Preferred Stock Investing-The Good , The Bad and The In Between 2021

[Winemaker]

I am adding to my DUK/PRA position below $24.55.

 

[tizod]

While most of you have seen my investments in income securities, I made a big jump this week and added AMZN and VRTX. Amazon is undervalued, IMHO, and set to generate huge cash flows. SO if the economy goes crapper, I think AMZN wins. So it's a good growth bet and will add the Apple dividend policy, I expect. VRTX is underfollowed (?) but best evolving pharma, and now has solid cash flow safety with current drugs. But this is the new wave of pharma the "other" guys are buying into, but I bet VRTX takes a lead, just like ISRG did. I held it for awhile to $350, sold, and just bought back in with more than before. I did also add some pref's and bonds, including the III recently discussed NEWT bond. I think it exceeds any inflation risk and stays in business, so win-win.

 

[pb4uski]

What NEWT bond?

 

[tizod]

I bought some of this below par:

NewTekOne 8.50% Fixed Rate Senior Notes due 2029 CUSIP/ISIN 652526 880/US6525268800

 

[olyveoil]

NEWT used to be a nice BDC I owned that had temporary Covid benefits. They decided one day they wanted to be a bank. I listened to the conference call and immediately sold. Can't bring myself to look at their Bonds.

 

[pb4uski]

NEWT is a little low on the credit spectrum for my investment policy... but I'll admit the yield is enticing but I'll stick with ALL-B... similar yield but better credit.

 

[Mulligan]

I also bought a base position of NEWTG first day of trading last week at $24.75.

 

[momoney]

I made a big jump this week and added AMZN and VRTX. Amazon is undervalued, IMHO, and set to generate huge cash flows. SO if the economy goes crapper, I think AMZN wins. So it's a good growth bet and will add the Apple dividend policy,

Walmart and Amazon could also be looked at as AI/Robot automation plays. When will the 2 largest employers employ more robots than humans?

Amazon currently “employs” 520,000 robotic drive units across fulfilment and sort centres. That is 30% of its “workforce”. However, as robots work 24/7/365 and don’t have holidays or sick days, then these 520,000 robots probably account for the equivalent of 1,500,000 extra workers!

 

[aja8888]

Walmart and Amazon could also be looked at as AI/Robot automation plays. When will the 2 largest employers employ more robots than humans?

Amazon currently “employs” 520,000 robotic drive units across fulfilment and sort centres. That is 30% of its “workforce”. However, as robots work 24/7/365 and don’t have holidays or sick days, then these 520,000 robots probably account for the equivalent of 1,500,000 extra workers!

So, when I get someone else's order in the box with my address on it, do I blame a robot?

 

[Mulligan]

Aja, to carry on your preferred stock thought on a different thread. I also have been toeing back into CTA-A at sub $55. About 6.4% yield and Corteva has a pristine credit rating of A- senior unsecured. I like looking at charts to see what they traded at in previous interest rate eras. If you pull up the chart of it on CNBC you are basically getting it at mid 1990s pricing. Of course Corteva was part of Dow Chemical back then, but its credit rating back then as Dow is no better than it is seperated as Corteva. And of course, why buy a 6% ish big bank preferred at par when you can get a stronger non financial trading 50% below redemption price. This would allow cap appreciation if rates drop, while the other would give you no capital appreciation and likely a call notice to go with it.

 

[aja8888]

Aja, to carry on your preferred stock thought on a different thread. I also have been toeing back into CTA-A at sub $55. About 6.4% yield and Corteva has a pristine credit rating of A- senior unsecured. I like looking at charts to see what they traded at in previous interest rate eras. If you pull up the chart of it on CNBC you are basically getting it at mid 1990s pricing. Of course Corteva was part of Dow Chemical back then, but its credit rating back then as Dow is no better than it is seperated as Corteva. And of course, why buy a 6% ish big bank preferred at par when you can get a stronger non financial trading 50% below redemption price. This would allow cap appreciation if rates drop, while the other would give you no capital appreciation and likely a call notice to go with it.

