Buys and Sells for Last Week

We entered last week chomping at the bit to do some buying, but in the end we sold a little and bought a little in an effort to balance our portfolios.

As we noted we were targeting the preferred shares of American Homes 4 Rent (AMH) CHS,   and giant REITs VEREIT (VER) and Brookfield Property REIT (BPR).  We already owned starters in the AMH-D issues and the CHSCN issues.

We did purchase starting positions in the 6.70% VEREIT monthly paying perpetual preferred (VER-F) and the Brookfield Property REIT 6.375% perpetual preferred (BPRAP), both of which brought us current yields of over 7%.

We sold quite a few shares of the term preferred of Gladstone Investment 6.375% (GAINL) as we tried to work that position down from a severe overweight position.  We continue to hold a somewhat overweight position in GAINL, but it is much more comfortable than the severe overweight position in which we started the week.  Additionally we sold a little of the GasLog Partners 8.50% fixed-to-floating preferred (GLOP-C) which brings use to a rather normal weighting.  We have NO problem owning these issues-simply was a portfolio management item.

So with the various selling and buying this week we remain with plenty of cash holdings and this week could buy a little BUT are not in any rush.  Income issues dropped like a rock–sprang back strongly and could well drop sharply again.

At this point we might consider a modest position in one of the Eagle Point Credit issues (term preferred or baby bond), although we are not totally excited to buy collateralized loan obligations.  We will watch the AMH issues and the CHS issues.

Another item mentioned during the week by one of the commentors (don’t remember who) was that the Invesco 2024 Target Trust CEF (IHTA) fell all the way down into the $8.90’s.  It was a nice tip which we did not act on, but would have if it would have ticked a little lower–in the end it closed the week at $9.35.  This is the type of item that would work well in the “Reader Initiated Alerts” category but it was not set up at that time.

29 thoughts on “Buys and Sells for Last Week”

  1. I always enjoy getting a market perspective from Peter’s weekend videos. For me it’s nice to have some type of idea of how the market may play out. Seems more downside isn’t out of the question…
    https://youtu.be/8_vEbP3nDC4

    Good day

    1. Hi Tech guy
      Tomorrow I am taking the cats that hang out in my office to visit Ms. Cookie at Kitty Kondo for a week or two, they don’t like that. I am going to unplug and try to find some fish, I like that. I sure hope nobody burns my house down while I’m gone, but if I worry about it too much I’d never go anywhere.

      1. Lol, after Nov/Dec I’m just keeping a closer eye on my six and any dumpster diving adds since ;*)

        Good day

      1. Bob, I dropped MH-A after one last quick flip when it was near par. I was smelling a rat. CEO said summer before last in Q&A it was being redeemed in a couple months..Well that never happened and I knew there had to be a reason and it wouldnt be a good one either. Always better to get out a too day early than a day too late! That is why I read conference calls. Sometimes its their off the cuff comments are the ones that one needs to remember, not the canned bragging talking points

  2. Earlier in the week I bought some QTS-B, DCP-B, GJP, EBRGF, and some MAA-I.
    Peeled off some of my HE-U, AILLL, and KTN to cover some of the trades. Still have plenty, of them, just locked in some cap gains, looking for more.

    1. I bought a starter position in BPRAP, just 100 shares, and did a swap selling BC-PA for BC-PB.

      I heard on another board that VTRB was called – and cannot find any news anywhere else. Anyone here to confirm or deny this thing?

      1. Yes, I held VTRB in my Schwab IRA and the proceeds of the redemption occurred in my account on January 3, 2019.

      1. Amy, if I decide to keep QTS-B long term its upside potential well down the road is significantly higher than A. And I was only losing a bit more than 25 basis points as the yield for B at purchase was almost 7.1%. This being a perpetual covertible preferred has some allure to me when yield is right. If it had been a term dated mandatory covertible I would not have had any interest in it.
        This is not a powerhouse credit quality data reit, so entry position and amount invested is small here.

        1. Thanks, Grid. So the decision was based on cap gain potential but I was not figuring the ‘optional convert’ clause as either a positive or a negative. I was thinking that since it is optional, that it was neither a plus or minus for the issue.

          I know that you stay away from mandatory convertibles, as do I, but I’m not sure of the significance of an *optional convertible* clause. …. in terms of how it would figure into a positive or negative factor.

