Category: Ideas

Let’s Do It!!

That is what I have to tell myself each day to force myself to buy riskier assets than I really want to hold.

Like many of you I have piled up cash positions that are too high–that means around 30% and I will have a few more percentages coming in when the Kayne Anderson 3.50% issue (KYN-F) money comes in on redemption. New issues being offered are either too low in coupon or simply are not issues that are really in my wheelhouse–i.e. too high of a perceived risk.

So each day I have to force myself into riskier assets. Actually I don’t have to–but I want to–I think it is the right thing to do even though it doesn’t always feel good.

Given that I have 50-60% of my funds in base portfolio positions that I have held for a long time it makes some sense to ‘force’ myself out into risk.

I certainly don’t think that others should move out to riskier assets–each person has their own needs.

Here is what I have forced myself to do in the last week or so.

I bought ($25.43) a full position in TravelCenters 8% baby bonds (TANNL). The issue goes ex on 2/13 for 50 cents. There is a bit of call risk–but there is a 8.25% issue that is callable which would go first and it is likely these won’t be called anyway (although one never, ever knows for sure).

I bought ($25.71) a full position in B Riley 6.75% baby bonds (RILYO). The issue just went ex for 42 cents a few days ago–I bought before the ex date.

This morning I bought ($25.09) a position in UMH Properties 6.37% perpetual (UMH-D). The issue will go ex on 2/14 for 40 cents.

Each of these had other issues that could have been bought, but considering YTC, ex dates etc. these seemed the best for me at this time–other folks may look at things differently.

I won’t likely hold long term on these issues, but would like to realize a 1-2% short term gain before considering selling them.

NOTE–I INVEST FOR THE LONG TERM WITH 60-70% OF AVAILABLE FUNDS–MORE IF I COULD FIND ACCEPTABLE RISK/REWARD. BELOW IS SOMETHING I DO ONLY FROM TIME TO TIME AND IT CERTAINLY IS NOT SOMETHING I ENCOURAGE FOLKS TO DO.

Tomorrow has the potential to be a good shopping day for those looking for potential ‘flip’ candidates.

Tomorrow (1/14) we will have 47 preferreds and baby bonds going ex-dividend–this to add to the 11 we had go ex today–a total of 58 issues today and tomorrow.

Folks that are looking to ‘flip’ (buy and hold for a short period–for me less than a month with hopes of a 1-2% gain) an investor MAY find it beneficial to buy on the ex-dividend date or within a couple of days as some issues tend to bounce back quickly from the “mark down” applied to share prices by the exchange to recognize that the shares are trading ex-dividend (without dividend).

The way this works is you had to own shares TODAY to receive the dividend/interest payment in the future–buying it tomorrow (the ex date) is too late for the current payment. The exchange that the shares are trading on will ‘mark down’ the shares by approximately the amount of the dividend–thus if the shares closed today at $26, but goes ex tomorrow for 50 cents the share price should open around $25.50 Tuesday.

Of course, in real life, the shares may be marked down by the ex amount, but never trade at that price. Shares could immediately move higher–or occasionally they will continue to fall further.

Some folks may ask “why go to all the trouble”–“why not just own it on the ex-dividend date and capture the dividend”? Certainly we have many investors on this website that do just that–they “buy and hold” for long term–and in fact that is what I mostly do–have a base of positions that I have held for years. Unfortunately because of low interest rates and high prices we have too much cash on hand.

Because of having too much cash on hand and no long term prospects to buy at this moment I resort to doing some ‘flipping’–many times of issues I don’t want to hold long term–in fact some I want to hold maybe a month at the max. Normally this is because the issue I am flipping is a lower quality issue that I am comfortable holding for years, but think I can squeeze 1-2% out of in a month or less.

So right now I am studying the list of issues going ex tomorrow and seeing which may have potential for bouncing back quick–most of the time determined by looking at the chart and secondly by determining how much in favor a sector has been lately. Once I pick a target issue I will watch it and when it looks stable in price I will make a buy–my intention is to hold until a 1-2% profit is realized–hopefully I will be out in less than 1 month.

