Addition of a “Sock Drawer” Section

I have added a new topic in the right hand side menu for “Sock Drawer” discussion.

The intent it to include items that all of us consider “sock drawer” holdings.

My definition of “sock drawer” is those issues I own that I consider extremely safe and that don’t have to be watched too closely. Normally they would have more modest coupons, but you can sleep well at night (relative to safety)–you know the income stream is extremely safe, althought the share price may move around quite a bit.

Others may have their own definition–in fact I know they do–that is fine

For instance, I have held the Tricontinental 5.00% preferred (TY- or TY-P) issue for years and years. Tricontinental is a closed end fund managed by Columbia Threadneedle. TY was formed in 1929 and this small amount of preferred stock is the only leverage the fund uses–2.2% leverage. Because it is a CEF they must maintain a 200% asset coverage on the preferred stock–the last time I calculated the coverage it was over 4000%. This is a $50/share issue and last traded at $54.66. The issue is callable anytime at $55/share. Shares were issued in 1963.

You can use the link in the right hand menu to access this section–it is here.

28 thoughts on “Addition of a “Sock Drawer” Section”

  1. CNPWM is on sale now.

    Asking $50, which is at par, but the redemption value is $51, so one would enjoy a cap gain if it were called. Yield is very modest, at 4.18% only, but this is an issue similar to CNLPL & CNTHP, rock solid and extremely illiquid.

    I bought 400 shares, to add to 100 that I have held for some time ( bought at $51 then ).

    1. inspbudget – Thank you for mentioning CNPWM. I was able to buy 200 shares for $50. It is exactly the kind of holding I need for my cash account!

      1. Malka, glad you got some. Looks like the seller has dumped his stash and moved on.

        This is a typical “Sock Drawer” resident. Just buy & forget about it. I consider such investments a perpetual CD, paying way better than a Bank CD, but just as safe and reliable.

        QDI dividends just add icing to the cake. The only bummer is low yield compared to other preferreds, but higher yield means a higher risk and that helps offset things somewhat

    2. I love that this was first callable on 3/1/1961! I guess that suggests they view this as a permanent funding source. Thanks for the idea.

  2. If you’re looking for safety, I think TVE is about as safe as it gets. The yield may be low, but it can’t be called and it currently pays twice as much as the 10 yr Treasury does.

    1. Derek – The downside to TVE is that if rates stay down around today’s levels come April, its coupon will reset to about 2.90%. That should still make it hold a premium price, but it’ll still be a drop of about 46 basis from today’s coupon.

  3. Tim,
    With the addition of new sections, your website is becoming increasingly more valuable! When are we going to be able to contribute some $ for this service?

    Would you consider -if you find it useful- adding yet another section for discussion on callable securities? That is a section to publish new call announcements. It could also include discussions on callable securities that have not been called and that in the opinion of the poster a) are likely to be called or that b) are NOT likely to be called soon? And also things like that list of callable IGs you generated a few weeks ago.

    I know that most of this has been posted under various sections, but maybe a separate section dedicated just to callable securities can be nice, especially for the alerts of new call announcements.

    Just a minor suggestion…

    Thx

  4. One must segregate a sock drawer issue from a purchase price to buy though. Some I own Im not selling, but unwilling to buy at current prices though. One could say if unwilling to buy at the current price one should consider selling then. But thanks to contorted mental math, I can absolve myself from that dilemma, plus my sock drawers tend to be illiquid which means I may not get in again for a long while.

  5. Tim, thanks for adding. I was actually looking for such a link a few days ago so I’m glad to see you add it now.

    1. Well I was hoping to see a list of sock drawer holdings. Also trying to find TY- or TY-P on Etrade but it doesn’t seem to be there. Tim, do you hold this one on Etrade? If so, what’s the symbol? All I see is TY ( TY TRI CONTL CORP COM) trading around $28.80 today with a 3.5% yield. Nothing else that begins wit “TY”. Thanks.

      1. You can look it up on Yahoo Finance as TY-P. Brokers use various symbols. As an example Vanguard uses TY_P if you want to lookup info on it but uses TY PR is you want to purchase it. At this moment the ask price is 55.33 that a high for the year. In the past year it was as low as 51.34.

        1. Thanks danzeb. I found it on yahoo but not at brokerage (Etrade). Guess I’ll look for something else in the sock drawer.

      2. The crown jewel of my sock drawer is the one share of MSEXP I bought from Gridbird last summer – and its up almost 40%!

        I will probably never get another share…

        Gotta love illiquids.

        1. Private, you have one more than I do now. The entire float is 780 shares I believe. I acquired up to 130 at one time. But when someone offered me $42 more dollars than I paid at $182.50 a year or so ago, I hit the sell button.

            1. Mark, No. It is an ancient preferred with a $100 liquidation value. It was issued uncallable. The company Middlesex has largely bought back all the shares over the past many decades. Less than 800 shares exist “in the wild”.
              It has gone 12 years without trading before. I know because I was the one that busted the streak. It did me very well in short order time, too.

              1. Grid, You’ve got some sort of knack for the most obscure issues out there.

                Always appreciate your insight and depth of knowledge.

