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Month: December 2019

Heads Up–GasLog LTD 8.75% Preferred Tumbles-Updated

Update–PTrader has posted a link in the comments here that indicate that the company may call this issue before too long. I had a low ball order in on this on Tuesday but with the added info and the pop in the shares Tuesday I will not have an interest in shares.

The GasLog LTD 8.75% perpetual preferred (GLOG-A) tumbled in the last 2 days by about $1. It is now trading at $25.43 down from $26.40 2 days ago.

The issue is callable 4/7/2020 and some folks probably figured out there was ‘call risk’ and wanted out.

Shares went ex dividend on 12/30 for payment 1/2/2020 so they will be building accrued dividends which with the normal 30 day call notice minimizes the call risk cost. Whether the company would be able to call this issue is an unknown.

NOTE–this is not the partnership which is GLOP–this is the parent company.

I may pick up a small position.

Heads Up–Bancroft Fund A1 Preferred Dumped at Close Today (credit rating updated)

Closed end fund (CEF) Bancroft Fund perpetual preferred (BCV-A) took a tumble near the close today (Monday) falling 88 cents on a 966 share’dump’.

Folks need to realize when you put a market order to sell on a stock that average 1,625 shares traded each day you can get badly bruised.

This issue carries a coupon of 5.375% which is damned good for a nice investment grade issue (Moodys A1)–and with a closing price of $25.50 today (after trading as high as $26.46 last Friday) this is as good as it gets. Shares had good ex-dividend a few days 2 weeks ago.

If the drop late today stimulates more selling tomorrow I will be a buyer.

The Bancroft Fund is a fund managed by Gabelli.

NOTE–the issue is thinly traded and most charts are wrong–you should use a chart at your broker (Fido chart is correct).

Who Issues Preferreds and Baby Bonds?

Just a bit of trivia into who issues $25 preferred stocks and baby bonds.

Below is a chart that breaks down the number of issues of $25 issues outstanding.

This is really nothing new for those that have been investing in these issues for years–but maybe newer investors aren’t aware of the breakdown.

This doesn’t show them by dollars–just by individual issues outstanding. The chart shows banks are the largest issuer–and if I listed by dollar value it would show banks are by far and away the biggest issuer since the big banks–i.e. JPMorgan and Bank of America tend to sell issues with 30, 40 or 50 million shares–while REITs etc are more in the 1-10 million area.

Monday Morning Kickoff

Records continue to be set in the equity markets–even with a holiday right in the middle of the week. The S&P500 opened the week at 3226 before seeing a low of 3220, but turning higher on Friday and closing at 3240.

The 10 year treasury seems to have found a fairly “sticky” yield in the last few weeks–in the 1.85% to 1.95% area. Last week it opening at 1.91% before hitting 1.94%, but closed the week at 1.87% as it drifted lower last Friday. With the slow markets last week whether this is meaninfull at all is doubtful. I see that the yield has popped a bit this morning to be at 1.94% now.

The Fed Balance sheet popped again last week as it grew by $28 billion. This gives us total growth during December of an incredible $100 billion of Non quantitative easing (that’s what Powell says anyway).

Last week we didn’t have any new preferreds or baby bonds announced–probably will be the same this week with the holiday right in the middle of the week again.

Below you can see that pricing on shares of preferreds and baby bonds moved the tiniest amount higher for the week. Remember that ex-dividend dates occur during these period and distort the numbers a little, but with a larger sample size the distortions are minimized.

Priority Income Fund Term Preferreds on Sale

The Priority Income Fund (no publicly trading) is a closed end fund which holds collateralized loan obligations (CLOs).

There are 5 outstanding issues of term preferreds from Priority Income Fund and most of them have gone ‘on sale’ during the last month.

The issues are generally down 4-5% since highs reached in September. For instance the PRIF-C 6.625% issue is trading at $24.70 after hitting a high in the $26.20 area.

Shares went ex-dividend on 12/12 for payment on 12/31/2019–so there is no accrual in the shares.

Disclosure–I own the PRIF-D 7% issue. Additionally I’m looking to see if I want to add the PRIF-C issue now (both are small – less than full positions).

Being a CEF Priority Income Fund must maintain a 200% coverage ratio and they are currently at around 400% (at least last time I calculated it), but are assets are ‘level 3’–meaning the value is not directly observable so each investor should do their own due diligence as many may not be comfortable holding CLO related securities.

I expect Priority to issue more term preferreds in the months and years ahead as this is their method of utilizing leverage.

You can check all the outstanding issue here.

A Few Sells and a Buy

While markets are a bit quiet as we end the year we are trying to grab a few end of year gains (all in IRA accounts) and get ready for the new year.

Yesterday I let go of a full position in the Gabelli Heathcare and Wellness Trust 5.76% perpetual preferred (GRX-A). I loved the 5.76% coupon on a strongly investment grade issue (Moodys A2), but it is living on borrowed time. The issue closed at $26.01 yesterday and has been callable since 8/20/2015. GRX does have a 5.875% issue outstanding which is now callable which may ‘protect’ the 5.76% issue, but more likely they would call both. This issue was a ‘base’ position–one which is a long term hold in the portfolio so I will be looking for another base position.

Additionally I tried to sell the new Medallion Bank 8% fixed to floating preferred (MBNKP). This new issue traded very weakly early on – down to the $24.40 area–2 weeks ago, but closed at $25.22 yesterday. I had an average cost of $24.58. My limit sell was obviously a bit greedy as only 88 shares were sold, but hopefully will get it done today. These shares were bought only as a flip–no intention to hold this junky issue too long.

