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

[Mulligan]

Cincinnati Bell's two acquisitions in 2018 were major mistakes and are eating up the EBITDA from CCB's investment in fiber technology. Now there are worries Fiber may get pushed out by 5G and so the stock and preferred falling like a rock.

And the only thing good they really had going for them was CyrusOne...And they jettisoned it and blew the cash on their crap core.

 

[Mulligan]

Well, I did a little bottom fishing and picked up a few hundred shares of EBBNF @ $17.97. Why not,?? I know Enbridge pretty well having worked on several pipeline projects of theirs in Canada and they are top notch. Plus, they have some strategic US assets in the northern states and own the Cushing Terminal a few big pipelines here.

I'm holding on to my CHSCM as I have had it a long time and why not?

Aja, your an oil man...So my plan was to just buy this one and forget about it...The terms on this are just very favorable. You think that is a fair plan to just trust Enbridge and forget about this one? I would really like have long term faith in this one.

 

[Mulligan]

Aja, your an oil man...So my plan was to just buy this one and forget about it...The terms on this are just very favorable. You think that is a fair plan to just trust Enbridge and forget about this one? I would really like have long term faith in this one.

The last purchase today was 7% QDI. With future upside and less exposure to,downside since it was reset last year off a 1.78% 5 yr Tbill.

 

[bobandsherry]

Wow - heavy volume today for NSS with it's sell off, about 4x the normal volume(237K traded). Glad I loaded up on ALLY-A instead of NSS, though there's still a sting with the drop even with the smaller position I have with NSS. Found nothing of interest other than this blurb.

https://dminute.com/2018/12/18/roge...e-by-3-76-million-as-valuation-were-volatile/

 

[aja8888]

Aja, your an oil man...So my plan was to just buy this one and forget about it...The terms on this are just very favorable. You think that is a fair plan to just trust Enbridge and forget about this one? I would really like have long term faith in this one.

Enbridge is the largest pipeline operator in Canada and maybe in North America. They move crude oil and lots of it. They have a bunch of terminals and distribute here and in Canada to refiners. I don't see them closing up shop anytime soon, but who knows what deals are made behind closed doors. I hope they aren't as stupid as CBB's management was.

My plan with a few preferreds is to hold them to call date as an income source. They pay more than my CD's and are a bit riskier, but good companies should be able to buy them back. Or I can trade them if need be.

 

[capjak]

CHSCN...I took my CHSCN beating like a man and sold off today .I pretty much have lost faith in CHS.

Why have you lost faith.....

 

[Mulligan]

Why have you lost faith.....

I lost faith in myself not so much them. I had 2 rules that I am supposed to follow and didnt...1) Sell NSS if oil went under $50
2) Dont own a company that has accounting problems. Yet I ignored both rules. Decent preferreds that tanked quickly also rebounded too...Like SRC-A and HE-U did today...CHS and NSS did not. They could bounce back quickly too... Now if they drop a few more bucks, I may look at them again...But I am fine not going there again too.

 

[Texas Proud]

I lost faith in myself not so much them. I had 2 rules that I am supposed to follow and didnt...1) Sell NSS if oil went under $50
2) Dont own a company that has accounting problems. Yet I ignored both rules. Decent preferreds that tanked quickly also rebounded too...Like SRC-A and HE-U did today...CHS and NSS did not. They could bounce back quickly too... Now if they drop a few more bucks, I may look at them again...But I am fine not going there again too.

There is also a divi coming up (NSS)... I have 800 shares and lost a years worth of divis... but I still like them since they are variable and LIBOR continues to go up...

 

[Mulligan]

There is also a divi coming up (NSS)... I have 800 shares and lost a years worth of divis... but I still like them since they are variable and LIBOR continues to go up...

I like your odds. I just got fed up with it and knowing what I should have done but didnt.....

 

[bobandsherry]

I like your odds. I just got fed up with it and knowing what I should have done but didnt.....

NSS has it's ties to oil and that may be constraining. But ALLY-A isn't and don't see it having problems paying dividend going forward, yet still despite being tied to LIBOR as well and with 2, 5 and 10 year all dropping lately I'm surprised that ALLY-A has also dropped. Not as much, but can't wrap my head around why it's dropped. Very usual movement in the markets across the board.

 

[Mulligan]

NSS has it's ties to oil and that may be constraining. But ALLY-A isn't and don't see it having problems paying dividend going forward, yet still despite being tied to LIBOR as well and with 2, 5 and 10 year all dropping lately I'm surprised that ALLY-A has also dropped. Not as much, but can't wrap my head around why it's dropped. Very usual movement in the markets across the board.

I think it is stabilizing around here...And will move up by exD date. My stable of preferreds have been overhauled...got AILLL, FIISO, CNIGO, CNIGP, ALLY-A, HE-U, PFX, NISOP, LANDP, SRC-A, KYN-F, UEPCO, MSEXP, KTN, KTH, EBBNF

 

[Mulligan]

Cincinnati Bell's two acquisitions in 2018 were major mistakes and are eating up the EBITDA from CCB's investment in fiber technology. Now there are worries Fiber may get pushed out by 5G and so the stock and preferred falling like a rock.

I saw a 2024 senior note is now yielding over 10%. That is never good news. The preferred cant recover when the senior note of shorter duration is that high.

 

[brokrken]

If any of us had any guts yesterday, we could have made a quick $0.50 on NSS today.

 

[Texas Proud]

If any of us had any guts yesterday, we could have made a quick $0.50 on NSS today.