                1. Mark, I generally know a lot about a very little, and very little about a lot. The reason I found these obscure issues was when researching preferreds about 7-8 years ago, everything bad about them was coming up and 08-09 Crisis of course.And then I read a constant barrage of “dont invest on the pink sheets”.
                  Well, I went to OTC markets on their data base and found all these pink sheets and call BS on the pink sheets all being bad investments. The best individual preferreds with the best coverage ratios are only one the pick sheets. The PacifiCorp preferreds for example have infinite profit coverage ratio over any IG bank issues coming to market. Because these old float illiquids dont have any new preferred sisters. Anyhow in my earlier preferred purchases I was only buying issues at proper entry points that showed through the decades they werent going to screw me over. Thus my path down that road. I will own anything now, and even pink sheets have various safe issues that arent old illiquids. But currently even now just eyeballing my preferreds, about 50% of my preferred stock value reside in pink sheets.

                  1. Hi Grid, Regarding these illiquid / uncallable / busted, how does one determine a proper entry point? I guess lets take WFC-L for instance. $1000 issue. Trading at $1545. With $75.00 dividend, it’ll take over 7 years just to recapture the premium. I’m obviously looking at this wrong since 10’s of thousands of shares trade daily. These are obviously not sock drawer purchases. Current yield looks to be about 4.85%. If I have a 5% yield threshold, would that be my entry point? Or PPWLM @ $151 with 4.6% yield, but very thinly traded.

                    Throwing out the “everyone’s investing styles and needs are different” mantra, and the slight difference in yield, … (I’m having trouble formulating my question since I know these 2 are like comparing apples and oranges. I’m not trying to figure out which of the 2 would be better to buy, per se., I’m still trying to figure out the proper entry price aspect).

                    As a primarily buy and hold type, I’d be looking for a good entry point for a starter position and then add opportunistically. Maybe I’m answering my own question…. If I have a large cash position earning 0.00% at TD, then either of these looks pretty enticing at over 4.5%. I guess then it comes down to liquidity. If I need some of the cash back, then WFC-L looks better.

                    On another tangent, concerning the more illiquid issues, is there more potential for capital appreciation over time since they could be a type of “rare find” category? Or would they mostly remain obscure, and thus just be harder to unload if I ever needed the money?

                    1. If it is busted… you could jump in at any time. You just have to get your head wrapped around it taking many years for break even, even though it is busted. I have bought mine within the last few years, and have been buying very little recently because everything is really expensive. So that is why i focus for now on past call issues that are so called pinned.

                      Other than that, there are not a lot of rules. I just make it up as I go because of the economy, fed, up/down rates…

                    2. Mark, the whole issue is a bit convoluted, can be circular, and not really decided in a vacuum. Just take Mr. Luckys response, he owns it but wont buy at this price. Well on face value, that means he should be selling. But he isnt and there is several reasons for that including avoiding tax on cap gains, or nothing else better to buy…And of course throw in the mental math of purchase price well below current price even though everything is a mark to market purchase. And this isnt a criticism of what Mr. Lucky is saying, I think the same way also.
                      But currently in general todays illiquids are not offering a compelling relative value. But unlike liquids on any given day or trade an illiquid could have value.
                      WFC-L yield wise is no real compelling value compared to new issuances. But factoring in the way callable issues trade, it still does provide insurance against further yield drops and no call stress concerns. There really never is a premium for a non callable. Its present yield is all that matters. The fact that PPWLM was issued at 7% is irrelevant as 7% isnt and wont be available from a ute.
                      Its hard to separate an individual purchase in relation to the total ones I own for me…I dont own WFC_L or PPWLM, but I got other similar type issues that will do the same thing…But while I have the SOCGP and SBNCM uncallable types, I also have term dated issues like LANDP and CNIGO. I also have some Canadian resets (I greatly reduced here past few weeks) that can move opposite of fixed perpetuals. And then I have fixed to float like an INBKl, and some higher 8-10% junkier stuff like CEQP-, PFX, and Amtrust baby bonds.
                      So I in effect spread out duration risk, yield risk, and credit quality risk. But tilt certain ways based on how the yield winds are blowing and exploiting any sell off in certain issues if opportunity presents itself.
                      Everything is a bit of what one sees through their own eyes. I bought about 2k shares this past week (that is a huge load up for me, that could be peanuts to other people) of MNR-C at about $25.02. I would not be a buy at todays at $25.16. Why? Because I am only in it for the divi flip that is approaching. Im shooting for about 30-40 cents be it right before exD or shortly after then I am out of it. Pennies matter on a trade. Not so much as a long term core hold others may buy for me.
                      Gun to my head on one purchase only, I would rather buy IPLDP at $25.47 than PPWLM at $150. My thinking is IPLDP will not get called any time soon and you have a bit more yield and maybe more price protection. But that is assuming unknowable assumptions. IPLDP could get called and PPWLM cant. There are no certainties, so I tend to cast a wider net with various types like mentioned previously above.

  6. Great Section to have. My top sock drawer preferred is WFC-L (actually bought in some scale below par).

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