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

[Mulligan]

WOW.... I have had a standing order to sell CNTHP for $57.10 for awhile...


Just sold!!! So a good cap gain and just got the divi... so cap gain of 5 divis and 1 to be paid... a good flip IMO...


Will have to put in an order to buy it back soon...

Good for you Texas! I have had to give up flipping my utes because it has gotten so much harder to get back into them at a respectable price. You arent as married to them as I am so you can move on to something else easier if the price is right for you.
As less as a year ago, everything I had was a flip as I could get back in them. Now maybe 15%-20% is available. Not that it is all utes, but a slug is also in term dated issues I want to stay married to.

 

[Mulligan]

I got in on ALLY.PR.A (GMAC Capital Trust) a year ago, past call date but thought it wouldn't be called. Up over 4% on the price and and 6.9% dividend, rate is adjustable. Continue to look that it isn't called any time soon.

Bob, what else you holding preferred wise besides the Ally trust issue?

 

[Texas Proud]

Good for you Texas! I have had to give up flipping my utes because it has gotten so much harder to get back into them at a respectable price. You arent as married to them as I am so you can move on to something else easier if the price is right for you.
As less as a year ago, everything I had was a flip as I could get back in them. Now maybe 15%-20% is available. Not that it is all utes, but a slug is also in term dated issues I want to stay married to.

On some of these I put what I consider a high price on them and just have a sale on them... if they hit that is good..

I hope to get back in somewhere less than $54... it was there less than a month ago... and low $54s last week...

I do like this as it is BBB+ and brings my portfolio avg rating up...

Just checked.... held just over 1 1/2 years and a total gain a divis over $3,600....

I do plan on buying more SPLP-A, but I was going to do that anyhow... I can wait... I have been a bit slower on my 'trading' to buy divis.... seems that the price is going up more than I want just before and I do not think I will be able to sell at a profit after the divi....

 

[bobandsherry]

Bob, what else you holding preferred wise besides the Ally trust issue?

I have only dabbled with preferreds, been long in common and index funds. Ally was my first preferred. I've had a few others that I've been in and out with gains. Only other one I'm currently holding is Countrywide Capital B. It's up slightly from where I got in.

 

[Mulligan]

On some of these I put what I consider a high price on them and just have a sale on them... if they hit that is good..

I hope to get back in somewhere less than $54... it was there less than a month ago... and low $54s last week...

I do like this as it is BBB+ and brings my portfolio avg rating up...

Just checked.... held just over 1 1/2 years and a total gain a divis over $3,600....

I do plan on buying more SPLP-A, but I was going to do that anyhow... I can wait... I have been a bit slower on my 'trading' to buy divis.... seems that the price is going up more than I want just before and I do not think I will be able to sell at a profit after the divi....

I only speak for myself but I love SPLP-A. It bears researching to study everything about company and the preferred itself though and be fine with it...But looking at PE of the company misses the point. They have bought out money losing companies on the cheap over the years as use their NOL’s (net operating loss) to offset their profits so they owe less income tax. I dont claim to understand it all, but have read enough to understand the major points. I have 1000 shares which is actually a lot for me on an issue that I dont perceive as bullet proof safe..This and ABRN are my biggest “riskier” plays. Of course risky is a personal judgement. I am not losing sleep owning it so its not like its a greek shipper or a RAS preferred or anything near that.

 

[bobandsherry]

I only speak for myself but I love SPLP-A. It bears researching to study everything about company and the preferred itself though and be fine with it...

I've been watching SPLP-A drop (improving the overall return). The K1 is what gives me pause. No other investments I have issues K1. Seems likely that I'd have to then file extension for each year going forward. For a few hundred shares not sure the hassle is worth it compared to other investment options. So it's like either get in with at least 1,000 shares or don't bother (or get in at right price for really good return).

 

[Mulligan]

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

Here is a couple blurbs one from Brian Harper from Seeking Alpha that give better example of what I was saying...From last year...
Steel Partners (NYSE:SPLP) is also interesting to us. They have been run for years by Warren Lichtenstein, who is a pretty solid capital allocator. Steel sells at around ⅔ of book value, and they have not been shy about repurchasing stock when it dips. Steel has massive NOLs (tax loss carryforwards), which over time they carefully and deliberately have purchased without tripping the IRS rules. They have several divisions including manufacturing, industrial, and financial. At the end of last year, they quietly folded a financial subsidiary with huge NOLs into their very profitable, relatively low risk financial division named Web Bank. Web had been a full taxpayer, so clearly the goal here is to cut their tax bill. Web earned about $1.25 pre-tax per SPLP share last year, so you can see the value there.