          1. Amy, this is only my opinion, but I will share it. When a perpetual and a sister owner optional convertible are within close shouting distance I will take the convertible because you have two possible ways to gain. The lower yield environment and common stock appreciation. The convertible will be a “loose tracker” of the common.
            For illustrative purposes…QTS 52 week high was $53…I bought QTS-B at $91.96. Present common price is $36. If common goes back to $53, I can convert at my option my preferred into 2.12 common shares…So at $53 that would mean in essence I would be selling my $91.96 preferred for $112.36. A nice little cap gain…Something that QTS-A is largely not able to do. But if common price tanks, then B has the back side support of its yield, and then in essence it becomes a perpetual like A is and trades for its yield….Its kind of playing the middle. A true believer would go with the common. A true max yield chaser would buy the perpetual. Its a bit inbetween.

              1. Gridbird, I agree with Amy. I have just started purchasing preferreds in the last couple months and am still learning, helped much by your willingness (and Tim’s) to share your knowledge and experience. Thanks!

                1. Glad I can help Alan. Convertible preferreds are not all designed the same… QTS-B is a cummulative perpetual convertible that has a owner option conversion and a company option conversion at a strike price. CNIGP which I also own is a different type of convertible. It also has an owner optional conversion at owners discretion, but no company optional conversion. But it is not perpetual and has a mandatory par redemption date if conversion is not exercized by owner before par redemption date.
                  Then you also have the mandatory conversion preferred issues. These have a mandatory conversion date and the amount of common shares you get is based on the price of the common stock when the redemption date occurs.
                  One just needs to be aware of their goals and expectations when considering any of them and understand how they work before buying.

                  1. Grid
                    They already got the land, the power, a plan, but need the customers. I bought the B on IPO but sold it when I thought it got ahead of itself, intending to get back in some day. Then the wheels came off everything and I wound up with A where I couldn’t refuse. If (if) QTS can execute their plan over time, some day B might even get the 150% on $100. That would be sweet. I’m A now, good luck on B.

                    1. P, you made me realize I forgot to mention the important part (for me)… I bought a small position here. In fact it is the smallest of the 17 issues I own. This is not a “passion play”. I hadnt paid attention but after looking I am up about $200 in a couple days. Maybe I should sell already since it is in my HSA. 🙂

                  2. Thanks Gridbird. For now I am being conservative in my purchases, mainly acquiring term preferreds and baby bonds with a maturity of less than 8 years or so…..and a few others that you have suggested such as AILLL, NISOP and EBBNF.

                    1. Alan, If one can make an assumption that Enbridge is a viable long term company (it has been around forever), and if one worries about eventual longer rates climbing, there is no better vehicle to play that angle on a quality company than EBBNF. Buying an adjustable that reset already at a bottom trough yeild in 2017 and the price of the preferred dropping a third to support that new yield is a great forward opportunity.

                    2. EBBNF…has an average daily volume of less than 1000 shares, which means it can be easily manipulated. I’d be careful around that one.

    2. GJP?…even my usual sources are scratching their heads over this plastic note. And unlike some other floaters out there, this one seems to have the jitters…how do you price it?

  3. While I don’t want to clog up the “Reader Initiated” page, when I was reading Barron’s this morning I noticed the yield on the Vanguard MM account is now paying 2.42% with a $3,000 minimum. For investors that want to park some cash right now, this is a good place to put the funds. I have some pretty healthy dividends coming in during January and will park some funds here, just in case there is a drop in some preferred stocks during the first quarter.

  4. Thanks Tim: My opinion the same. One concern is that the government requirement for financing could eventually become so high as to crowd out other financing including financing for non-IG enterprises and precipitate a credit contraction for firms with weaker credit. My preference is for preferred in firms that can survive with internal financing should such a situation ever occur in the next year or the next 10 years.
    It normally takes about 3-5 quarters after a Fed funds rate change BEFORE we see a change in economic data. So there are 4 Federal funds rate increases over the past year which have not necessarily shown up in economic data YET. We may see a further slowdown in the next quarters ahead or we may not.

  5. I get the impression that you are putting a little higher weighting in perpetual preferreds and a little less in term preferreds. Is that based on assumptions that long term rates, i.e. the 10 year T-note, may have peaked, that the risk premium for lower quality preferreds will not increase even more as the economy slows, and that you expect to see a more stable, i.e. less volatile, market for preferreds and baby bonds? I too am weighing the proper subjective balance between shorter term preferreds and perpetual preferreds, i.e. reinvestment risk vs. interest rate risk.

    1. Hi Dave–yes I have determined MAYBE-for now perpetuals will provide a bit of an advantage but I am kind of nervous about it so am moving slowly and keeping most of the term preferreds and short dated baby bonds while using ‘cash’ for modest starting position buys.

      As everyone know the massive federal debt is going to come home to roost and perpetuals could get killed when that happens–the problem is we have been waiting for this issue to rear its ugly head for years already and whether something happens in the next month–or in 10 years is such an unknown.

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