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

[Mulligan]

I was also busy doing some flipping as well, although my gains are nowhere near those of Ken or Mulligan.


Sold a portion of my HE-U for $26.12, then a couple days later bought back same qty at $25.86. Hey, $0.28 per share gain is still better than a sharp stick in the eye.


And today, bought 100 shares of NTRSP at $25.11, and decided to flip it just before the market closed at $25.18. Just pennies, but better than a loss.

Thats funny Coolius, I did the same thing recently with HE-U. I only did 500 shares of my 2000. I sold over 26.20, but bought back at 25.95 a bit higher. Since I originally bought a slug at $24.50, I didnt mind paying higher to buy back. I really regretted selling them anyways so just glad I got them back.

 

[Mulligan]

Thanks, me too!

- one of the silent readers...

Steely, I am not versed, but there is a whole world of preferred funds and preferred closed end funds...PFXF is kind of the ying to the PFF yang. PFF is mostly financials such as banks and insurance, while PFXF has a small amount of financials preferreds in it.

 

[steelyman]

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

Steely, I am not versed, but there is a whole world of preferred funds and preferred closed end funds...PFXF is kind of the ying to the PFF yang. PFF is mostly financials such as banks and insurance, while PFXF has a small amount of financials preferreds in it.

Thanks again for the pointers, I’ll look into PFXF! The reason why I was motivated to buy PFF is that I’d owned Monsanto common for a long time but they were bought by Bayer, all cash. So I had money in my taxable brokerage core that needed a home. I bought some other common (solid but not sexy, e.g. CVS) but was looking for something a little different, to me anyway.

Then I remembered this thread. [emoji4]

 

[Running_Man]

So, when do people start taking a speculation on PCG.A? How long will the dividends be suspended? Anyone own these?

 

[Mulligan]

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

So, when do people start taking a speculation on PCG.A? How long will the dividends be suspended? Anyone own these?

I traded in them lightly just playing bounces. But that was before Camp Fire...Zero interest in them...Over priced...I started buying SCE-L and G yesterday on dip. They have rebounded 30 cents or so today. Yesterday there was less than $3 difference between 5% SCE preferreds and 5% PCG preferreds and SCE is not only paying but just increased common divie too...PCG liabilities considerably higher than EIX. I actually plan on holding G and L a while.
Before Camp Fire suites in conference call were indirectly implying years before suspension is lifted. Now things are way worse.
The SCE preferreds are off over 20% past year while the common was down only 5% ish which mirrored the market...PCG common down 60%. SCE preferreds were beaten up way more in relation than EIX or even in relation to PCG preferreds factoring in their suspension, IMHO. So...In I went!

 

[Mulligan]

Made a small balance out trade today for a long term hold. Bought 100 shares of CBKPP today at 101.25. Has a pretty high kicker to go with libor in 2022 considering CoBank is a very high quality preferred issuing Coop bank.

 

[Running_Man]

PCG stock down 50% today 80% from November and the preferreds have dropped to about % to the 12-15 range. Now the interesting thing is the preferreds are in line for the same claim from what I read as are the liabilities from the fire, so then it becomes what does a bancruptcy court do? If the liability for the fire is to be paid out then the preferreds must be paid out, and likewise for unsecured bonds which total 18 billion and fire losses of 30 billion while preferreds are 258 million. Not that I am buying but I am watching the situation.

 

[Mulligan]

PCG stock down 50% today 80% from November and the preferreds have dropped to about % to the 12-15 range. Now the interesting thing is the preferreds are in line for the same claim from what I read as are the liabilities from the fire, so then it becomes what does a bancruptcy court do? If the liability for the fire is to be paid out then the preferreds must be paid out, and likewise for unsecured bonds which total 18 billion and fire losses of 30 billion while preferreds are 258 million. Not that I am buying but I am watching the situation.

RM, I am not a bankruptcy expert, so this is a question not a reply. Why do think preferreds have any claim? They are equity. If equity is wiped out then one would assume preferreds are also. The billions in debtor financing is now coming and it roots itself above the unsecureds. PCG had a sham bankruptcy 15 plus years ago and it took years to unwind. This is a major serious issue that dwarfs that situation. This seems like a casino play now. This bankruptcy process will be years in unwinding.

 

[Running_Man]

It was listed on the list of obligations I saw linked to a CNBC story of outstanding liabilities that were on equal footing for claims against PCG. Maybe that was a mistake I am certainly not a bankruptcy expert either. I am interested because the preferred is falling far less than the stock, and trying to work that out.

