Added Info on CEF Preferred List

I was updating some info on the CEF preferred page and noticed that some months ago I had added the ‘coverage ratio’ to the list.

Us conservative people like to see really solid coverage ratios–the higher the better.

The list is here–and on the right hand side we have coverage ratios for the senior securities. The coverage ratio is the asset value divided by the senior securities liquidation amount.

While the current yields on these securities are modest I can really sleep well at night owning some of these issues.

Disclosure – we hold a number of these preferreds.

AllianzGI Convertible Fund 5.625% preferred (NCV-A) AllianzGI Convertible Fund II 5.50% (NCZ-A), Ellsworth 5.25% Preferred, Bancroft Fund 5.39% preferred (BCV-A), Gabelli Utility Trust 5.625% preferred (GUT-A) and the Tricontinental 5% preferred (TY-)–and I forgot Kayne Anderson MLP 3.5%.

24 thoughts on “Added Info on CEF Preferred List”

  1. The content here is VALUABLE. Buy-Sell-Hold tactics are a bit of an arcane art that one develops over real market time. You can ‘learn’ it but actually you are discovering your own style….over time. A good Student can learn once they give up their own chatter. A good Master can tell you in a short sentence, but it may mean little to a student without dropping one idea to consider the new action required. Sounds Toaist almost…ha.
    I hope that the chatter does not come here like other sites as mentioned above. I do believe that a support site like this and QO do deserve a free choice to contribute a donation for deep services rendered. There are very pertinent lessons for investing survival and security here and I have reflected on the skills hard learned by others here.
    Just for fun here’s an investing koan: BMYMP, came out of the blue.
    Holding a few open buy orders close to the vest right now also some limit sells if desired by someone else; will share more positions later. The thinly traded environ with alot of these securities is alot like hunting for a trophy…good fun all around. Need a nice value opp to come up.
    Cheers All!

    1. Joel said….You can learn it, but you are discovering your own style….
      I couldnt agree more! That is all what it is about, to learn what best suites each person…..I use a different more casual terminology….Stay in your lane bro, stay in your lane…..And that is what I do.

  2. Tim, just my 2 cents on the website as I have to go back and prepare tax returns for the next two months in partial retirement (no problem with finances, just a little fun), but the purpose of fixed income investments is to provide long-term income and stability. At least for me, just too much comments about “trading” stocks here. Certainly hope we don’t go down the same path as SA. These investments are long-term and day to day patterns don’t concern me much. Overall, I hope we don’t go down the same path as SA.

    1. Hi kaptain–I think that some like me trade a small part of their portfolio-maybe 70-80% is fairly solid and longer term while I have maybe 20% where I will do a quick flip or something. I think folks write about trading some stuff, but hopefully they are mostly solidly invested for the longer term.

      1. Tim, I also enjoy discussing trades and others that share. And like you I churn a smaller portion. It might sound distorted, but its only because the sock drawer issues arent mentioned because there is no need to. I dont see much value in discussing the fact I own FIISO for the 1200th consecutive day and its price hasnt changed in 2 years, but it is something I own and always will.
        I had three people PM from SA just today wanting info on discussed preferreds here. They were looking for preferreds that fit a criteria they wanted and made purchases because of the mentions here…

        1. I have been unable to access Silicon Investor since they got overly aggressive with their cookies. Firefox ghostery blocks most cookies but I was able to to access until last week. Anyone have a work around? The disclosure for what they want access to is disturbing.

      2. Tim, like you probably 80% of my portfolio is filled with income securities that I “love” and the other 20% is securities that I “like” because they generate income, but would certainly sell if a better/new issue comes along. Overall, I believe in long-term investing as I believe the results are better and it is more efficient for tax purposes.

    2. Kaptain, for others to know we are online friends so we arent offended by disagreements, but I respectfully only partially agree. I have sock drawer issues which are long term holds, so for me that is issues like my FISSO, CNIGP, MSEXP, NI-B, and now some Canadian resets recently purchased. But others that are bought it just doesnt make sense to just blindly hold…Take ALLY-A. I bought a slug at par on sell off last month. It is past call and high Libor and went above $26 yesterday. It just doesnt make sense to expose oneself on a past call issue. So I sold at $26.05 yesterday. I also own BANFP, I buy around $26.30 and whenever it goes over $27, I sell. It has tradeable patterns to profit I have used for many years. Plus, though odds of call are low, it has been redeemable since 2009 and that must be factored in also. If I see a spike in an issue I own, I am not going to just ride it back down to its normal range, if its a non sock drawer preferred.
      There certainly isnt anything wrong with buy and hold as I have plenty also, but each buying situation is different. To just adapt a buy and hold strategy would eliminate all sorts of buying opportunities. For example, I am not going to just buy and hold SCE-L, I bought from distressed prices and when yield isnt commiserate with risk of holding I will sell. Its kind of like a restaurant to me. You pick from the menu that best suites ones needs or strategy and ignore the rest.

      1. I like reading Grid’s trophy kills. It gives me ideas. Some I follow through with that are very profitable. Like ALLY-A, and EBBNF, CHSCN. It is a way to juice returns, add some spice to your life, and get feel of gambling/winning with a % of your money. The thought would be to create a page just for that if people didnt want to read it.

        Tim, I manage your site with an RSS feeder. That way i can see time of post, summary, poster, etc. I can pick and choose to read, view by poster, and mark ones viewed, etc.

        Many thanks to your efforts.

