Buy/Sell/Hold Decisions – Short Term Trades

We have discussed on here many times ‘sock drawer’ holdings–those that we really like for the dividend/interest they pay us, but also for the safety they bring along. These many times as what I call ‘base holdings’. I try not to sell them–and many times I don’t pay attention to them daily.

It is obvious to all on this site, that I, along with many others, have been reluctant to jump on the spate of low coupons issues that have been presented to us during the last many months.

This leaves us with excess cash in accounts that is earning maybe a 1.50% money market interest rate–sometimes even less.

Because of this I use some of my excess cash to buy some short term holdings (flipping and dividend capture) with the desire to earn just 1-1 1/2% in a month—I’m not asking for much–just a friggen 25 to 40 cents/share.

NOTE–nothing here should convey the idea that myself and folks on the site are about short term trading–quite the contrary–we love to buy and hold, but we have to have issues that are of the right risk/reward and allow us to sleep at night–the low coupons offered currently just don’t cut it.

Well for the most part this has been like ‘shooting ducks on a pond’-for months and months, although January was much more difficult than December in this regard.

But as some commenters have noted today there are a number of decisions that have to be made–and here are a few examples–some of which I may have outlined on the Flipping and Dividend Capture discussion page.

Triple net lease VEREIT has a 6.70% monthly paying preferred (VER-F) outstanding which has been a great preferred to own. Unfortunately the company has been redeeming shares–in chunks of 4-8 million–as you can see here. Fortunately it is a 43 million share issue so it will take a while to get all the shares redeemed at this rate. During the last partial call in December shares fell to near $25–I owned a small position at that time and added a decent chunk after the fall. Today the issue hit $25.73–I am out after collecting 2 monthly dividends and a capital gain.

So the decision was–let it ride and see if it goes higher–or will they call some more shortly thereby driving the price down? I decided that it best to exit with the gains and wait for the next partial call and see what develops.

I bought a full position in the TravelCenters 8% baby bonds (TANNL) on 1/21/2020 for $25.43 looking for shares to rise into the ex-dividend on 2/13. I have a GTC sell in at $25.90 right now–today it closed at $25.79. I have achieved my initial goal with a near 1 1/2% gain and obviously could sell right now–but I believe that there is just a bit more upside in the issue prior to the ex date next week. If my GTC executes fine–otherwise I will have to decide whether to take my gains or hold through the ex date for the 50 cent capture. The issue has been callable since 2017–but I believe it has no risk of a call.

Lastly for now–I had bought the B Riley 6.75% baby bond (RILYO) at $25.71 on 1/13 hoping for a quick and profitable dividend capture. It went ex-dividend the next day 1/14 for 42 cents.–poor idea. Typically I want to buy on a dividend capture 2-3 weeks before the ex date, but I made a bad decision to buy the day before–just antsy with too much cash on hand. Anyway I continue to hold the issue and finally today see about a 20 cent net gain–all in all not really that bad, but timing was really bad and this isn’t really an issue I want to hold long term. So my decision is to exit immediately for just under a 1% gain, hold a bit longer and see if I can squeeze out another 5-10 cents–or just be patient and hold closer to the next ex date in April before selling. As alway I want to have a rib eye steak gain–hamburger steak isn’t that great.

23 thoughts on “Buy/Sell/Hold Decisions – Short Term Trades”

  1. Anyone know why Maiden holdings preferred MHLA is up so much? Tempted to dump here, but the trend is my friend. If I could understand some of the reasoning maybe I’d hang around for higher price

  2. I’m not allowed to flip these anymore. And as you can imagine it’s been a very lucrative thing ….what with prices on many hitting 29.

    All other things equal, sell YTC of 3 or lower. Buy mid 5’s with 4+ YTC. And look to clip new issues either as they come at 25 or shortly thereafter in gray market

  3. Tim, CEO has mentioned in previous conference call they are always “looking at preferreds” in term of their cap structure, not the redemption issue. I dont think it is prudent at current price point they will just drip and drab redemptions. It could be whittled down to a call in its entirety and a reissue. Nothing is certain either way admittedly.
    Do me a favor with all your excess cash Tim and load up more on UMH-D to pump that airless balloon up, so I can get my 27 cents at $25.30 and be gone already ha. I did a one day flip to embarrass your boy Pendy today.
    We have been pillow fighting for 3 days over his refusal to admit his $80 Exxon purchase was a bad buy. So I went in yesterday posting to him my 200 share purchase at $59.905 and then promptly flipped at $62.74 today. I made more in 20 hours holding it than he has in over a year, and let him know it, ha.

    1. Gridbird; I have a very close friend who is 81 years of age and he has owned 10,000 shares of EXXON for decades. He is always rubbing my nose in it about their great dividends. I have not brought up to him that it is now traveling in a very southerly direction in a rather big way. I don’t even follow the stock but I just happened to see on CNBC the other day that it had dipped below $60 which will not make Bill my friend very happy. Also the other day on CNBC which I watch about 5 hours per day that Jim Cramer said this quote: “Oil companies are the new Tobacco”. I see and I get Jims point. With the big rush for the Green New Deal and battery operated cars the younger generation does not want to own “Dirty Oil Companies”. Jims words not mine.

