Innovative Income Investor | Innovative Income Investor

Party On!! Who’s Smoking What?

The equity markets are up 11% this week before todays ‘party’. I don’t understand it at all–no surprise that someone who sees the chaos going on couldn’t understand stock prices moving toward where they were a month or two ago. Maybe I am all wet–and should be 100% invested at this moment, but I am fine with 60-65%–I think I will have a chance at lower levels.

At some point markets will wake up–I think–but not now. Investors need to use the levitation to continue to get positioned—maybe you have some issues that you aren’t comfortable holding—a good time to lighten up.

A continuation in nibbling is still the plan. I couldn’t help but add more of the Affiliated Manager 5.15% trust preferred issue (AATRL) yesterday–I am overweight, but the 8% is too attractive to me.

The issues I mentioned Monday and the smaller banks I mentioned yesterday are still attractive–for nibbling. Excepting the AATRL issue I noted above it is all about nibbling.

Buy? Sell? Hold? Darned Good Question

Should one be buying, selling or simply still just sitting tight?

Great question with no answer – 1 size doesn’t fit all.

My goal for this time is simply to come out of the virus situation with an average portfolio yield somewhat over the 7% area–maybe 7.5%–and to have 80-90% of my cash invested. The primary difference in what I hope to end up with is a portfolio that is much higher in quality overall–loaded up pretty good with utility preferreds and baby bonds of investment grade quality (or a notch under IG) bought at nicely favorable prices.

I will sprinkle in some mREIT preferreds–which in spite of the huge bounces in recent days are still providing 8-12% current yields. And when the time is right a few lodging REIT issues.

Also I have been looking at the regional and community banks today. Seems like Customers Bancorp (CUBI) and Tristate Capital (TSCAP) have some decent issues available at still decent prices.

Also the Affiliated Managers 5.15% convertible trust preferred (AATRL) is giving us another shot at a investment grade issue with a current yield at 8.00%–I just added a little more at $32.75 (it is a $50 issue). This issue trade consistently in the $50/share area through most of this year. As I have mentioned before this one is a true gift.

So I am around 60% invested and will likely move a bit higher–but I really question whether we won’t have another shot at better prices–I though so, but so far I have been wrong–we’ll see. I don’t mind being wrong if I can get that 7-8% portfolio yield with decent quality.

Gabelli Dividend and Income Trust Announces Redemption

In what almost seems like a ‘return to normalcy’, CEF Gabelli Dividend and Income (GDV) has announced a partial redemption of their 5.875% perpetual preferred (GDV-A). The redemption is for 5/6/2020.

The company will redeem 50% of the outstanding shares–shares that have traded very nicely during the recent market drop.

The announcement can be read here.

The CEF is a relatively decent sized fund with over $2 billion in net assets (as of 12/31/2020) and this redemption of 1.542 million shares is relatively easy for the company.

This partial redemption may make the other half of the shares remaining outstanding a decent buy at around $25–of course they could announce redemption at any time.

In Case You Missed It. Two Harbors Reinstates Dividend

A couple of weeks after suspending all dividends (common and preferreds) mREIT Two Harbors Investment (TWO) announced reinstatement of their dividends.

On 3/24 the company announced the suspension.

On 3/25 they announced the sale of their non-agency residential mortgage portfolio to reduce risk and potential margin calls.

Last Friday they had an update and made no mention of the reinstatement.

With todays announcement the company is stating $1.2 billion in unrestricted cash–guess the folks are pretty damned smart.

Disclosure–I owned a modest position in TWO-D 7.75% perpetual which I bought last week and sold on the early pop of $3-4/share this morning. I expect to repurchase at lower levels.

Articles of Note

There are a few articles of note worth reading.

Reuters published a story on a bail out for mortgage servicers.

Supposed billionaire Tilman Fertitta is offering 15% for a term loan. You can be sure that this is going to be a common theme in the months ahead–we all know how leveraged these companies have been–and any disruption would cause problems–certainly the mother of all disruptions will bankrupt many.