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

[jimnjana]

That is a tough one... .

That is what I thought...after the fact. Glad I didn't get carried away.

 

[Mulligan]

That is what I thought...after the fact. Glad I didn't get carried away.

Jim, I bet your fine with it. The company bonds are not highly rated, but they are not on deaths door by any means. I wont rule it out owning again. There are a lot riskier ones! They are paying their bills. Its not a bet the farm issue, but probably none are, lol...But put it this way...They have been "on the edge" before and never not paid the divi. So compared to that they are in great shape. I wouldnt worry about it unless you are worried you bought too much. Runningman had some discourse on the company many pages ago. He can read a balance sheet more proficiently than me.

 

[aja8888]

I agree Micheal. Especially when the words "dont want to lose any money" are mentioned...Glad to see you stop by Micheal. Now where are your preferred tips? You just made me think with you being a moderator (and a good one, I may add) this thread hasnt seemed to cause any Porky threats like healthcare threads, lol.

Mul, agreed on no pending Porky visitations....maybe you should liven it up with some sports betting advice? Or some update on your love life? (preferreds are kind of boring....)

 

[Mulligan]

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

Mul, agreed on no pending Porky visitations....maybe you should liven it up with some sports betting advice? Or some update on your love life? (preferreds are kind of boring....)

Im looking for advice. I got 9 days left before my stack of Benjamins head off to Vegas with me in seeking much better returns than a preferred..... This is a tough year for me havent made up my mind.
Leaning heavily towards Cardinals 8 over and a few minor plays. The Patriots 12.5 under is tempting and the Lambs under also. Dont have a strong conviction yet. Might need a few Grey Gooses when I am out there to give me the proper vision to pick some winners!
Love life? Expensive! I have to pay for her too as she is coming in tow. And of course that means I had to book the Wynn! So now I need to win big just to pay off the "overhead costs", lol.

 

[Running_Man]

OK I know everyone here seems lately to be more interested in the Dolphin portfolio and with current pricing I understand why that is.

I came upon a spreadsheet for a “Widows portfolio” from LordXot on the fools discussion forum, LordXot was mocked as a cult here back in 2012 with the upcoming sure rise in rates for his preferred stock selections, but I find his portfolio and advice to be good here, he is calling for waiting on the Widows portfolio and one should wait to invest until there is a large correction (he defines that as a 7% average portfolio yield in the preferreds and with all the low interest rate preferreds being issued you will have income for life.


https://docs.google.com/spreadsheets/d/12LYjPAlxDXl-apTFbu_ARAAvkwAMA0XFpS4K8RfGMUA/edit#gid=0

Basically the spreadsheet is a list to watch for if a major interest rate correction comes. This is his comment in Feb of this year:

There's a third common error and that is investment selection contradicting investment goals. If one buys a pfd for income and then sells it if the price falls, for reasons not related to company specific financial concerns, i'd say investment goals and methods aren't aligned with their investment selection. They are uncertain as to want they want and how to get it. Investments and methods should match goals and needs. Along the same lines, if one bought and wanted nav preserved, selling may be right but initial investment selection would be wrong, particularly at this point in time....imho. Many are investing contra to known risks and characteristics associated with pfds....rates, inflation, liquidity, call, lack of growth or participation in the issuer, and so on, and into the face of high pricing/low yields as well, and in contradiction to their own investment needs.

I would not buy "any" pfd stock right now if i was concerned that the price might fall.....let me emphasize this......none!

Now I admire what he says but did not agree with him and actually a few weeks early had purchased PSAPRD and presently am up 12 percent in price…. but I agree with his outlook that preferreds are income vehicles and pricing is irrelavant. but to optimize income and prevent calls timing of the purchase is imperative and right now is not a good time to buy many preferreds and I think in most cases preferred holdings should be on the lower edge of ones targeted allocation.

 

[Mulligan]

RM, what is the dolphin portfolio? Couldnt find anything... Lord Xot has a big following and I enjoy his posts on SI. But for the record I dont think he has ever recommended anything from Widows portfolio and he never invests from it. Heck he wasnt recommending conservative BGE-B when it was 10% in the 09 crisis and that is high quality.
I dont disagree with your points or his in general. But I dont have to play by the rules and really dont need a strategy. Take my big play in CFC-B. Its pretty much gambling that I lose 17 cents to have backside yield support and solid short term yield of 6.8% if it remains outstanding...Buying a just issued 5% preferred perpetual like the new SCE preferred issue? Forget about it! Im not getting one of those wrapped around my neck. CFC-B will not drop on future incremental yield increases. In fact if they came out tomorrow and said they wouldnt call it until maturity it would have to jump over $3 bucks almost immediately.

 

[Running_Man]

 

[Mulligan]

Good one! Ya, in this interest rate environment it is my favorite strategy. I could get the extra 2-3% from a leveraged CEF just as easily as I get it myself. But who knows what those nitwits are doing with my money and what the leverage mechanisms are. I will make the extra vig on my own and know what I hold anyways. But more importantly, I enjoy it more.

 

[Running_Man]

I consider what you do is very well thought out and in general I will just call it the Dolphin portfolio since you are buying the preferreds that can be called and are willing to flip out of them if the price is attractive enough and keep the eye out for a suitable replacement. There is too much to go into LordXlot entire portfolio theory as he is very willing to take on low graded securities if he feels dividend is covered. But his comments on matching the portfolio to the desired outcome I think is frequently overlooked. Note that he did not say he would not own any preferreds but rather not own any if he was worried about the price falling, There are two ways to deal with that, 1) your way buy preferreds where you do not think the price will fall and be willing to flip into a similar situation or 2) Wait on an interest rate impact on preferreds and be ready to jump on them when the prices fall for a very long term income stream without fear of calls due to the sub calling price.

