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

[Running_Man]

I am thinking this interest rate scare will dissipate with next week's rate hike - but who knows what the Feds will say at that time?


Income is my objective, and though painful to see NAV decline, it does not impact the income stream. Easy to say, but hard to remain detached when seeing so much red on the screen.

With a 1/2 percent increase by the Fed by December the expected amount, and the economy doing so well, interest rates are moving towards new recovery highs. My fear is these 6 percent preferred will become 6.5% preferred moving toward 7 % preferred and a 8-16 percent decline could hit in the next 6 months in the share price of these, not enough return for me to offset the risk I see right now.

The differential between competing rates is rapidly closing in on many of these preferreds, which have held up pretty well to date.

 

[Mulligan]

With a 1/2 percent increase by the Fed by December the expected amount, and the economy doing so well, interest rates are moving towards new recovery highs. My fear is these 6 percent preferred will become 6.5% preferred moving toward 7 % preferred and a 8-16 percent decline could hit in the next 6 months in the share price of these, not enough return for me to offset the risk I see right now.

The differential between competing rates is rapidly closing in on many of these preferreds, which have held up pretty well to date.

I suspect we are closer to some rate scare trading than in quite a while. But that drum beat has been said for several years and things have been great for income flipping. Being up 10% this year, I am fine giving up a bit. But I have maneuvered some. These issues I own , ASRVP, JBK, CNIGO, CNIGP, HE-U all have term dates from 2023 to 2034. These have and will trade a bit stiffer than true perpetuals. Plus for the trust debt, I am just fine holding plus 6% safer debt until maturity. NSS is a floater...GLP-A movement will be more company health related than small increases of treasury yield. AILLL will not see par...Just wont happen unless we chase 4%. AGO-B actually will hold fairly strong just because call risk will be minimized...AGO-F is a sister issue still above par at a 5.57% yield...AGO-B is free 100 basis point ride...

 

[Mulligan]

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

Today has not been a good day for my portfolio - almost all red on my screen. Tough day, for sure, for income issues.



Someone got the spooks, and dumped IPWLK down to $100.51 on 200 shares.


I quickly put in a bid at $100.52, but now it has gone back up to $103.90. [emoji20]
Maybe another frightened seller will emerge later.

Coolius, there you go again...Bad day huh? Must have lost what 5-10 cents in total on your income issues? ....Im actually up big today thanks to my massive oversized position of AILLL, and somebody bought some over $27 today. I dont really even count those gains, but our plus 40 cent divi is coming soon anyways from it.

 

[Coolius]

Coolius, there you go again...Bad day huh? Must have lost what 5-10 cents in total on your income issues? ....Im actually up big today thanks to my massive oversized position of AILLL, and somebody bought some over $27 today. I dont really even count those gains, but our plus 40 cent divi is coming soon anyways from it.

Well, Mulligan, WFC-L went down by $16 a share today. That is not small potatoes.

 

[Running_Man]

I suspect we are closer to some rate scare trading than in quite a while. But that drum beat has been said for several years and things have been great for income flipping. Being up 10% this year, I am fine giving up a bit. But I have maneuvered some. These issues I own , ASRVP, JBK, CNIGO, CNIGP, HE-U all have term dates from 2023 to 2034. These have and will trade a bit stiffer than true perpetuals. Plus for the trust debt, I am just fine holding plus 6% safer debt until maturity. NSS is a floater...GLP-A movement will be more company health related than small increases of treasury yield. AILLL will not see par...Just wont happen unless we chase 4%. AGO-B actually will hold fairly strong just because call risk will be minimized...AGO-F is a sister issue still above par at a 5.57% yield...AGO-B is free 100 basis point ride...

I would think perhaps rates going up in the manner they have actually help anyone who flips as the volatility and fear create more short term favorable trading spreads in the smaller issue market.

 

[Mulligan]

Well, Mulligan, WFC-L went down by $16 a share today. That is not small potatoes.

Yes, it was down 1.27% today....Guess what...AILLL was up exactly 1.27% today also...So you are squared up on the day...Sorry, we arent all going to donate food baskets to your house because you are poverty stricken from the loss, lol...[emoji846]

 

[bobandsherry]

Yes, it was down 1.27% today....Guess what...AILLL was up exactly 1.27% today also...So you are squared up on the day...Sorry, we arent all going to donate food baskets to your house because you are poverty stricken from the loss, lol...[emoji846]

Well... Only if he held as much AILLL as he did WFC-L. Or if he held more AILLL than WFC-L he's actually ahead. Was good day for me, rate increase is good for my holdings.

