Calmer Markets Prevail

While we love the large gains we have racked up during the last week we knew that share prices wouldn’t keep moving higher day after day–there has to be a pause and then a backing and filling on various issues.  The average $25 share has barely moved the last 2 days.

We have gains for the year of 1.5% to about 3% depending on account so we have to love it–but with the quick rise we never were able to get too much money deployed with the exception of the purchases from last week.

Our thoughts now are simply to keep watching the preferreds and baby bonds for some bargains–or simply some that are fairly priced.  We are showing only 5 issues within 1% of their 52 week low so we know that we are going to have to search harder for true bargains–for now the quick rise in prices took the juiciest issues up quickly.

We did do 2 really quick flips this week.  We bought and sold the Teekay Offshore 8.5% perpetual (TOO-B) yesterday at $19.30 and sold it a couple hours later for $19.80.  Additionally we had bought 1000 shares of REIT Ashford Hospitality (AHT) on Monday and we sold it yesterday for a really nice gain of 40 cents/share.  It is nice to have a couple quick winners-it helps to balance out some of losers which we have held longer term-like GasLog Partners 8.5% perpetual (GLOP-C) where we have incurred a $1.75/share loss.  We don’t generally write about the quick flips as they are happening as we don’t consider them investments–just something to potentially add a little juice to the portfolios–sometimes done out of boredom.

For folks looking for some bargains–for flips or longer term holds it helps to watch the “share price loss” listing here.  This is where we picked up on the Teekay Offshore plunge yesterday (all 3 preferred were off 1.50 to 2.25/share).

27 thoughts on “Calmer Markets Prevail”

  1. Does anyone know anything about ENSTAR? Its a $169 stock. They have two preferreds trading under par and yielding over 7%. ENSGRP, ENSGRO are not investment grade (BB+), but the company looks pretty good.
    Appreciate any insight


  2. CHS reports results:
    News Release Issued: Jan 10, 2019 (2:12pm CST)
    CHS Reports $347 Million First Quarter Fiscal 2019 Net Income
    ST. PAUL, Minn., Jan. 10, 2019 /PRNewswire/ — CHS Inc. (NASDAQ: CHSCP, CHSCO, CHSCN, CHSCM, CHSCL), the nation’s leading farmer-owned cooperative and a global energy, grains and foods company, today reported a net income of $347.1 million for the first quarter of fiscal 2019.
    “Our strong first quarter results position us well as we start our 2019 fiscal year,” said Jay Debertin, CHS president and chief executive officer. “We are focused on making CHS our customers’ first choice by advancing our technology solutions and equipping employees to meet the changing needs of our customers around the world. We will do this while maintaining financial discipline and rigor.”
    Key financial highlights for the quarter that ended Nov. 30, 2018, include:
    • Net income of $347.1 million, an increase of $159.9 million from the restated first quarter of fiscal 2018.
    • Consolidated revenues of $8.5 billion, a $452.4 million increase from the restated first period of fiscal 2018.
    • Pretax income of $367.2 million, an increase of $159.4 million from the restated first period of fiscal 2018.
    • Improved crude oil pricing, which drove higher refining margins.
    • Favorable market conditions in the crop nutrients business, which resulted in higher margins.
    • Improved earnings in the company’s CF Nitrogen, Ardent Mills and Ventura Foods investments.

  3. OSBCP Old Second Bancorp Inc. 7.80% Cumulative Trust

    Large block selling yesterday and today on the Dark Pool Exchanges at prices as low as $10.32. Looking at Dark Pool volume chart for OSBCP via SqueezeMetric I see this has happened before but the average volume between yesterday and today is the largest of any 2 day period over the last 360 days. Current Bid/Ask 10.35/10.38

    Anyone know anything?

    1. Blue, I cant answer specifically, but have played with OSBCP, ASRVP, and BANFP TRUPs for years. It seems like this happens some a few weeks after exD. I used to assume someone in the know was getting out before a redemption notice. But they never happen. I kind of moved on from OSBCP because price movement lately has been pretty tight between 10.30-$10.50 usually. I tend to trade ASRVP and BANFP more now. The shares traded today still reperesent less than 1% of the float.
      About 3 years ago then CEO said they would look at redeeming OSBCP, but nothing materialized. He has since retired. Small banks have been hesitant to redeem these since they cant reissue them for Tier 1 anymore.

      1. Thanks for the input Grid & Citadel. I haven’t been trading them, they just sit in a Roth.

        I need to find something to trade though.

        1. Blue, since it repaid its dividend suspension what 5 years ago, there have been very few higher yield issues that have had the pricing stability it has had. You were wise to have held. Looking back I wish I had just kept it. I let that CEO scare me off when he mentioned looking at redeeming it a few years ago. Each year has just got harder to get in it at a reasonable price.

    2. I’ve got OSBCP in a couple of my accounts and its always been a steady eddy performer. Something may be afoot, but $10.32 is a decent price for it imo.

    3. I don’t know anything about why there was a big jump in volume but it was I who had the 10.35 bid in. I just went back to change it to 10.38 but ran out of time before the close. I forgot what time it was darn it! I’m sitting here in Hawaii but my mind is still on Pacific time back in Idaho. It must be all that salt water.

      1. I have OSBCP in both taxable and in a ROTH. Would have been better to have everything in taxable, but didn’t have money elsewhere at the time, lol.

        I first bought when Grid called my attention to it. Cost basis of $10.25. Thanks, Grid – and I repaid you with the MTB- signal, right?

        No intention to sell, it’s a sock drawer resident.

        1. That is my intention also. I have 800 shares. I was looking to round that up to 1000 shares with my bid of 10.35. Nobody wanted to sell to me at that price. Maybe tomorrow.

