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

[Boho]

Please let us in on your "secret"!

Sorry, wrong thread. I'll try to delete that post.

 

[aja8888]

Sorry, wrong thread. I'll try to delete that post.

If you can't delete it, a Mod can do it for you.

 

[Mulligan]

They never finished my order at $24.96, I am wailing and gnashing my teeth.

I know your a controlled portion guy so what you buy will stay a palatable amount...But for others holding it still bears watching and monitoring. Ya never know this Puerto Rico debt they are insuring will work out.. They said they had it covered basically worst case scenario in July but that was before the hurricane, so economy will be in shambles. Its certainly no secret about their exposure here. Common stock would get rocked first and it was actually up nicely today. But still, call me paranoid, but it isnt being thrown in the sock drawer and being forgotten about though.

 

[Freedom56]

I know your a controlled portion guy so what you buy will stay a palatable amount...But for others holding it still bears watching and monitoring. Ya never know this Puerto Rico debt they are insuring will work out.. They said they had it covered basically worst case scenario in July but that was before the hurricane, so economy will be in shambles. Its certainly no secret about their exposure here. Common stock would get rocked first and it was actually up nicely today. But still, call me paranoid, but it isnt being thrown in the sock drawer and being forgotten about though.

Hello Mulligan,

Here are the facts:

https://assuredguaranty.com/no-acti...guaranty-policyholders-to-be-protected-from-p

Their exposure to PR is $302M. Their investment portfolio generates $400M per year. They have a a $12B claims payment reserve. This is why they still have an A rating from S&P.

MBI has a $4B exposure to PR debt and AMBC also has a significant exposure.

This explains the price action of AGO vs MBI and AMBC over the past year. I sold AGO-PE a long time ago when PR defaulted on the general obligation bonds. Their exposure to PR was unknown at the time.

Keep in mind not all of the $74B debt is insured.

From the WSJ:

At the top of the pile are plain vanilla mutual funds, which held about $14 billion of Puerto Rico’s outstanding bonds as of March, according to Morningstar Inc. Two fund families, OppenheimerFunds and Franklin Templeton Investments, held most of the debt. About 7% of Franklin’s debt was insured as of mid-March, the WSJ calculates, which also means that 93% was not and will suffer impairments.

General Obligation bondholders include: Aurelius Capital Management, Autonomy Capital and Monarch Alternative Capital LP,
Sales tax revenue-backed (Cofinas) bondholders: Scoggin Capital Management, GoldenTree Asset Management, Merced Capital, Tilden Park and Whitebox Advisors have held Cofinas.

Bonds insurers: roughly $12 billion of the island’s $70 billion in outstanding debt is insured. It will be up to the bond insurers to fill the gap when interest and maturity payments are missed. Insurers backed a wide swath of bonds from Puerto Rico, complicating the island’s ability to prioritize payments. Among the companies with the biggest exposure to Puerto Rico debt include Ambac Financial Group, National Public Finance Guarantee Corporation, Assured Guaranty Ltd. and Financial Guaranty Insurance Company

So the biggest losers are going to be the mutual funds (holders of the funds) and asset managers (clients who hired those losers to manage their money).

The things to watch right now are the banks with exposure to PR (ScotiaBank etc...) if people just walk away from residential and commercial mortgages. I've been to PR about 3 times in the early 90's. It was okay then but it's a mess right now

I hope this makes you sleep better at night with respect to AGO-E.

 

[Mulligan]

Thanks but it probably wont, Freedom, lol. I dont worry mostly because I dont own much. I had read managements version pre hurricane which mirrored some of what they said. But the landscape economically has changed since this report you posted and management conference call. Toss in my Moorebonds distrust for insurers and I will naturally worry anyways. But since its a bit under 400 shares I will say its more like “heightened awareness of the issue” than worry, lol.

 

[pig pile]

IPWLK liquid today, current ask is $101.50. I added to my stash of this one.

 

[NgineER]

I am very much a novice, but started looking into preferreds a bit more.
I know that most of the WFC issues have a lower yield, but I was looking through these, and I think that the WFC-L is too expensive now at over $1300.

Investigating the other issues, I am a little surprised of the prices I see.WFC-J 8% yield is trading at 25.52 with one $0.50 dividend left before call
WFC-O 5.125% yield is trading at 25.04 with one $0.32 dividend left before call.

Looking at these two for example, are people irrationally looking at the yield of 8% and thinking that it will go beyond the call date and make them money?