      1. True, true… so very true. The other point of view is presented on the Visual Capitalist web site where an interesting infographic from the International Energy Agency (IEA) predicts that although the amount of energy we derive from renewable sources will increase an impressive 300% by 2040, it will still be a minor component of the total energy mix. Looks like oil, natgas, and even coal, will be here for a while longer. Most users of energy would love to get away from carbon based energy sources, but it looks like the Exxons, BPs and Shells of the world will still have to provide a significant chunk of the millions of megawatts the world’s megacities use. Visualcapitalist.com.

    2. Just a guess, but I’m thinking UMH-D might be trading poorly due to many of their properties being in the Marcellus shale gas basin

      With nat gas under $2, these communities are going to struggle

      1. Jacob, It really isnt trading poorly as its up 6% from last Feb, I just moan about it, buying last week wanting a quick flip out. UMH-B has been price trapped because management already said they will redeem it when it becomes callable later this year. UMH-C is trading strong. UMH-D was pushing its boundaries when it went to market at its modest coupon. The common stock survives and limps along.
        The company was designed to feed the trough of insiders and has done it well over the years. Throw in their Pendragon and Morwa love for Mall reit preferreds they owned and that has been a money drainer for them. They are just a mediocre outfit. If they cant even run that company in an efficient manner whatever made them think they would be better preferred stock investors? 🙂

        1. Thanks for the heads up Grid – I didn’t realize UMH had their own REIT investment portfolio. Looks like they have 40m of unrealized losses as of at 12/31/18 – yikes.

          With how successful they are, they should think about becoming SA (Seeking Awful) contributors.

          1. Jacob, I think they said they were going to liquidate those shares. Dont know if it has happened yet, or if they are stalling. They did this for a long time, and the theory was believable. They used the dividends from the preferreds to help pay their dividends when cash flow was low. And it worked for a while until their junky portfolio caught up with them and bit back hard.
            In reality most people arent buying a business to have that business run a quasi preferred stock fund at same time. Focus on your company dudes!

            1. UMH: I believe 97% of their investment is in common stock. Only 3% is in preferreds, and that is why they have had some losses. Out of that common stock, about 30% or so is invested in MNR. But in a market that goes up, I am not sure how they lost money. I believe their investments are in REITS (office, healthcare, Mall). I wonder…. if they invested in something like WPG, CBL, and that is how they are getting losses? They invested over 100 million, and have big losses, so my guess is their investment was to go after the giant dividends on the mall rats. I wonder how I could find out.

              I personally own a big slug of UMH-B I bought a year ish ago when i dipped near par. I figured it would be a sure thing for them to redeem and be a good short term play for almost 2 years.

              1. Mr. Lucky, yes last I saw they had the mall reit crap and took a beating. Landys already said in a conference call last summer they were redeeming the B series to lower capital cost. So, I wouldnt be surprised if they redeemed pretty quickly come redemption time. They were honest with MNR-B several years ago in a CC. They mentioned their intentions about a year ahead of time on that one too.

                1. I wasnt aware so much of their “investments” were in commons. I only read references to their preferreds. Makes sense because of the beatdown they had since the common stocks have been beat up even worse.

                  1. Gridbird,
                    You made the correct call as you have almost all the time. Thank you and thank Tim. The lead on CNBC also believes fossil fuel even with “generous dividend payor” XOM, for value investor are not good bets. Even EPD presumably one of the best had mixed earnings call transcript. I bet huge on Brookfield. At one time, BEP and TERP, two of its renewables gapping up with over 5% increase. Closed with 3+%. AY, renewable in Europa saw some gains. On the other hand, all the LNG shippers got smashed. GLOP, GMLP and even HMLP the strongest balance sheet at IPO saw drastic decline with all its preferreds QDI followed to the tee. I have huge positions in all 3 but continue to hold. I am assuming that the scare is related to the norovirus. Less demand for energy and commodities. I added a few shares on LOAN, a small cap REIT with pro forma dividend of 7.5%. Last Q balance looked okay with decline in Cash Flow but presumably positive EPS. Rubicon Associates wrote an article some months ago as reasonably safe. Three SA articles positive on HT commons seem to be “correctly priced” weak hotel but no existential risk. I bought small amount of UMH-D following Tim plus small amount of the new AGNC for my daughter, after selling most of the shares of my ancient holding on SIEGY (Siemens) reading their Earnings Call today. Siemens have been struggling with their ill timed energy position and old infrastructure plus their healthcare (got new contract from Quest Diagnostics) but still disappointing (unrealized loss) in that segment. Siemens is similar to GE. I continue to hold Brookfield’s TOO-E and TOO-B plus Brookfield’s CBB-B. Someone is offering a better price to buy out CBB while CBB has signed a contract to be merged with Brookfield. Some lawyer is thinking of suing CBB for alleged “low balling Brookfield’s offer.” To me this so silly. CBB was on life support before Brookfield, just like TOO. I am betting on Brookfield’s integrity, not a new Karfunkel or the witch in Navio Maritime. Brookfield’s eREIT continue to hold presumably with buy backs by the management. The street seems to like BX (Blackstone, the other giant private equity: Schwartsman announced that he will leave most of his assets to charity). LOL.

