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

[Golden sunsets]

Well dang, if that isn't annoying.

 

[Golden sunsets]

So 4 of us on this board had bids in higher than 50. I wonder how many bids were in on that stock when the trade occurred.

 

[Coolius]

So 4 of us on this board had bids in higher than 50. I wonder how many bids were in on that stock when the trade occurred.

At the close of market yesterday, my Level 2 screen showed 5 bids, ranging from low of $51 to high of $52.20.

It was definitely a direct broker-to-broker transaction, bypassing every single retail bid.

Makes me upset that they can simply break the rules of trading with such impunity.

 

[Mulligan]

At the close of market yesterday, my Level 2 screen showed 5 bids, ranging from low of $51 to high of $52.20.

It was definitely a direct broker-to-broker transaction, bypassing every single retail bid.

Makes me upset that they can simply break the rules of trading with such impunity.

Coolius, the odd thing about it, is the small transaction. You and I have both seen 10k-50k block transactions occur in these illiquid types bypassing retail. But a 300 share block sold on purpose at an intentional loss? The good thing is for people owning it,who worry about net worth, next transaction will occur in its normal range that is certain. In fact it will be higher than the previous transaction.


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[Coolius]

Coolius, the odd thing about it, is the small transaction. You and I have both seen 10k-50k block transactions occur in these illiquid types bypassing retail. But a 300 share block sold on purpose at an intentional loss? The good thing is for people owning it,who worry about net worth, next transaction will occur in its normal range that is certain. In fact it will be higher than the previous transaction.


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There are only 198,000 shares of this series issued. That's a very small amount, only $9.9 Million face value.

I don't think they will call this issue by itself, as calling costs would be high versus amount redeemed. Likely they will be called along with others, should that happen.

In any case, we are assured $51.44 as redemption value, so we will definitely not receive less than that on a call.

No worries, maybe that trade was trying to shake out some Nervous Nellies - if so, it did not work. I am keeping my 200 share bid at $52.

 

[Mulligan]

There are only 198,000 shares of this series issued. That's a very small amount, only $9.9 Million face value.

I don't think they will call this issue by itself, as calling costs would be high versus amount redeemed. Likely they will be called along with others, should that happen.

In any case, we are assured $51.44 as redemption value, so we will definitely not receive less than that on a call.

No worries, maybe that trade was trying to shake out some Nervous Nellies - if so, it did not work. I am keeping my 200 share bid at $52.

Several utilities have one or two higher issues and the others are 60-80 year old issues with way smaller yields but remain stubbornly close to par along with the higher ones. My assumption is people just cant let the yield float upward as the allure of a $110 call on a $100 par is too great to let go. And it is possible if one series gets pulled the entire series would too. I have 100 shares of AILLI I bought a month or two ago at $95.50 I believe, so the true yield is around 5.4%. But call price is $2 above $100 par issue. If my AILLL and AILNP ever get called, I imagine this one would join the club. Hope not...Its not they like we just entered a low rate environment yesterday.


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[Golden sunsets]

At the close of market yesterday, my Level 2 screen showed 5 bids, ranging from low of $51 to high of $52.20.

It was definitely a direct broker-to-broker transaction, bypassing every single retail bid.

Makes me upset that they can simply break the rules of trading with such impunity.

When I saw the price drop to $50, I edited the bid I had in from 51.65 to 50.00 so that should have shown on your screen but did not. I wonder why. I think it's unusual that 4 out of the 5 bids were from people who post on this forum.

My other thought is I wonder who the seller was who only got $50. It seems like the broker was not doing that client any favors.

 

[Coolius]

When I saw the price drop to $50, I edited the bid I had in from 51.65 to 50.00 so that should have shown on your screen but did not. I wonder why. I think it's unusual that 4 out of the 5 bids were from people who post on this forum.

My other thought is I wonder who the seller was who only got $50. It seems like the broker was not doing that client any favors.

It is illogical to sell at $50. Any seller should have known that redemption price is set at $51.44. That public info is from the prospectus and from QuantumOnline. No way anyone investing in CNTHP is gonna miss that.


Oh, I don't think it's unusual that 4 of the bids originated from ER.org. The folks reading this forum / thread are intelligent & savvy, and very likely have a good understanding of the particular circumstances with this and other Trapped Ute Preferreds. And recognized the value in it.

And we have our very own guru, Mulligan, to thank for that !! He has very generously shared his strategy and rationale with no benefit or compensation to himself.

I, for one, have no problems with the virtual friends in this thread going for it. We all benefit from each others' contributions.

But having said the above, be watchful for pump-and-dump schemes. Hope this thread will not see any of that.

 

[Winemaker]

Perhaps it was a IRA to Roth conversion, or spouse to spouse/child move.

