I am curious what everyone is up to – generally speaking. Are you buying? Booking some profits? Or simply mainly holding?
I have noticed a couple ‘schools of thought’–1 school is that prices of preferreds and baby bonds have risen ‘too far, too fast’ and some profit taking is in order with the hope of rebuying at lower prices. The other schools is simply more of a ‘buy and hold’ strategy–watch currents investments and collect the ‘spoils’.
My own method now is to try to trim around the edges a bit and buy the top quality I can with proceeds of the trimming. Of course the top quality issues have risen quite a bit in the last month or two and thus are no longer ‘raging’ bargains. This leaves me in a bit of a conundrum thus the trimming is pretty minor. I have historically been a bad market timer and once I exit I don’t get the cash reinvested in a timely fashion thus hurting my dividend and interest flow–of course the negative of having too much cash is cushioned by the fact that we now receive a relatively generous bit of interest in money market funds.
I did trim the Eagle Point Credit 6.50% term preferred (ECCC) on Friday–I had a bit more than a full position and with the net asset values (per common share) of the specialty finance company’s getting hammered pretty good recently I want to observe their coverage ratios a bit in the potential coming recession. These company’s have been excellent at raising new money through common share sales and thus the coverage ratios have held up–but if we get a true recession will they be able to raise cash in an adequate fashion to maintain coverages?
I now have around 6% cash in our accounts so not too harmful to cash flows–but should I be raising cash and looking for a better opportunity?