Well, I was a bit late... I decided to buy last night and when I went in this morning it was up a bit... but I did take the plunge... now hoping it to go up and snag a divi...


If I can get back to zero for this year I still will have a return of just over 9% for the past 2 years...

 

[Mulligan]

Only made one trade today but was happy. Bought 400 shares of KTN at $28.78. The 6 month payment of $1.02 is kicked out in a bit over a week. Saw a dump going on and it appears last trade was back to $29.49.

 

[Freedom56]

Me thinks that we are setting up for a situation similar to 2014-2017 with respect to preferred stocks. This feels a lot like the end of 2013. Passive ETFs and funds holding these are still in liquidation mode. However this is counter-intuitive to where treasuries are headed and the spreads are widening. Eventually investors will be seeking income again as equities will continue to under-perform due to their valuation. I'm going to start my limit order buys of larger bank preferred stocks over the next few weeks. I have been trying to snag COF-PD at par but no luck so far. I would stay away from any regional bank exposed to the retail and energy sectors.

 

[Mulligan]

Me thinks that we are setting up for a situation similar to 2014-2017 with respect to preferred stocks. This feels a lot like the end of 2013. Passive ETFs and funds holding these are still in liquidation mode. However this is counter-intuitive to where treasuries are headed and the spreads are widening. Eventually investors will be seeking income again as equities will continue to under-perform due to their valuation. I'm going to start my limit order buys of larger bank preferred stocks over the next few weeks. I have been trying to snag COF-PD at par but no luck so far. I would stay away from any regional bank exposed to the retail and energy sectors.

Freedom, I agree. The spreads are getting pretty wide as the 10 year and preferreds are going in opposite directions yield wise. My only caveat is this, that I think has changed. Market gave every preferred a free pass the past 5 years. With short end rising and many crap companies on variable rates and some debt walls approaching, the market may not be so kind to preferreds and debt of these companies. Some are getting smacked around now. I have really tightened up the hatch in credit quality and also have more longer term call protected issues.
Take KTN I bought today...Basically, I am buying an 8 year debt issue that is non callable with a 6.4% YTM for BBB type credit...I am very fine with that.

 

[Mulligan]

Freedom, I am thinking if the yield curve inverts and economy softens..Some people may get an education on how leverage can work in a counter manner, that coverage ratios, debt walls, and cap stack can matter.

 

[Freedom56]

Freedom, I agree. The spreads are getting pretty wide as the 10 year and preferreds are going in opposite directions yield wise. My only caveat is this, that I think has changed. Market gave every preferred a free pass the past 5 years. With short end rising and many crap companies on variable rates and some debt walls approaching, the market may not be so kind to preferreds and debt of these companies. Some are getting smacked around now. I have really tightened up the hatch in credit quality and also have more longer term call protected issues.
Take KTN I bought today...Basically, I am buying an 8 year debt issue that is non callable with a 6.4% YTM for BBB type credit...I am very fine with that.

Mulligan,

Earlier in the year I posted that I expected rates to invert and they have started to. I believe that the fed will be forced to ease interest rates sometime next year to flatten the yield curve. In this environment you have to buy quality preferred stocks and bonds of companies with good free cash flow. I would continue to avoid retail, energy, and mall REITS, and regional banks. You also have to expect that passive funds will go into these program driven sell modes impacting individual issues. I generally stay away from the low capitalization companies and those with accounting problems.

 

[Freedom56]

Freedom, I am thinking if the yield curve inverts and economy softens..Some people may get an education on how leverage can work in a counter manner, that coverage ratios, debt walls, and cap stack can matter.

Yes that will happen. The company that is frightening now is AT&T with $190B in debt. I have no position in the stock or its securities. They have coverage from their telecom holdings as telecom is a cash flow business. But they paid too much for Directv and Time Warner. I also think IBM is going to be a problem.

 

[brokrken]

Snagged some LMHA at $23.40 and have a bid in to increase my position in RILYZ.

 

[capjak]

I lost faith in myself not so much them. I had 2 rules that I am supposed to follow and didnt...1) Sell NSS if oil went under $50
2) Dont own a company that has accounting problems. Yet I ignored both rules. Decent preferreds that tanked quickly also rebounded too...Like SRC-A and HE-U did today...CHS and NSS did not. They could bounce back quickly too... Now if they drop a few more bucks, I may look at them again...But I am fine not going there again too.

CHSCM at $22.30. No bounce back......

 

[Mulligan]

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

Cap, some have bounced back...They make me nervous. I dont know if I can get back in them again. Their management has been an embarrassment for several years now. If it was just the market I would get back in strong.
Anything high quality and plus 6% or decent quality illiquids with a maturity date of under 10 years really has not traded bad at all.
CHSCN is 50 cents lower than when I dumped it. I really didnt think it would go lower, I just wanted out to exploit another issue on sale.

 

[aja8888]

Cap, some have bounced back...They make me nervous. I dont know if I can get back in them again. Their management has been an embarrassment for several years now. If it was just the market I would get back in strong.
Anything high quality and plus 6% or decent quality illiquids with a maturity date of under 10 years really has not traded bad at all.
CHSCN is 50 cents lower than when I dumped it. I really didnt think it would go lower, I just wanted out to exploit another issue on sale.

I'm holding on to mine. The payoffs in Mexico are going to blow over. These guys are not GE.

 

[Mulligan]

I'm holding on to mine. The payoffs in Mexico are going to blow over. These guys are not GE.

Aja, if you like Ag, look at LANDP. It is almost back to par. In 9/2021 they must redeem it or kick the payment up 300 basis points. Its in pretty decent shape.