                    1. John, yes energy is a problematic land mine almost as tough as shipping. Overproduction, cap ex, sentiment, and now investing segments are becoming haters of oil and even nat gas make areas tough to navigate. Shipping is just out of my sphere, so I dont follow.
                      You mentioned Brookfield. I was just researching today but not buying a reit they own. Brookfield DTLA Fund Office Trust. Private but a legacy preferred DTLA-P still trades. They own a lot of LA office buildings. The dividend on the preferred has been suspended since 2008. Its accrued about $17 dollars in dividends. It trades at $21. They have mentioned in past intentions to pay by 2023. Who knows. Im not going there but it was some interesting readings though.

                    2. Grid – Given you’re researching DTLA-P you might be interested in info from The Special Opportunities Fund [SPE] run by Phil Goldstein and Andy Dakos. They’ve been in DTLA-P to the tune of 171,723 shares or so for nearly 4 years now. That’s how I am aware of it and though I’m unwilling to own DTLA-P individually, I am in SPE because of their ideas such as this investment.. From 2017 semi annual report – “We recently accumulated a stake in the 7.625% Series A Cumulative Redeemable Preferred Stock of Brookfield DTLA Fund Office Trust Investor Inc. (NYSE: “DTLA-”)at prices up to $27.25 [a quick review doesn’t show their actual average cost]. The face value of the preferred is $25 per share and there is currently about $14 per share in unpaid dividends. The concern of investors is that Brookfield, the owner of all the common shares, may attempt to make a lowball offer for the preferred stock. Fortunately, the preferred stockholders are entitled to elect two directors and we have notified the Company that we intend to solicit proxies to elect Andy Dakos and myself to serve as preferred directors. If elected, we will advocate to DTLA’s board that preferred stockholders should receive $25 plus all the accrued dividends.”

                      Updated in most recent semi annual report from Aug ’19: “Brookfield DTLA Fund Office Trust Investor Inc. (DTLA-) owns several high-rise office buildings and a shopping mall in downtown Los Angeles. The Fund owns DTLA’s 7.625% Series A Cumulative Redeemable Preferred Stock, which has not paid dividends for several years. The current stock price of the preferred shares is about half of the sum of their face value and the accrued dividends. Andy Dakos and I have seats on DTLA’s board. Although the timing is uncertain, we continue to believe Brookfield is making the right moves to increase the value of the company’s properties that should enable it to pay the accrued dividends or retire the preferred stock at a premium to the current market price.”

                    3. Yes, 2WR, I had read all that stuff too. Kinda covered it from all angles as it interested me for some reason. Clearly the preferred thinks the likely hood of payment is there to some degree because the preferred has stayed stubborningly in the $20 range for years on end.
                      There is value there, but when its extracted is the problem. Its actually a decent case to show how a company can access the cash without getting it via common dividend. Establish a preferred higher in cap structure, which they have in this situation.
                      If a company wants to unlock some cash, there ways to go around the preferred and still get it without paying preferreds.

                    4. They’ve issued pref’s that are senior to DTLA-. I spoke with Phil & Andrew on it a while back, they don’t expect recovery for a few more years atleast

                    5. 2WR, that would explain the run-up in 2017. I’ve owned DTLA-P for several years, on a speculation that LA real estate would cooperate. So far it hasn’t. The DTLA properties are all core downtown class A high rise buildings, some designed by signature architects, and the rest by top local designers. But leasing demand will have to increase beyond the 90% (and slightly lower) occupancy rates to fuel improved cap rates.

                      I spent much of my career in Southern California commercial design and construction and I know all the properties very well. So far no joy in that market, and it appears less and less likely it will happen during the current cycle.

                    6. Yes, MCG, I had read all about that also and agree it was a black eye for me to give buying this serious thought. And that wouldnt preclude them from having more. For those not familiar, the entire boondoggle isnt Brookfields creation, they just took it over and are trying to make it work. Qniform, thanks for the additional color. Kind of reconfirms what I have read.
                      The stock price reflects an ability to eventually pay, but no where in the realm of several year suspended PCG-A. Its at $27.71 and demanding a premium for the couple year deferrals. And that may take a few years out of bankruptcy to pay again still.

                    7. Grid- I’ve actually been involved in it for a long time, received the settlement payout as well from the lawsuit etc. I think they’ll eventually pay out so I’m keeping it

                    8. MCG, I certainly will defer to your more intimate knowledge here. But never owning it, I dont see any immediate reason to buy for me. This info has been out there for years, so its not a secretive hidden gem. Everything I have read suggested a liquidation would easily pay preferreds in full, so I certainly see the value in your decision.

    3. There are 1600 JPM cusips. And only 5 JPM preferreds. I can’t be bothered reading prospectuses and analyzing multiple dif issues. Their bonds just haven’t worked for me. Their pfd have gone thru the roof.

      It seems a lower cost source of funding for many companies.

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