While overall the preferred stock and baby bond arena have appeared to have leveled off this week from huge gains of last week there is a ‘backing and filling process’ occurring that is helping to create buying opportunities.
It is very seldom that stock prices move only in one direction and we have been waiting for prices to move down some in a number of issues we had on our watch list.
Last week we had hoped to add to our starter position in a number of issues, but the quick rise in prices locked us out of the bargains we were seeking. 1 of those issues was the American Homes 4 Rent 6.50% perpetual preferred (AMH-D). The issue had come off the lows (around $22.20) 2 weeks ago and over the course of the next 10 days raced to around $24.25. The issue then fell to $23.20 as some short term gains were taken by owners. We were able to snag additional shares right at the low of $23.20–shares closed the day at $23.60. Below you can see the chart.
The moral of the story is that investors still looking to buy more preferred shares and baby bonds need to keep closely watching for short term holders selling into the strong gains of the last week or two–bargains are still being created. This is not to say that issues backing off from recent highs won’t keep falling–maybe they will so a slow ‘leg in’ to the position is sometimes best.