        1. Mr. Lucky, that would be a great idea. It keeps people that are too busy to be wasting time reading my non sense and then having to waste even more valuable time writing and complaining about their time being wasted, lol…
          Anyways, Speaking of wasted time…I sold 500 of my HE-U at $26.24 I bought at 24.50, and then bought them right back at 26.08. I do this stuff daily, and also did it with the MTB preferreds today too…And it beats working 8 hours at Walmart for the ~$100, lol…

      2. Grid and SteveA, I certainly welcome discussion when there are two sides to any issue – and investors can always disagree on different strategies because people often have different goals and income needs. At least for me, trading on a regular basis does not really work. Commissions need to be paid on both sides of the trade and there are also income tax consequences if people are trading in a taxable account. Plus, when I had been a frequent trader in the past, it meant that I was not monitoring the quarterly results for my holdings and also put my “To Buy” list on the back burner because I was trying to make some quick trades. I always need to have my “To Buy” list ready to go, just in case one of my issues is called. Overall, I believe long-term investing is a more profitable and tax-efficient strategy for me.

        With that being said, if I purchase a 7% preferred issue at $25 and the security goes to $27, I’ll clearly sell (especially if in my tax-deferred account) if I can replace it with a comparable security that is selling at close to par value. Also, if a good preferred/baby bond drops to $23 for nothing other than poor market conditions (and company fundamentals remain sound), I’ll also purchase at that level and would sell at $25 if I can replace it with another issue. However, those situations only happen a few times per year.

        1. Unfortunately those 2 times/year (last year was Feb, and Dec) are yielding large drops in the preferred. Many articles, are showing many new people in the preferred space, and they are investing their money like common stocks. Also the preferred CEF’s are re-balancing causing very good trades. Was amazing how many market orders were done in Dec.

          The potential gains are large if one is willing to come up with a hybrid approach. Ex. In the Fall, euphoria was peaking. People were excited to get their hands on 5% at par. Setting aside 30% of a portfolio in the Fall and waiting for the Dec slash and dash was EXTREMELY profitable. I am sitting on large gains, just like Feb. The more people tweet and show their buys.. the more i understand about market sentiment. I did the same last Feb. Prices normalize, and move back to 30% cash.

          This site is helpful for 2 reasons. Gives me market sentiment. Gives me ideas for trades, gives me ideas where to park that cash.

          1. Mr. Lucky, I havent read such articles, but you nailed it for me. I am 100% in “preferreds”. Each issue I buy serves a specific purpose all within the context of the holdings I have. The purpose could be bond like, common stock like cap gain buy, or just vanilla preferred buy. I like preferreds serving different purposes so they will not all move in corresponding fashion…Remember the December sell off we liked so much? I own many that simply dont move much. So I sold out of those and loaded up on several issues like SRC- A that I have no desire to hold long term. Spank it around for a few days buying and selling on the volitility spikes, them pocket the money and go back to what I prefer holding…My only 2 trades I lost money on this year was then also. Not from what I bought but what I sold in it. Though NSS has been good to me the past few years, I am done with it. Fortunately at that point my allotment was small..But lesson was learned….Stay in my lane…

          2. It is beneficial to me to read the differing viewpoints of the folks here. Ity is so obvious that we all have different likes and dislikes, but one of the jobs I see myself doing is separating the wheat from the chaff.

            I have zero interest in shippers or foreign issues, so much as I agree with Grid on various things, I stay away from Canadian stuff. But I do not try to impose my viewpoint on others, and hope that all who visit Tim’s site will respect and learn to live with this eclectic mix.

            The nice thing is that this site is free for all – at least for now – and anyone who does not like the tone or the atmosphere has the option of not coming here.

            1. I agree and would hate to see rules or guidelines that would cause some to post less. I am relatively new to preferreds and baby bonds and am a conservative , primarily buy and hold investor. Still I feel I learn from those who may post about a trade they made and think that it is unusual for a post to be completely focusing on a trade or a long term buy.

    3. Kaptain, Agree partially also. I don’t do any investing with quick flips in mind. To me, it’s a gamble.

      However, when you achieve your objectives with an issue, nothing wrong with taking profits. When I buy, a new preferred issue it’s is with a view that it will be called in 5 years (not sure if you call that long term).

      Many issues trade with a premium to their share price for the 1st 3 years and then tend to lose that premium the last 2 years.

      So take NI-B, a very popular issue for many of us. If the market wants to pay upfront for 8 quarters of dividends that’s 13% plus any dividends you get before the price gets to that premium. For every single stock, I own I have now established an upfront sales price (both preferred, ETDS, and the small amount of common).

      For preferred stock and ETDS, I think about it as, the number of dividend quarters upfront that I would be pleased to get. If the market hits it, I am ready to move on.

      1. I established a separate number of quarters for each issue, ranging from a low of 4 quarters (one year) to a high of 8 quarters (2 years) based upon my judgement of how valuable the issue is.

        1. I look at it completely differently. I don’t consider how many quarters ahead the issue might be paying me in the current market price. I look at where the issue has traded over time, the quality of the issue and my yield on cost. If I got in at a very low level resulting in a nice dividend over my holding period, I’ll just hold it even if the market price takes off.

          Example: NNN-F was purchased back in December at $20.79 and I’m ahead 9.85% on market price or 6.3 quarters forward dividends. My yield on cost is 6.25%. I would not sell this for any reason that I can imagine. I’m getting a solid yield on an IG issue that doesn’t have a first call until 10/21. If I sell I would have to have an equally appealing issue. This is a very safe issue. I am in the same position with some of my other December purchases. FRT-C, NEE-I, PRE-G. I have no plans to trade out of these quality issues and can’t imagine a scenario where it would make sense.

    4. Tim, you know that I agree with kaptain lou. Some people just can’t help themselves when it comes to posting (on multiple sites) all their trades and flips. Some people find it useful but many of us just don’t have the time to sift through it all. These posts get littered across every one of your articles. Please keep thinking about a way to segregate that kind of discussion in its own sandbox.

  3. I am liking these “conservative” pref and been loading on them thanks to you Tim. All the best.

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