Right now the 8% J issue has -0.5% annualized return from now through 12/15/2017 whereas the 5.125% O issue has a 7.10% annualized return through 12/15/2017

Issue	Current Price	Annual Payout	Yield	Call Date	number of annual dividends	total revenue	total return	annualized return
wfc-j	25.52	$2.00	8.00%	12/15/2017	0.25	$(0.02)	-0.08%	-0.50%
wfc-l	1317.5	$75.00	7.50%	noncallable	5.00		0.00%
wfc-n	25.06	$1.30	5.20%	9/15/2017	-0.25	$(0.06)	0.24%	-2.61%
wfc-o	25.04	$1.28	5.13%	12/15/2017	0.25	$0.28	1.12%	7.10%
wfc-w	25.83	$1.43	5.70%	3/15/2021	3.50	$4.16	4.02%	1.18%
wfc-x	25.53	$1.38	5.50%	9/15/2021	4.00	$4.97	4.87%	1.24%
wfc-p	25.052	$1.31	5.25%	6/15/2018	0.75	$0.93	3.72%	5.67%
wfc-y	25.8498	$1.41	5.63%	6/15/2022	4.75	$5.83	4.51%	0.97%
wfc-v	26.52	$1.50	6.00%	12/15/2020	3.25	$3.36	3.16%	1.00%
wfc-q	27.2	$1.46	5.85%	9/15/2023	6.00	$6.58	4.03%	0.68%

Am I missing something? To me it looks as if WFC-O would be a buy with a guaranteed 7.10% almost guaranteed annualized return. But this might be best handled in a tax preferred account.

 

[Freedom56]

I am very much a novice, but started looking into preferreds a bit more.
I know that most of the WFC issues have a lower yield, but I was looking through these, and I think that the WFC-L is too expensive now at over $1300.

Investigating the other issues, I am a little surprised of the prices I see.WFC-J 8% yield is trading at 25.52 with one $0.50 dividend left before call
WFC-O 5.125% yield is trading at 25.04 with one $0.32 dividend left before call.

Looking at these two for example, are people irrationally looking at the yield of 8% and thinking that it will go beyond the call date and make them money?

Right now the 8% J issue has -0.5% annualized return from now through 12/15/2017 whereas the 5.125% O issue has a 7.10% annualized return through 12/15/2017

Issue	Current Price	Annual Payout	Yield	Call Date	number of annual dividends	total revenue	total return	annualized return
wfc-j	25.52	$2.00	8.00%	12/15/2017	0.25	$(0.02)	-0.08%	-0.50%
wfc-l	1317.5	$75.00	7.50%	noncallable	5.00		0.00%
wfc-n	25.06	$1.30	5.20%	9/15/2017	-0.25	$(0.06)	0.24%	-2.61%
wfc-o	25.04	$1.28	5.13%	12/15/2017	0.25	$0.28	1.12%	7.10%
wfc-w	25.83	$1.43	5.70%	3/15/2021	3.50	$4.16	4.02%	1.18%
wfc-x	25.53	$1.38	5.50%	9/15/2021	4.00	$4.97	4.87%	1.24%
wfc-p	25.052	$1.31	5.25%	6/15/2018	0.75	$0.93	3.72%	5.67%
wfc-y	25.8498	$1.41	5.63%	6/15/2022	4.75	$5.83	4.51%	0.97%
wfc-v	26.52	$1.50	6.00%	12/15/2020	3.25	$3.36	3.16%	1.00%
wfc-q	27.2	$1.46	5.85%	9/15/2023	6.00	$6.58	4.03%	0.68%

Am I missing something? To me it looks as if WFC-O would be a buy with a guaranteed 7.10% almost guaranteed annualized return. But this might be best handled in a tax preferred account.

It's very unlikely that WFC-O will get called. It's overpriced.

 

[Sunset]

Are you sure the math is correct in your table ?

I read wfc-w and it odd at annualized return (my calc's)
4.175÷25 = 0.167 (total revenue adjusted to par divided by the par value)
0.167÷3.5 = 0.047714286 = 4.77 % annualized return.

 

[NgineER]

You are correct, I already captured the number of years in the total return. Thanks for catching it. I did use the current price rather than the call price for the calculation.

 

[bobandsherry]

What Freedom56 said - call date is no guarantee of redemption. I don't understand your "annualized return" calc either. Guess you are trying to calculate the yield to call but that doesn't seem right either.

 

[Mulligan]

WFC has had WFC-J entered into the computer program to call this the first chance they could 5 years ago.

 

[Running_Man]

Federal Realty on 9/27 issued a 5% Investment grade preferred, I have a mental note to buy some when the price hits 18.

