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.

34 thoughts on “Flipping For Steak Dinners”

  1. There are many kinds of flips and I try to dabble in them all to generate a little alpha. A favorite technique is swapping among different series of the same preferred. Unfortunately, those opportunities are usually in riskier higher yield issues but I’ve had a lot of success swapping among the NGHC and NS preferreds series while maintaining a core position. Probably make 40-70 cents a year from the swaps in addition to the dividend.

    1. I swap between NLY-F and NLY-I. Instead of 6% I’m making 10-15%. Makes it worth the risk. Also swap between AGNCM and AGNCO for nice gains. CIM-C vs CIM-D is a good one, and NRZ-A vs NRZ-B.

  2. I owned CSSEP for a few months dividends. Got nervous about their sustainability in a downturn and sold. May be worth the risk for aggressive dividend seekers. I found it too unpredictable to play the flip.

    1. I read somewhere that Chicken Soup for the Soul owns a big piece of a streaming product called Crackle which is popular with the younger cord cutting demographic. Definitely not a sock drawer issue…but it provides some sector diversification for the portfolio and a fat quarterly dividend.

      1. Citadel–yes a new acquisition–honestly the growth of Crackle gave me a bit more courage to give it a go.

  3. Tim, don’t you thnik CMFNL should go around 25.40 anytime soon? I still own it with a solid amount of shares.

    1. Eugene–over time I thing so–but that is what I thought before holding for 2 months and I just wanted to move to new potential opportunities.

  4. Still working and pushing 70. I don’t have the time to pound the key board so I have opted for a little less return, a little less stress and a better sleep at night. Even my afternoon naps with my Catahoula Hound Dog are peaceful.
    My hat is off ( stormy kromer ) to used guys. I love the trade and the mindset just not for me. I buy at a reasonable price and try my best to enjoy the ride. Stay away from the Dog Food, stop and smell the pizza, and always keep your nose in the air for that sweet steak on the grill. Remember a short time ago the world famous words of Tim McPartland you snooze you loose. Much said in few words

    1. Mudshark, I read your comment and had to google the hat and dog.
      I enjoyed those images and my imagination got woke.
      Thank You

    1. Grid–I saw this and another announcement in November, but on the SEC site they have none of the filings. I also might try a flip if the issue ever appears but I wouldn’t want to get stuck long term in this junk issue.

      1. What a mess of incompetence displayed by Vanguard for me today…And I am eternally grateful for it! Over an hour of dropped calls, “their computers are messed up”, “cant find the ticker”, “call back in 30 min”…Ugh…Price is dropping so the incompetence is paying off for me.

        1. Grid–on rare occasions incompetence is good. I pulled it and saw it at 24.50 so bought a starter position at 24.49–if it gets its sea legs I will finish up the position.

        2. How exploitative of you! Vanguard had been very good for the last 6 months or so on getting new issues posted. Their norm had been 2-3 days after the rest of the world but recently they had gotten many tickers up same day. Without my having to spend 30 minutes on the phone with them.

          Was too good to last It seems.

      1. ‘Preciate, Ray. This a Dave Kingman flip trade for me. Been waiting for this dung heap issue to trade.

        1. Grid,

          Love the Dave Kingman (home run or strike out, and nothing in between) reference!

          I don’t see a publicly traded parent, one that pays a nice dividend, which is one of my criteria on preferreds. Not confident this will move up when it begins normal trading, but at least the potential for a successful flip is there at current price. Good luck!

          Quick

          1. Bob, I checked formal definition of skank and unsurprisingly it didnt match my use of the word…So I checked Urban Dictionary and found that definition to match my interpretation of the word….So I better use your formal definition, ha….An unpleasant person vs. an unpleasant smell. Im going to say they are a similar weak rating since both would be hard to tolerate!

  5. My philosophy is somewhat different than flipping for one modest profit. I flip as part of an overall plan. Like the salesman who makes a $10 commission or the server who gets a $10 tip. They didn’t go to work to make 10 bucks. By serving several tables and turning them over several times the server makes good money. That’s how I approach short term trades.

    1. Martin G–I agree with your method–I don’t know how much time you invest in this strategy–I don’t have much time right now. What is your daily time investment?

      1. You’re right it takes time to do it well, though you can still play with a smaller time investment. Trading is my only job and I’m watching for trades off and on throughout the day when I’m not out.

  6. That is very interesting Tim. I think a lot of people, including myself, are trying to do some version of dividend capture trades. Have you considered setting up a thread like Sandbox that just focuses on these types of trades. We might be able to help each other with ideas and eat more steaks!

  7. I let my SR-A go at $27.02 and$27. Sold the entire chunk. Had just repurchased at about 26.35 ave from multiple purchases, not 2-3 weeks ago. It could go higher, but I dont fret as I always get another chance. This one has been a very good flipper over and over. I love the issue, but not at $27. Will wait for another opportunity whenever it comes. I want to keep it as a core, but I just make way too much money doing this as opposed to just holding it.

    1. Grid, I’d say flipping SR-A seems like a safer bet then flipping Ally-A which is trading past its call date, would you agree?

      1. Citidel, for me they are two unrelated type trade/holds for me. SR-A is bouncy, and as long as the price stayed in neighborhood of last purchase price, it can serve as a long term hold. But if it spikes quickly like it is prone to do at times, one can sell if that is a goal.
        ALLY-A is very consistent and probably because it is so liquid (more liquid than many common stocks even). When you buy in 25.80s range, and it doesnt get redeemed, your going to get the interest payment and a round trip movement of the stock back to the 25.70-80 range. The market outside of any unusual market craziness, is going to make you pay up close to 2 interest payments to get in after payment, then it creeps up to 3 payments before kicking out the payment. The market knows its got a call risk possibility so that is how is stays relatively anchored in that range.
        So in other words I own this when I dont have any other compelling options, and I can get in and buy below $25.90 which I did. If something compelling comes up, I would sell and take whatever I got while owning it and move on,

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