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

[Mulligan]

Good comment re: PFF. It describes what I want and am willing/able to do. They are in the process of changing their index (see? I do a little homework!)

I think of it as an easy and fun way to pretend to be in the preferred market without huge risk. I’ll watch/read what the varsity does.

Just me, Steelyman, the problem isnt so much the fund, its the damn index’s the various preferreds follow by their design. The companies that set these indexes drop and add without rhyme or reason. And not for portfolio improvement, mostly for liquidity purposes. So then the funds always have to dump and buy..When they dump...They dump and they sell at below normal prices because of the sell imbalance. And when they buy they drive the price up paying more than they should to get all the shares.
Its all a very inefficient process.
In fact there is a little cottage industry of individuals profiting by buying dumps and also selling the ones that spike on buys.
I even did this with NGHCN. It was getting dumped and I bought. I dont even like the company but its up almost 50 cents since I recently bought. I dont trust these people but the common stock is doing good, so I will be patient and hold a while.

 

[steelyman]

Thanks for the insight, Mulligan. I’m not sure if we’re talking about the same thing although I think it’s similar. My understanding as far as PFF goes is that it’s adopting a different index, not that the index is changing the underlying stocks.

But I’m a rookie. My current plan (underway) is to DCA into PFF for a while (Fidelity charges no fees for the iShares trades) and give it some time. My interest is the dividends. We’ll see!

 

[Mulligan]

Thanks for the insight, Mulligan. I’m not sure if we’re talking about the same thing although I think it’s similar. My understanding as far as PFF goes is that it’s adopting a different index, not that the index is changing the underlying stocks.

But I’m a rookie. My current plan (underway) is to DCA into PFF for a while (Fidelity charges no fees for the iShares trades) and give it some time. My interest is the dividends. We’ll see!

Steelyman, this new index (Was it ICE?, cant remember but I did the other day anyways, lol) will do like all the other ones. They will constantly rejigger whats in it several times a year. They all tend to base it on watching liquidity. If the individual issue cant muster daily trading volume needed (usually around 150k) it wont be added or could be dropped...What a great concept...Lets base a tracking fund off volume...Quality, yield, duration...None of that trivial stuff matters, lets just buy it because its liquid!
Maybe that is why it has been so easy for me to beat it. Liquidity is the last reason I use...In fact the biggest profits I usually make on trades are the opposite. Finding illiquids, buy into liquidity and sell into illiquidity.

 

[brokrken]

They all tend to base it on watching liquidity. If the individual issue cant muster daily trading volume needed (usually around 150k) it wont be added or could be dropped...What a great concept...Lets base a tracking fund off volume...Quality, yield, duration...None of that trivial stuff matters, lets just buy it because its liquid!

Haha, I think you could combine all the volume of 4 or 5 of mine and they wouldn't trade 150k shares in a week, much less a day!

 

[steelyman]

Steelyman, this new index (Was it ICE?, cant remember but I did the other day anyways, lol) will do like all the other ones. They will constantly rejigger whats in it several times a year. They all tend to base it on watching liquidity. If the individual issue cant muster daily trading volume needed (usually around 150k) it wont be added or could be dropped...What a great concept...Lets base a tracking fund off volume...Quality, yield, duration...None of that trivial stuff matters, lets just buy it because its liquid!
Maybe that is why it has been so easy for me to beat it. Liquidity is the last reason I use...In fact the biggest profits I usually make on trades are the opposite. Finding illiquids, buy into liquidity and sell into illiquidity.

Oh my! Something I can actually answer! You’re right on, the new index is ICE and was approved last fall.

I do hope your profits keep rolling along, the commentary in this thread is educational for interested readers.

 

[Freedom56]

Misanman, this is just my opinion, but PFF hasnt come close to matching my returns for 6 years running. They seem to buy just what some index says that makes no rhyme or reason. Then they dump shares to reset without any care to capital. They then also have a performance dragging expense costs...And they are overloaded in financials.
But that being said, if you only want a small splash, not really interested in taking individual company risk or wanting to research stuff, it would probably be better to go that route. As there is a benefit in diversity by owning the fund instead of buying your own if you dont want the hassle.

