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

[MooreBonds]

LMRKN, trading at about $23.50. I already had 200 of their LMRKP. LMRKN is a new issue, 7% coupon, but it's a little unusual: callable after 7 years, but you, the holder, can also exercise a force call by the company at par after 7 years, and then once a year thereafter. Interest rate: the GREATER of 7% or 3mo LIBOR + 4.698%. After 7 years, interest rate rises to 9%, and then another bump up after that. It's convertible to common shares, but conversion price is $19.21 (current equity is at $14.45).

So, essentially, it's a 7 year security of a company that's a little different (owns real estate leased to billboard companies, as well as other infrastructure assets it leases out).

I picked up 100 of the new LMRKN this morning. I would have picked up 200 if I didn't already have 200 of the LMRKP.

 

[MooreBonds]

Well, I paired down some money with some of the usual suspects with call alerts keeping the price honest. I bought 200 more CPE-A at $50.95. I bought 200 a couple weeks ago under $50.80. This will at least make it to next payment which is $1.25. If they call it, so be it, but they didnt call first date available though (end of this month). Its a bonus if it continues trading a while.
Added 200 more BGCA at 25.78. Not very optimistic on this one lasting but my cost basis is low enough with my big $25.41 purchase I really dont care. Still need to buy something else....And different too.

I previously sold my CPE-A at $52 a while back when I was nervous about oil prices. Since oil has recovered, and since Mulligan tiptoed back in, I followed suit with a few shares at just under $51 last week. I have a feeling their looking at their returns (the way they calculate them) from their oil drilling operations as being too high to devote capital to pay down the preferred in the immediate future (they show in their slides they 'earn' something like a 30% return from their drilling operations, so unless they get a big increase in credit lines at rates of 8% or below that they can't deploy in drilling, they won't divert precious working capital to pay down the preferreds at a savings of 10% if they 'earn' a 30%+ payback from drilling at current prices).

 

[Mulligan]

I previously sold my CPE-A at $52 a while back when I was nervous about oil prices. Since oil has recovered, and since Mulligan tiptoed back in, I followed suit with a few shares at just under $51 last week. I have a feeling their looking at their returns (the way they calculate them) from their oil drilling operations as being too high to devote capital to pay down the preferred in the immediate future (they show in their slides they 'earn' something like a 30% return from their drilling operations, so unless they get a big increase in credit lines at rates of 8% or below that they can't deploy in drilling, they won't divert precious working capital to pay down the preferreds at a savings of 10% if they 'earn' a 30%+ payback from drilling at current prices).

Moorebonds, that would be sweet if you are correct. Being essentially past call now and oil strong allows chickens like me to venture in this issue.

 

[brokrken]

Making me some easy money today...Entergy will be redeeming some old.Arkansas preferreds. I got 40k bought before word got out. Redemption price above par price. Will be plucking several dollar cap gain plus an accrued divi for an assumed less than 2 month hold.

How did you get word?

 

[Mulligan]

Tim McPartlands website...A total class act. And conservative common sense investor. Innovativeincomeinvestor.com

 

[bobandsherry]

Almost just tried to buy ALLY-A again as it dropped or even more BGCA, but will try to get something else if I can.

Ex-D is today for ALLY-A. I had proceeds from sale earlier this month so I did the "Texas Proud" Two-Step and flipped this. Bought in late yesterday at $26.21 for 1,000, snagged the 47 cent dividend and then flipped out of it today at $25.95, netting a $210 "Mulligan" for dinner money.

 

[Mulligan]

Ex-D is today for ALLY-A. I had proceeds from sale earlier this month so I did the "Texas Proud" Two-Step and flipped this. Bought in late yesterday at $26.21 for 1,000, snagged the 47 cent dividend and then flipped out of it today at $25.95, netting a $210 "Mulligan" for dinner money.

Here ya go Bob.....”Honey put your apron away, Im taking ya out for a nice dinner tonight!”....She will appreciate!