 

[Mulligan]

Well... Only if he held as much AILLL as he did WFC-L. Or if he held more AILLL than WFC-L he's actually ahead. Was good day for me, rate increase is good for my holdings.

Bob, Coolius is just angling for a charitable food basket. I wouldnt be surprised if he had his holdings on a spreadsheet he has a bigger stash now than he had yesterday.

 

[Running_Man]

It was not quite a year ago that I got negative on outlook for interest rates in the October - December time frame. Since then the 3 month libor has gone up about one percent in 10 months. I will continue to be cautious I think until I can at least see a pause in the uptick, or where some values get to be such a good price on a panic dip that I would buy them for that (think WFC-L dropping quickly towards 1,000). But as long as the companies purchased are financially viable and continue to pay it will not effect income all that much if one were to stay in the preferreds and reinvest at least 1/2 of dividends to the purchase of additional shares.

 

[Mulligan]

I highly suspected Libor and short term were moving, but gambled long end would not appreciate much to hurt income issues, which fortunately they didn’t. Im not as confident going forward. If I had to bet I would go seeing 3.5% before seeing 2.5% again.

 

[Coolius]

Bob, Coolius is just angling for a charitable food basket. I wouldnt be surprised if he had his holdings on a spreadsheet he has a bigger stash now than he had yesterday.

Nope, holdings not added to at this time. However - I am watching WFC-L and BAC-L with a mind to add a few more shares if they go solidly below $1200. I have my doubts if they would get close to par, however; that would be a 30% drop in share price.


If the rate fear increases into early next week, some interesting buying opportunities could well appear.

 

[Mulligan]

Nope, holdings not added to at this time. However - I am watching WFC-L and BAC-L with a mind to add a few more shares if they go solidly below $1200. I have my doubts if they would get close to par, however; that would be a 30% drop in share price.


If the rate fear increases into early next week, some interesting buying opportunities could well appear.

I think we have forgotten what real buying opportunities are... Last fear route preferreds were considerably lower despite same 10 year yield almost 5 years ago... RNR-C is over $25 today back in 2013 it was $21....KIM-I is $25 today it was around $20 back then...It takes a lot of dollars in stock price to increase yield in a meaningful manner.

 

[bobandsherry]

I had an too oversized position when I bought 24.80 sold all but 400 at 26 a little while back.And rolled big back into NSS around 25.70...

You no longer concerned with NSS being called?

 

[Mulligan]

You no longer concerned with NSS being called?

Been buying a relative truckload for me...2000 shares again....Figured out CEO was referencing refinancing revolver and wasnt referring to NSS when he mentioned refi for this fall...At 22 cents above call and interest payment, no call loss will occur now. At plus 10% Im back in...Where do you get a situation where debt yield is higher than the preferreds? Actually like a redemption in a year to keep me honest. But oil trend is too much in NS favor now, so Im in!

 

[bobandsherry]

Been buying a relative truckload for me...2000 shares again....Figured out CEO was referencing refinancing revolver and wasnt referring to NSS when he mentioned refi for this fall...At 22 cents above call and interest payment, no call loss will occur now. At plus 10% Im back in...Where do you get a situation where debt yield is higher than the preferreds? Actually like a redemption in a year to keep me honest. But oil trend is too much in NS favor now, so Im in!

Thanks, I was just curious as you seemed to have soured on NSS due to call. It didn't seem to make sense for them to call it, but ya never know if there's something hidden under the sheets. With 2,000 shares, you must be feeling pretty good on NSS.

 

[Mulligan]

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

Thanks, I was just curious as you seemed to have soured on NSS due to call. It didn't seem to make sense for them to call it, but ya never know if there's something hidden under the sheets. With 2,000 shares, you must be feeling pretty good on NSS.