But think about the opportunity PFF and other passive ETFs create for retail investors. They dump holdings into a relatively low liquidity market during fund redemption driving prices of investment grade preferred stocks well below par and their yield spreads over 3.5-4% versus the 30 year bond. Then they bid them up well over par as money flows back into the funds. Then there is the ridiculous index re-balancing that you alluded to.

 

[Mulligan]

But think about the opportunity PFF and other passive ETFs create for retail investors. They dump holdings into a relatively low liquidity market during fund redemption driving prices of investment grade preferred stocks well below par and their yield spreads over 3.5-4% versus the 30 year bond. Then they bid them up well over par as money flows back into the funds. Then there is the ridiculous index re-balancing that you alluded to.

I should do it more...But the problem is many of the issues that are being rebalanced are issues I am generally not a fan to hold such as shippers. And since I stay fully invested generally, I would have to sell something that I dont want to or have to pay up to reacquire because of liquidity. To compound my present problem I have a buttload of Canadian reset issues in my Vanguard. They really didnt know this was going on. Once they figured it out, they have banned the buying of these securities. I could sell them but I couldnt repurchase them.

 

[Mulligan]

Oh my! Something I can actually answer! You’re right on, the new index is ICE and was approved last fall.

I do hope your profits keep rolling along, the commentary in this thread is educational for interested readers.

Steelyman, the way my memory is going, I am shocked I got it right. Last week I went from memory and bought the wrong preferred and didnt even know it, lol..Lucky for me it jumped 50 cents and I sold it. Analysis is overrated I guess...Time to bring back the monkeys throwing darts!

 

[capjak]

August 2015, I jumped in with AILLL at 25.63 and a 6%+ dividend based on Mull’s recommendations and continued to add to it now at 2500 shares than several others around 6% div all based on Mull’s recommendations. Yielding $20,000 per year qualified div. with no intention of selling so far seems to work.

 

[Mulligan]

August 2015, I jumped in with AILLL at 25.63 and a 6%+ dividend based on Mull’s recommendations and continued to add to it now at 2500 shares than several others around 6% div all based on Mull’s recommendations. Yielding $20,000 per year qualified div. with no intention of selling so far seems to work.

Cap it appears Duke is going to be issuing a QDI preferred in the 5.75% range. I probably will buy a few. QDI ute preferreds dont come to market often...NI-B did late last year and I made a lot flipping that bad boy several times and still snagged the divi too.. Before that Alabama Power and a 5% issue in 2017 was the previous issue..So they dont come often.

 

[capjak]

Cap it appears Duke is going to be issuing a QDI preferred in the 5.75% range. I probably will buy a few. QDI ute preferreds dont come to market often...NI-B did late last year and I made a lot flipping that bad boy several times and still snagged the divi too.. Before that Alabama Power and a 5% issue in 2017 was the previous issue..So they dont come often.

If I get it close to 25 I will buy some as well, as I have some cash sitting around right now. Thanks for the heads up.

 

[pb4uski]

If I get it close to 25 I will buy some as well, as I have some cash sitting around right now. Thanks for the heads up.

+2

 

[bobandsherry]

If I get it close to 25 I will buy some as well, as I have some cash sitting around right now. Thanks for the heads up.

Trading for the day at $25.22 to $25.25. That close enough? You get in?

Strange - I checked earlier and it was DUEK, just went and checked again and now it's DUEKL. Interesting to see change inter day.

 

[Freedom56]

I would wait for another sell-off of preferred stocks and baby bonds before buying. We should know that this will happen again as it does every year. There are many good quality QDI preferred stocks from JPM, WFC, BAC, C, COF and others that offer higher yields and even great yields after they sell-off well below par. Buying and selling preferred stocks is like the movie "Edge of Tomorrow", except this loop will go on forever as long as investors/institutions continue to buy and sell preferred ETFs such as PFF and PGX.

 

[mrc758]

Question for you astute preferred investors. I have some GLOG-A which according to Quantum pays a qualified dividend. Schwab classified some of the dividend as ordinary even though the company IR said that there was no ROC or reclassification. I called Schwab and they said it was because of what the company reported. Do any of you have a problem with the brokerages doing this?

 

[Mulligan]

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

Trading for the day at $25.22 to $25.25. That close enough? You get in?

Strange - I checked earlier and it was DUEK, just went and checked again and now it's DUEKL. Interesting to see change inter day.

