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

[Slow But Steady]

AHT has made themselves a very complicated entity by spinning off the luxury hotels and also spinning off the management company, but retaining some connections to each.

They are also trying to sell the mid-service hotels in a package, and folks may be upset that the transaction hasn't closed yet.

Management has pissed off some of their investors, who doubt their claims that they have the investors' best interests in mind.

They are sitting on $200 million cash, though, so it doesn't seem likely that the preferred dividends don't get paid.

 

[Slow But Steady]

It looks like the dumping is concentrated on AHT preferreds. Even the common is not as badly down ( "only -4% ).

Other specialty REIT Preferreds are down, but in the range of 2-3%, nowhere near the 6-7% drop of AHT preferreds.

Absolutely no news that I can find. Very strange indeed, unless there's some hidden news yet to be released.

AHT common shares are down over 30% since 12/1 and over 60% in the last year, so it's already taken a beating.

 

[Coolius]

On CNBC the finance analyst was talking about how the hotel industry was not yet taking into account that the oil decline is killing this industry and risking bankruptcy's and the risk to regional banks as a result of that. I think anything in this area is now getting killed as a result of this.

Well, serves me right for stretching for yield. I made a rare foray outside of my comfort zone into the world of 8%+ yields, and now the tuition bill is due and it's NOT CHEAP.

I'll cower behind the walls of my comfort zone from now on, methinks.....

 

[Mulligan]

Issues like AHT-D are certainly more volatile. It went under $10 during the epic 08-09 collapse and never missed a dividend. Many times they trade more on fear than actual payment of dividend. I am just not conditioned to be able to trade in this area. It isn't so much good or bad investing to me, its I am not man enough to meet the challenge.
I prefer what my big 5 have done today... 1) No trades 2) No trades 3) No trades 4) up 20 cents 5) up 23 cents... Less volatility the better for me.


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[Mulligan]

Well, serves me right for stretching for yield. I made a rare foray outside of my comfort zone into the world of 8%+ yields, and now the tuition bill is due and it's NOT CHEAP.

I'll cower behind the walls of my comfort zone from now on, methinks.....

Yes, "A man has to know his limitations" and I know mine.... I hope...mine are 4 up, 2 down and the rest no trades... Hey that 1 share of AILNP is still available for $1000 bucks! If they ever call it you will only be out $900 Coolius.


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[Coolius]

Yes, "A man has to know his limitations" and I know mine.... I hope...mine are 4 up, 2 down and the rest no trades... Hey that 1 share of AILNP is still available for $1000 bucks! If they ever call it you will only be out $900 Coolius.


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AILNP is so out of range it isn't funny.

But, a bright spot in today's sea of red...... High bid CNTHP @ $52.45.
Some of us got it at around $52.20, correct ? And probably secured the dividend as well.

WFC-L seems to be forming a good support floor at $1,172 - $1,175. The next dividend ( $18.75 / share ) is approaching late February.

 

[Lucantes]

Thanks Mulligan for the responses, very informative for me.

 

[Mulligan]

Thanks Mulligan for the responses, very informative for me.

Your welcome, Lucantes.... I re-read what I responded to you and may have been a bit more negative than I should have. Like I mentioned we did move my dad into PFF and PFXF.. We started with buying him some CNLPL, AILLL, WFC-L, and CHSCL. But ultimately he wanted to put upper 5 figures more dollars into these, and pushing 80 he said he didn't want to continue building individual positions. We had a quick call on DQUEK after buying and he did not want to go down the road of dealing with hassle of possible calls and having to buy more. He was willing to let them clip the 50 basis points or so expense ratios and let the fund managers do it.
If you blend the two above funds you can get a more diversified portfolio of them and you certainly don't have to worry about dealing with calls and re buying if it happens. All of the issues they own I don't mean to imply are all bad, but like any index you are buying the market. And that is what they do in many ways. Actually its an arbitrary index fund created and changed by a bank usually that they try to mirror as well as possible.
They just cant buy into the ultra safe illiquid utility issues I prefer because they would have to buy up the entire issue to get in any appreciable amount of money an index fund of that size has.
Feds have tried to raise rates, but long end of market is laughing at them, so we could be in a very long period of time where long rates are very low which is a very hospitable environment for high quality preferreds. This has been my thinking for 2 years now and still hasn't changed. But this is only my "nobody opinion" though experts are now coming around to this view also.
But if I am wrong and you do not like to see capital loss at the expense of receiving dividends caution is in order!


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[Mulligan]

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

The past couple weeks have been a good example of the world of preferreds are not uniform in action. As Coolius and I have mentioned since inception of thread, if one wants safe yield and minimum price volatility you have to stay in high quality companies illiquids, that issue preferreds because they "want to" not because they "have to". Many in the "have to" category such as BDC's, shippers, and Mreits are being taken behind the woodshed for a bare butt spanking. These type of issues are now reaching "high risk, high rewards". While someone could make money on them, it isnt why I invest in preferreds, so I stay away. The Fed doesnt have to raise rates, as Mr Market is doing it for them. Punishing issues with less the stellar balance sheets. It is really the same scenario as KMI has went through except in other companies in other areas.
I have to relearn the lesson occasionally, though luckily I always do it in small amounts on "flyers". Have managed to lose a couple hundred bucks on AES-C recently... Its balance sheet is not as strong as traditional utilities. Throw in Brazil for good measure and Mr. Market says...Back to the woodshed you go, too! So I take my swats like a big boy and move on.

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[Coolius]

Very interesting to see the price action of Trapped Preferreds like AILLL, AILNP, CNTHP, CNLPL , GLFPN, GLFPO on a day like this - there isn't any !!