Thanks I'm going to look into CTA-A over the next few days. If rates actually fall this year, this may be a great deal at it's current price. I think it's time I start rebuilding my preferred portfolio again.

 

[Mulligan]

Aja, There is also a sister issue CTA-B, that trades in low $70s similar yield. It is callable at $120 and A is callable at $102. They both were issued over 70 years ago, so no real risk of a call for either. My preference was A only because it is more under par and had a slight yield advantage at purchase. These 2 are on NYSE and not OTC. But still very illiquid being the floats though bigger than most from that era are largely institutionalized so patience is needed for best pricing when one decides its the right time to enter.

 

[pb4uski]

Added both to my preferred stocks watchlist. Golfing tomorrow but perhaps Friday.

 

[Mulligan]

Added both to my preferred stocks watchlist. Golfing tomorrow but perhaps Friday.

Me too, PB. Plan on some payback from a rough Tuesday outing.

 

[aja8888]

Aja, There is also a sister issue CTA-B, that trades in low $70s similar yield. It is callable at $120 and A is callable at $102. They both were issued over 70 years ago, so no real risk of a call for either. My preference was A only because it is more under par and had a slight yield advantage at purchase. These 2 are on NYSE and not OTC. But still very illiquid being the floats though bigger than most from that era are largely institutionalized so patience is needed for best pricing when one decides its the right time to enter.

Thanks for the info and the history. I'm making a list, and checking it twice, oh.....that's later this year. But I am getting ready to load up with some preferreds as they were good to me once.

 

[Texas Proud]

Yea, I am going to have to check some of these out...

Just looked and my KMPB is BB and yielding 6.53.... less than some BBBs... and I have a 30% gain on it....

WOW... I have a 58% gain on my CUBI-F and it is still yielding 10.5%.... whoever mentioned this when it dropped... thanks... I did have some already but this extra has been great... too bad I only bought 1,000 shares...

 

[pb4uski]

Looking at Globe Life 4.25% callable baby bonds GL/PRD trading at 14.94/7.11% yield. BBB+/Baa2 so good credit.

Only thing that is spooking me is that looking at 1-year chart it was trading ~$18-20 until April and then dropped sharply and has been trading at $14-16 since.... so sudden ~$4 drop. Looked for news and couldn't find any. Anyone have an idea why?

 

[Texas Proud]

The price of the common dropped a lot also... maybe something up with them and there might be a rating change coming...

Just saw an article that Wells dropped the price target of the common way down back then... need to look a little deeper to see why... mine was just a very quick look..

 

[pb4uski]

^^^ I posted a similiar question on innovatineincomeinvestor.com and it looks like company has been having short attacks on the common and may have misselling and the baby bonds have followed the common.

 

[Mulligan]

^^^ I posted a similiar question on innovatineincomeinvestor.com and it looks like company has been having short attacks on the common and may have misselling and the baby bonds have followed the common.

PB, I cant say I love insurers or banks much (or anything much except utilities , lol) , but I snagged a few hundo around this price as a hold. Their credit and holdings in terms of credit quality I suspect are totally unrelated to those rumors. Likely just hit equity and even that has climbed back. I just typically look for issues with a fair yield but way under par, if I am looking at perpetuals (or long maturity sub debt). So I will dabble here.
As a longer term dual nasty currency play, I bought 1000 shares of CNUTF at $12.92 (currency converted) which is a 4.5% $25 CAD preferred from IG rated Canadian Utilities LTD. Nets about 6.4% QDI.
On other end of duration spectrum, there was a rare dump on KTH so I sopped up some shares in $27.60s and low 70s today. That is about 6.5% YTM with a $27.10 maturity in 4/2028.

 

[pb4uski]

Mulligan, you must be my brother from a different mother! I bought at full position of KTH just today... 6.5% works for me. Any idea why the unusual disparity between the S&P (BBB-) and Moody (A3) ratings for KTH? I hadn't seen such a disparity before.

