New Purchases in Medium Duration Income Portfolio

Today we made 2 new purchases in the Medium Duration Income Portfolio. These purchases bring the model portfolio to about 76% invested. Our original target was to get to 90% by March 1st, but we are going to pause. As we look at share price losses occurring through income markets it seems silly to go further — for now.

Today we added the 7.35% Cowen Sr Notes (NASDAQ:COWNZ) which was issued in December. Of course we had to pay $25.42 because of the relatively high coupon. This is the longest dated maturity (2027) we have purchased in this portfolio. Honestly we are shooting for most in the 2021-2022 area which will minimize the volatility–the Cowen issue could exhibit quite alot of movement because it is 9 years until maturity.

Additionally we added the more modest coupon of the Atlas Financial Holdings 6.625% Notes (NASDAQ:AFHBL) which mature in 2022. We paid $25.45 for the shares. We were quite surprised when doing our due diligence on AFH to find this is a nicely profitable, but small, insurance company. AFH specializes in insurance for small commercial vehicles–taxis, buses etc. This particular issue of 1,000,000 shares (bonds) is all of the debt the company has outstanding which leaves the company in a fairly stable financial condition. The common shares trade in the $18/share area, but unfortunately no dividend is paid on the common. Just the same we believe this to be one of the best short maturity issues available at this time.

Now that this portfolio is 76% invested we will get the dividend table laid out on the portfolio page and see how we look in terms of current yields etc and distribution timing (we wish they were laid out evenly month to month, but this was not a factor for choosing and issue).  Dividends and interest will begin to roll into the portfolio in March–with luck (and a little skill) we will see if we can get into the black as we are already down $250 (2/10ths of 1%) in February and we fully anticipate a difficult year for income investors of any sort.