Category: General Commentary

This is the giving season–giving gifts, contributing to charities (even though we no longer can deduct our contributions) and trying to be a decent person (not always with success).

We all know common stocks have been “giving”–almost daily, but I am surprised that the preferred stocks and baby bonds I buy just keep on “giving” as well. Investment grade issues have been contributing greatly to good times, in spite of rising interest rates–at some point this will have to end–but now isn’t the time.

Some of us have looked for potential set backs with year end sell-offs or rebalancing and they just haven’t happened–so quiet–maybe too quiet

With the sortable spreadsheet I have posted I am able to drill down on what is happening in income markets really easily and below is a chart from December showing what income issues have done. I have removed issues that have suspended dividends.

The red line represents all $25 investment grade preferreds. The blue line represents all $25 issues–preferreds and baby bonds of which there are 655 issues. The green line is the 10 year treasury.

Of course during December we see a lot of ex-dividend dates — and there 100 more in the next week so we really need to see a longer term chart (I will keep tracking these numbers), but certainly for holders during the month of December the good gains continue.

I am anxious for the new year to start and am concerned that the easy gains of 2019 will become much tougher in 2020–we shall see.

Bank of America (BAC) called their 6.50% perpetual preferred (BAC-Y) today for redemption on 1/27/2020 which is the 1st day they are available to be redeemed.

No loss will be incurred by holders as it was trading around $25.40 yesterday.

This is one more issue gone from the “Investment Grade $25 issues in or near 1st redemption date” list.

I did not have this issue on the list from back in November since it was a few months out, but it looks like I should update the list further with additional issues–say up to 3 months out.

Here is the list–showing how many issues have been called for redemption in the last month.

NOTE–the yield to worst shown is incorrect-as it doesn’t count accrued dividends/interest, but I hope to install a new formula before long.

I continue to hold the Vornado Realty Trust (VNO-L) perpetual (VNO-L) 5.40% and the WR Berkley (WRB-B) 5.625% Subordinated Notes.

The reason to hold some of these issues is because they are tied to $25 fairly closely because they are in, or near, potential redemptions and thus likely trade with less volatility–and their coupons are strong in the current rate environment.

As always if you have a Google account you can take your own copy of this list.

There is definitely power in the commenters on this site.

Sometime back in early December–maybe 12/4–someone (sorry I can’t find the comment so not sure who it was) mentioned that the 7.10% CHS Reset Rate perpetual preferred (CHSCN) was tumbling hard the last few days.

Probably by pure accident I took a look–since I scan hundreds of comments each day I don’t have time to check everything out–but I did on the 5th. Shares had traded as high as $28.28 and now had tumbled down to around $26.70.

CHS has always been a favorite of mine–for no particular reason–maybe just because they are local to me. Being that the company had an ex-dividend date coming up (12/16) for 44 cents I took a modest position (wish it was more) at $26.76.

Shares went ex on 12/16 and shares were ‘marked down’ by the dividend amount–but it never actually traded at that level (as far as I can tell).

Shares had closed at $27.13 on the 13th (Friday) and closed on ex-date (Monday) at $27.04. It closed at $27.25 yesterday–and now trading at $27.12 (corrected these prices from earlier incorrect prices).

I am exiting today–not because there is anything wrong in holding further, but more so because the account it is in holds almost no cash at the moment–and I need some dry powder.

14 days–3% gain.

THANKS TO COMMENTERS – THE MOST IMPORTANT AND PROFITABLE PART OF THE WEBSITE.

I’m writing this more for newer investors that might be on the site rather than for those that are well seasoned in preferred stocks and baby bonds.

“Steak Dinners” is referring to quick, but modest profits, that some of us take from time to time.

THIS IS NOT encouragement to newer folks to employ these methods, but I know that throughout the website there are comments on what people are doing investment wise. There is nothing that is right or wrong–just what works for you.

