Portfolio | Innovative Income Investor

CHS Confirms Business Softness

Today giant Ag Cooperative confirmed that the ag economy is extremely soft and that the threat of tariffs is bringing more uncertainty to their business. More than once in the last month or two I stated that we would likely see this market softness hit CHS earnings in the next couple of quarters. Of course we know that CHS is as much a oil refiner as they are a grain merchant–so earnings can still remains respectable.

An article in the local newspaper today outlines some of their challenges. This article is timely as I am going to start to add some more shares of the CHS preferreds to the portfolio. I currently own two issues (the CHSCM 6.75% issue and the CHSCN 7.10% issue) and will continue to add more shares at favorable prices starting tomorrow. If I am to own more perpetuals at this moment–these are pretty much the most stable issues that can be found. That earnings will likely be down in the next few quarters is only a minor consideration as it has been shown time and again that CHS can go these cycles and while they can be a bit painful the coop will survive just fine.

Tomorrow I will add some of the CHSCM 6.75% to current holdings around $25.17/share. Recall that this issue was originally a reset issue, which has now been fixed at 6.75% because of the change from libor to sofr. If share prices fall I will consider further purchases. The CHSCN 7.10% issues currently trades at $25.55 which is not a price which I am willing to pay at this time–but 25 cents lower it becomes a consideration.

A Missed Portfolio Trade From Last Week

Last Wednesday I added some shares to our portfolios–but forgot to note it here. I did add it to my ‘laundry list’ of holdings.

I added the Chimera Investment 8% Fixed to Floating preferred (CIM-D) which is now floating at a coupon of around 10.6%. The issue has been floating since April at 3 month SOFR plus 5.379%–obviously a tasty yield right now I paid $25.02 last Wednesday and the shares went ex today for 64 cents and shares are now trading at $24.68. I could have picked up a little yield by buying CIM-B which has a current yield of near 11% as it is at 3 month SOFR plus 5.791%. My choice was made simply because if they were to make a call it would be the CIM-B issue first (who knows for sure).

This is my 3rd position in the mortgage REIT space which still composes around 8% of invested money. I have a position in Annaly 6.95% FTF preferred (NLY-F) which now it trading in the close to 9.80% area. Also I have the Rithm 7.125% FTF (RITM-B) which is now trading with a yield around 11%.

I watch these high yield issues kind of closely–any pricing over $26 could bring a swap into another issue as the lower rates go the more likely a ‘call’ will occur.

It’s a Struggle to Buy Some Preferreds

While we often talk about ‘illiquids’ as many of the $50 and $100 preferreds it has become more and more apparent that the term ‘illiquid’ can be used much more broadly–to many of the $25 issues.

Today I have been trying to double up my position in the Priority Income Fund 6.00% term preferred (PRIF-H). This issue started the day at $24.04 and has a mandatory redemption in December, 2026—so getting me to 8% (+/-). I have changed my good-til-canceled order once and I am leery of chasing the price which is now at $24.15. I was able to get a partial fill at $24.15—so now my order sits. Total volume on the day is 400 shares–I would call that pretty illiquid.

PRIF in total is a pretty illiquid group right now–folks want a decent yield and the level of certainty which comes with the mandatory redemption. Below are the PRIF issue part way through the trading day.

A Little Buying This Morning

While I don’t see many ‘bargains’ out there in shorter dated maturities I did add to one of my current holdings today to help me toward my 7% goal (and you can be certain 7% will be plenty difficult in the next year).

I doubled up my position in the MidCap Financial Investment 8% notes due 2028 (MFICL). The issue goes ex-dividend the end of this month so I had to pay more than is optimal ($25.55), but at least I capture the 50 cent interest payment. It should be noted the issue has a 1st call date in December, 2025. It should be noted that with the early call date and the maturity in 2028 pricing on this issue should be close to $25 (stripped price) most of the time over the course of the next couple years.

MidCap just released their earnings last night so one can get a good update on the company in the release. This is a pretty large BDC (relatively speaking) with assets of over $3 billion after merging with 2 Apollo fund last quarter.

Of course I will add this to my ‘laundry list’ of holdings.

A Bit More Selling with a little Buying-Corrected

Once again yesterday I chose to do a bit more selling of positions and added to one position.

I sold the following positions—2 were ‘trims’, but I sold the entire GAMCO position.

Affiliated Managers 5.875% baby bonds (MGR). The price was $24.96.

Entergy Texas 5.375% preferr ed stock (ETI-) at $24.40.

GAMCO Natural Resource Gold and Income 5.2% perpetual (GNT-A) @ $23.87.

I added to my position in the XAI Octagon 6.5% term preferred (XFLT-A) @ $25.02–this matures in March, 2026. This issue keeps trading down below $25 so I also have a GTC order @ $24.85 to buy more.

For the time being that should be all my selling–we will see where interest rates head before making further decisions, although I will be looking for issues trading at or below $25 that mature in the next 6 months–hiding spots for money at rates above CD and money markets rates.

I have not had the opportunity to update my ‘holdings’ page yet, but will get it done yet this week.