Gladstone Investment Term Preferred On Sale

I was surprised (and pained) to see the GAINL issue of BDC Gladstone Investment go on sale right now.  The issue is ex dividend today by 13 cents-BUT it is off 64 cents at this time.

This newer issue is a 6.375% coupon with a maturity in 2025.  It is off 63 cents right now for a current yield of 6.80%.  The issue is a monthly payer.

We are already overweight in this issue so won’t buy more now (we are trying to stay away from buys this week)–BUT if it stays on sale until Monday we likely will go a little more overweight.

33 thoughts on “Gladstone Investment Term Preferred On Sale”

  1. Well, today was my initiation into the preferred and baby bond club. Stuck my toe in the water and did a little bottom feeding with 100 shares of each of the following:
    UCZ @ $24.76
    BC-B @ $24.02
    CHSCL @ $24.89
    GAINL @ $24.12
    AQNA @ $24.51
    KIM-L @ $19.87
    DUKB @ $23.83
    NCZ-A @ $22.94
    Going to keep an eye on prices and add more to these and new positions as warranted.
    Thanks to Tim and many more members here for their kind help. Looking forward to continuing the education!

    1. Looks like you have a good strong group. If I was you I would now sit tight and see how they do the next few days. If some (or even all) move lower it is what I call the cost of admission–let’s hope for some return to sanity.

  2. There is a difference in the asset coverage required for GAINM and GAINL. It is currently 200% for both but will be 150% for GAINL starting 04/10/2019. The company would have to call GAINM at $25 if they want to take advantage of the new rules that allow 150% asset coverage for BDC’s. I bet it gets called early due to that requirement.

    1. Hi 35spline–I covered this on a post here–you are correct that they need to call GAINM to take advantage of the 150% leverage–I verified this with the company.

      Here is the exchange I had with the company–

      The following comment was submitted via the Gladstone Investment Corporation website.

      Hello–I am wondering if the recent change in the asset coverage requirements in 2019 (from 200% to 150%) will be applied to the currently outstanding term preferred stock issues? The original offering prospectus specifically states 200% (versus a more generic wording such as “as required by law). Thanks for your help. Tim McPartland

      Gladstone Investment Reply.

      Good morning Tim
      The change does not impact the currently outstanding term preferred stock.

      1. Tim,
        I am still not sure how the company can say the change does not impact the current outstanding term preferred given the wording of the original prospectus for GAINM. Thanks for the response.

        1. Read the company’s reply again. To my read, the company’s statement is correct. If asset coverage drops below 200% the company needs to redeem the M issue. In other words, no change to what is stated in the prospectus.

        2. What they mean is the M issue will not allow 150%–so it needs to be redeemed as the 200% is in effect.

        1. 30 year under 3%, 10 year 2.75%

          The more he speaks about inflation being subdued, the worse the drop. This move to normal rates is not at all understandable

    1. I am still trying to learn how to pick which issue to buy so I may be missing something but when I look at GAINM vs GAINL, I see higher CY, YTC, and longer call date for GAINL. I have not perused the prospectus so there may be pertinent information there that I am missing.

      1. Amy–the M issue has a 200% leverage requirement–while the L is 150%. The M needs to be redeemed if they want the higher allowance for leverage in April (when their board approved 150% becomes effective) as the M doesn’t allow for 150%.

  3. Lmrko is trading at $21 for a yield of 9.4% !?? Thoughts on this one? I read a couple articles that thought their income stream was stable. I bought some for $21.68 a few weeks ago.
    Good day

    1. I am curious about this one too. Its price had been one of the most stable ones and then it had gotten a bit volatile even before this recent tantrum.

  4. A lot of people were sleepwalking through a bunch of rate hikes. They have awoke and are in a very foul mood. Now it’s like playing Wack a Mole for bargains with stuff popping up everywhere. Except some moles can hit back. Time will time all.

  5. A lot of the fire sales on preferreds/babies relates to how the market structure has changed over the years. In the old days when stocks were actually traded on the floor of the NYSE, a human “specialist” was assigned to each stock. He (and I think they were 100% men for many years) was responsible for maintaining a “fair and orderly market.” He was also the buyer and seller of last resort and would trade for the company account if need be. If he saw prices collapsing too rapidly, he could and would halt trading to stabilize the prices. He would corral some buyers to step in. If they did not step in to his satisfaction, he would buy for the specialist company account.

    Specialists have been replaced by “designated market makers” which in most cases is an algorithm running on a computer in Mahwah, New Jersey. There is little to no human observation or intervention, particularly on low volume issues like these. This algorithm is only obligated to buy a minimal amount of shares, typically 100, in a falling market.

    Another key factor is that the large high frequency trading firms appear to NOT be trading in these issues. They are more interested in flipping highly liquid shares for a 1 cent profit than risking getting stuck holding illiquid shares they cannot flip at ANY price.

    Net effect is that many of these prices on issues have become very divorced from their fundamentals.


    1. Tex: I agree totally with your analysis. You left one thing out. In addition to the specialist making a market, shares were purchased through a broker who would temper your decision to buy or sell in a volatile market. It was not as easy as a “click of a mouse”. Good investing.

      1. jag–yes you are probably correct–it was a very structured process–now if I wanted my buy and sells are on a 3″ x 6″ screen.

  6. A lot of flash dumps in last few days. And some dumb buys. Look at LANDP. Someone paid 25.70 today (XD) when they could have had it for 25.17 yesterday (dividend adjusted). A 2%+ movement in 1 day, with no news.

    1. This is why I flip LANDP so often….A flippers delight and then it will always present a chance to get back in 26.20s again like it did yesterday, as I sawed off 500 shares again.

      1. Grid, you probably intended to type $25.20s instead of $26.20s. But that’s OK, we know what you mean, :-))

        If there was a buyer at $26.20, I would short the crap out of it……..

        1. Inspy, No wonder it has been so easy to flip it….At a loss every time, lol…Yep, miss the good ol days when flipping meant buying above $26…But never LANDP, that is for sure!

  7. What a difference a year make …….

    PLDG is priced at the moment at 57.73 with a SY of 7.40% and a YTM of 6.07%.

    On January 11th, the same issue was priced at 75.99 for a SY of 5.64% and a YTM of 2.14%.

    2.14%, I’ll say that again. Price matters. You are going to make a lot more money at 6.07% than 2.14%. Compound that difference for the 8-9 year term of the issue and see the difference.

    1. Ha–Bob-in-DE–are you saying that some investors are asleep at the wheel when they hold a share with a 2.14% YTM? Just kidding–we certainly see some real bonehead stuff–guess it caught up to them.

  8. I was surprised to see this as well. Why would someone sell off today, when they could have sold cum-div yesterday and made more money?

    But the current market sentiment is so volatile, people are dumping issues like they’re on the verge of BK. PLDGP had a dump yesterday, went down almost 10% just like that to $55. I tried to get some, but not successful.

    Just wishing and hoping for all this panic and senseless dumping of income stocks to end. It’s discouraging, but watching to try and catch some buying opportunities here & there. HE-U was a good one in that regard.

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