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Flipping For Steak Dinners

I’m writing this more for newer investors that might be on the site rather than for those that are well seasoned in preferred stocks and baby bonds.

“Steak Dinners” is referring to quick, but modest profits, that some of us take from time to time.

THIS IS NOT encouragement to newer folks to employ these methods, but I know that throughout the website there are comments on what people are doing investment wise. There is nothing that is right or wrong–just what works for you.

Most times when I employ these methods of making a few extra bucks it is with issues I don’t really want to hold long term. I own mostly term preferred stocks and baby bonds with maturity dates in the next 2-10 years, but almost always have a decent chunk of cash in our accounts which I can use for “flipping” or “capturing” dividends. This is NOT true investing as most of us would define investing–but it works for me–mostly.

In my case if I see an issue drop based on news of some sort, I might take a position after the fall, expecting a bounce back at which point I would sell. Normally I am looking for 1% to 2% gains (25 or 50 cents on a $25/share).

Other times I may simply see an issue that is trending toward the lower part of the issue trading band and pick up shares looking to exit if a 1%-2% gain is realized.

Other times I may see an issue that is currently redeemable that is trading around $25 and I may buy it expecting the shares to move higher as dividends (or interest) are accrued–if it moves higher quickly I will sell the shares–otherwise I will hold until at least ex dividend date there by capturing a dividend.

Needless to say these techniques do not always work profitably, although the last couple of years have been a good period for most of my trades–although some have taken longer to “pan out” than was hoped when the position was initiated.

Here are a couple trades lately–I will walk through my thoughts and results.

On October 16th, 2019 Investcorp Credit Management (ICMB) announced that they were selling 600,000 shares of their 6.125% baby bond (CMFNL).

Being a ‘news’ event I thought there was a possibility for a quick profit–a week or maybe a month to play out.

Shares had been trading in the $25.50-$25.75 area prior to the announcement. Shares fell as far as $24.30 before bouncing back on the day (10/16) of the announcement and I bought 500 shares at $24.81. Unfortunately it traded in the $24.60 area a number of times over the next couple of weeks. I simply continued to hold the issue looking for my best exit. Fortunately it finally began to climb into the ex-dividend date (12/12) and reached $25.10. I held through ex-dividend, thus locking in the dividend, and I sold yesterday for $24.90.

On the CMFNL issue above the interest is a little above 38 cents quarterly and I got a measly 9 cent capital gain on the shares–for a total of 47 cents. I had hoped to ‘flip’ the shares originally for a 1-2% quick “steak dinner” trade in a month. Instead it took a full 2 months, but I did get near 2% so I am happy.

On November 22, 2019 Chicken Soup for the Soul (CSSE) 9.75% preferred was trading at $25.17 and I purchased 500 shares.

These shares trade somewhat erratically, but it had just come down from the $25.80 area so it looked ripe for a quick profit. I purchased my shares on 11/22 for $25.17. Shares were going ex-dividend for 20.3 cents on 11/29 (it is a monthly payor) so at a minimum I was going to grab 1 dividend.

Ex dividend date arrived and I held through the date thereby capturing the dividend and was able to sell for $25.21 on 12/2.

In this case I captured 20.3 cents on the dividend and 4 cents on a capital gain–a total of just under 1% in 10 days.

Since I had a plan I stuck to it–but this is one of those cases where one wishes they would have held on because the shares kept climbing and are in the $25.55 area.

Chicken Soup for the Soul is a newer company and while revenues are growing nicely, there is not much chance of a profit anytime soon and I didn’t want to stick around too long.

These are a couple recent trades and I have a couple others currently “in process”, but I am generally unable to do more than a couple of these each month as I don’t have time to ferret out the good candidates.

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