A Couple Purchases Last Week

We made 2 purchases last week that we wanted to briefly mention.

1st off we bought a position in the new Citizens Financial Group (CFG) 6.35% fixed-to-floating preferred. The issue is a notch below investment grade, but the regional bankers with solid financials have traded relatively strong through the turmoil of the last few months. We believe the issue will move into the $25.50 area (or slightly better) in the next 30 days. This one may be sold for modest gains if they occur-but we are fine holding the issue as well. The issue is still trading on the OTC Grey market under ticker CFGLL.

The 2nd purchase we made was in the newer Algonquin Power and Utilities 6.875% fixed-to-floating rate subordinated notes (NYSE:AQNA). Algonquin is a Canadian utility focused on electricity and natural gas delivery as well as having a division which supplys water and sewage treatment. Virtually all of their operations are in the U.S. The company is a smaller utility with revenue in the $2 billion dollar area. The issue is 1 notch below investment grade at BB+ from Standard and Poors, but with a coupon of 6.875% the risk/reward proposition is pretty good.

With these purchases we move closer to be being fully invested and with moves we have written about in the past 4-6 weeks we are getting positioned in a way that is not overweight in any given area and with some coupons that are reasonably good for the quality level.

15 thoughts on “A Couple Purchases Last Week”

  1. Earnings stink this quarter. I have no idea why the stock market keeps going up. My guess, is they think the Fed is dovish. I don’t think so. I think they simply are not hawkish any more. We will no tomorrow.

    I did but CFGLL, however I sold my “holding tank” PSK booking profits ahead of dividend payment. Lowered my overall allocation from 60% in market to 49%.

    I will wait to see Fed. reaction tomorrow

    1. Sounds like you are skeptical SteveA of common shares right now–I join you in the skepticism, but that is why I don’t buy many common issues–I don’t trust market moves and haven’t for a long time. I am fine trying to crack my 7% annual nut–let the adventuresome (and many times foolish) folks by common shares.

      1. Same here 7% is goal. In addition to being skeptical on common stocks, I am not yet confident in Fed under new chairmen. More so in the lack of consistency in their message. Hopefully we see that tomorrow

  2. Unrelated, but of interest to some I think – from SA:

    Banks ease up from selling new bonds
    Jan. 25, 2019 10:55 AM ET

    Banks and other financial companies are pulling back from issuing new corporate bonds, Bloomberg reports.

    They’ve sold about $50B of bonds so far this year, down over 40% from the same period a year ago. The largest U.S. banks pulled back even more, selling $12B–about a third of the year-ago level.

    Banks’ debt issues are declining as tax cuts have increased cash flow, reducing their need to borrow to meet reserve requirements.

    Many foreign banks, which typically sell bonds in January, have held off sales this year amid uncertainty over Brexit and higher hedging costs in currency markets.

    The decline in bond issues from financial firms could mean gains for the bonds that are issued. CreditSights strategists picked bonds of large U.S. banks as a top trade for 2019 due to the lower level of new issues and lenders’ strong balance sheets.

    1. Affinity4Investing–if it is factual that there is that little debt being issued that would be a good thing – economically speaking since we will need that buying power to buy the trillion in new government debt that will be issued.

      1. It just amazes me the volume of Treasuries sold, and yields recently trending downward. Who has that kind of money? Why would they tie it up for 10 years at 2.7%? I guess because there is tons of paper money being made world wide that people and governments don’t really want to be holding. There’s not enough gold to convert it all into and squirrel way (too cumbersome anyway) so US Treasuries are the new gold. It’s the only thing available in big enough quantity, liquid, and perceived as “safe”, to soak up the enormous liquidity. We print more, they buy more, and everybody gets crazier.

        1. So…you’ve just built a McMansion on a nice estate on the Gulf. Your mortgage is a back-breaker but you’re okay with it…for now. The real question is, ‘why does the mortgagor make you put down a large down payment and take out insurance in their name?
          So…asking the correct question in a quiet spot away from the TV/cnbc has real value. Just a leading question worth spending alot of consideration time with. As we’ve witnessed, normal mortals do not have the same latitude toward changing the rules as our money gods.
          On topic here, am digging out some very interesting exchange traded instruments, but with unfilled open orders and watch mode I’m laying low right now. Thanks to the community here. JA

          1. Joel–am mostly laying low also. I have reached a good point in the portfolio-still too much cash, but I am being fussy–with the 3% gain I already have we can afford to be picky–don’t have to stretch.

            1. Tim, that is why I am nibbling on these decent quality Canadian reset preferreds from Enbridge and Emera. I am buying on the low end, not the high. Allowing the punishing resets that drove prices down way below par to benefit me long term down the road.

              1. It seems that more and more people are interested in Canadian Preferred Shares. Here is a link to the site with the best up-to date information.
                This site is very similar to the Tim McPartland’s, except it covers Canadian market only.
                If investor would like to get any info and analysis this is place to go first.
                Just type ticker EMA.PR.C (for example) in the search box and you get all the history.

        2. P–almost every day I see money ‘sloshing’ around–people in their 50’s and 60’s buying stuff they don’t need ‘because they can’—the 10 year experiment in zero interest rates has caused lots of sloshing around money.

          I had a car auction on the tv this past weekend and watched a guy spend $2 million on a Ford Mustang–I know nothing about cars, but it must have been special. The seller was willing to sell for $1 million, but the bidders took the price way up.

          1. Some day he sells for $20 million…..”Well I bought it for only $2 million, but of course that was back when a dollar was worth a dollar”.

  3. Looks like 2 nice solid choices, Tim! I didnt due a lot myself last week. I bought a little bit more of MTB- and the venerable RNR-C at $25.20 ( a cumulative preferred unlike most QDI insurer preferreds, though that probably isnt important). I also owned, like a few others here, a very quick 2 day hold and flip of AFSS for a bit over a $1 a share profit. I doubt I have the nerve to do it again.

    1. Grid–as you know on the those quick flips they work until they don’t and even on their debt I wouldn’t want to hold it long term–those folks are pretty slimy.

      1. Agree totally, Tim. The trade was never based on the love of the company which is zero. It was just a basic quick oversold bounce back from sell volume pressure. The fundamentals of the company hadnt changed in one day. And at 500 shares it was just an attempt at a self backslapping trade that worked. It was not an investment! 🙂 That is a total slimy outfit and in 2 trades over the past year holding 5 days in total I made $3 a share on the trades. I dont see a 3rd act here.

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