 

[Mulligan]

It was listed on the list of obligations I saw linked to a CNBC story of outstanding liabilities that were on equal footing for claims against PCG. Maybe that was a mistake I am certainly not a bankruptcy expert either. I am interested because the preferred is falling far less than the stock, and trying to work that out.

Just a guess here....But if after bankruptcy process is completed and there is deemed ANY common stock value, then the preferreds in theory would be made whole before that penny is given....Unless there is some process that reduces the par value that I am unaware of. Also remember there is already 5 accrued dividend payments trapped in that value also. But it is just too risky for me...I did buy a little more SCE-L today on a sympathy sell off though.

 

[Running_Man]

Nice move on SCE-l did you get at the $17.40?

 

[Mulligan]

Nice move on SCE-l did you get at the $17.40?

No, it actually got to 17.29. I got too greedy and set it at $17 and it didnt reach so I chased up to buy at $17.50... Only bought 500 shares.. I already owned 500 that I bought at 18.10 last week. I also have 500 of SCE-G I bought last week. I got my fill...Funny thing.. I bought 500 of the L in Roth last week and chickened out today and sold at 18.12 and then bought them back at 18.02 in taxable....I hate leaving risky issues in my Roth as I cant ever get that money back if I lose it.

 

[Texas Proud]

Just a guess here....But if after bankruptcy process is completed and there is deemed ANY common stock value, then the preferreds in theory would be made whole before that penny is given....Unless there is some process that reduces the par value that I am unaware of. Also remember there is already 5 accrued dividend payments trapped in that value also. But it is just too risky for me...I did buy a little more SCE-L today on a sympathy sell off though.

Just an FYI on BK... there is nothing that requires that a class is paid in full before giving something to a lower class...


I remember reading about some BK about 20 years ago where a higher class got 80% of what was due, the next class got like 40% and the one below that 20% ish... you would have thunk that the highest would get 100% before any goes to the lower and the bottom gets 0%.... IIRC only the equity got zero... before you ask, I cannot remember who it was....

 

[Mulligan]

Just an FYI on BK... there is nothing that requires that a class is paid in full before giving something to a lower class...


I remember reading about some BK about 20 years ago where a higher class got 80% of what was due, the next class got like 40% and the one below that 20% ish... you would have thunk that the highest would get 100% before any goes to the lower and the bottom gets 0%.... IIRC only the equity got zero... before you ask, I cannot remember who it was....

Do think it was equity stack or debt? Im just asking because I sure dont know. I have read before on what you stated as far as debt goes... I also know situations of stressed companies paying off the preferreds below par value after a vote. But this wasnt a bankrupt situation though. The thing with PCG preferreds are they are tiny tiny portion of their equity. Before all this recent collapse it wasnt maybe but 1% of capital.... Now EIX through SCE are more aggressive issuers of preferred stock. The SCE preferreds represent 9% of total capital. And oddly enough, the SCE preferreds sit above the parent EIX unsecured debt in capital stack.

 

[pb4uski]

RM, I am not a bankruptcy expert, so this is a question not a reply. Why do think preferreds have any claim? They are equity. If equity is wiped out then one would assume preferreds are also. ....

No, preferreds are ahead of the common in the event of bankruptcy or liquidation.... that is why they are called preferred, they have preference over common.

 

[Mulligan]

No, preferreds are ahead of the common in the event of bankruptcy or liquidation.... that is why they are called preferred, they have preference over common.

PB, I know that...That is why I invest in them.... The sentence was in reference to a receiving any claim if the bonds only received partial recovery. He was stating an example where lower cap stack received partial payment while cap stack above was not fully paid in full. My point was if bonds arent made whole and equity was wiped out would preferreds get anything if bonds above were not made whole first. He was implying they could. My assumption would be if the bonds were not made whole, they wouldnt broach the divide to equity side and allow them to receive anything...preferred or common.

 

[Mulligan]

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

Just an FYI on BK... there is nothing that requires that a class is paid in full before giving something to a lower class...


I remember reading about some BK about 20 years ago where a higher class got 80% of what was due, the next class got like 40% and the one below that 20% ish... you would have thunk that the highest would get 100% before any goes to the lower and the bottom gets 0%.... IIRC only the equity got zero... before you ask, I cannot remember who it was....

Texas, this is interesting...Debt is not debt and preferreds are not all preferreds. EIX subordinate debt Of 1.7 billion sits subordinate to the SCE trust preferreds. So these preferreds of 2.2 billion in par value actually sit above 12% of the companies debt. This is per Moodys...And the trust fund has no debt inside the wrapper either. It is the Series L preferred stock that is inside the trust. So its a true QDI preferred.

