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

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Took some of my MH-A proceeds and doubled down on ABRN notes at $25.25... So I have 800 now. This company seems to have its act together hitting on all cylinders. And the past first call of note will keep it reasonably pressured near par for time being. 52 week spread is $25 to $25.87 which is pretty tight. Just not a lot out there to buy and plus 7% is nice without incurring a lot of risk here for time being. I will hold until end of year and reevaluate if I am comfortable still with 800 shares.
 
1.64% on the 5 year treasury today, also the European negative yield percentage hit a new high last week as more than 30% of European countries now have negative yields.

An interesting thing also occurred with the Norwegian Sovereign fund announcing it would only hold bonds that are Euro, US Dollar or Swiss denominated as they seek only very liquid bonds - this is primarily a get out of Japanese bonds moves as the Japanese Central Bank is purchasing over 80% of all current volume into the Central Bank and holds more than 40% of any Japanese Government bond ever issued-- this is apparently a response to the very high concern the Japanese Central Bank had on July 7th when it's 10 year bond hit 0.1% in yield!! the horror it went up over zero and Japan has no money to pay interest!!! -- they announced they would buy limitless bonds to hold interest rate at 0.1% and no higher no matter what..... to this point the Central Banks have continued the juggling act to keep all the low interest rates. I keep expecting this to end badly and Central Banks keep surprising me....
 
Finally put my last bit of cash from the rest of MH-A sell to work. Took me longer than usual to get fully invested...Reentered KTH and added to some call dated issues. 5.5% ish YTM in 2028. Also bought a few hundred more TCF-B to clean the account out at $25.20. Probably be sitting tight until outsized positions of ABRN or TCF-B is called..
Term dated issues to hold are CNIGO, KTH, ABRN, LANDP.
Perpetuals are BURCP, CNTHP, AILLL, CNLPL, MSEXP, BRG-C, CTWSO, FIISO, and WGLCP.
 
Broke a cardinal rule this morning.

Sold 1/2 my position in HE-PU; this is ( was ) a sock drawer resident.

I hope to buy back lower in the near future, however. The price was too tempting to resist - and bid has continued to rise following my sell. Very likely due to the XD date next week.
 
I dont blame you Coolius. In fact I would sell all at 1.5 years over par. This issue screams call... BGE-B finally caved...With these issues I wouldnt press much above a divi above par. At 2.48 above par you are saying it isnt getting called in next 2 years. This is only a 17 yr bond now...HE could refi a 17 yr bond under 4% easy.
 
Yep a bummer, jsrm. But these are the only real risk "yield chasers" I will take...Grab my nickels and move on. I sold off the chunk I owned in one account yesterday and will hold the rest until call. Picked up a few issues recently. Bought KTH at $31.90 the other day. Yesterday I was able to snag 78 shares of DMRRP at $75 and it will go exD next week. Flipped those for $600 holding a couple weeks earlier this year and regretted it. Wont ever sell these, learned my lesson. Banished to the sock drawer you go! Bought some SPLP-A again and RNR-C. RNR is an old insurance preferred that is actually cumulative. Dont see those anymore. At 6% and investment grade those are hard to find anymore.
 
I read in prospectus of the new Alabama Power 5% issue proceeds will be used to possibly call three preferreds which included ALBMP. This is not an official call though. Could happen anytime though as its first call date is this October I believe. I wouldnt bet against the call.
 
Mulligan, did you see CNTHP? Traded 200 shares at $56.

Ask is now $58.50.

Am sure tempted to put in an ask at $58.49, that is absolute nosebleed territory! Seriously, I would question the sanity of anyone willing to pay $58......:nonono:
 
Preferred Stock Investing-The Good , The Bad and The In Between

Coolius, I have largely sobered up from my drunken flipping spree. It has made me more promiscuous investing wise which I had to seek forgiveness for... I have bought a lock and key for the sock drawer... I stuffed AILLL, CLP issues, CNIGO, MSEXP, CNIGO, DMRRP, FIISO, CTWSO, KTH, BURCP, LANDP into the sock drawer...
The only ones I would consider selling is CRLKP, WGLCP, BRG-C, ABRN, and the remaining TCF-B. Nothing really to replace with so no desire to sell them.
I tried for 2 years to get CTPPO and finally got 60 or so of them and wound up flipping them the other day when someone offered $7 bucks for them....Not happy I did that now... So I am done flipping my core illiquids....I hope!
Im doing some studying on a Canadian ute that owns many US utilities. It offers a 5 year reset based on 5 yr Canadian bond plus 2.64%. Might buy some of these a bit down the road.
 