Additionally I have an interest in shares that are in the early call period and trading at $25 plus accrued. For instance a favorite of mine is from insurer WR Berkley (WRB) and is a 5.625% subordinated note (WRB-B). The baby bonds have been callable since 5/18 and it is likely they will be called soon (or maybe not). WRB sold baby bonds at a 5.10% coupon recently so we know it would be advantageous to call the WRB-B. This issue has been a favorite of mine, but is currently at $25.80–and the dividend is only 35 cents so I sold my shares a while back at a nice gain. It is possible that the shares will be marked down by 35 cents tomorrow, but continue to fall since it should be obvious to everyone (at least anyone paying attention) that they are risking 45 cents by holding longer. If the shares were to continue to fall I might have an interest–but not until $25.05 or so.

Now it is too late to do what I call a “capture and flip”, but essentially it is capturing the dividend/interest and then waiting for upward movement in the share price and letting it go. You might notice that many issues start to move sharply higher 1-2 weeks before ex date as folks clamor in to capture the dividend. Then the issue is marked down by the ex amount and on ex dividend date immediately begins to move higher again. This can provide delicious gains when it works out–as much as 2-3% in a month.

Now FORGET EVERYTHING ABOVE!! These are extraordinary times–flipping, capture and capture and flip have been like “shooting ducks on a pond”. While we watch common stocks go up and up and I complain–honestly flipping etc has never been so easy. THIS WILL NOT LAST FOREVER! At some point I will have 2-3 flips in process and something will go wrong with interest rates etc and I will lose money on the flip. There are no guarantees in life–nor investing, but until it no longer works I will be doing some of it.

HERE IS THE MASTER LIST WITH EX-DIVIDEND DATES.

This is simply a replay of the note I posted on 11/23/2019 and previous to that in September.

The number of opportunities in the investment grade arena has fallen since that time–i.e. issues are trading TOO HIGH.

I will work on a new listing for the next week and will include non-investment grade issues as well.

This is from 11/23/2019

About 2 weeks ago I posted this spreadsheet which is Investment Grade Preferreds and Baby Bonds Now Callable.

I am reposting–I did not update the dates as little changes over a 2 week period (although since the original post 6 issues have been called for redemption), BUT prices do change and I see a couple I don’t own that are in the list which I may pick up.

Currently I own the following off the list–

Axis 5.50% preferred (AXS-D)

WR Berkley 5.625% baby bond (WRB-B).

Vornado Realty Trust 5.40% Preferred (VNO-L)

So I now see a couple others that I will look closer at for potential purchase.

1st is the DTE Energy 5.25% baby bond (DTQ).

2ndly is the Kimco Realty 5.50% preferred (KIM-J)

The idea is that if interest rates don’t move too violently up or down these issues should stay relatively closely tied to liquidation preference ($25) while providing high levels of safety. I don’t really want to deal with any issues under 5%, because the redemption likelihood is small thus exposing the issue to bigger share price moves (down).

Here is the list again.

Note that the yield to worst DOES NOT include accrued dividends so the actual yield to worst is slightly better than that listed.

For those wanting the full investment grade list of baby bonds and preferred stocks you can click here. You can toggle on the bottom for investment grade.

Update–PTrader has posted a link in the comments here that indicate that the company may call this issue before too long. I had a low ball order in on this on Tuesday but with the added info and the pop in the shares Tuesday I will not have an interest in shares.

The GasLog LTD 8.75% perpetual preferred (GLOG-A) tumbled in the last 2 days by about $1. It is now trading at $25.43 down from $26.40 2 days ago.

The issue is callable 4/7/2020 and some folks probably figured out there was ‘call risk’ and wanted out.

Shares went ex dividend on 12/30 for payment 1/2/2020 so they will be building accrued dividends which with the normal 30 day call notice minimizes the call risk cost. Whether the company would be able to call this issue is an unknown.

NOTE–this is not the partnership which is GLOP–this is the parent company.

I may pick up a small position.

Closed end fund (CEF) Bancroft Fund perpetual preferred (BCV-A) took a tumble near the close today (Monday) falling 88 cents on a 966 share’dump’.

Folks need to realize when you put a market order to sell on a stock that average 1,625 shares traded each day you can get badly bruised.

This issue carries a coupon of 5.375% which is damned good for a nice investment grade issue (Moodys A1)–and with a closing price of $25.50 today (after trading as high as $26.46 last Friday) this is as good as it gets. Shares had good ex-dividend a few days 2 weeks ago.

If the drop late today stimulates more selling tomorrow I will be a buyer.

The Bancroft Fund is a fund managed by Gabelli.

NOTE–the issue is thinly traded and most charts are wrong–you should use a chart at your broker (Fido chart is correct).