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

[pb4uski]

Yes, call risk is a difficult thing to judge. It's tempting to say... "well, I just won't buy anything significantly over par... problem solved"... but then that makes slim picking even slimmer.

[Coolius]

I have owned PPX for a while now, bought just a shade over par. So I'm comfortable sitting on this one until redemption or maturity, whichever comes first.


I agree with Mulligan that at its present price of $26.20, call risk is too high, and I would not be a buyer at this level unless I had great confidence it will not be called due to divesting of their UK assets.

[53anddone]

Quote:

Originally Posted by Mulligan This is just a personal opinion. I owned PPX off and on alot for several years. It was a great flipper after it would go exD it would drop in $25.20 range then I would sell around $26 before exD, rinse and repeat over and over. But it is trading now like market has “forgot” its past call. It doesnt go exD for another month and is $1.20 over par. Its par yield is way over what new issues of its ilk would pay now. But the other worry is they are looking to dump half their business (the U.K. Business) and have it for sale. This would deleverage company big time, so assumption would be to pay off a lot of debt with the cash from proceeds.... Or if this drags out they could redeem and reissue. The safety of the issue in terms of payment is no concern to me, but call loss is what scares me off at over $26. The following sounds irrational (and it is), but if I was a long time holder of the issue for income only, I would probably just hold until they redeem... But if it was for a brand new purchase, I wouldnt for the above risk reasons of a call. The reason my logic is irrational is because technically at market open one is “buying” their shares daily if they arent selling them. PB, you are correct. They sit above preferred stock. They cannot suspend payment unless all preferreds and or dividends of common are suspended first. The suspension is rarely used...Its really only there for credit agencies to count part of this debt as equity since it could be suspended without penalty or bankruptcy. So it makes (in credit agencies eyes) the ability to “hide” some debt on the equity side.

I had forgotten about the UK sale. Brings up the call risk for sure.

[pb4uski]

Looking at the charts, PPX has had a really good run up since the last dividend, which increases the call risk so I think it will go on the watch list and I'll pull the trigger on it if it dips.

Meanwhile, GAB-J looks like a relatively better value as a long term hold all things considered.

[Mulligan]

Quote:

Originally Posted by pb4uski Looking at the charts, PPX has had a really good run up since the last dividend, which increases the call risk so I think it will go on the watch list and I'll pull the trigger on it if it dips. Meanwhile, GAB-J looks like a relatively better value as a long term hold all things considered.

I tend to trade more, to juice returns as I enjoy the “junkie action” of it all also...But I like your “relatively better value” comment, PB, and chuckled... Because since the market recovered, that really has been my entire trading angle. Nothing out there is absolute value, just relative and narrowly even in that mode. But its all I have, ha.
A few sneak out though, when the Seaspan 7.125% 2027 maturity issue that was delisted several months ago and finally had a ticker assigned to it the other day, I jumped on in $24 range and added a few hundred more at $24.50. Its back up to $25 now. It is not a sector I enjoy investing in though at all... But because of that “relative” word, I feel compelled to hold instead of a quick gain flip.

[pb4uski]

Yeah, its a bit funny in that when this thread started you were much more of a buy and holder and more focused on safe utilities as I recall... and I was drawn into these preferreds and baby bonds mostly as a relatively safe income source... and over the years as you've learned more you've become much more adventurous.

We all evolve.

I wonder if there are any research tools that I am missing. quantumonline is my go-to place, but I also browse through posts and the preferred and baby bond lists at innovativeincomeinvestor and read any free preferred stock articles on Seeking Alpha (with some skepticism). The tools for researching preferred on Fidelity and Vanguard have been ok, but disappointing. My focus is more towards investment-grade credits, with little call risk with yields in the 5-6% range.

[pb4uski]

This thread made me think to look back and see how I had done on the issues that I've had that were called... and I was pleasantly surprised.

Only 2 losers... worst was one where it was called less than 3 months after I bought it and I lost $294... the other was a $41 loss after 5 months... but all the calls combined had a ~3.4% IRR so not so bad I guess.

[Mulligan]

Quote:

Originally Posted by pb4uski This thread made me think to look back and see how I had done on the issues that I've had that were called... and I was pleasantly surprised. Only 2 losers... worst was one where it was called less than 3 months after I bought it and I lost $294... the other was a $41 loss after 5 months... but all the calls combined had a ~3.4% IRR so not so bad I guess.

PB, roughly 35% are still in pure illiquid utility preferreds. But I figured out over time with these I can just trade in and out of them as the market doesnt care if its Connecticut Light and Power or Alabama Power. For example I do this all the time... NSARO was about 2 months ago laying there for the taking at $103.70. I bought over 300 shares. Then one day a couple weeks ago bids were coming out around $108 so I dumped them all. Then just this past week I bought them back at $104.70 and it goes exD in a week. I really didnt want to sell them but when the bids go up, out goes the sell button as I know I can get them back.
Another example off top of head.. APRDO came available day before exD 3 months ago at $103. The very next day I captured divi and flipped them at $105-106. Then a few weeks ago I bought them back at $104 and still captured the 12/14 divi. See to me this is how I turn 4% issues into 10% plus issues.
They arent growth stocks but range bound issues. Buy on lower end sell on upper end. But dont get greedy either way as the trade wont happen.
Of course nothing is wrong with buy and hold, for income seekers only. I like to goose returns and I reinvest the income anyways.
Yield chase for me generally has to have “wind behind my back”. For example QTREP. Its a riskier play, but QVC is on a roll, cash is rolling in and company is doing great. I will ride these for a while and collect higher income. I still watch this one closely, because John Malone being John Malone isnt going to take all that free cash and pay down debt. He is giving big chunk special one time common divis, which do nothing for the preferreds. He likes his leverage unfortunately. But he and another insider have $100 million of the preferreds themselves, so they got skin in it too.
I also have other IG or near IG stuff too besides utes. I have a full position of KTBA I mostly sit on. Also LXP-C and SLMNP too. That kind of stuff. I will run a base position then go up and down on it based on its price movement. But never totally vacate the positions.

[Gumby]

New thread for 2021 is started here. https://www.early-retirement.org/for...ml#post2538962