Most times when I employ these methods of making a few extra bucks it is with issues I don’t really want to hold long term. I own mostly term preferred stocks and baby bonds with maturity dates in the next 2-10 years, but almost always have a decent chunk of cash in our accounts which I can use for “flipping” or “capturing” dividends. This is NOT true investing as most of us would define investing–but it works for me–mostly.

In my case if I see an issue drop based on news of some sort, I might take a position after the fall, expecting a bounce back at which point I would sell. Normally I am looking for 1% to 2% gains (25 or 50 cents on a $25/share).

Other times I may simply see an issue that is trending toward the lower part of the issue trading band and pick up shares looking to exit if a 1%-2% gain is realized.

Other times I may see an issue that is currently redeemable that is trading around $25 and I may buy it expecting the shares to move higher as dividends (or interest) are accrued–if it moves higher quickly I will sell the shares–otherwise I will hold until at least ex dividend date there by capturing a dividend.

Needless to say these techniques do not always work profitably, although the last couple of years have been a good period for most of my trades–although some have taken longer to “pan out” than was hoped when the position was initiated.

Here are a couple trades lately–I will walk through my thoughts and results.

On October 16th, 2019 Investcorp Credit Management (ICMB) announced that they were selling 600,000 shares of their 6.125% baby bond (CMFNL).

Being a ‘news’ event I thought there was a possibility for a quick profit–a week or maybe a month to play out.

Shares had been trading in the $25.50-$25.75 area prior to the announcement. Shares fell as far as $24.30 before bouncing back on the day (10/16) of the announcement and I bought 500 shares at $24.81. Unfortunately it traded in the $24.60 area a number of times over the next couple of weeks. I simply continued to hold the issue looking for my best exit. Fortunately it finally began to climb into the ex-dividend date (12/12) and reached $25.10. I held through ex-dividend, thus locking in the dividend, and I sold yesterday for $24.90.

On the CMFNL issue above the interest is a little above 38 cents quarterly and I got a measly 9 cent capital gain on the shares–for a total of 47 cents. I had hoped to ‘flip’ the shares originally for a 1-2% quick “steak dinner” trade in a month. Instead it took a full 2 months, but I did get near 2% so I am happy.

On November 22, 2019 Chicken Soup for the Soul (CSSE) 9.75% preferred was trading at $25.17 and I purchased 500 shares.

These shares trade somewhat erratically, but it had just come down from the $25.80 area so it looked ripe for a quick profit. I purchased my shares on 11/22 for $25.17. Shares were going ex-dividend for 20.3 cents on 11/29 (it is a monthly payor) so at a minimum I was going to grab 1 dividend.

Ex dividend date arrived and I held through the date thereby capturing the dividend and was able to sell for $25.21 on 12/2.

In this case I captured 20.3 cents on the dividend and 4 cents on a capital gain–a total of just under 1% in 10 days.

Since I had a plan I stuck to it–but this is one of those cases where one wishes they would have held on because the shares kept climbing and are in the $25.55 area.

Chicken Soup for the Soul is a newer company and while revenues are growing nicely, there is not much chance of a profit anytime soon and I didn’t want to stick around too long.

These are a couple recent trades and I have a couple others currently “in process”, but I am generally unable to do more than a couple of these each month as I don’t have time to ferret out the good candidates.

I’m really pleased with the number of folks reviewing, and I think copying the spreadsheet I posted last Friday (I have no way of knowing how many copies are made).

So far, while my instructions on copying and renaming the spreadsheet, are NOT being followed by many I think it is most likely that some do not understand the in’s and out’s of working with Google Sheets. I will publish a new set of instructions soon so that maybe more folks will be able to understand them.

Also there have lots of comments–too many for me to respond to all of them, but I am going to read them closer and see what “tips” are there for me to utilize.

I know for sure that a couple folks offered formulas for the Yield to Worst column. The formula I use doesn’t factor in the “accrued” dividends or interest and thus makes the number a little worse than it really is. I will be working on this in the week ahead.

Also some others have offered suggestions which I will be looking at.

Don’t forget that while a sortable sheet is nice all the issues are sorted in various manners on this page here.