23 Preferreds and Baby Bonds Higher

Really–I counted an hour ago and there were 23 preferreds and/or baby bonds higher–out of near 700 that I track. Wow! Wow!!

The average $25/share preferred and baby bond is off 42 cents today.

Anyway I have been so tempted to buy in here–but I have resisted–I notice a few folks are nibbling here and there, but myself I want to get to at least noon Monday before making further decisions.

Here is the loser list–looks pretty ugly for shippers and lodging REITs.

I do note that my ‘old friend’ WR Berkley 5.625% (WRB-B) is trading at $24.91 and there is a month of accrued interest in it already. I will resist until Monday.

With stocks off around 2 1/2% right now the close today will be interesting—a nice bounce this afternoon would be comforting, but not sure who would be buying going into a weekend with the virus background at play.

30 thoughts on “23 Preferreds and Baby Bonds Higher”

  1. Despite the heavy losses in the indexes, the crowd faves are acting strong. Microsoft, FB, Googl are green in a sea of red. Even United Healthcare is green. These may have found a stable low and could be the beginning of a broader recovery sometime next week, unless of course we get some nasty news on the virus over the weekend. I was not willing to take the risk and dip a toe in any of these just yet.

    1. One of the worst week ever for equities and preferred stocks in some cases are able to do worse, even with interest rates falling . After a good earnings report Golar (GLNG) closes the weak positive while the GP is hammered and the preferred (GMLPP) goes under $20. Dislocation unfortunately affects illiquid assets and preferred stocks are between a rock and a hard place.

      1. Gabriele, all these HY Preferreds are pretty much 100% retail owned and they all puked them up in a panic. Total disconnect from the actual HY market today. Many buys out there for the risk-takers here.

  2. Is the expensive lesson for this week- good idea to sell if you have 2 years dividend upside?

    Those low yielding corporate bond funds stayed strong while preferreds all got smacked hard. I still have a lot to learn…

  3. GMTA call protected BAA2 at 5.625% dipping to $25

    HFRO/A call protected A at 5.375% dipping below $25

  4. Unbelievable. Even a name that looked quite safe like Prudential Plc has been hit like a junk, this time for the demerger news that is considered a credit negative event.

    1. Gabriele, PUK-A is unbuyable even at this price to me…Extreme call risks, RNR-C of same ilk (why they hell hasnt it been called) finally served notice this week.

  5. Today was a great day, I bought WRB-B, SJIJ, BC-A, AGO-F & BEP-A.
    All below par except BC which was catched at $25.15.
    Nice, very nice day. Looking forwad to Monday.
    Wish you all a good hunt, guys.

  6. I am only nibbling small amounts (6% or 8% of a normal position). Why? I am not seeing Investment grade issues paying 5.2% or above break below $25 in any meaningful way. With the exception of the new Brookfield issues, any that are call protected are not breaking below $25.

    To me, a real selloff has the call protected investment grade dropping below $25.

    That to me would be more of an indication to move from a nibble to a taste.

    1. I thought nibbling a small amount would mean at least a quarter or a third of a position!

  7. My account was rock solid through all the sell offs of 2019 and early 2020… Until this past week hit ouch… Gains that took months vaporized in less than a week :*p Well most of us can probably say, we didn’t plan on an animal virus out of central China to cause a pandemic that would take over the world. Lol Here’s to the zombie apocalypse!

    1. TechGuy
      I asked a question here this week and received an answer. ‘The market drops in an irrational manner when panic/fear sets in. You are not alone. Many of my utilities dropped this week. Must be because people stop using their electricity when they read the news. Oh, wait, if they stay home, they use more electricity.
      Don’t even try to make sense of it.
      BUT, if you can find it in the news,
      An Israeli medical institute is very close to a vaccine and an ‘antidote’. You won’t find that info in the MSM, because they print hysteria !

  8. Picked up the often mentioned IPLDP at $25.06 this morning. Thx for the tip Grid and others.

  9. Tim – funny you mentioned WRB-B below “par.” I remember hearing about it and also TDE around here as coupon capture plays with a defensive stance because of the coupon cushion to what was coming out…. That wasn’t that long ago… Now they’re both below “par,” cushion erased. I’m out on WRB-B but still a small position on TDE, and tempted to add…. I like your Monday at noon strategy too much though…

    1. Sold WRB-B last month because of call risk. Right move, wrong reason. Had to buy some back today, below par and below their 5.15% issue doesn’t make sense.

  10. I have been waiting for fire sale prices on preferred stocks, but now that it’s here it feels like the fire could take down the whole house. It feels like the risk to preferred dividend payments is on the table which I would not have imagined before. If schools were to shut down, people will stay home to take care of their kids, their offices will close, and no one will be there to press the buttons to make those dividend payments go out. Of course, this assumes they still have the cash flow to fund it. This is why a fire sale price still prevents me from being a buyer.

    1. Don–exactly the feeling that I described earlier in the week—there is nothing more difficult than hitting the buy button right now, which is fine—everyone is different–some buy, some sell and some don’t know what to do. Keep dry powder though at the ready and when the time comes just a taste here and a taste there–no wholesale commitment of funds.

    2. Don, Some of…no ALL of our very best acquisitions over the years, be it in financials or real estate, have been during times when everyone was upset with the markets or recent performance of an otherwise excellent asset. When seeing the word “panic” tossed about, it is somewhat of a buy signal for me.

      I’ve been in slow net-sell mode for months and am now (finally) in slow buy mode. Anything purchased or admired at a higher price over the last few months should appear as a relative bargain today. One caveat; buy quality assets you want to hold long-term.

      I’ll be buying more every day in a market like this. This morning added more IPLDP at 24.99 and FPF (my only etf or fund) at 22.56. No matter what they do going forward, they’re holds – unless they can be traded for something better.

      1. FPF and FFC, yeah team! Both went from quite overpriced to nicely priced in 4 days. Those CEFs give you one a lot of price action.

        1. have been watching FFC. Do you have a way to determine intraday NAV on a CEF?

          I am pretty sure it’s a discount to NAV but haven’t been able to find what percent it is until before the start of market day (overnight NAV)

  11. Tim, you know the world has gone mad when out of your tiny list of green preferreds; 2 are from bankrupt PCG and havent paid a dividend in a couple years, and another is a 4% par non cumulative railroad trading at $30….Wow.

    1. Fred–I looked at IVR-B on the loser list and thought at 7.62% current yield that should be on my list next week.

        1. I nibbled some small (symbolic) positions today, mainly thru gtc orders I had and did not remove. Many from recommendations from III, including some of grid bird’s and/or Tim’s favs , Tx!

          Examples: cownz@24.87, ipldp@24.98, ipb@28.88, gdv-h@26.25, ebbnf@18.21, kth@32 plus a handful of others in which I was a bit early.

          I think I am happy to own these at these entry prices. Some will be quick flips, if we stop seeing more baths and babies thrown at the close today or next week.

          One more thought: after the panic resides, I think we will see the bond rates even lower for a longer time, and thus, many preferreds, as long as they don’t default, will be even more attractive than they r today, with a significant potential increase in value. Does this make sense, or I am I overly optimistic as a III investor?

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