A Few Opportunities Arise

The softer market today has opened a few opportunities for conservative folks.

The 5% Tri-Continental preferred (TY-P) has fallen back on lite volume–I bought 100 shares at $54.85–I see it wants to go a little lower. This $50 issue is callable at $55/share anytime. The CEF had a 4500% asset coverage ratio as of 12/31/2019.

There are bunches of utilities that have set back 1-3%–maybe there is an opportunity there for those looking.

Here is a list of investment grade CEF and investment grade issues (preferred and baby bonds). This is for folks looking for safety–but willing to take some interest rate risk.

34 thoughts on “A Few Opportunities Arise”

  1. Tim,
    A while back there was a good review on this site on CHS corp (CHSCL,CHSCM and cohorts), I don’t remember who it was but it was a darn good review. Not sure how to find that post. Can you post a link to it please.

    Their earnings got hit pretty good by the oil slump and the COVID effects on their Ag operations are still not clear.

    1. AKJ–you can search in the search box (not the ticker box) for CHS–then you can find what you are after.

      https://innovativeincomeinvestor.com/?s=chs

      Actually I think one should be very careful with this one now–I am going to post something in the next day or two–virtually all of their earnings are from their refinerys recently–not sure they are making any money anywhere now–going to have to research further.

      1. That’s the impression I got too from a quick look at a summary of their earnings. I was interested in them as an agriculure play but the dependence on income from refinery products vs Ag dulled my enthusiasm. I have a few shares of Nutrien (NTR) and was looking for something to complement it.

      2. Market futures are strong today. Wonder if this will last after opening or will there be selling into the strength?
        I know CORR was a good ride for people the last few years and I sometimes regret bailing on it, but It never seemed to live up to its promise of expanding its energy investments and when it sold the tanker farm in Portland but kept the drilling wastewater facility in Dakota ? I walked away.
        The common was down over 8.00 in pre-market trading. This will affect the preferred

        1. Charles M, no regrets at all. CORR just made an announcement on SA. Their 40+% total asset tenant filed bankruptcy.

          https://seekingalpha.com/news/3560331-corenergy-sees-dividend-dropping-to-0_05?app=1&ifp=0&utm_medium=email&utm_source=seeking_alpha&mail_subject=pre-market-summary-on-your-portfolio-portfolio-1&utm_campaign=nl-portfolio&utm_content=link-9
          Not that long ago, CORR published in SA bragging how strong their balance sheet is, intending to buy back their own commons and preferreds. I was stupid not to sell then.
          https://seekingalpha.com/news/3554501-corenergy-unveils-repurchase-program

          IMHO, CORR is not to be trusted at all! The nerve of them. This one is worse than BDC’s best ARCC or Glog and even GMLPP, it seems.

          While CORR and CORR-A does have a decent history of capable to rise from ashes at least once or perhaps even more than once, this time, it seems that they are DONE. Someone at SA made some comment on their old tenant who filed for Bankruptcy but came back. I tried to sell my 217 shares bought in the worst timing just slightly below par taking a 20% quick loss. I do NOT want to wait the dividend. I will bet on my old faithful Shipper, Safe Bulkers Preferred, either C or D. The most honest owner, the smallerst bulker has announced buying its own commons and preferreds. I trust the two Greek brothers totally. Worst case possibility: they might offer some below par for the preferreds plus some commons, as they did with the B shares which had a FAIL to call clause. Otherwise, I suggest that we all stay with Tim and Gridbird. I visit SA daily only to keep an eye on my legacy trashy positions. Funny that Rida et. al. / Jussi Askola / Brad Thomas made so many posts, trying to claim their competitions’ picks will end up in bankruptcy and theirs are the “hidden gems”. Truth of the matter is: eREIT do have intermediate risks. All these questionable positions are getting propped up by the Feds, it seems. Thank you, Tim and Gridbird.

          1. Clarity, please John. Are you stating that one of the two tenants just filed bankruptcy or are you talking about an old bankruptcy?