I bought the Urstadt Biddle 5.875% perpetual preferred (UBP-K) yesterday, mainly as a dividend capture move. The issue had fallen a bit yesterday and goes ex dividend in 2-3 weeks. The combination of a short term fall (I hope) and a foreseeable ex dividend date for 37 cents made this particular issue attractive. This will have a target of 1.5% so may hold through ex date or will sell when my target is reached – maybe before ex date.

I tried (but didn’t get an execution) to grab a position in the GDL Fund cumulative, puttable issue (GDL-C) for a ‘base’ position, but didn’t get an execution. I am happy with a 4% position for a base issue and it would help replace the Kayne Anderson 3.50% Mandatory Redemption term preferred (KYN-F) which will be called in April.

While there aren’t any big selloff going on it appears to me that there are some individual issues being ‘sold’. These are not large volume issues, but it appears that the sells are likely individual investors, so one may be able to snag a bargain today somewhere.

Into the Home Stretch

Well hopefully folks are getting through the holiday period with their sanity. With our 6 grand kids ranging in age from 4 to 15 holidays are becoming less stressful as they are quite content to play with each other instead of requiring adult supervision (at least as much).

So with just 4 trading days left in 2019 I hope we maintain our gains–I really expect market movements will be pretty muted, whether it be stock prices or interest rates.

Last night I was adding more data and filing in a few blanks in the database when I came upon an issue I thought I would mention. This is for folks looking for a stable value issue–with a relatively short maturity date.

The issue is the GDL Fund $50/share preferred (GDL-C).

This issue is cumulative, puttable and callable. The coupon is set at 4% for 2019 and 2020, which will potentially be reset later in 2020 for the next 4 years.

Investors can ‘put’ shares back to the company in March, 2020 and March 2022 at $50 plus accrued dividends.

There is a mandatory redemption in 2025 at $50/share.

The issue is trading around $50.90 and as happens with these types of issues it is somewhat illiquid–trading only 600 shares a day.

Being a Gabelli CEF (closed end fund) the fund must maintain a 200% asset coverage ratio–as of 6/30/2019 coverage was at 237%. The fund holds level 1 assets (common stocks mostly) and quite honestly, the fund performance is pretty lousy, but I am not overly concerned about the fund performance as long as they maintain asset coverage.

The issue is not rated, but would likely be investment grade if they decided to rate it.

So this issue has a lot of good qualities–for me the 2025 mandatory redemption is perfect. The puttable period in 2022 and the mandatory redemption will help maintain shares in the $50 price area. Also the 4% coupon isn’t too bad for this type of issue.

The company can redeem shares starting in March, 2021–but I would be surprised if a 4% issue were called.

Current yield is 3.93% and yield to worst is just under the 3% area.

I am pondering a purchase since I have a rather large position (for me anyway) of over 1000 shares of the Kayne Anderson 3.50% (KYN-F) issue and with the mandatory redemption in 4/2020 I am looking for a place to stash some ‘safe’ money.

It’s the Giving Season and Income Securities Have Joined the Festivities

This is the giving season–giving gifts, contributing to charities (even though we no longer can deduct our contributions) and trying to be a decent person (not always with success).

We all know common stocks have been “giving”–almost daily, but I am surprised that the preferred stocks and baby bonds I buy just keep on “giving” as well. Investment grade issues have been contributing greatly to good times, in spite of rising interest rates–at some point this will have to end–but now isn’t the time.

Some of us have looked for potential set backs with year end sell-offs or rebalancing and they just haven’t happened–so quiet–maybe too quiet

With the sortable spreadsheet I have posted I am able to drill down on what is happening in income markets really easily and below is a chart from December showing what income issues have done. I have removed issues that have suspended dividends.

The red line represents all $25 investment grade preferreds. The blue line represents all $25 issues–preferreds and baby bonds of which there are 655 issues. The green line is the 10 year treasury.

Of course during December we see a lot of ex-dividend dates — and there 100 more in the next week so we really need to see a longer term chart (I will keep tracking these numbers), but certainly for holders during the month of December the good gains continue.

I am anxious for the new year to start and am concerned that the easy gains of 2019 will become much tougher in 2020–we shall see.

Monday Morning Kickoff

The S&P500 traded in a range of 3183 to 3226 and closed near the high at 3221 last week as stock traders and investors continue to drive prices higher.

The 10 year treasury opened at 1.85% before moving as high as 1.95% before closing out the week at 1.92%. The question is can the rate move above 2%? As long as we see a very slow move higher I don’t mind seeing rates rise a bit–it will eventually put a stop to these sub 5% issues.

The FED balance sheet grew by a giant $42 billion. With the new QE the balance sheet has now grown $378 billion since 9/4/2019–this is really a giant QE–$90 billion a month.

Last week we had just 1 new income issue.

Gabelli Multimedia Trust sold a new 5.125% perpetual preferred which is now trading under OTC ticker GABGP. Shares last traded at $25.35

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In addition to the Gabelli issue the new 8% foxed-to-floating rate issue from Medallion Bank (a division of Medallion Financial-MFIN) began to trade.

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After starting out very weakly early in the week–trading as low as $24.40 the issue got some traction as the week wore on and the share price traded as high as $25/share, before settling back a bit in the $24.90 area.

Disclosure–I bought a 1/2 position at $24.49 and finished the 2nd half at $24.65. I likely will exit this position soon as it was meant only as a ‘flip’.