As most of you know I am a really conservative investor–but even those with tolerance for more risk are forewarned to use caution around some of the new preferred issues and baby bonds of late.
We have seen most of the really poor quality issues of late get slaughtered–really slaughtered, and I suspect more will soon will be taking a trip to the slaughterhouse with the others.
Just looking over some of the new issues here is what I see going back on my new issues list (which can be found here).
Harbor Custom Development (HCDIP) 8% convertible is trading at $15.76. Sold on 6/1/2021. Underwriter ThinkEquity.
Cadiz Inc. 8.875% perpetual preferred (CDZIP) is trading at $19.03. Underwriter B Riley.
Soluna Holdings 9.00% perpetual preferred sold on 8/19/2021 now trading at $21.78. Underwriter Univest.
LifeMD 8.875% perpetual preferred (LFMDP) sold on 9/30/2021–now trading at $20.10. Underwriter B Riley.
ComSovereign Holdings (COMSP) 9.25% perpetual preferred sold 10/26/2021 now trading at $14.12. Underwriter The Benchmark Company.
I didn’t buy any of these issues–but some of them have great ‘stories’–i.e. Cadiz wants to pump water from wells in the desert and sell to southern California cities. It is a great story, but one which has been talked about by Cadiz for over 20 years.
In general the coupon alone should warn folks away, but we all want yield and sometimes it is tough to avoid these junky issues–but alas it is almost always better to be happy with 6.00% instead of stretching for high yield. As I said I haven’t bought any of these, but I did almost ‘buy in’ to one of the stories (I don’t remember which one it was)–we all like great stories, unfortunately these are mostly just that–stories.