Alternatives to bonds

[lawman]

I am looking to invest $100,000.00 in something other than stocks and bonds. I am considering MLP's, REIT's, and possibly a BDC's (business development company) ..I am particularly interested in knowing which of these 3 is the lowest risk...I'm not looking to hit a homerun but I am willing to assume more risk than investment grade corporate bonds pose. Comments and suggestions are appreciated..BTW this will be a long term investment..

 

[corn18]

Buy a Porsche.

 

[DrRoy]

A BDC is probably the highest risk, but all are subject to the stability of the underlying business.

 

[njhowie]

With interest rates freaking out some areas of the market this week, there are some very good values in preferred stocks.

I've been picking up very strong issues paying 7%.

 

[lawman]

With interest rates freaking out some areas of the market this week, there are some very good values in preferred stocks.

I've been picking up very strong issues paying 7%.

Such as ?

 

[OldShooter]

My limited experience with these types of investments is that where they are offered to retail investors, all the juice has been sucked out by the promoters and the sales commissions. That's why my experience is limited.

I'm not doing it any more but I used to have pretty good luck with private placements offered locally. My first was a piece of an apartment complex and the nice thing about that one was that the general partner waited and got most of his payoff oinly after the real estate was sold. Skin in the game, IOW. Other deals were similar, medical, technology where I knew the CEO, restaurant (a really fast way to lose all the money), etc. I also bought into two or three deals that were called "blind pools," pretty much like today's "SPAC" deals except smaller. In all cases I knew the promoters and it was the same situation where they got paid mostly when the deals were wrapped up successfully. Again skin in the game.

So ... you might start sniffing around via your personal network; attorneys, CPAs, Insurance agents, commercial real estate specialists, etc. to see what might be available in your area.

 

[pb4uski]

Such as ?

An example would be J.P Morgan Chase, which has 5 different preferreds outstanding (see table below). JPM/PRH was one of my first purchases. I bought it for $25.70 in Feb 2019, have received 6.15% dividends since then and it is currently at $25.59.

One of my favorites is AGO-B... a S&P A rated credit (Baa by Moodys) that has a 6.875% coupon currently yielding 6.55% but does have some call risk.

With today's pricing, call risk is often a significant issue so be sure to consider yield-to-call in your investment decisions. I've had about a dozen issues called in the couple years that I've been doing this... most at profits since I bought them right but less than a handful at small losses (not considering interest received). I try to buy at less than par + a quarter's worth of interest to mitigate call risk but will sometimes go higher for a issue that I really like or if the call date is a few year away. You win some and you lose some.

To me, the risk is only slightly higher than investment grade bonds, but the returns are much better. The values do sometings get hit hard during crises... like back last March values depressed but there were a lot of buying opportunities.

YMMV.

 

[braumeister]

I guess Beanie Babies are out of the question?

 

[Dash man]

I’ve been invested in Main Street Capital (MAIN) that is currently paying a 6.7% dividend and spreads it out monthly. Before COVID they also paid two special dividends, one each in June and September. It’s a well run company and weathered the 2008 financial crisis well and so far has survived this crisis with only cutting the two special dividends. The stock price is not a big mover but it’s a good dividend that grows in normal times.

 

[corn18]

I’ve been invested in Main Street Capital (MAIN) that is currently paying a 6.7% dividend and spreads it out monthly. Before COVID they also paid two special dividends, one each in June and September. It’s a well run company and weathered the 2008 financial crisis well and so far has survived this crisis with only cutting the two special dividends. The stock price is not a big mover but it’s a good dividend that grows in normal times.

MAIN dropped 61% in March 2020. It has a PE ratio of 82. It's burned through $230M of cash in the last 3 years. They had $58M of revenue total in 2020. That is a terrible company.

 

[Dash man]

MAIN dropped 61% in March 2020. It has a PE ratio of 82. It's burned through $230M of cash in the last 3 years. They had $58M of revenue total in 2020. That is a terrible company.

I wouldn’t judge a company on its stock price on March 2020, of which it has doubled since its low.
Here’s some more information based on the latest quarter: https://apple.news/AQV1wZcWxRfCEyPJ92TBXyw

 

[corn18]

I wouldn’t judge a company on its stock price on March 2020, of which it has doubled since its low.
Here’s some more information based on the latest quarter: https://apple.news/AQV1wZcWxRfCEyPJ92TBXyw

I wouldn't judge it on the latest quarter either. I looked at the financial statements from 2018 on. Not a good company. Burning through cash and shrinking is not a good combo. But I am a value thinker, is I may very well be wrong.