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Category: Ideas

I Went on a Buying Spree–Relatively Speaking

In one of my accounts I went on a buying spree of sorts–I hope not too early.

I opened starter positions in a number of issues today as the ‘baby went out with the bath water’ and investment grade utility and CEF issues presented what I thought was a buying opportunity. We will know in a month whether this was a wise decision.

Remember that most of these are just starter positions and if they fall more I almost without a doubt would add more.

Here is what I added today.

More Ellsworth Growth and Income 5.25% perpetual (ECF-A) at $24.70.

DTE Energy 5.375% baby bonds (DTJ) at $23.49.

DTE Energy 6.00% baby bonds (DTY) at $24.99.

Duke Energy 5.625% baby bonds (DUKB) at $25.05.

Entergy New Orleans 5.50% baby bonds (ENO) at $24.39.

Nextera Energy 5.65% baby bonds (NEE-N) at $24.86.

I think being able to secure some investment grade issues around 5.75% to 6% current yields is a small gift–but we will see.

Note that some of these issues have 2, 3 or 4 years of call protection some do not, but at these prices I am not concerned.

I can’t predict tomorrow, but I hope to move to a different account looking for some quality issues.

As many of you know WHEN we come off the bottom it will be the middle grade (and even junky issues) that will head higher 1st and strongest–BUT this is when we come off the bottom and we don’t know when that will be, but we will be holding cash to do some buying there in select higher yielding issues.

Here We Go!!

The futures markets in stocks were way up and way down overnight–but now are up by over 1/2%. A guessing person would say we will be seeing some pretty wide swings today.

Last week cost us personally around 2%–almost all of the losses on Thursday and Friday and they were biggest in perpetual preferreds–that should be no surprise.

Here is what we are doing today.

1st off we are doing nothing–we are going watch and see if stocks and bonds hold steady in here. I don’t care if stocks fall again–but I hope these moves are kept to the 1% area.

2ndly we are shopping in the short maturity issues-those maturing in the next 10 years.

We are also shopping in all utility and CEF preferreds and baby bonds.

The last area we are watching is the mREIT preferreds. Theses issues are offering plenty of value, but being perpetual they may have more volatility.

So our theme is quality and/or short duration with a sprinkling of perpetual preferreds. Some folks may remember that I have always tended toward the shorter maturity issues–baby bonds and term preferreds–this serves one well with wild markets, but you give up some coupon.

Everyone should note that many of the quality issues are still expensive–but they have a lot less call risk in them–so if they were a good buy at say $27 they are a bunch better at $25.50 (or whatever the number is).

The CEF preferreds are here.

The shorter maturity issues can be seen here (slow loading page). How about the Gladstone Investment 6.375% issue now at $25.35 and not callable until 8/2020 with maturity in 2025?

The utility baby bonds and preferreds are here. How about the Entergy New Orleans 5.50% (ENO) baby bond issue trading at $25.13. First callable in 4/2021 and rated ‘A’ by S&P? This is a first mortgage bond.

As far as selling–I don’t see anything that I plan to sell right now. I have plenty of dry powder and while I hold the Golar LNG Partners 8.75% (GMLPP) which got hammered, I bought only 200 shares. I also have an overweight in UMH-D–I plan to hold the issue. In spite of UMH being ‘hated’ I see little fundamental risk in the issue (although I ‘mark to market’ in my mind everyday–none of this ‘you don’t lose money until you sell–I have lost money on this position).

141 Preferreds and Baby Bonds That are Potentially Dangerous to Your Wealth-Updated

UPDATE–I have tweaked the spreadsheet removing some issues with redemption dates in the future with incorrect calculations on the YTW.

Below is a spreadsheet that lists 141 preferreds and baby bonds that are either currently redeemable or will be within a couple of months.

I have arranged these with the worst yield to worst on the top–potentially the most dangerous of them all.

I am not saying any of these in particular will be called now–but a high percentage of them could be–do you hold them?

The last time I published a list of these I used just investment grade issues–this list covers any and all $25/share issues no matter the rating.

Note that the yield to worst calculation is off by a small amount (less than 1/2%) as it doesn’t figure accrued dividends and interest in the calc.

You need Google Sheets to open this spreadsheet.

Here is the spreadsheet.

Addition of a “Sock Drawer” Section

I have added a new topic in the right hand side menu for “Sock Drawer” discussion.

The intent it to include items that all of us consider “sock drawer” holdings.

My definition of “sock drawer” is those issues I own that I consider extremely safe and that don’t have to be watched too closely. Normally they would have more modest coupons, but you can sleep well at night (relative to safety)–you know the income stream is extremely safe, althought the share price may move around quite a bit.

Others may have their own definition–in fact I know they do–that is fine

For instance, I have held the Tricontinental 5.00% preferred (TY- or TY-P) issue for years and years. Tricontinental is a closed end fund managed by Columbia Threadneedle. TY was formed in 1929 and this small amount of preferred stock is the only leverage the fund uses–2.2% leverage. Because it is a CEF they must maintain a 200% asset coverage on the preferred stock–the last time I calculated the coverage it was over 4000%. This is a $50/share issue and last traded at $54.66. The issue is callable anytime at $55/share. Shares were issued in 1963.

You can use the link in the right hand menu to access this section–it is here.