Strong hands holding - no one needs to sell. The Robo-algo machines do not have them on their radar screen, so they cannot sell.

Apart from these, though, the rest of the preferred sector is taking its lumps along with everything else.

NAV is down, but income stream remains unchanged - as it has been since the beginning of the year.

 

[Slow But Steady]

AHT-D is down another $2 today. They say not to try to catch a falling knife, but maybe I'll snag a few more shares soon. I really don't see them suspending the dividends.

 

[Slow But Steady]

Edit: Multiple post - Sorry.

 

[Mulligan]

AHT-D is down another $2 today. They say not to try to catch a falling knife, but maybe I'll snag a few more shares soon. I really don't see them suspending the dividends.

Good luck Slow! This is out of my comfort zone. I know they have cash on hand, but don't know why it is acting this way. It is getting killed worse than the common is today. I dont know what lies in the weeds on this. Many people make money in these types of situations, but it isnt where I feel like I can succeed because my nerves aren't steely.
I got out of AES-C today at $47.40 and accepted my couple hundred loss. Trading volume has been HUGE, and is reaching multi year lows. This was a reach issue, so I have no marriage to it and bailed. I sold out of OSBCP again today at $10.01.
I am digging down and hiding deep in utility preferreds. I am now trying to stick to a strict mantra (until I change my mind ) of owning only what I understand and are safe capitalized companies.
Interestingly, I heard on CNBC what is rarely mentioned. Bill Gross actually recommended a closed end preferred stock fund FPF... I am not going there, but you rarely hear these things mentioned on tv.


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[hesperus]

must be that pesky risk thing, even in preferreds...

 

[Mulligan]

must be that pesky risk thing, even in preferreds...

+1....We are in absolute agreement in that statement. But then again, that never was in dispute.


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[hesperus]

Which preferreds have been holding up best lately?

 

[Mulligan]

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

For me, the ones that never trade! Those are the utility preferreds. They just wobble on a few trades and lock up once a week or so. Those are the ones I have most my money in. For example AILLL dropped 40 cents last week, as I snagged the last available at $25.75. Bidders went up to $26 today while ask minimum was at $26.75 (which would be a dumb market purchase) to buy but nobody was offering to sell. My most illiquid only has one share available and it is offered for $1000, which is $900 over par. No buying will be going on there.
The junk preferreds which are offered by cash starved companies have been rocked for the past 6 months as they mirror the high yield debt market which has been trashed. I stay mostly in investment grade illiquids and they have been holding up well. But again,they rarely move much. And that is good for Coolius. I worry he thinks he will have to go back to work full time if his issues drop a nickel.


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[aja8888]

Watching my favorite CHSCM getting near $26. I would love to pick some up under $26.

 

[jazz4cash]

Interestingly, I heard on CNBC what is rarely mentioned. Bill Gross actually recommended a closed end preferred stock fund FPF... I am not going there, but you rarely hear these things mentioned on tv.


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KOD?


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[Mulligan]

Watching my favorite CHSCM getting near $26. I would love to pick some up under $26.

That wouldnt be a bad buy. It has got close to your mark. I juiced my returns this past year trading in and out of CHSCL while keeping my baseload intact.
I would really love a few adjustable preferreds "throw in the towel" and drop. Then just sit on the issues with rate hike protection in pocket and wait for underlying bond to mature and take the cap gain at maturity.


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[Mulligan]

KOD?


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Maybe...Does Bill even have a "fast ball" anymore? He always looks defeated when he is on tv anymore. Maybe its just old age....


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[aja8888]

More on FPF:

Best Buys In Preferred Shares CEFs For 2016 Are Paying 8.5% Or More | Seeking Alpha

FPF: Several funds rise to the top of this analysis. FPF is at the top of essentially every category. It is the only top-ranking fund that has a deep discount relative to its mean discounts over the past quarter, six months and full year. By this measure, indications are that the fund is unlikely to suffer marked price drops relative to its NAV. Add to this the fact that it has been turning in an excellent performance at NAV and the fund only becomes more attractive.

FPF is only one of two funds here that is not wholly invested in the domestic market. The other is DFP whose portfolio is 72% US. FPF, by contrast, is more strongly international with a portfolio that is 49% US.

The credit rating for FPF's portfolio is 64.6% BBB or above; 30.2% BB, 1.6% B, and 3.6% unrated. It's noteworthy that energy is not listed as being among it top ten sectors.

 

[Coolius]

Watching my favorite CHSCM getting near $26. I would love to pick some up under $26.

I also have the same mindset; had sold CHSCM a couple weeks ago at $26.34, and have been watching for it to swing below $26 to buy back.

CHSCL, if it goes below $26, would be a great deal - but I suspect it will not happen unless things get a lot worse in the market.

 

[Mulligan]

More on FPF:



Best Buys In Preferred Shares CEFs For 2016 Are Paying 8.5% Or More | Seeking Alpha

That thing uses 34% leverage and is loaded to the gills with banks and insurance companies. That is a major no no for Widowed Orphaned Grandma Mulligan... Also, WOG Mulligan just read the top 10 holdings and didn't recognize any of them...


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[Running_Man]

Yes that was me today testing AILLL at 26 today just to see if I could get a bite (not even a nibble) really think that is a little too high with the chance of a call, but thought $25.75 was not going to fill. Any one holding those are holding a nice security. Did get 5.5K of WFC/L today though @ 1175 so I now own the first preferred stock of my life. Those utility preferred you like aren't illiquid they are solids, they never move