I got trapped as the ticker wasnt trading before I left to golf and I noticed on golf course it was so I bought 600 shares as a core hold at $25.27. Really wanted closer to par...But you cant compare utility preferreds to bank preferreds as they historically will trade firmer than bank ones do. But the fact it is so massive it will be very liquid and prone to more market movements in general. Since it is a core hold I will not be obsessed with its price movements...Duke issued a 6.375% QDI in 1993 when 10 year was 5.75%. Getting a 5.75% with a 2.45% ten year is actually better relative value than the 1993 issue that has long since been redeemed.
I also think a bit more globally here...I have an almost equal representation of preferreds that are adjustable tied to 5 year US Tbill and Canadian 5 yr. So Im just staying balanced (ok and I got some shameless high yield issues too).
Im not betting on it, (or even worried about it) but if our rates drop closer to other industrialized countries this thing will not see par again. There is a reason why there are some 3.5%-4% perpetual preferreds trading in the market...And they were issued during the 40s and 50s when 10 year was around this yield.
It really is no surprise this thing has jumped. The whole issue was quickly upsized to 1 billion dollars because of the huge demand for the issue...One doesnt often get a bite of the QDI utility preferred apple..Maybe the 4th one issued from different utes since 2013.

 

[Mulligan]

Question for you astute preferred investors. I have some GLOG-A which according to Quantum pays a qualified dividend. Schwab classified some of the dividend as ordinary even though the company IR said that there was no ROC or reclassification. I called Schwab and they said it was because of what the company reported. Do any of you have a problem with the brokerages doing this?

Mrc, sorry I am of no assistance. Have you checked with investor relations of Gas Log? Maybe they can assist you. Here is a link that has an email address.
https://www.gaslogmlp.com/full-news-article.html

 

[capjak]

Trading for the day at $25.22 to $25.25. That close enough? You get in?

Strange - I checked earlier and it was DUEK, just went and checked again and now it's DUEKL. Interesting to see change inter day.

Nope, using fidelity could not see it trading this am and got busy...

 

[mrc758]

Mrc, sorry I am of no assistance. Have you checked with investor relations of Gas Log? Maybe they can assist you. Here is a link that has an email address.
https://www.gaslogmlp.com/full-news-article.html

Thanks. I did talk to IR and I think it's Schwab's screwup. I think they looked at the 8937 for the common units and applied them to the preferreds.

 

[Texas Proud]

Well, nothing like just holding on...


I bought PIY and watched it drop... down to almost $10... bought in the mid $14s... well, now it is back to the mid $13s and rising... heck, my portfolio is not positive even though I still have a loss on this one..

 

[Mulligan]

I got abused without lubricant from underwriter of MRBPP a 7% QDI F/F from small midwestern bank Merchants. They played with the shares for 4 days before they let the peons like me in at $25.50.

 

[bobandsherry]

I got abused without lubricant from underwriter of MRBPP a 7% QDI F/F from small midwestern bank Merchants. They played with the shares for 4 days before they let the peons like me in at $25.50.

For 7% QDI, I wasn't letting 50 cents stop me, so I bought 400 shares yesterday at same price. Saw a pop this morning, guess we'll see if that sticks or not.

Currently holding NSS, MRBPP, GLMPP, GL-A, GLOP-C, EBGEF, CIM-D, CHMI-B and AHT-F. Also holding a few paying high dividend common.

Not much dry powder left to take advantage of great opportunities going forward. Not much I really want to let go of either. AHT-F may be a target to take down, bought at $20.49 so already up 11.5%, but still well under par.

 

[Mulligan]

Bob,I just dont have the nerve for AHT preferreds but I do own RLJ-A for a little yield spice. Yes, I think MRBPP was still a good play. Just ticked they issue it at 7% par and had no intentions of passing them out to us at par.

 

[bobandsherry]

Bob,I just dont have the nerve for AHT preferreds but I do own RLJ-A for a little yield spice. Yes, I think MRBPP was still a good play. Just ticked they issue it at 7% par and had no intentions of passing them out to us at par.

Heh - I snagged AHT-F on a dip in Feb, up 11.5% since I bought it and just pocketed a div payment so it treated me well. But that's one that's on my list to trade-in/up on something good.

 

[Mulligan]

Good trade Bob...I am not indicting it..Just indicting my lack of courage, lol.