WebBank, a hidden gem on the balance sheet, generated a dividend for the parent of $9.5 million last year (and paid $18 million in cash dividends to the parent from 2012 to 2014) but is on the balance sheet at book value, roughly $60 million. The subsidiary has returned to the parent cash dividends equal to 46% of the book value of the subsidiary in four years and has generated cash dividends on net income year to date of 22.78%.[viii] Given the fact that stakes in publicly traded companies can be acquired at a discount to SPLP's current market capitalization, we view WebBank as a free option.
https://seekingalpha.com/article/40...locator-trading-discount-market-value-holding

 

[Mulligan]

I've been watching SPLP-A drop (improving the overall return). The K1 is what gives me pause. No other investments I have issues K1. Seems likely that I'd have to then file extension for each year going forward. For a few hundred shares not sure the hassle is worth it compared to other investment options. So it's like either get in with at least 1,000 shares or don't bother (or get in at right price for really good return).

This is a basic one from what I have been told by several people. I was more worried about the UBTI limit since I have it in tax differed. Since I have now found out this is totally unrelated to UBTI, I own more now, but side step the K-1 issue being in tax differed though.

 

[Sunset]

I picked up another 100 shares of SPLP At $20.85 , of course right after someone got 400 for $20.75

Since I'm getting free trades, I figured I'd add slowly while it drops to $20.

 

[pig pile]

For those interested, AILLL having a liquidity event this morning. Seller @$26.45. Most shares are gone already but last I checked there are 1100 left. Good price as long as this puppy doesn't get called.

 

[Mulligan]

For those interested, AILLL having a liquidity event this morning. Seller @$26.45. Most shares are gone already but last I checked there are 1100 left. Good price as long as this puppy doesn't get called.

Pig, I finally got the rest of ones I flipped and lost... I bought 500... Will sell something off later as I stole from checking acct to buy... We will know soon enough if it was smart...Whatever, Im falling on the sword with this 70 times coverage issue.

 

[pig pile]

Pig, I finally got the rest of ones I flipped and lost... I bought 500... Will sell something off later as I stole from checking acct to buy... We will know soon enough if it was smart...Whatever, Im falling on the sword with this 70 times coverage issue.

Yes I jumped in heavy this time too. Bought and sold this one several times with nice gains. If they call, for sure a loss, but I'm way ahead on this one anyway.

 

[Coolius]

You guys were fast! I saw this thread, went to put in an order - and the AILLL shares are all gone!

Ask back to $27.40.

Congratulations to those who got shares!!

 

[bobandsherry]

Pig - thanks for sharing. Bought in. Any reason to think this would get called? I didn't see anything to indicate possible call.

 

[pig pile]

Pig - thanks for sharing. Bought in. Any reason to think this would get called? I didn't see anything to indicate possible call.

Mulligan would be the one to chime here and I'm sure he will.

Sorry you missed it Coolius. Seems like this one always has its liquidity moments. More opportunities ahead I'm sure as people panic before dividend announcement.

 

[Coolius]

Well, a little too slow on the trigger finger this time, lol.

That's OK though. I already have a reasonable amount, bought at average cost basis of $26.08.

I started buying & selling about 2 years ago, when Mulligan first clued me in on Past Call Ute illiquids. AILLL is now a permanent resident of my Sock Drawer along with CNLPL, CNTHP, HE-U and IPWLK.

 

[Mulligan]

Mulligan would be the one to chime here and I'm sure he will.

Sorry you missed it Coolius. Seems like this one always has its liquidity moments. More opportunities ahead I'm sure as people panic before dividend announcement.

I have reasonable theories, but bottom line its out of our hands...Though we will know soon I promise! I am not interested in getting kicked hard in the privates by purchasing into a call, so I like our chances! Besides it adds a little excitement to the purchase.

 

[pig pile]

Well, a little too slow on the trigger finger this time, lol.