 

[Texas Proud]

Ex-D is today for ALLY-A. I had proceeds from sale earlier this month so I did the "Texas Proud" Two-Step and flipped this. Bought in late yesterday at $26.21 for 1,000, snagged the 47 cent dividend and then flipped out of it today at $25.95, netting a $210 "Mulligan" for dinner money.

LOL... keep doing it....

I was doing it about once a month... total of 15 last year.... but I have decided to do it more often and take less per flip about a month ago...

So, here are my flips for the last month when I got a wild hair and started to do this on an accelerated pace, first number will be the days owned and second the net gain, and third annualized return...

21, $226, 34%
7, $629, 329% (it was a make up divi, so more than normal)
1, $170, 480%
7, $40, 14% (did not recover well, moved on)
8, $134, 60%
4, $145, 106%

Own 2 right now... trying to sell one and waiting for the ex date for the other... estimate being

11, $113, 31%
7, $163, 67%

So far this year I have made over $2800 which is more than I made last year... the big problem I have right now is calculating my return... IOW, this is inside an account so if I buy something and sell it a few days later I used to be in cash for a few weeks... and I do not have a fixed amount that I invest so I cannot just say I have $20K and calculate the return on my total cash... using weighted avg invested had its drawbacks...

SOOO, does anybody know of a program where I can get a better handle on my return? Last year my weighted avg return was 18%, but this year it is calculating to be 63% right now... I do not think that is right...

 

[MooreBonds]

SOOO, does anybody know of a program where I can get a better handle on my return? Last year my weighted avg return was 18%, but this year it is calculating to be 63% right now... I do not think that is right...

If you want the honest return, take your total $ profits, and divide it by the total capital you have committed to this venture. So if you net $2,900 after commissions, and you had $20,000 in cash sitting there available for your trades, then your honest return is 14.5%. The danger with your "annualized return for each trade" is that even if you trade every day and make annualized returns of 20% for each trade, if you only traded $2,500 in each trade and kept $17,500 in cash sitting idle all year long, then your return isn't really that good overall (because even if you kick ass on your trades, your trades were only utilizing a small % of your investment capital, and the rest was sucking wind earning 0.2% in cash balances).

But, if you like oogling your annualized % returns (and/or, you typically have most of your dollars tied up in trades and not sitting in a piddly cash interest account):

1. Take your return from a trade.
2. Multiply it by the # of days you held the stock.
3. Multiply it by the % of equity that trade took up, as a % of your total available (i.e. if you allocate $20,000 for Mulligan-esque activities, and your trade position was $10,000, you multiply by 0.5)
4. Add all of the numbers from #3.
5. Divide the total by 365 (or, if you are doing intermediate results during the year, change "365" to the actual # since January 1 ,or whatever your base date is......so if you were calculating it through June 30, you would still do the same steps in 1-4, but in #5, divide by 182 instead of 365).

 

[bobandsherry]

SOOO, does anybody know of a program where I can get a better handle on my return? Last year my weighted avg return was 18%, but this year it is calculating to be 63% right now... I do not think that is right...

There's so many ways of looking at it. The simple way is you have $x dollars set aside and you'll may $y dividends year. So you could just y/x to get what you earned on the dollars you set aside. Or you can get more specific and look at the overall return for actual investment. Look into the XIRR function in either Excel or Google Sheets and put in the investment and returns by date. There's many other ways to skin the cat, just depends on what you want to measure. Sounds like you are doing OK based on your overall returns for the relatively small $$ set aside.

 

[Texas Proud]

If you want the honest return, take your total $ profits, and divide it by the total capital you have committed to this venture. So if you net $2,900 after commissions, and you had $20,000 in cash sitting there available for your trades, then your honest return is 14.5%. The danger with your "annualized return for each trade" is that even if you trade every day and make annualized returns of 20% for each trade, if you only traded $2,500 in each trade and kept $17,500 in cash sitting idle all year long, then your return isn't really that good overall (because even if you kick ass on your trades, your trades were only utilizing a small % of your investment capital, and the rest was sucking wind earning 0.2% in cash balances).

