Category: Investment Ideas

The Priority Income Fund (no publicly trading) is a closed end fund which holds collateralized loan obligations (CLOs).

There are 5 outstanding issues of term preferreds from Priority Income Fund and most of them have gone ‘on sale’ during the last month.

The issues are generally down 4-5% since highs reached in September. For instance the PRIF-C 6.625% issue is trading at $24.70 after hitting a high in the $26.20 area.

Shares went ex-dividend on 12/12 for payment on 12/31/2019–so there is no accrual in the shares.

Disclosure–I own the PRIF-D 7% issue. Additionally I’m looking to see if I want to add the PRIF-C issue now (both are small – less than full positions).

Being a CEF Priority Income Fund must maintain a 200% coverage ratio and they are currently at around 400% (at least last time I calculated it), but are assets are ‘level 3’–meaning the value is not directly observable so each investor should do their own due diligence as many may not be comfortable holding CLO related securities.

I expect Priority to issue more term preferreds in the months and years ahead as this is their method of utilizing leverage.

You can check all the outstanding issue here.

While markets are a bit quiet as we end the year we are trying to grab a few end of year gains (all in IRA accounts) and get ready for the new year.

Yesterday I let go of a full position in the Gabelli Heathcare and Wellness Trust 5.76% perpetual preferred (GRX-A). I loved the 5.76% coupon on a strongly investment grade issue (Moodys A2), but it is living on borrowed time. The issue closed at $26.01 yesterday and has been callable since 8/20/2015. GRX does have a 5.875% issue outstanding which is now callable which may ‘protect’ the 5.76% issue, but more likely they would call both. This issue was a ‘base’ position–one which is a long term hold in the portfolio so I will be looking for another base position.

Additionally I tried to sell the new Medallion Bank 8% fixed to floating preferred (MBNKP). This new issue traded very weakly early on – down to the $24.40 area–2 weeks ago, but closed at $25.22 yesterday. I had an average cost of $24.58. My limit sell was obviously a bit greedy as only 88 shares were sold, but hopefully will get it done today. These shares were bought only as a flip–no intention to hold this junky issue too long.

I bought the Urstadt Biddle 5.875% perpetual preferred (UBP-K) yesterday, mainly as a dividend capture move. The issue had fallen a bit yesterday and goes ex dividend in 2-3 weeks. The combination of a short term fall (I hope) and a foreseeable ex dividend date for 37 cents made this particular issue attractive. This will have a target of 1.5% so may hold through ex date or will sell when my target is reached – maybe before ex date.

I tried (but didn’t get an execution) to grab a position in the GDL Fund cumulative, puttable issue (GDL-C) for a ‘base’ position, but didn’t get an execution. I am happy with a 4% position for a base issue and it would help replace the Kayne Anderson 3.50% Mandatory Redemption term preferred (KYN-F) which will be called in April.

While there aren’t any big selloff going on it appears to me that there are some individual issues being ‘sold’. These are not large volume issues, but it appears that the sells are likely individual investors, so one may be able to snag a bargain today somewhere.