Earlier this week I moved some losing positions from my IRA to my Roth, and my cost basis in the Roth was adjusted to the new lower position. Not sure of the dollar amount converted now.

 

[Mulligan]

When I saw the price drop to $50, I edited the bid I had in from 51.65 to 50.00 so that should have shown on your screen but did not. I wonder why. I think it's unusual that 4 out of the 5 bids were from people who post on this forum.

My other thought is I wonder who the seller was who only got $50. It seems like the broker was not doing that client any favors.

Weird things happen with illiquids. Probably the reason 4 of the 5 bids were from this forum is because we have discussed it. I bet the CEO of the holding company doesn't even know about it! One thing I have learned Golden, if you are really interested in buying a certain issue such as CNTHP is set a reasonable price and don't move it. And don't look at low trades as those are usually one offs, and they won't be snagged at that price again.
In illiquids, I believe in dividend captures. If you wait for it to go exD to buy at lower adjusted price you probably will be dissapointed and not catch it at the readjusted rate.

 

[Mulligan]

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

Perhaps it was a IRA to Roth conversion, or spouse to spouse/child move.



Earlier this week I moved some losing positions from my IRA to my Roth, and my cost basis in the Roth was adjusted to the new lower position. Not sure of the dollar amount converted now.

You have been holding your cards close to the vest lately, Winemaker. Any new issues you have looked at lately?

 

[MooreBonds]

Perhaps it was a IRA to Roth conversion, or spouse to spouse/child move.

I found out the hard way that you can't do stuff like that.

Have several accounts at the same broker. I crunched some numbers to find the "optimal" account to have each position in, based on dividend yield, current/future tax rates, foreign tax credit, etc.

Since many of them were relatively illiquid, with generous spreads on bid/ask, I posted a mid-price bid in one account, and then immediately placed an offsetting ask at the same price in the other account. The trade crossed.

A day later, I get an e-mail from the broker. Apparently, that's considered illegal, and grounds for banning your account. While my intentions were noble, its illegal to prevent people from crossing trades at various prices for various reasons.

Like if you wanted to make a trade happen for just 1 share at some unGodly low price, which in turns sets off any stop-loss orders to sell at market (if a price trades low enough). If a stock isn't very liquid, you could clean up and buy lots of shares at low prices.

Or, if for some reason, you were a mutual fund manager, and you wanted to sell another account some illiquid stock at a high price to have the "last quoted price" be some unGodly high price, to spruce up your fund's NAV for end of quarter/year to get a bigger bonus.

Now, sure as shite, if I wanted to try transferring my shares from one account to another by trading at some low price with this stock, and I tried crossing a trade at 50, I'd have everyone and their mother buying it before I was able to buy it with my other account. But perhaps there was something like trading on another exchange (remember those reams of pages your broker made you sign? there was likely something in there about the broker being able to route your order to any exchange they feel like. Yes, there is something in there about having to offer price improvement, but I don't know what various arcane fine details there might be with pink sheet stocks and other exchanges).

 

[Mulligan]

You know this stuff better than I do, so whats your best guess? I mean this was lowest trade price in 5 years. It was only 300 shares, so that screams individual holding. It literally bypassed the normal bid/ask showing on Ameritrade screen. I mean I was literally in the live action trading of it and checked price again, and it showed the trade. All bids and asks were unmoved from it. Very odd. It is almost the reverse idiot trade. One that buys at market price the crazy ask price on an illiquid.


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[Winemaker]

You have been holding your cards close to the vest lately, Winemaker. Any new issues you have looked at lately?

Nothing new, happy with most positions. Collecting 5-9% divvies is sweet.

However, my energy/materials portion is getting slammed pretty good. My M.O. over the years is always to add to sectors/positions that are down each quarter, but I'm catching knives like snowflakes during a blizzard. I would hate to believe " that it's different this time" but with no inflation, no manufacturing, and an energy glut, I don't see an end in sight.

 

[pb4uski]

....Have several accounts at the same broker. I crunched some numbers to find the "optimal" account to have each position in, based on dividend yield, current/future tax rates, foreign tax credit, etc.

Since many of them were relatively illiquid, with generous spreads on bid/ask, I posted a mid-price bid in one account, and then immediately placed an offsetting ask at the same price in the other account. The trade crossed.

A day later, I get an e-mail from the broker. Apparently, that's considered illegal, and grounds for banning your account. While my intentions were noble, its illegal to prevent people from crossing trades at various prices for various reasons.....

If you just want to transfer assets between accounts you control, why couldn't you just do an in-kind transfer (effectively a private sale to yourself)?

 

[Mulligan]

I probably made my last trade of the year as my cash is about dry until I get an infusion next month. Bought 200 more shares of MNR-A at $25.42. Have 400 shares now. A relatively huge position for me that isnt a utility preferred. My only non ute that is bigger than this is my CHSCL issue.