But, if you like oogling your annualized % returns (and/or, you typically have most of your dollars tied up in trades and not sitting in a piddly cash interest account):

1. Take your return from a trade.
2. Multiply it by the # of days you held the stock.
3. Multiply it by the % of equity that trade took up, as a % of your total available (i.e. if you allocate $20,000 for Mulligan-esque activities, and your trade position was $10,000, you multiply by 0.5)
4. Add all of the numbers from #3.
5. Divide the total by 365 (or, if you are doing intermediate results during the year, change "365" to the actual # since January 1 ,or whatever your base date is......so if you were calculating it through June 30, you would still do the same steps in 1-4, but in #5, divide by 182 instead of 365).

I am doing the weighted avg invested... but I had not calculated it based on the total as I never had a set amount sitting there to invest... but until a month ago it had been about the same all year... also, I invest almost all I have so I only have cash between the trades...

I jumped in with a bit more money this last month since I sold some of my permanent stash, bought a security but flipped it after I was able to make $170 in one day...


But, even with taking into account idle cash I am still doing over 30% annualized return so far this year... and that is being generous with the amount of idle cash...

 

[bobandsherry]

But, even with taking into account idle cash I am still doing over 30% annualized return so far this year... and that is being generous with the amount of idle cash...

30% annualized returns? Nice.... Time to bet the farm....

 

[Mulligan]

And Winemaker said a year ago what I did made his head spin. You guys have taken my Model T and turned it into a corvette. Heck I could have flipped my Entergy Ark. Preferreds the same day for $3 a share more, but I am holding out for the additional $1.25 divi in 6 weeks or so, lol.

 

[bobandsherry]

And Winemaker said a year ago what I did made his head spin. You guys have taken my Model T and turned it into a corvette. Heck I could have flipped my Entergy Ark. Preferreds the same day for $3 a share more, but I am holding out for the additional $1.25 divi in 6 weeks or so, lol.

Heh! Not so much a Corvette, more like a Model A.... Had cash sitting on the sideline while I look for a home for it, so thought I'd turn a quick few bucks. My longer term search continues.

 

[Texas Proud]

Heh! Not so much a Corvette, more like a Model A.... Had cash sitting on the sideline while I look for a home for it, so thought I'd turn a quick few bucks. My longer term search continues.

I am also looking to get another long term investment... but I might just add to NSS or C-N for the floating... but C-N is above par and I am not in a trusting mood for floaters that are over par that can be called anytime...

 

[Mulligan]

I wouldnt do it, Texas concerning C-N.....Too much risk...BAC just called largely all their trust preferreds a couple weeks ago.

 

[Texas Proud]

I wouldnt do it, Texas concerning C-N.....Too much risk...BAC just called largely all their trust preferreds a couple weeks ago.

Thanks.... confirms my doubts... heck, now I have to think about selling what I have as I do not want to get stuck with a cap loss (even though I have one right now)...

I want to keep away from over par if past call date... just not worth the trouble IMO since there are a good number of other issues out there...

I am keeping my GWSVP as I do not think they will call, but have now decided to not buy any more...

 

[Mulligan]

Thanks.... confirms my doubts... heck, now I have to think about selling what I have as I do not want to get stuck with a cap loss (even though I have one right now)...

I want to keep away from over par if past call date... just not worth the trouble IMO since there are a good number of other issues out there...

I am keeping my GWSVP as I do not think they will call, but have now decided to not buy any more...

I have certainly tightened up my above par and past calls. Though I am big into BGCA and CPE-A lately. But they are not call loss trades since I bought under par plus next dividend. Buying more NSS is tempting but I am resisting the urge as I truthfully have plenty already.

 

[Texas Proud]

I have certainly tightened up my above par and past calls. Though I am big into BGCA and CPE-A lately. But they are not call loss trades since I bought under par plus next dividend. Buying more NSS is tempting but I am resisting the urge as I truthfully have plenty already.

I am trying to get some more BGCA but the price has gone up.... waiting for a decline to snag some... but might have to pay up since divi is coming up...