I have been reading “The Great Depression - A Diary” by Benjamin Roth as it was recommended on another thread. It is a very interesting read, much of it is very practical information that is not truly understood in the world of portfolio probabilities as it is a diary of someone going through the depression, starting after 2 years of depression — which at that point Mr Roth recognized the depression was something he might learn from.

I especially like his entry of June 10, 1932, he quite correctly observes and notes that the market must be at a bottom because the prices make no sense and states it is he believes an ideal time to buy — but he cannot because even though he was and still is a working attorney he has no money. Later in the book he describes how even in 1940 his earnings are only 40% of what they where in the late ’20’s. But he compares common stocks and preferred and states he thinks an RCA preferred has got to be a good buy — it was two years in arrears on a $5 dividend and he was sure the company would survive the common was at 2 3/4 - the preferred at 3 7/8. He anticipates that if the common survives the preferred will again pay dividends and go back to at least 75.

He was quite correct and by 1935 RCA had resumed dividends and the preferred traded at 92 after paying the dividends in arrears. The gain that he could have achieved was 30X his investment.

The best part of the diary is Benjamin Roth does not worry about what could have been, he accepts he has no money and does the best he can notating what is going on in the financial world while still analyzing the markets from a value basis and giving his expectations.
His point throughout the diary is when markets hit such a terrible decline, you need to have money to take advantage of the value. Most of the people who had money and he talks of many — lost all their money and so had none at the bottom. When you reach the bottom in many cases of financial crisis the preferred stock could be quite a better performer than the common as the dividends that were thought to be lost, which crushes the preferred value causes a massive uptick when survival is no longer in doubt.

Days like today in the market are great and if they continue into the future with a 7-10 percent annual gain a conservative portfolio will see me through retirement with no trouble. But if a day of reckoning does occur be ready to analyze situations for great values. Missing preferred stocks in 2009 was a very large mistake on my part.

There are not in my mind any great values to be had in the market either in common, preferred, or fixed income markets at the present time. Most values that are offered seem to be relative valuations basing the value on the price of another investment that appears overvalued, at least to me.
 
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Excellent points, RM. And I am guilty as charged on buying "relative values". But I decided about 4/5 years ago when I started buying preferreds I wasnt going to wait for 2008-09 again, as I learned 20 years later to finally let go of the 1970s and 80s inflation. And for many of my issues, KTH, CNIGO, LANDP, CRLKP, etc it ultimately doesnt matter. They are term dated and will mature so the yield is what it is and then it matures. My FIISO is 1998 yield in 2017 rate era. Now that is a steal and solid 8% is good 95% of the time in history of interest rates. Most of my electric ute money is about 400 bps above 10 year which is excellent historical value. AILLL was issued as a 6.625% when 10 year was in 7% range. Now its 6.2% with a 2.1% treasury...Excellent historical value.... And some pay in 5% range...But they have 50-100 year track records of payments and drinking and using water isnt going out of style and Amazon wont run them over either, lol.
So I have learned to accept to take what I can get mostly trying to snag relative values as that is my best options for time being.
 
I agree you have invested in the most stable and sure of the preferreds available and I think you are about as safe as one can be in this asset class -- indeed it is almost it's own unique Mulligan asset class that is impossible to replicate on a large scale, which is the result of the intelligence and insight of your investing method. However, for the first time in a long time I believe the end of low rates may be upon us and I don't think market mavens have really thought through what that means for the investing world.

In reading Roth's book or diary from 1931-1940's it struck me how unprepared everyone was for what actually occurred--- not in 1929 but from 1931 - 1940. The vantage point Roth had from his work as an attorney and his ability to relate it to the financial world is unique. Good times actually wiped out many investors that Roth saw as they attempted to make back what they lost in the previous downturn. In the present environment a bear market in stocks and bonds will devastate pension funds and foreign economies right when an aging US population is growing greatly in size.

While I am not nearly as sure as I was in 2007 that a very major economic downturn is upon us, when I sold all my stocks, I am for the first time in a long while concerned enough that I am bringing my common stock allocation down to 25 percent - I have been significantly over that for the past years, and my preferred allocation to 40% of my preferred funding level - 4 % of my total portfolio --- I will be selling my PSAPRD preferred, which has given me a few nice dividends and a nice runup from 21 when I purchased it, I had previously sold my Alabama Power preferred as I thought that was to be called and the sales price nearly covered all the dividends I expected.

The bond portion of my portfolio is going to continue to be 5 year US Treasuries and I will continue to roll them as they mature into another 5 year treasury unless other more interesting investments raise their head.

I am fortunate in that I only require a 2.9% withdrawal rate so I can afford the lower returns this strategy is going to offer if the market continues on an upward path and rates stay low. I will stay with this investment plan for at least the next year unless a major change in financial markets affords an investment opportunity. At the present time, I find no investments particularly appealing.
 