I guess these posts are my way of saying I am getting very worried about interest rates in the next six months, more than at any point in the last 4 years.

 

[Mulligan]

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

Yes, what he does is different and he has a strategy and a nerve of steel to match it as that is needed with what he does. I dont worry about him. He knows what he is doing and does not promote others to follow. Yet many do. And I am afraid they only do what he does, because he does it. They do not understand capital structure
risk or how volatile these issues can get. Im afraid they wont have the stones he has and do the opposite due to the human emotional element and buy high and sell low on a credit lockup/lockout risk they knew nothing about....But to each his own..
I tend to sway opposite of consensus a bit, so my fear of interest rates climbing is higher too. That is why the last five issues I have bought and plan to hold are term dated issues. This eliminates the capital risk from rate increase when held to maturity. Most of these are 4 years max. One is 2028. An of course CFC-B is for all purposes a short term issue. If it isnt I will be pleased as its 7% par issuance was when 10 year treasury was 4.6% . A helluva alot of backstop built into that one if it stays around for any period of time.

 

[Sunset]

I was sleeping and so got called on 2 preferreds.
Maiden Holdings and AES-C , fortunately I didn't buy them too much over the call price so no damage once you count in the div's paid for this year. (yes fake math)

 

[Coolius]

I wasn't sleeping, but got called on PSA-PS.

Happily, someone bought my entire position this morning at $25.16.

Calculated the redemption value was par+$0.119 = $25.119. So I put in a sell order for $25.16 and it filled.

It was a good ride for close to a year, sad to see it go, but it was inevitable.
I still own PSA-T, and that will be the next domino to fall, most likely within a year from now - hope it isn't earlier.

 

[Mulligan]

I was sleeping and so got called on 2 preferreds.
Maiden Holdings and AES-C , fortunately I didn't buy them too much over the call price so no damage once you count in the div's paid for this year. (yes fake math)

Sunset, I am fine with your "fake math". In fact that really is the only way you can. Your purchase price is your purchase price and one knows the call price. It is what is so your math is good!

 

[Mulligan]

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

Well last day I can trade for a while, so had some fun...Sold my KYN-F and bagged a big 17 cent profit or so including the monthly divi. Got back in SPLP-A. The Handy full acquisition seems to be settled with the 20% par $25 put of all shares in less than 3 years clarified for me so I am back in at $21.85. Got back in GBLIL at $25.68. It didnt realize there is some "bonus" first divi payment from excess accrual to make this divi 61.25 cents, so just about back in at par again. It goes exD tomorrow.

 

[jimnjana]

. Got back in SPLP-A. The Handy full acquisition seems to be settled with the 20% par $25 put of all shares in less than 3 years clarified for me so I am back in at $21.85..

I didn't see the PAR value for this one anywhere. What site did you use? On preferred channel says there is no par value.

 

[Mulligan]

Go to quantumonline and then hit to prospectus and there u get the finer points of the issue. Basically they r using the preferred to buy out completely 2 companies they had majority ownership in already.

 

[Mulligan]

Buying GBLiL right before market close sure was a no brainer trade for me yesterday.

 

[Mulligan]

Jim pricing on splp-a can be jumpy and under pressure at times because it wasnt issued to public. It was forced on existing shareholders of common stock splp bought out. This probably not what they wanted. A second buyout is coming again this fall. That is why i like the put and 9 yr term. It takes the pressure off being right on correct entry point.

 

[jimnjana]

Jim pricing on splp-a can be jumpy and under pressure at times because it wasnt issued to public. It was forced on existing shareholders of common stock splp bought out. This probably not what they wanted. A second buyout is coming again this fall. That is why i like the put and 9 yr term. It takes the pressure off being right on correct entry point.

thanks. looking at that today. bought some more GBLIL. I tried to buy RSO-c shares but fidelity wouldn't let me do it online.

 

[Mulligan]

Hadnt really followed market last week being out of town but noticed GBLIL recovered entirely in a weeks time after going exD. That sure was easy money.

 

[jimnjana]

Picked up some CBL-D shares this week. Had picked up some of the SPLP-A shares, but still trying to figure it out.

 

[Mulligan]

Jim, you got something in common with my girlfriend...She likes malls too. Except she isnt interested in making money off them, she is more into spending it there, lol.
I am going to come up with some scheme here next week to run a circuit again with some cash try to bag 2 or 3 dividends off same money in a cycle like I did last month. Kind of neat catching small cap gains and multi dividends from same cash pile and not miss the divi cycle from where the money came from to begin with. Will need to figure out which ones to bag and what sequence though.

 

[Golden sunsets]

You are my hero Mul; Let us know your results.


Sent from my iPad using Early Retirement Forum

 

[Coolius]

Mulligan,

I will await your scheme with eager expectations, and try not to hold my breath while so waiting.

 

[Mulligan]

Mulligan,

I will await your scheme with eager expectations, and try not to hold my breath while so waiting.

Well guys it may be easier said than done. The last 3 times I did it, it wasnt a plan, just reactionary. It appears I cant make the opportunity, I will just have to wait for it. Something has to drop, then pick it up before exD then unload unto something else that drops. If nothing sags its hard to start the process. Of course since the cash is sitting from the sale, I will need to force it unless I just hold... But that isnt my style.. We are getting close to nut cutting time of CFC-B. I may buy more and stare em down with exD inside 20 days now.