Back to Nibbling

The sharp rise in equities seems to be pretty premature–but markets do what they do and if investors think the pain of Covid 19 will be gone in 3 months they are going to be buyers now.

Unfortunately the pain is just beginning and will likely be with us for the next year-maybe more. Certainly some sectors will be living with the financial repercussions for years.

Many preferreds and baby bonds had big moves yesterday and so I will do some buying today–I am 55% invested and will add 5% more today. The 55% I have invested are almost all investment grade utility and CEF preferred bought at nice discounts–now I will spread out into some junkier issues.

Here is some of my shopping list for today.

I am looking at buying one of the Annaly Capital (NLY) preferred issues giving current yields in the 10% area.

I am going to buy some Brookfield Property REIT (BPYUP) preferreds – BPYUP with a current yield in the 12.49% area.

I will add some more of the American Homes 4 Rent (AMH) issues–in the 6.75% current yield area.

I am buying some Compass Diversified (CODI) preferred with current yields in the 11.41% area.

I have already been trying to place some orders and the spreads are so wide as to be ridiculous–but I am certain by days end I will have bought some of the issues mentioned above–if not all of them.

20 thoughts on “Back to Nibbling”

  1. Hello Citadel West; I will try hard to answer your question. A full position for me is usually 4,000 shares. But if I feel a company is truly “Rock Solid” I will buy a whole lot more than that. Let me give you an example. Schwab has a couple of preferreds. The one I own is the one that pays 5.95%. I bought it right on the IPO day. The symbol is “SCHW+D”. I own 14,000 shares because when I bought it I felt it was a very rock solid company with millions and millions of customers. Most likely it will get called on 6/1/21 and I will have to go out and look for things to replace it. So my “definition” of a full position is “subject to change” as to how good I feel about the financial strength of a given company. I now own very huge positions in preferreds of WFC. BAC, MS, GS, PNC, and JPM. All preferreds, no common. My biggest downfall in life is if I feel really good about a company I have been known to take a very large position. Just one last example, when both “Visa & Mastercard” went public back in 2008 and 2006 respectively I took very oversized huge positions in both. Well I got either very “Lucky” or maybe a little “Smart” as both are up over 1,000%. They certainly have given up some of those gains and I have since been selling small pieces here and there on “Up Days” to not have too much money in any one idea. Don’t know if I answered your question but I did try. Hope this finds you safe, sound, and healthy.

    1. Chuck, it sounds like you’re saying 4,000 shares is a normal full position for you. which would make a 3,000 share purchase a three quarters position. If that is correct, it helps provide some context to your comments.

      I’m in favor of preserving cash until we know for sure a bottom has been put in, but that’s a matter of personal preference.

  2. For those who dabble in Mreits – based on this – CIM preferreds seem like a bargain. If they feel comfortable now stating they expect to declare a reduced but still .30 dividend on the common in the SECOND quarter – that means the preferred dividend is solid

    On February 11, 2020, the Company announced its first quarter 2020 common stock cash dividend of $0.50 per common share. This dividend is payable April 30, 2020 to common stockholders of record as of March 31, 2020. Consistent with the Company’s plan to enhance its liquidity and strengthen its cash position until market conditions stabilize, the Company currently anticipates that beginning in the second quarter of 2020, the Company’s board of directors will adjust the quarterly cash dividend on shares of the Company’s common stock from prior quarters. The Company currently expects that the board of directors will approve and that the Company will declare a cash dividend in the amount of $0.30 for the second quarter of 2020. The Company paid the first quarter cash dividends on the issued and outstanding shares of its preferred stock on March 31, 2020.

  3. Tim,
    “The 55% I have invested are almost all investment grade utility and CEF”

    Can you name some of the UTEs that you own?


    1. d—I can, but I bought at much lower prices so they are are not giant bargains now. CMS Energy baby bonds, Spire Preferred, Interstate Power and Light preferred. Southern Company baby bonds (2 issues), Nextera baby bonds (2 issues), Entergy baby bonds (2 issues), Duke baby bonds, DTE energy baby bonds (3 issues)–there are a few more I think.

    1. Martin–I actually did sell some TWO preferreds on the pop today–too far too fast. I’ll get them next week for much less.

        1. Martin–my were small positions also but $3-4 gains in a day or so it too far too fast–at least I think.

  4. I never bought CODI common because of the K-1. I’m assuming they send one for the preferred too.

    1. Yes; I’ve held small amount in IRA, so not an issue, although this year Fido wants me to send them an estimate of all the UBTIs I might have. Haven’t yet received any of the 3 K-1s I should be getting.

  5. Hello Tim–& thank you for such a valuable site! As I see that U R nibbling, I would like to offer an issue for your consideration & due diligence>>>>
    CTZ 6.63% Now selling for approx. $20.00 & yielding about 8.5%.It is a legacy baby bond From Quest Communications which was bought up by now parent Century Link. It is BBB- rated/fixed rate. In fact, to the best of my knowledge (per Quantum) the only preferreds or baby bonds of CTL are several of these Quest legacy baby bonds. I doubt very much that this will be called and, if so, there is a nice cap. gain to be had. I have had a rather large position in this issue for a number of years so there is no incentive for me to add any more.

    1. I hold full positions in both CTBB and CTDD, and have held both for several years. Both are callable in 2021, versus CTZ callable in 2020. However, I do believe that due to the current low interest rate environment, that all will be called once the economy gets past the virus issue.

      1. I wouldn’t count on them being called. I would buy a lot of them now if I thought there was a good possibility of that happening, but it would take CTL around $3 Billion to redeem the 6 baby bonds they have outstanding.

  6. Sounds good Tim. Thanks
    How are you feeling about Priority Income Fund these days ? How do we get info on their current NAV and asset coverage ratio ? I am holding a large position in PRIF – F that I bought in Feb 2020 when it was issued. I had intended to flip it but got caught in the virus madness. Relative to everything it is holding up pretty well, recently traded at $20. Appreciate your thoughts.
    PS: I like CODI Pref too. Very solid company

      1. Thanks Tim
        As I suspected but just wanted to hear it from you as I know you had done a deep dive on them not too long ago. I sold off my entire position today. Better to take the hit now and replace it with something more solid at the same price. Many good choices out there. FWIW, I strongly believe this rally is way way overbought. I am holding / building dry powder for the next wave of selling. BTW, this site is invaluable in times like this. Thanks so much for everything you do and for building this community of knowledge and experience.
        Be safe.

  7. Chimera announced a new public offering of $250 mil in sr notes due 2023. Semi annual div payments in Apr and Oct. No stated dollar amount or yield. Effective yield on current prefs are in the 13-14% range.

  8. I bought 3,000 shares yesterday of “STT+D” at $24.44 which I felt was a very attractive entry point. They are custodians for over $34 TRILLION and operate in 100 countries according to their website. Nice call protection till 3/15/24. Coupon is a 5.90%. Lots of debate on CNBC as to if a real market bottom is in or not. I guess thats what makes a market? Not nearly as many bargains as there were last week. Many of these high quality names have now moved up well over a buck to a buck and a half per share. Would still like to hear from you bankers out there as to how risky or how safe is Citigroups preferreds. Their common symbol is “C”. They have several preferreds that are still priced very nice. With all my buying Iam now down to just 15% cash available for future purchases. Along the pathway I did buy some AAPL common for the long haul. It has really jumped alot since my purchase.

    1. Chuck, it seems like you’re throwing a lot of money at this market. Is 3,000 shares a full or partial position for you?

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