A Few Purchases From Last Week

Last week I added to my positions in some of the CEF preferreds–not necessarily those I prefer to hold, but just the same, ones I feel comfortable holding. At the right price I prefer the Gabelli related preferreds, but most of them have been priced too high all year long.

I added to 3 issues–all which I already owned. Specifically the Highland Income Fund 5.375% preferred (HFRO-A), the RiverNorth Specialty Finance 5.625% term preferred (RMPL-)and the new RiverNorth/DoubleLine Strategic Opportunity Fund 4.375% preferred (OPP-A). The RMPL- issue is unrated while the other 2 are both A1 from Moodys.

Now I have pretty much full positions in these–or in the case of the new RiverNorth/DoubleLine issue an overweight position.

Certainly I will do nothing today–or maybe for the rest of the week as markets gyrate a bit–then restarting my hunt on the weekend.

19 thoughts on “A Few Purchases From Last Week”

  1. I think the big question on HFRO is Pine Creek which is like a third of their holdings. Any way to see financials on that company?

    Another issue is the massive 38% discount. The primary way CEFs cure asset coverage violations is issuing shares ATM, especially if underlying holdings are illiquid. The big discount makes it hard to issue shares.

  2. I own several Gabelli preferreds since I went to a larger cash position. Low volatility makes them a good choice for standing by. When I get bored I trade some of them on the 10 cent swings.

  3. On The Invesco I traded the IHTA several times the last 6 months between 6.50 and 7.50 Quit playing with it and lost track. Now I see its up to around 8.00
    Friday I picked up a couple 100 shares of BRG-PA at 25.14. All I want to do is hold till its called. As discussed here, most people expect it to be called as there is a 2% increase in interest that kicks in on Oct. 21 2022
    I hope for at least one more dividend of .515 before next call

  4. Thanks, Tim. Been sitting tight pending the election results. Good choices, I think.

  5. Tim, are you still holding on to IHIT?

    It took a tumble in March and never really recovered.

    1. Citadel–no–was out of that before the big tumble–cmbs looked pretty dicey to me, but maybe at some point there is a potential re-entry.

  6. Thanks for the update Tim!

    For relative newbies like me it can be helpful to get a sense of the “why” behind a decision. Do you mind sharing what your thought process was that made these particular issues seem like buys last week?

    1. Mike—I want some safety–2 of three are A1 which is high investment grade. You really can’t buy reasonable safety with these coupons anywhere around the $25 liquidation preference–but all of these offer decent prices. Likely the price will just drift around $25/share or even lower so not much if any capital gain prospect–but I can sleep well at night.

      Also on the new RiverNorth Issue I was in too early at 25 and it is now 24.60 so just adding some at a more favorable price.

  7. Tim
    I have owned HFRO-A for some time, and I continue to hold it. But it’s been a real dud. I don’t know how else to describe it. Moody’s says A-1, but the market seems to say more like B-1, and that doesn’t appear to be changing. If the market really viewed this is an A-1 issue, it would be trading literally about 2 points higher. My only comfort is the 2-1 SEC coverage requirement.

    Thanks again for all your great work here.

      1. The common of HFRO likes to hold some of their own stuff & Jt Venture.
        Not very palatable.

    1. nhcoast–yes if it said ‘Gabelli’ it would be 2 point higher. As Gridbird says ‘names matter’. I have been disappointed with the RiverNorth/DoubleLine new issue as I thought it would trade strong–forgetting that names matter. I have noted in the past that many investors paint the preferreds (even at A1) with the same brush as the common–and the junkier common issues cause their preferreds to trade weak. I just want a little safety with a decent coupon–and these are about the best you can do.

      1. Tim,
        I have accumulated at various times on HFRO-A for 400 shares with minimal unrealized loss. Like you said, the issuer does not appear palatable. Even if Moody should downgrade 2 notches as it did with CTL (now LUMN, currently trashed by a negative analyst from Citi Bank) or TDS or USM, HFRO-A would still be Investment Grade. TDS and USM had a great quarter, the new baby bond from USM trading at ridiculous price above $26. I hold quite a few shares of TDE baby bond 6.875% sold some when it gapped up $25.9 +. Except during the era with toxic overvalued real estate back in 2002, Moody/SP/Fitch has not been terribly wrong IMHO.
        OR the EPR Property common and REIT being trashed with bankruptcy of cinemas. Of course, there can always be unusual circumstances. EPR senior unsecured debt was rated investment grade before the COVID.
        I am trying to get a few more shares of HFRO-A in IRA accounts.

    2. HFRO-A has a 287% asset coverage. Underlying trades at a 38% discount. Should low interest rates hold over the next 3-5 yrs, the short-term holdings will reload at even lower rates, with the 35% leverage accelerating downward pressure on this perpetual.

      The positives are that the PFD only dropped to $18 in Mar, the underlying NAV is at $12.61 (vs price), and someone at Moody’s thought it deserved the A1 stamp.

        1. The denominator in the SEC coverage ratio is the gross value of the assets as stated by HFRO. A lot of Level 3 assets there, like Creek Pine, etc., so that valuation is subjective (to put it charitably). As an alternative, I look at the what the coverage would be if the stated value of the assets were discounted the same way the market does. Applying a 36% discount to HFRO’s stated net assets, I get a coverage ratio of approximately 220% – not great, but not a sign of imminent disaster either.

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