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.