Down We Go But I’m Not Buying

Markets are taking a leg lower as folks wake up a bit from the never ending ‘v recovery’ chant.

I’m doing nothing really. I have been selling a bit in the last week around the edges–i.e. for some of the utility baby bond issues which I held full positions in I have taken a portion off the table. Really they were pretty extended–and given my expectations for better buying opportunities ahead I just banked some profits.

I had held a full position in the Wintrust 6.875% Fixed Rate Reset preferred issued on 5/2/2020 and I unloaded that for 2-3% gain. I am not enamored by any of the smaller community banks issuing high yield preferreds (i.e. 7%+/-). When I look at the exposure they have to ‘main street’ and in particular lodging and retail I think I can safely predict they are going to take some pretty massive write downs.

Bottom line is I think that we will see some nice buying opportunities in preferreds and baby bonds, but it is likely that until we start seeing 2nd and 3rd quarter earnings (or losses) we won’t have any real fundamental data to base investments on–or at least fundamental data that I can hang my hat on.

Right now 3 of 4 accounts we have are in the black–one is in the red yet by 5% so don’t know if I can get back to even this year on this one–the good part is this account had a nice double digit gain last year so likely my 6-7% annual average will remain intact.

18 thoughts on “Down We Go But I’m Not Buying”

  1. Here is a interesting article for those of you invested in bank stocks.
    Limiting buybacks and special payouts and increases in dividends for now, but leaving open the possibility the feds may re evaluate the situation in the 3rd qtr. don’t forget banks can be required by the Feds to suspend dividends and they are not cumulative on their preferred.

      1. Which BDC is taking them public to get their money back from the market ?
        If I was interested in retail grocery stores I would wait for Safeway to go public again

        1. Kimco used to own them or part of it. And recently lowered their stake. Albertsons was losing money by the truckload a couple years ago…Maybe Covid grocery foot traffic past quarter finally put enough lipstick on the pig to take it public. They had tried a time or two to rid themselves of the porker and they always had to pull it back.

          1. We used Albertsons for almost 28 years when we lived in Santa Fe and found it to be merely ‘adequate’ as a retail grocer. It may have improved and our local store may have been an outlier, but I doubt it.

            Living in Texas now gives us access to the much better in all ways H-E-B grocery chain.

            1. You haven’t lived until you’ve had to shop “The Pig.” We’ve lived with the local Piggly Wiggly now for 13 years and it’s the only store we’ve ever known where whenever something’s on sale, coincidentally I’m sure, the item hardly ever rings up at the sale price. My wife’s a shopping queen and catches them at this all the time, but oddly enough, they’ve never gotten any better… Gee I wonder why that is??????

          2. Grid, if its the same company that was going around past 10yrs buying up grocery chains they were desperate a couple years ago to buy RAD so they could combine the drugstore and grocery business and go public without paying the fees to go public. I owned RAD at the time and voted no on the pig with lipstick

            1. Charles, You reignited my brain cells. I remember that RAD thing now. Albertsons had double digit bond yields back then if I remember. I read they had to drop IPO price several bucks to get any interest. Too much fat and not enough meat on this porker I guess.

        2. Charles – I don’t think you mean “BDC.” It’s been private equity owned primarily by Cerberus. They used to call these leveraged buyout firms but I think that terms gone out of favor. In any event, I don’t think it would be BDC at all as they’re supposed to be focused on much smaller companies than an “Albertson” type co. I could be wrong though… There could be BDC involvement I suppose but I’d doubt in any lead capacity.

    1. Don’t know about the present situation but I remember years ago that Albertsons was viewed as a weak kneed sister financially. Maybe they’ve gotten better. I know its all unionized. Didn’t know they were doing a preferred at the same time.

  2. I bought the BSX-a at par $100 when it issued last month. sold it at 109
    its back down to 102 (was even lower)
    so I am back in. this is the 5.5% convertible issue
    solid company but then what do I know

    1. Did you also look at BDXB a 6%mandatory preferred with 6% coupon? This was IPOed a week or so before BSX-a along with a secondary of BDX at $240. I see BDX do be a fine company and think BDXB is a good mand. convert…

  3. There is an end of quarter rebalancing which is expected to create some selling pressure according to CNBC and others.

    1. Last day of the quarter is typically good for traders. DO NOT DISTURB I’ll be looking for trades all day.

  4. I see the Atlanta Fed GDP Now number is at -45% with the blue chip consensus at -35%.

    I just can’t buy anything right now. Everything is priced like nothing is wrong.

    1. IMHO the political risk is far too high to buy at this, or anything close to the current levels. I plan on just sticking to short term trades and A rated bonds and preferred stocks until November.

  5. Tim – I was encouraged to buy some of the smaller banks, not to hold but flip when it moves to a permanent listing. But I am seeing not all have materialized in gains, actually have to wait for a good day to make 2-4% so I will sell these bank preferred’s on a good day (hopefully there is one soon) and take a pause

    Thank you and community for the informed discussions and guidance. I really appreciate everyone’s efforts

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