On this page folks should comment and write about illiquid securities–preferreds and baby bonds. By Illiquid I am talking about those issues that seldom trade–or only trade in very small volumes.
We have a lot of discussion on the site about these types of securities–normally $50 and $100/shares issues and the commenting gets scattered about–by using this page we can keep this topic more centralized.
A caution to all investors, but in particular those will little experience in illiquid securities. Tight limits must be used on all of these securities–if you don’t use limits you will butchered. Also while some of these issues have been outstanding for more than 50 years they can still be called–it happens and if you overpay (pay more than liquidation price) you may be setting yourself up for a loss. Always do your own due diligence–always double check the facts–everyone makes errors (certainly I do) and you need to know the facts.
Investors should know that illiquid securities will drop like a rock if there is a large move higher in interest rates. One of my current and long time holdings has been a $50/share issue from CEF Tricontinental (TY-P or TY-) with a 5% coupon–very high quality. This issue is now trading around $56, but in its life (issued in 1963) it has traded as low at $18/share–so there should be no doubt they can move sharply.
Some current stripped yields, according to my googlesheet formulas:
1. AILLN 6.42% (77.00 ask).
2. UEPCN 6.30% (76.00 ask)
mbg, there is no activity on those illiquids. I was able to buy AILLP at 64.35, 6.21% yield.
I see AILLN now has some volume (233 shs).
I figure hitting the ask on UEPCN would trigger a trade.
I picked up some more AILLN to add to the (pig) pile, couldn’t pass it up!!
Also topped off some CTA-A (Corteva), ask is a bit below $54; ~6.52%
Picked up some CTA-B at $68.57 (6.56%). History shows it to have move upside potential than CTA-A. But, both are good solid buys.
I cannot be the only one who refuses to buy more CTA-x due to having a lower cost basis during the upheaval some time back. I realize it makes zero sense but I can be stubborn. A couple of dollars lower I would be interested again.
What I am open to is swaps between them to improve my yield but I have only done that once so far. Even doing that my cost basis is low. I also recall there was an SA article that caused one of them to spike in price? It was during that time I did the swap if I recall correctly.
Yes. It was an article. Here is the SA link. Good times.
https://seekingalpha.com/article/4756442-ctaprb-an-undervalued-investment-grade-opportunity-from-corteva#scroll_comments
fc, I have reached my limit with this one, lol. General rule for me is not to go over 1% of my total account value per security but have blown thru that limit for this one as I have roughly an equal amount of the A & B.
AILLN pays 4.90 per year. At a price of 77 I see that as a 6.36% yield. Not 6.42%. Honestly though that is not much of a difference. Just tossing it out there for accuracy’s sake. It’s price falls right in line with other reasonable deals lately.
One strategy to consider is giving up a tiny fraction of yield for that possible call one day out of the blue. So AILLP at 64 for 6.25% could be a better long term purchase for a possible future cap gain. We have seen stranger things happen with other ills right? Keep in mind it is peanuts for the UTE to call these raggedy old preferred.
fc, 6.42 was stripped yield as mentioned by mbg
Well.. almost time for some reading glasses here. I breezed right past that. Thanks.
and for me, almost time for some Prevagen … I forgot I’d said it was stripped yield and was all set to check my formula until I saw pig’s comment.