            1. I am not totally sure. There is a person on the SA named Jz10

              https://seekingalpha.com/news/3560331-corenergy-sees-dividend-dropping-to-0_05?app=1&ifp=0&utm_medium=email&utm_source=seeking_alpha&mail_subject=pre-market-summary-on-your-portfolio-portfolio-1&utm_campaign=nl-portfolio&utm_content=link-9
              Here are various posts by Jz10. I do not think that he/she is a short seller, then of course, one never know.
              Here are his various comments from the above LINK:
              Right now the big unknown is whether the GIGS wells shutoff is temporary or permanent. Some of the wells shut off now won’t be economical to restart, so there will be a permanent loss of oil production capacity.
              Right now CORR’s common is still pricing in a very optimistic scenario that those wells will be turned back on soon. If CORR can’t pay more then $0.05/share in dividends for the indefinite future, with some risk that GIGS might have to be written down to 0, then CORR common should be significantly lower.
              There is a recency bias that is anchoring people’s expectation of prices to the recent past when CORR was trading at $45, so the current price near $15 looks cheap. As time passes and more people come around to the realization that $0.05/share dividends are here to stay, CORR will reprice lower to account for an indefinite future of $0.20/year dividends. At this point CORR should be priced like a long term call option on oil prices, like OXY. A fair price for CORR at this point is probably around $5-8 to account for the potential upside but also factor in the possibility that CORR is worth $2-4 long term if the GIGS wells are not economical to restart and gets shut down permanently.
              14 Apr 2020, 11:30 AM

              Here is another one of Jz10
              14 Apr 2020, 07:42 AMReply3Like

              jz10
              Comments3005 | + Follow
              I had a slight inkling that Cox was going to pull this move. EXXI went bankrupt during the oil crash of 2016, so it’s clear that the economic on these wells don’t work below $30.
              I expect UPLC to go bankrupt again, Last time a quick gas price rebound to $3 saved the Pinedale lease while UPLC was in BK. The thing with UPLC is that they can drag things out for a while since they have no near term bond maturities, but they can also decide to declare bankruptcy anytime.
              If UPLC stops paying as well, their cash flow would not support the preferred dividend. That being said, they have 120M in cash lying around. So there is little reason to suspend the preferred dividend. At current preferred prices, they can buy back all the preferred shares for $70M and still have $50M left over.
              Times like these really show the importance of having a fortress balance sheet.
              I went through the 10K. This company is organized as eREIT, talking about FFO and AFFO, EBITDA play. I sold all my 216 shares at about 20% loss at $14.52. It is now $14.50 last trade. These days, I really hate these trashy junks, sold all my non IRA shares and perhaps even IRA shares on STWD (decent history … I am holding on to the rest), CLNY-G, the crook as I have reported on this WEB. Despite headline news, WTI continue to decline. That to me, does not bode well for CORR or CORR-A. Of course, I could be totally WRONG.

              1. OK, so that is what I thought. I have seen nothing that says the tenant has filed for bankruptcy, which is a big deal in the equation. The stock is selling for pennies which isn’t good, but different than saying they had filed for bankruptcy. Was just looking to make that distinction.

                I agree, not much of it is good for CORR/CORR-A. Going to be a tough road with these people not paying their bills and being such a huge part of the revenue stream.

          2. John, A few good quotes I try to follow, but I get weak on a few myself…

            More money has been lost reaching for yield than at the point of a gun.” – Raymond DeVoe Jr.
            And a couple good quotes from legendary investor….Mark Twain…
            IT AIN’T WHAT YOU DON’T KNOW THAT GETS YOU INTO TROUBLE. IT’S WHAT YOU KNOW FOR SURE THAT JUST AIN’T SO.”
            OCTOBER: THIS IS ONE OF THE PECULIARLY DANGEROUS MONTHS TO SPECULATE IN STOCKS. THE OTHERS ARE JULY, JANUARY, SEPTEMBER, APRIL, NOVEMBER, MAY, MARCH, JUNE, DECEMBER, AUGUST, AND FEBRUARY.”

      3. Many or all of the CHS preferreds were issued to finance CHS’ joint venture into the nitrogen fertilizer business. I believe the total investment was around $3 billion. Debt service on the preferreds should be in excess of $200 million annually, while CHS income from that business was only $5.7 million last quarter. Annualize income to $23 million: $23 million income vs $200 million outgo.

        The $3billion joint venture followed a $175 million write off when CHS started and the ceased building its own fertilizer plant.