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[capjak]

I probably made my last trade of the year as my cash is about dry until I get an infusion next month. Bought 200 more shares of MNR-A at $25.42. Have 400 shares now. A relatively huge position for me that isnt a utility preferred. My only non ute that is bigger than this is my CHSCL issue.


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Why Monmouth REIT?

 

[Mulligan]

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

Why Monmouth REIT?

I own no reits, and the only reit that interests me are warehouse reits connected to growing internet shipping services. Monmouth is a conservatively run reit that buys new warehouses and "burns the mortgage" with the expiration of the 15 year lease contracts. They mostly do business with investment grade grade companies such as Fed Ex and Jim Beam. Fed Ex leases 54% of their warehouses and have had a 20 plus year relationship with. They had 100% renewal rate on buildings past year and have high occupancy rate.
They started in 1968 and founder is still with them. In Fact he just bought 500k more of the common last month. Dividend of the common has never been missed since inception of company. This provides insulation for the preferred.
They have 2 preferreds. I chose the past call one with higher yield. The B issue isn't callable for a few years and par yield is actually higher. I am betting it doesn't get called as the yield is only about 150 basis over the common. I like to gamble on a call chasing yield, than risk of company actually paying the dividend.
The 7.5% yield appears tasty and safe. I also liked how the preferred traded back when preferreds got torched in 08-09. Many went into single digits. MNR-A stayed above $14 and never missed a payment (of course it couldn't miss a payment since the common didn't either) even during the depth of the crisis.
If you like liquidity (which I don't usually) this wouldnt be of interest. It didn't even trade Friday, but has had "robust" action of 700 shares today.


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[capjak]

I just confirmed 100 @ 25.42 MNR-A (that's all they freed up, still waiting on more)....

 

[Mulligan]

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

I just confirmed 100 @ 25.42 MNR-A (that's all they freed up, still waiting on more)....

Well Congrats! I hope... ... I originally was just staying at 200 shares, but a friend of mine wanted a 100 as he is in his first year of buying preferreds... I don't think he really understands any of it, but he has liked his CHSCL and AILLL so much he wanted a piece of the action. So I decided to buy 200 more with him.
Some people wince at illiquidity and concentration (Fed Ex 54% of buildings) of one company leasing all the buildings....But MNR is exploding because Fed Ex likes doing business with them and have done it for over 2 decades. Plus all the contracts are staggered over various years. I would rather be in bed with one company that is thriving, investment grade, and committed to the process instead of buying for diversity with a bunch of faceless and not understood companies diversifying the portfolio.
Just stay patient on bid/ask as you can tell, they like to keep the spread wide for the "idiot market order" purchase.


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[Dan32]

Does anyone have an opinion on AFSI/A or AFSI/D? I've owned the common stock for a while. AFSIpA is 23.97 with a dividend rate of 7.04. AFSIpD is25.29 with a dividend of 7.42%.

 

[Mulligan]

Does anyone have an opinion on AFSI/A or AFSI/D? I've owned the common stock for a while. AFSIpA is 23.97 with a dividend rate of 7.04. AFSIpD is25.29 with a dividend of 7.42%.

Sorry Dan. I don't know anything about them. I have played around with property and casualty preferreds making a quick buck on a divi and cap gain here and there, but really don't have any understanding of their finances. That is a reflection of my poor abilities not a negative in any way on investing in them.
My personal "No Go's" are MReits, BDC's, shippers, and anything in energy outside of public utilities.


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[Mulligan]

Does anyone have an opinion on AFSI/A or AFSI/D? I've owned the common stock for a while. AFSIpA is 23.97 with a dividend rate of 7.04. AFSIpD is25.29 with a dividend of 7.42%.

Just as a reminder in case you do not know. One who owns the common shares of a company would not have a problem in owning the preferreds as they set above common in capital structure. A common stock dividend cannot be paid out until preferred dividend is paid first.
Most people work the opposite in way in they own the preferred as a safer play than buying the common...along with of course the usually higher paying dividend. If common divi is higher than the preferred is, that can possibly be a very foreboding statement on the viability of the common stock dividend's future.


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[Dan32]

Thanks, anyway. The common stock showed up on a screen I did some time ago and has done well for me. I have a few of the preferred utilities already mentioned in this thread. I was intrigued by AFSIpA because it is below par with an interest rate above 7 and decent volume. I have an order in at a limit price that may be too low to exercise, but since the record date is March 1 for the next dividend, I'll be patient.

 

[Mulligan]

Thanks, anyway. The common stock showed up on a screen I did some time ago and has done well for me. I have a few of the preferred utilities already mentioned in this thread. I was intrigued by AFSIpA because it is below par with an interest rate above 7 and decent volume. I have an order in at a limit price that may be too low to exercise, but since the record date is March 1 for the next dividend, I'll be patient.

Patience is a good thing.


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