 

[Mulligan]

Mulligan, you must be my brother from a different mother! I bought at full position of KTH just today... 6.5% works for me. Any idea why the unusual disparity between the S&P (BBB-) and Moody (A3) ratings for KTH? I hadn't seen such a disparity before.

PB, the only other time I have seen this was with NYCB bank. Fitch rated preferred like 3 notches below others because not only was it subordinated to the subordinated debt, but was also noncumulative… Anyhow Fitch rates KTH BBB+, so S&P must nick it for some criteria Moodys and Fitch do not. Even so S&P rates its senior unsecured BBB+, so I have zero worries here with a fully regulated transmission and distribution only utility. They are undergoing a major cap ex plan, and regulatory rate recovery approvals always lag a bit there in PA. No concern for me.
6.5% wont make us rich and famous, but it will bring the bacon home….Always fully cooked and on time also.

https://www.fitchratings.com/research/corporate-finance/fitch-affirms-exelon-corp-subsidiaries-ratings-revises-peco-outlook-to-negative-17-05-2024

 

[bobandsherry]

SCCB and SACC

Sachem Capital Corp. Announces Registered Public Offering of Notes

BRANFORD, Conn., June 17, 2024 (GLOBE NEWSWIRE) -- Sachem Capital Corp. (NYSE American: SACH) today announced the commencement of a registered public offering of USD-denominated unsecured, unsubordinated Notes due five years from the date of issuance (“Notes”), subject to market conditions.

The Notes are anticipated to be rated BBB+ by Egan Jones, Egan-Jones Ratings Company, an independent, unaffiliated rating agency, although this is contingent on prevailing market conditions. Egan-Jones is a Nationally Recognized Statistical Ratings Organization (NRSRO) and is recognized by the National Association of Insurance Commissioners (NAIC) as a Credit Rating Provider (CRP). Egan-Jones is also certified by the European Securities and Markets Authority (ESMA). A securities rating is not a recommendation to buy, sell or hold securities and may be subject to revision or withdrawal at any time.

Sachem Capital Corp. Announces Registered Public Offering of Notes :: Sachem Capital Corp. (SACH)

www.sachemcapitalcorp.com

Based on the Use of Proceeds from prospectus, used to pay SCCB that is maturing 6/30. And gearing up as well for maturity of SACC maturing 12/31/2024.

From the Prospectus:
We plan to use a portion of the net proceeds from this offering to repay, in full, the outstanding principal balance of the June 2024 Notes and the accrued but unpaid interest hereon. We estimate that the amount required to repay those notes in full is $[•] million. We intend to use the balance of the net proceeds from this offering for working capital and general corporate purposes, i.e., to fund new real estate loans secured by first mortgage liens. However, we may apply some or a portion of the balance of the net proceeds from the sale of the Notes to repay all or a portion of the approximately $34.5 million principal amount of December 2024 Notes, plus accrued and unpaid interest thereon which mature on December 30, 2024.

https://ir.sachemcapitalcorp.com/al...0001104659-24-072060/0001104659-24-072060.pdf

 

[pb4uski]

^^^ Interesting, but I prefer to stick to investment grade credits but the 8%+ yields are enticing.

 

[Mulligan]

I normally stick to IG ute preferreds. But I added more of this today. It used to be this as a baby bond.

TEMP55 Search Results - QuantumOnline.com

QuantumOnline.com offers complete income investment security information for individual investors seeking regular returns on investments.

www.quantumonline.com

Its now a delisted baby bond trading on bond desk. The company is now Nassau Companies of New York. It is 10% current and 13% YTM of 2032. I owned for many years until they offered a tender at $20 and I accepted after a nice cap gain. And bought them back today and some a few weeks ago around $18.35.

AM Best Revises Issuer Credit Rating Outlook to Positive for Operating Insurance Subsidiaries of Nassau Financial Group, L.P.