 

[Mulligan]

Federal Realty on 9/27 issued a 5% Investment grade preferred, I have a mental note to buy some when the price hits 18.

Hope you have a good memory!

 

[Texas Proud]

CRAP.... got 1 (yes ONE) share of SPLP-T....

 

[Sunset]

You don't use "all or none" on preferred shares ?

I usually use an all or none on all share transactions, unless I'm at a brokerage where the trades are free.
Probably because of stories from this thread

 

[Freedom56]

CRAP.... got 1 (yes ONE) share of SPLP-T....

I hope that wasn't through a full service broker.

 

[yakers]

I am interested in Prefereds for diversification in my IRA. I am not a short term trader, may hold’ forever’ if the asset fits. Or draw down equally as I take RMDs. While I mostly do not market time I do like to take advantage of the occasional obvious investment opportunity. When I have funds to add to the portfolio I look at what sector has been doing worst and what is low in my AA and buy something. Is there a Preferred ETF to follow and what would indicate a good time to buy this asset Vs other segments of the market?

 

[Freedom56]

I am interested in Prefereds for diversification in my IRA. I am not a short term trader, may hold’ forever’ if the asset fits. Or draw down equally as I take RMDs. While I mostly do not market time I do like to take advantage of the occasional obvious investment opportunity. When I have funds to add to the portfolio I look at what sector has been doing worst and what is low in my AA and buy something. Is there a Preferred ETF to follow and what would indicate a good time to buy this asset Vs other segments of the market?

I would not buy any preferred ETFs period because of market risk and their inclusion of convertible preferred stocks. Just take a look at the preferred ETF SPFF. The performance of this ETF over the last 4 years has been dismal returning about 1.5% per year whereas investors who hold individual preferred stocks have had returns in excess of 7%. If you look at the form 19a for SPFF, you can see that 15% of their distribution is return of capital. So the high distribution yield is a mirage. The only preferred ETF that has done okay has been PGX. CEFs are a better option and have performed far better (PDT, JPC, HPS, HPI, FFC, FLC, FPF). They have delivered superior returns but are more sensitive to interest rate hikes since they are leveraged. CEFs are historically expensive now and I would not be a buyer.

 

[Texas Proud]

You don't use "all or none" on preferred shares ?

I usually use an all or none on all share transactions, unless I'm at a brokerage where the trades are free.
Probably because of stories from this thread

No, it means I can lose a good deal... this is only the second time I have bought 1 share... so not something that is going to break the bank.... I just wonder who is selling one share?

I hope that wasn't through a full service broker.

Luckily not... well, luck has nothing to do with it since I chose Vanguard... so it cost me $2...

 

[brokrken]

I also just got executed on 71 shares of IPL.D. I hate partials, but forgot to mark all or none. Rookie mistake.

 

[Mulligan]

I side with Texas, especially the illiquids. It happens every now and then...whatever, I say...Take today...If I had put a AON on my AILNP at $112 today, I would not have got any. Instead I snagged 58 shares...Very pleased...
I have totally flipped out of SPLP-A into SPLP-T now and pleased...I got out of SPLP-A out of gate today at $21.68 on a premarket sell bid, and a few hours later got in T at $20.90... Lowers the cost basis nicely...My other block the other day I transitioned from $21.10 to $20.55.
Oh, and finally...I after sleeping on it, and talking with a few others, I decided to sell my AGO-E off at $25.10 today for a decent steak dinner profit. It just isnt worth the worry for me. I cant dig into an insurance company numbers and liabilities and fake being intelligent on it.

 

[brokrken]

I have totally flipped out of SPLP-A into SPLP-T now and pleased...I got out of SPLP-A out of gate today at $21.68 on a premarket sell bid, and a few hours later got in T at $20.90... Lowers the cost basis nicely...My other block the other day I transitioned from $21.10 to $20.55.

Just curious, why did you trade our of A and into T? I'm in A and have no plans to do anything.

 

[Mulligan]

Just curious, why did you trade our of A and into T? I'm in A and have no plans to do anything.

Brokrken, SPLP-T is actually A.. T are the shares that were just given to Handy and Harmon common stock holders who Steel bought out. A has been accruing its new divi for over a month now. Steel was cheap and didnt want to hand the T owners a free partial divi..T is worth about 19 cents give or take less than A. Come January 1st, all T shares will be converted into A shares price. So its a simple arbitrage trade to lower cost basis on shares. T shares are probably under a bit more pressure since many who got these wont want to keep them.

 

[brokrken]

Got it, thanks.