        1. codger–one of the all time worst investments by a coop—they were selling multiple issues of preferreds to build their own nitrogen plant then dropped the idea and got totally screwed buying into CF Nitrogen–that CEO got canned–none too soon.

        1. Mark under Tims “Preferreds” listings…Just simply hit the “$50-$100 preferreds” link…It is the very last one at the bottom.

  2. Picked up some PW-A at 25.11 I’m thrilled to be participating in the hottest three sectors of the past 140 years! Thanks for the tip on this obscure issue.

    1. I think you are on to something here Jim as I never thought of the investment that way. The railroad was really a top notch feat of the 19th century. Weed and Woodstock were definitely a 20th century marvel, and Solar could be the king power source of the 21st century. One thing is certain…Power Reit wont be sending out any employee pink slip lay off notices….Since it only has one full time employee, ha.

      1. Me too

        I’m in a bit higher than you two, 25.30, and I’m ok with that. I’m not looking for a quick flip. If it gets called tomorrow (which I’m guessing it won’t), I break even. If not, then I like that 7.75% coupon.
        If someone fronted them $15m at 4.7%, presumably after DD, then I’m good with being behind them in line for an extra 300 bp.
        My only question is to grid: where do you come up with this kind of thing (not asking to divulge any trade secrets)? And thanks for the lead.

        1. Nhcoast, to be honest about 5-6 years ago, I was looking to expand my preferred investing niche beyond Ameren, Baltimore Gas and Electric, and Connecticut Light and Power and a few others of same ilk. I started thinking what about a railroad preferred stock? I found a couple and saw this one imbedded in with that sector, on the railroad reit website I found. Its genesis was a pure railroad reit spun off from Norfolk and Southern moons ago. Then the preferred got issued in essence to help litigate against Norfolk for a big score after this Lessor guy took control of it.
          They lost the lawsuit, but still had the guaranteed million dollar lease contract enforced though. I have owned it off and on past 6 years. Anyhow he needed to do something as the company was just the rail line ownership. Solar was becoming popular so he tried the solar farms. He got some contracts but the terms allow maybe 1% escalator clauses so the growth just wasnt there and solar started expanding other ways. He got the pot idea in the past year or so….Way better terms, but the risk is higher of course as these clients arent of the depth of Norfolk or the Utilities that are owning the solar farms on the land.
          I bet there has been a heckuva a lot of weed smoked during the lock down. Have a friend who has an adult child working at a head shop (they cant sell weed) that somehow was declared essential service and has stayed open. He worked Easter Sunday and said bongs were flying out of the store that day, ha.

    2. I’d be concerned about paying over 25 since it is callable and their is a reasonable possibility it will happen.

      1. danzeb – most definitely a valid concern.
        The question: is it worth the risk?
        At 25.30, with the accrued dividend, if the call is noticed tomorrow for May 15, you about break even. The “loss” is a month’s opportunity cost on the $25.30 per share investment plus the wasted time. For the 7.75% coupon some might think it’s worth the risk (in conjunction with the other obvious risks of an investment like this). It’s well understandable that others might not.

        1. ZERO percent chance this is redeemed prior to next divi. His kids own 10% of the float. He aint screwing them.

  3. Can I just say how much I enjoy this forum? Learning about Baby Bonds through this site has been so enjoyable that I’ve barely noticed the apocalypse outside. I can’t imagine being able to research and perform DD on BB offerings w/o this website. Thanks for posting the investment grade link, diving in there now.

    1. Thanks San Diego–am certain you are basking in better weather than in Minnesota where we got to enjoy (NOT) another 8 inches of fresh snow.

      1. You know you’ve been reading this site a little too diligently when you look up the ticker symbol NOT …

    1. Thanks James Craig–I gotten it from 10q and 10ks for years and never seen this page. Will link it somewhere on the site.

  4. I bought the ECF CEF itself a couple of weeks ago @ $7.12/shr. Pays a higher dist. than the preferred. I actually found it via one of your investment grade preferred lists.

    So, thanks, Tim…had never heard of this one before.

      1. Tim, I’m curious why you bought TY /P. Its has a current yield of 4.55% at $54.85 and a 5% coupon. Did you buy it because of its credit rating/ asset coverage?
        Thanks,
        Jeff

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