MooreBonds, is Cowen just like a small boutique investment firm?
Primarily. They might have other financial interests, but they're primarily a small boutique firm.
Its a good topic! I reduced my position last week, but only because I like NSS and wanted more... My take for what its worth is it is about the range of yield 7% it should be...It never was a $25 par 6% issue...That was pure funny money... The value is in the 2/2020 put, but that is too far away for the price to factor in. I hope it drops and then I would sell something to buy more.
Perhaps the new tax law is also lessening the value of the parent company? Wasn't one of their main plans to buy companies with large deferred tax assets, then using those deferred tax assets to lower the parent company's tax burden? With corporate taxes dropping, won't that somewhat reduce the value of DTAs? Not saying that SLPL is hanging onto a shoestring, but perhaps it's creating a little weakness?
There are different ways of calculating the yield, but from the way I look at it, holding it for 8 years to final maturity means you are buying a $21 stock now and get $25 in 8 years. That works out to an extra $.50 in capital gains in 8 years. Your current income is $1.50/year now. Add in the $.50 in cap gains and that's essentially $2.00 in total return per year (Yes, I realize you should use the future value reduced by a discount rate, but this is simple back of the envelope calculations here).
So $2 per year in gains from a $21 stock is about a 9.5% annualized total return.
Or, if you want to be more accurate, using a discount rate of 5%, the $4 in cap gains in 8 years is worth about $2.72 in today's dollars. Divide that over the 8 years you wait to get it, and that's about an extra $.34 per year in gains. Add the $1.50 in interest you get per year, and you are getting about $1.84/year for the next 8 years. Which is an 8.76% yield off of a $21 stock.
And that excludes the bonus effect of 20% of the stock called in 2 years.
So to me, it's a good risk/reward proposition, for an appropriately small portion of your portfolio. I'm already tapped out with enough shares that I want to risk to a company like this( I think my current till is about 450 shares of SPLP-A).