 

[pb4uski]

PB, I know that...That is why I invest in them.... The sentence was in reference to a receiving any claim if the bonds only received partial recovery. He was stating an example where lower cap stack received partial payment while cap stack above was not fully paid in full. My point was if bonds arent made whole and equity was wiped out would preferreds get anything if bonds above were not made whole first. He was implying they could. My assumption would be if the bonds were not made whole, they wouldnt broach the divide to equity side and allow them to receive anything...preferred or common.

Got ya. Yes, I would think that any securities that are senior to the preferred would need to be paid in full before the preferreds would get anything.... if not what benefit is there to being senior?

 

[Texas Proud]

PB, I know that...That is why I invest in them.... The sentence was in reference to a receiving any claim if the bonds only received partial recovery. He was stating an example where lower cap stack received partial payment while cap stack above was not fully paid in full. My point was if bonds arent made whole and equity was wiped out would preferreds get anything if bonds above were not made whole first. He was implying they could. My assumption would be if the bonds were not made whole, they wouldnt broach the divide to equity side and allow them to receive anything...preferred or common.

I do not remember enough about the company... but IIRC there were like 9 to 12 levels of claims...


I would think that pref would be knocked out also with the common...

 

[Mulligan]

Took one more bite of the MTB- apple today at $1003. The $15.93 divi goes exD in 2 weeks. No redemption notice came with it so this 6.375% par high quality QDI cumulative bank preferred will live on.
I have over 50 shares of MTB- and MTB-C so this is an outside position and probably my favorite preferred now in terms of quality and yield.

 

[Coolius]

Mulligan, glad to see you joining me on the MTB- train. I hope we will be able to enjoy the income stream for a good long while.



If,as you have said, these shares were initially for institutional holders, they are probably held for an indefinite period ( hopefully forever ) and the bank has no plans to redeem.


I have the same number of shares as you, all MTB-. Unfortunately, I bought them much earlier, at higher prices, so my cost basis is $1,011. But I have enjoyed a couple of dividends already.


Definitely a sock drawer resident.

 

[Mulligan]

Coolius, you make your price sound worse than it was. That was well under one dividend above par. And who is to say you didnt buy them shortly before exD? That price is equivalent to paying $25.27 for a $25 par. The issue is 37 basis points higher and with higher credit quality than just about any big bank issue on the market.

 

[brokrken]

I'd be interested in getting the group's thoughts on any of the AFSI preferreds. AmTrust Financial recently went private and since the announcement the prefs have gotten crushed and the yields are ~ 12%. I can't find an S&P or Moody's rating, but Insurance industry specific rater, A.M best, has them at A-. The non-cumulative part scares me and they have issued more preferred shares in the recent years which also worries me. However, they are in a good cash flow business and going private puts me at a ease a bit that the people running the show now are fully vested in the success. Anyway, just a thought. Would love to hear your thoughts.

 

[Mulligan]

I'd be interested in getting the group's thoughts on any of the AFSI preferreds. AmTrust Financial recently went private and since the announcement the prefs have gotten crushed and the yields are ~ 12%. I can't find an S&P or Moody's rating, but Insurance industry specific rater, A.M best, has them at A-. The non-cumulative part scares me and they have issued more preferred shares in the recent years which also worries me. However, they are in a good cash flow business and going private puts me at a ease a bit that the people running the show now are fully vested in the success. Anyway, just a thought. Would love to hear your thoughts.

The company hasnt performed the greatest. It crapped on MH and has stressed it to major problems. The family doesnt have a trustworthy reputation. The interests of the preferreds are not in alignment with the private shared common stock holders. This is why they are trading low. Usually what is good for the common is good for the preferred. But not in this situation. This is why the butt ass cap stack baby bonds are trading so much higher. They have legal protections. Usually there is not much diff in yield between butt end baby bonds and their preferred sisters.
Now if you are looking for higher risk reward action to trade as opposed to buy and hold that would be a different investing thesis I wasnt opining on.

 

[brokrken]

The company hasnt performed the greatest. It crapped on MH and has stressed it to major problems. The family doesnt have a trustworthy reputation. The interests of the preferreds are not in alignment with the private shared common stock holders. This is why they are trading low. Usually what is good for the common is good for the preferred. But not in this situation. This is why the butt ass cap stack baby bonds are trading so much higher. They have legal protections. Usually there is not much diff in yield between butt end baby bonds and their preferred sisters.
Now if you are looking for higher risk reward action to trade as opposed to buy and hold that would be a different investing thesis I wasnt opining on.

Mully, thanks for the input. I knew about MH, but I didn't realize the family has questionable character. In that case, I'll pass and keep looking. Have a small portion of cash that I'm looking to put into something higher yield (8%+) that isn't complete crap.