Bob, I fell for the trap of “a little bit of knowledge is dangerous”. About 6 weeks ago or so I read on CEO conference call CEO said they had a “refinance to do” this fall. Well, I knew for certain they had no debt maturities until 2020...So that meant it had to be NSS...So I sold all out at $25.73....But then about two weeks ago, I read a “NS road show presentation” and discovered they said they were refinancing debt that had been in revolver to pay off an April bond that matured. It never occurred to me that money was never cleared from credit revolver 4 months ago. So for short term, NSS will live on anyways.
Fortunately I was able to get most of my shares back a few pennies cheaper than I sold and got a nice flip in with the cash too. Probably will sit on these shares and let it play out a quarter or so.

 

[Texas Proud]

Bob, I fell for the trap of “a little bit of knowledge is dangerous”. About 6 weeks ago or so I read on CEO conference call CEO said they had a “refinance to do” this fall. Well, I knew for certain they had no debt maturities until 2020...So that meant it had to be NSS...So I sold all out at $25.73....But then about two weeks ago, I read a “NS road show presentation” and discovered they said they were refinancing debt that had been in revolver to pay off an April bond that matured. It never occurred to me that money was never cleared from credit revolver 4 months ago. So for short term, NSS will live on anyways.
Fortunately I was able to get most of my shares back a few pennies cheaper than I sold and got a nice flip in with the cash too. Probably will sit on these shares and let it play out a quarter or so.

I remember when you had mentioned it... and I held on as the risk was so minimal and I LIKE this issue... but I only have 800 shares.. trying to stay a bit diversified on pref shares...

 

[Mulligan]

I remember when you had mentioned it... and I held on as the risk was so minimal and I LIKE this issue... but I only have 800 shares.. trying to stay a bit diversified on pref shares...

If this issue was call protected in would be $2-$3 higher considering its higher yield than the lower cap stack preferreds. But call risk will largely make this a solid yield play with minimal flip opportunity. But I bet within 2 weeks in not sooner after exD it will be right back over $25.50.

 

[Mulligan]

After dumping my HE-U at a nice profit the other day, I had to buy something, so I added to NSS and GLIBP today...GLIBP sure went on a ride today...It sagged to like $25.04 and I bought 500 at $25.10. It jumped all the way up to $25.78 later before settling over $25.50. Still in line for the divi which goes exD later this week. I originally bought at $24.66 a few weeks back and sold last week at $25.37. Been a nice trading vehicle already.

 

[bobandsherry]

Mulli..... You must sit in front of your screen when you're not on the golf course, and guess you still check prices while cruising the greens Seems I always find the dips after they've already moved back up

 

[Mulligan]

Close, I got roped into a parttime job with little to do...So I watch the stock screen a lot, lol.

 

[Mulligan]

Close, I got roped into a parttime job with little to do...So I watch the stock screen a lot, lol.

Oh ya, Bob...And inbetween golf swings too...

 

[Coolius]

I finished up my GLIBP flip today. Bought back shares at $25.51 ( having sold them at $25.78 yesterday ).


So my effective cost basis based on initial buy ( plus flip profit ) works out to be about $24.94. Now to see if I have opportunities to flip after XD Friday.

 

[Mulligan]

I finished up my GLIBP flip today. Bought back shares at $25.51 ( having sold them at $25.78 yesterday ).


So my effective cost basis based on initial buy ( plus flip profit ) works out to be about $24.94. Now to see if I have opportunities to flip after XD Friday.

Coolius, I dont know how long I will be in GLIBP. Nothing wrong with it though. I flipped out a bunch of my ASRVP today. Somebody was willing to pay more than I bought at a few weeks ago, and they let me have the juicy interest payment also as it went exAd today...Very kind of them...I lapped up the 400 shares of AILLL today. I quietly have bought up a bunch under $26.70 recently and topped off more at $26.76 since they were laying there... Im only a mid 6 figure guy with a nice pension so this isnt huge, but I am about 40% of my stash in just AILLL and NSS now.
Will eventually rotate a chunk out of NSS, but buying at $25.70 and a 57 cent plus payment friday is a great place to hold. No way this live floater will sit around par after exD. It will be back over $25.50 in a couple weeks....Would love to get some kind of modest sell off to where I could just load up on plus 6% QDI utes and call it a day. And focus on my coming NHL bets and season, lol.

 

[bobandsherry]

Would love to get some kind of modest sell off to where I could just load up on plus 6% QDI utes and call it a day. And focus on my coming NHL bets and season, lol.

What's the fun in that? Lol