That's OK though. I already have a reasonable amount, bought at average cost basis of $26.08.

I started buying & selling about 2 years ago, when Mulligan first clued me in on Past Call Ute illiquids. AILLL is now a permanent resident of my Sock Drawer along with CNLPL, CNTHP, HE-U and IPWLK.

great price on the AILLL!!!

I have 3 of your sock drawer items myself. Had the 4th one (HE-U), but sold for fear of call.....see where that got me. lol

 

[MooreBonds]

great price on the AILLL!!!

I have 3 of your sock drawer items myself. Had the 4th one (HE-U), but sold for fear of call.....see where that got me. lol

Not to worry, Pigpile - I sold HE-U in an attempt to flip it. It ran up to 28, as it had in the past, and I figured "It's easy money, I'll just buy it back when it drops to $26.30 or so."

I'm still waiting for that GTC to be filled at $26.30. I even tried bumping it up a few shekels to $26.50, but no dice. At least you did it for good reasons. I did it out of greed. And a desire to be like Mulligan.

 

[pig pile]

Not to worry, Pigpile - I sold HE-U in an attempt to flip it. It ran up to 28, as it had in the past, and I figured "It's easy money, I'll just buy it back when it drops to $26.30 or so."

I'm still waiting for that GTC to be filled at $26.30. I even tried bumping it up a few shekels to $26.50, but no dice. At least you did it for good reasons. I did it out of greed. And a desire to be like Mulligan.

We all try to be Mulligan. lol

Hey Mulligan, I'm chasing SPLP-A down. Where does this selling end? lol. Up to 659 shares now as I just bought another batch.

 

[aja8888]

I'm not Mulligan, but is there a reason people are chasing a falling knife?

 

[Mulligan]

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

I'm not Mulligan, but is there a reason people are chasing a falling knife?

Because it is a unique falling knife. A falling knife is thought of as a company whose fortunes have fallen and dont know when a turn around will occur. This company is fine...Its the unique situation of a company issuing preferreds directly to owners of a company they are completely taking over...Its simply just a buy/sell imbalance with hedging going on with HNH as the other side...Plus many commoners are just taking the deal and then probably selling them out... Liquidity was 15 times daily ave volume until very recent. Its just getting swamped, so in those terms it has held up very well. No one can predict the bottom. I just bought at terms l can accept... 13-14% returns cash in 2/2020 on the 20% put (Thanks Mr. Gabelli for that forced throw in) and then maturity at $25 in 2026. You dont see these types of terms on preferreds often at all.
Now if the common stock of the company was tanking that would be a different story. But it is up almost 30% in the past 12 months.

 

[bobandsherry]

We all try to be Mulligan. lol

Hey Mulligan, I'm chasing SPLP-A down. Where does this selling end? lol. Up to 659 shares now as I just bought another batch.

Guess where HNH will trade and you'll get the price of SPLP-A as they are tied together. HNH conversion to SPLP-A @ 1.484.

There's some market maker at work here, so which is driving which at this point? Unless it's has been extended the offer ends tomorrow (10/11).

Original offer by SPLP in March was $29/share for HNH, so using conversion rate I can see this heading just south of $20.

 

[Mulligan]

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

Guess where HNH will trade and you'll get the price of SPLP-A as they are tied together. HNH conversion to SPLP-A @ 1.484.



There's some market maker at work here, so which is driving which at this point? Unless it's has been extended the offer ends tomorrow (10/11).



Original offer by SPLP in March was $29/share for HNH, so using conversion rate I can see this heading just south of $20.

I agree Bob, HNH is the rope yanking the curtain here. Smarter people than me can play the opposite side of trade temporarily or even arbitrage HNH also. I just simply am looking at it from Feb. 2020 and 2026 term dated points of view and accepting the long end result. SPLP raised the offer in preferreds already from first original offer just going from memory. As I never had any interest in playing HNH if trade didnt go through or whatever, because it is up bigly the past year also. I know ultimately what I am getting from SPLP-A or at leas the basic terms. I dont know what would happen to HNH if it didnt close. But since SPLP already owns 70% of the shares to begin with, I imagine its going to get through.

 

[aja8888]

So Mul, seeing I just saw this and don't have much time to do the research on SPLP-A, what is the expected return here? Going back to the original offering price at call, Something else besides the dividend?