I understand your concerns, RM. Very valid.... If I wasnt a pensioner and only spend about 70% of it monthly I would probably share same concerns you have. As long as my dividends are safe, I can count on them to be reinvested. If prices were to move up my bank account looks bigger. If they go down I reinvest with higher yield going forward. It serves as "mental comfort food" as much as anything, lol.
 
I believe interest rates are going to go up.... but I have believed that for at least 5 years!!!

The thing is I do not see any reason that they will go up more than a long term trend of say 3% to 4% for 10 year treasuries... therefore I do not see much downward pressure on prices... or at least any shock except for an individual company or industry...
 
I feel the same FWIW. And some prices of preferreds as mentioned before are not out of whack with relationship to normalized yields. Take RNR-C. I bought it this week at $25.28... It went to market at $25 in 2004... Way before Fed intervention. If 6.2% was good in 2004, 6.0% is even better today.
 
Running_Man said:
While I am not nearly as sure as I was in 2007 that a very major economic downturn is upon us, when I sold all my stocks, I am for the first time in a long while concerned enough that I am bringing my common stock allocation down to 25 percent - I have been significantly over that for the past years, and my preferred allocation to 40% of my preferred funding level - 4 % of my total portfolio --- I will be selling my PSAPRD preferred, which has given me a few nice dividends and a nice runup from 21 when I purchased it, I had previously sold my Alabama Power preferred as I thought that was to be called and the sales price nearly covered all the dividends I expected.

The bond portion of my portfolio is going to continue to be 5 year US Treasuries and I will continue to roll them as they mature into another 5 year treasury unless other more interesting investments raise their head.
Click to expand...

RM, thanks for your interesting perspective on the market and I too am getting a bit nervous about the state of the market and the low interest rate environment.

My question to you, if you don't mind sharing, is what else are you investing in (besides treasuries) since your equity allocation is only 25%?
 
aja8888 said:
RM, thanks for your interesting perspective on the market and I too am getting a bit nervous about the state of the market and the low interest rate environment.

My question to you, if you don't mind sharing, is what else are you investing in (besides treasuries) since your equity allocation is only 25%?
Click to expand...

At present my equity allocation is not at 25% it is above 35% but I am reviewing which are the best stock components to keep and will be selling over the next couple of weeks, but in the end my portfolio for at least the next year will be around 25% common stocks 50% 5 year treasury ladder portfolio 4 percent preferred stocks, my 5% withdrawal portfolio, 8 percent gold and the remainder I have an an annuity - I consider the value invested as part of my long term bonds — that I have had since 2007 that goes up a fixed 4% a year, ---a non-cola pension plan and my wife’s social security— which I do not consider for portfolio purposes. While I like the Harry Browne portfolio, I just can’t get myself to get to 25% gold.
 
Dang - CNLPL traded 215 shares today @ $53.88.

I was excited seeing it, as I had a GTC for 200 shares at $53.88, but unfortunately, my bid did not fill.

Someone scooped me that time. :mad: Probably Mulligan......:blush:
 
Nope wasnt me! But I developed a "bad wing" and cant golf for a few days, so I had to do something...Sold off my KTH for a quick 55 cent profit... Couldnt help myself, didnt want to...Oh well. I saw CNTHP spiked...And no I wont sell those no matter what....Or at least I hope I never will!
 
Coolius said:
Dang - CNLPL traded 215 shares today @ $53.88.

I was excited seeing it, as I had a GTC for 200 shares at $53.88, but unfortunately, my bid did not fill.

Someone scooped me that time. :mad: Probably Mulligan......:blush:
Click to expand...


There were 250 shares of CNTHP that sold for $58.25.... I had an order for that many shares at that price to sell.... but DANG... they were not my shares!!! Coulda flipped to one of the others....
 
Texas Proud said:
There were 250 shares of CNTHP that sold for $58.25.... I had an order for that many shares at that price to sell.... but DANG... they were not my shares!!! Coulda flipped to one of the others....
Click to expand...



This happens frequently in illiquids getting screwed. I have even been jumped and shares sold to lower bidders...Did you know brokerages will have contracts to get paid to hold back sells and buys and allow front running? All legal... The little guy is always at the end of the pig trough.
 
Made an homage trade for Running Man.... 400 shares of KYN-F at $25.26 today... 3% YTM for 2.5 years and return of money aint so bad... Especially if his thesis proves true... If I had a dozen opportunities to invest in such issues as KYN-F with about 2.5 yr maturities I wouldnt be upset if all my money were in these types.
 
Coolius, it is so quiet you probably haven't even noticed...But big dog FIISO went exD for us yesterday...
 
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