahead.

You did great at $52.20 with CNTHP. You may at times see a sell lower price, but you usually have no shot to get it at that price. Its usually one trade (and probably a rigged one that you had no shot to get)then a freeze up occurs and then you have to wait longer and pay even more. This one has gone weeks on end without a sale before. If you check the 20 year historical price of the issue, you will see you got a very good price in relation to current interest rate environment.
Although I am not ever really worried about diversification (I prefer concentration of highly profitable issues as opposed to diversity by getting weaker issues) remember CNLPL and CNTHP are essentially the same thing. They both are owned by same company and have same rights and priority. Just like CHSCM and CHSCL as you know I am sure. The CHS issues are way more liquid with narrower bid/ask than the old preferreds are.


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[Mulligan]

I put in some lowish bids for some of these, now I hope for a flash crash.

Jim its definitely is good to set a price you are comfortable owning them. And if it doesn't get there nothing lost. But usually the ones I buy do not act this way. They just simply don't trade. A few months back AILLL had a mini crash falling on multiple trades from $25.80 or so down to $25.20. Coolius and I chased down and didnt get squat. Then it locks up for a few days and then goes back to $25.80.
BGLEI had a huge 20k or so block trade and never was put on market. Just a private transaction. CNTHP had a 28k block last week trade at a lower price and was conducted in 2 trades. A private transaction with no shot to get in at that price. CNTHP probably hadn't traded that much cumulatively the entire year.


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[Coolius]

AILLL might be setting up for another dive -- down 2.75% today. Keeping my eye on it, if it goes below $26, will add to my holding.

 

[Golden sunsets]

AILLL might be setting up for another dive -- down 2.75% today. Keeping my eye on it, if it goes below $26, will add to my holding.

Mulligan has taught me a lot about Preferred's. Is AILL a T & D only?

 

[Totoro]

I really think Mulligan should try and write a book about preferreds, and self-publish. Maybe with additional input from others here. To help more ppl understand, Wall Street won't do it (too much of a niche).

Just rearranging the stuff he has already written here and you are 80% there.

Maybe organize some seminars and do TV appearances with Kramer (ok, that is a joke, otherwise I am serious).

Then again, drawing unwanted attention might spoil the party.

 

[Coolius]

Mulligan has taught me a lot about Preferred's. Is AILL a T & D only?

Yes, AILLL is a Transmission & Distribution provider.

You might notice this morning, when Preferred stocks are taking big hits because of the strong jobs report, "Trapped Preferreds" such as AILLL, CNLPL, BGLEI are stable. These are typically thinly traded, and suitable for an income-oriented portfolio ( until they are called, of course ).

 

[Mulligan]

Mulligan has taught me a lot about Preferred's. Is AILL a T & D only?

Yes Ameren Illinois will always be a T&D. They own no power sources.
Many major power producers have been buying up T&Ds companies, so they can get guaranteed profits from regulated environment.
It gets kind of interesting with debt and preferreds in dealing with the Holding Companies. Traditionally exchange traded debt has higher standing than preferreds, but it actually is the opposite in dealing with Holding company debt and the owned companies under them.
Take SO (Southern Company), they just issued a nice debt offering that I should have bought but didn't.
Anyhow, their major profit sources are the dividends they receive from the bought out utilities. However, they cannot get that source of revenue (the bought out common share dividend) until the preferred owners of the bought utility get their dividend. So in instances like this my take is the preferreds of the acquired company are safer than exchange debt of the holding company.


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[Mulligan]

I really think Mulligan should try and write a book about preferreds, and self-publish. Maybe with additional input from others here. To help more ppl understand, Wall Street won't do it (too much of a niche).

Just rearranging the stuff he has already written here and you are 80% there.

Maybe organize some seminars and do TV appearances with Kramer (ok, that is a joke, otherwise I am serious).

Then again, drawing unwanted attention might spoil the party.

Kramer, there are others on this forum that know just as much as I do. The trouble is they read other forums and know you can get BBQ'd suggesting such a purchase. At least Coolius will stand up and raise his hand that he drinks the koolaide!
I have heard one comment ever on preferreds on CNBC. On advisor briefly mentioned he was buying them and Kelly Evens responded..."Arent those things Warren Buffet buys"? She obviously knows nothing about them, but the market is rather small in the investment world.


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[Coolius]

Kramer, there are others on this forum that know just as much as I do. The trouble is they read other forums and know you can get BBQ'd suggesting such a purchase. At least Coolius will stand up and raise his hand that he drinks the koolaide!
I have heard one comment ever on preferreds on CNBC. On advisor briefly mentioned he was buying them and Kelly Evens responded..."Arent those things Warren Buffet buys"? She obviously knows nothing about them, but the market is rather small in the investment world.


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Pass the Koolaide, please.........

 

[pb4uski]

Don't you mean Cooliusaide?