I am surprised you have CPE-A.... a small company with a high yield... no rating, but probably in the B to B- range... might be worth a look for me since I do like the higher yields since these investments replaced my high yield fund....

I have NSS also... makes up about 20% of my current pref portfolio.... it will be less when I invest my free cash, but more than enough for me also...

 

[Mulligan]

I am trying to get some more BGCA but the price has gone up.... waiting for a decline to snag some... but might have to pay up since divi is coming up...


I am surprised you have CPE-A.... a small company with a high yield... no rating, but probably in the B to B- range... might be worth a look for me since I do like the higher yields since these investments replaced my high yield fund....

I have NSS also... makes up about 20% of my current pref portfolio.... it will be less when I invest my free cash, but more than enough for me also...

Normally I wouldnt, but when high yield issues become past call their chances for price stability increase dramatically. I want price stability in high yield issues. And this one is simple...With oil above
$50 its going to pay just fine. I wont flip, but will hold. I treat this as a term dated issue. Actually for what this issue is, its current yield, the state of oil, and being past call, this mark to market wise, may be one of the safest perpetuals on the market including investment grade issues.

 

[Mulligan]

Made one trade today and one yesterday...Bought 400shares of PCG-G at $19.70.... Just going to let this play out...These issues will start to trade counter intuitively as the accrued dividends start to rack up over time...Will be at 90 cents worth already come July.
Bought 400 of LANDP at 25.38at sub 52 week low and going exD next week. Been in this issue off and on ad nauseam.

 

[Texas Proud]

Just filled up my pref portfolio....

Bought another round of BGCA yielding just under 8% and one of CPE-A yielding just under 10%....

So my weighted avg yields 8.22% and rating is BB-.... not bad IMO...

Plus I have about 28% of it variable with LIBOR so it can only get better going forward...

 

[Mulligan]

Just filled up my pref portfolio....

Bought another round of BGCA yielding just under 8% and one of CPE-A yielding just under 10%....

So my weighted avg yields 8.22% and rating is BB-.... not bad IMO...

Plus I have about 28% of it variable with LIBOR so it can only get better going forward...

BGCA, NSS, and CPE-A take up a considerable amount of my portfolio now....I probably dont want to do the math on it as I suspect I dont want to know!

 

[Texas Proud]

BGCA, NSS, and CPE-A take up a considerable amount of my portfolio now....I probably dont want to do the math on it as I suspect I dont want to know!

Mine are SPLP-A, NSS, BGCA, and C-N making up 68%... heck, I only have 7 issues...

 

[MooreBonds]

Made one trade today and one yesterday...Bought 400shares of PCG-G at $19.70.... Just going to let this play out...These issues will start to trade counter intuitively as the accrued dividends start to rack up over time...Will be at 90 cents worth already come July.

On quantumonline:

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No causes have yet been identified for any of the unprecedented wildfires, which continue to be the subject of ongoing investigations. However, California is one of the only states in the country in which courts have applied inverse condemnation to events caused by utility equipment. This means that if a utility's equipment is found to have been a substantial cause of the damage in an event such as a wildfire - even if the utility has followed established inspection and safety rules - the utility may still be liable for property damages and attorneys' fees associated with that event.

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Current market cap of PCG is about $22B. I haven't found a site that lists an updated estimate on the cost of the CA wildfires, but various references anywhere from $20B to $30B+. Given how insane some juries are in awarding punitive damages, do you think even just a small % liability + punitive damages would almost certainly bring this company under? There is no proof...but get 12 members on a jury and show them how any transformer could shoot just one spark in the tinder brush and start a blaze, and I'm betting PCG will get hit with at least some liability (maybe 10%?) of the wildfires.

So say they get hit with a $10B legal judgement - Would their common just get snapped in half? Or does someone see something else happening? (If they sold $8B in bonds, that would definitely impact the profit margins, but should the preferreds make it through still standing as long as the judgement doesn't exceed about 75% of the common equity value?