        2. Inspbudget we have helped each other well over the years…Just think how much money we could have made living next door and sitting with our laptops on while drinking coffee at market open. 🙂

  4. I have a question. Do I assume correctly that if a company called 60% of its preferred shares a year ago then there is a very good chance for them to call the rest. And if so, then if such preferred trade below par then it’s additional bonus.

    1. Vah, it just depends…Some weaker reits were doing partial calls redeeming what they could with funds and financing available…But market changed on them and now they have no incentive or possibly resources to do some. On the other end, I can sight you an example of a high quality company that did a partial…Back in 2013…RNR-C had a partial call almost 6 years ago and remains untouched. I personally wouldnt buy a preferred, in general, on thoughts it would be redeemed if that was the only purpose.

    2. van, it’s a deep and important investing question you have asked about. Each company issuing this debt or preferred equity instruments is unique and you really have to monitor their 10 Q’s and K to see what the company is disclosing looking for hints. Also, you should listen to their conference calls and/or call the companies CFO or Investor Relations Department to get additional questions answered. Most do not fully redeem unless they can refinance much cheaper or their financial position (REO, ROA, cash flow etc) have changed dramatically, the company no longer needs these funds to operate or their asset coverage percents has changed (just recently assetcoverage rations went from 200% to 150% in many issues). Hope that helps, Nomad

    3. Partial calls provide insight into an issuer’s behavior. It says to me, if the price gets any decent distance above par, the balance is likely to be called. But if present price is below the “call trigger”, it’s just going to sit. Unless some other force is at work.

      Look at AHT-D as a perfect example. It was partially called in Dec ’17 and now sits at 20 and change. It ain’t going anywhere.

  5. I’ve been very active but choosing my income spots carefully the last month and a half. Today I initiated a position in some shorter term (because of the short call) AGNCB @ 25.07 should be a nice YTC and their is still about 0.645 of shortest YTC div. IF it’s not called then it’s 7.74% from a $9+ billion market cap profitable company… AGNC’s other Preferred is a 7% coupon trading at $25.52. Wishing everyone a profitable year, Nonad

  6. In my trading dollars, I went in on SCE-L today for a modest amount as yield is pushing 7%. Common up 2.7% last 5 days while L preferred down 3.44%. Let this one play out a bit, though tepid. EIX did just raise common stock divi so the stress here isnt like PCG faces….For now anyways… Its my version of buying a shipping preferred.

        1. What’s the reason? Is anybody thinking EIX will eventually become another PCG? The stock did perform much better. Probably it’s due to some rebalancing/technical issue, as it’s usually the case with preferreds.

          1. Gabriele, EIX already has the life line thrown to them with the 2017 major fire they had. They will get to pass that on to rate payers. PCG has the huge donut hole risk from 2018 Camp Fire that was the devastating fire and legislative help did not cover this. They are on two different risk levels (baring of course no more fires), Parent EIX and subsidiary SCE both have strong credit ratings and they just increased common divi. I tend to make trades when common stock is going up nicely while preferred is slipping which is this scenerio. Certainly not a strong conviction trade, and not being tossed into the sock drawer.

            1. Does the SCE credit rating appear stable (Baa1/BBB- per Quantum Online)? Common shareholders may still take a haircut from the PUC from the 2017 fire albeit less than if the legislation had not passed. The dust has not settled yet.
              There is no free lunch. Close to a 7% QDI yield with a 2.72% 10 year T-bond yield implies certain risk. Below PAR. Not a sock drawer ute but a ute nevertheless. IMHO worth consideration if Mr. market tanks again.

              1. Dave last month they affirmed the rating with negative outlook. Concerning SCE, The trust preferreds were affirmed at Baa2 and senior unsecured at A1.
                They have billions in untapped access to revolver, they have a billion dollar liability policy that will cover a significantly higher portion of liability than PCG policy will. However, the overhang from rating agency is of course the inverse condemnation that still wasnt address with the legislation. So no current problems, or liquidity issues, but credit agencies are a bit tepid in speed in lowering investment grade issues to junk status because of the implications. But they arent getting the warning sirens PCG were getting from rating agencies many months prior to the downgrade.
                The whole SCE/PCG financial situation and stock reactions are interesting. People want to lump them together yet EIX has tracked the market in general last 52 weeks while PCG has been pummeled. Yet the preferreds of EIX have traded more like a B2 or B3 QDI. Interesting tidbit..The holding company debt of EIX is structurally subordinate to the trust preferreds of SCE.

    1. Hi Gridbird- just want to thank you. When I first signed on you welcomed me and said “don’t shoot the wrong animal cause it could come back and bite me in the butt”.
      So far I’ve done a lot better and have learned a lot from you, Tim and other regular contributors.
      One day I hope to offer some worthwhile information myself, and be able to pass it forward like you. THANK YOU

      1. I remember, BigBear, lol. I am just paying forward what I know, some of which came from Tim years ago on SA. I am not a comphrehensive preferred investor. I have a lane, and stay in it. I just tend to stay in quality illiquids, past call issues, and utility preferreds. There are many more types from different industry subsets but I dont stray far from my home….Or I would get lost! …. Find your investing “run lane”, keep allocations reasonable, and make sure you buy issues that if they drop, you are comfortable owning long term without fear of a dividend suspension or bankruptcy and you will be fine! Volitility risk, duration risk, credit risk, yield risk, market sentiment risk, etc.. …Its a jungle out there! 🙂

        1. Grid- I printed what you just said in your reply. I think it is loaded with wisdom , and I want to make sure I don’t stray out of my lane. Thanks again.

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