Let the Beatings Continue

Well the open today will be really lousy–down over 1000 points–futures are halted, but ETF trading continues and it looks like a 5-7% down open.

Yesterday I bought the Interstate Power and Light 5.1% (IPLDP) perpetual—the issue is now redeemable, but I paid only $24.90.

I sold a bit yesterday also – I want maximum cash levels when we hit the bottom (whenever this will be). As the days have gone by and purchases are made I have off loaded some perpetuals, although I don’t own too much of these. Essentially recycling cash to remain at high levels.

I had mentioned that on Tuesday I sold the little bit of Golar LNG 8.75% perpetual (GMLPP) I had–which was obviously a big mistake. Also I sold Brookfield Property REIT 6.375% (BPYUP) perpetual.

Income investors should be continuing to build shopping lists–but there is no way we are at the bottom yet–and there is a high probability that some preferred and baby bond issuers are going to have substantial financial pain through the balance of the year and may suspend dividends for a few quarters.

Here is a list of Lodging REIT preferreds–some of these companies may well suspend dividends later in the year—they are all cumulative and I might be a buyer at much lower levels–months from now. On the other hand I wouldn’t touch Sotherly or Ashford issues.

So the bottom line is I continue to watch and add the highest quality issues. I trim around the edges to keep high levels of cash.

Some investors should be doing some selling to the point that they can sleep at night—while others with very large stashes (more than they will ever need) will likely be holding and/or buying bargains–but the bottom line is we will continue to see better bargains in the future.

22 thoughts on “Let the Beatings Continue”

  1. selling nothing. Buying RNP…discount blew out to 12% yesterday, and should be higher today. Bought at 16.88. trade worked well last time the discount went this high with a bounce from 21 to 23.

    Also buying RLJ-A. Bought at 16.70. Looked at my biggest losers, and this stood out. Down 25% (!!) today. Common looks to be bottoming. Think the common dividend might be cut, but coverage for the preferred is quite good.

    1. WFC-V and WFC-Q both look interesting.
      So do the two Ford baby bonds (F-B and F-C, down 11% today to the $21.xx range), IG, and I would think Ford would pay consistently.

  2. The market is so bad even the best stock pickers of all time, Monkeys throwing darts, cant make any money today.

    1. Agreed. The country is poised for a complete shutdown. May happen within the week. What will happen to stocks when that happens?

  3. EPD is best of breed. The preferred it inherited in consolidation, ETP-E, has dropped to $14.. Was over $25 just last month. Now yielding 13% and not callable until 5/24. I am thinking about consolidating some losers from energy and hotels into it. Am I missing something?

  4. Here’s a few more that are getting thrown out with the bath water that I think present really good values today. In no particular order of preference: “C+S”, “FCIZP”, “SREA”, “WFC+V”, and if you have just a little bit of “courage” I still feel that “EPD” is well capitalized and will be able to make their payments. I spoke to their IR Mgr a few days ago and she assured me they have great cash flow and have never missed a payment, for what thats worth to you. Always remember this, its times like this that the really smart guys in the room make a boatload of MONEY. I also bought more “AAPL” today too but thats a common stock, not a preferred. The real question becomes just when do you need this money. If in the next 24 months then maybe you shouldn’t do anything.

  5. Super ugly today, remember, most of your sharp decline is a lack of liquidity, there are no bids for many preferreds and baby bonds. It does not mean that today they suddenly cannot pay divs/interest. It does not reflect intrinsic value. For example, Investcorp/CM Finance baby bonds are down $4+ on 900 shares traded and a bid ask of $21/$22.19. This does not reflect the reality that at maturity these bonds are almost certainly going to pay back $25 par. But if trying to sell your house today, it’s kind of like insisting on selling your house while in the midst of a live hurricane.

    1. Just bought APO-B @$24.00 even as it came off trading halt. Happy to hold this double IG issue for the duration at that price.

  6. HFT has compressed the time for moves that used to take months. It’s also changes the displayed liquidity and seems to generate larger moves on lower volume. Freaky.

  7. For my friends on this site you should maybe take a serious look at “WFC+Q” today. I bought 3,000 shares yesterday at $25.13. Its a Wells Fargo preferred with a 5.85% fixed coupon and not callable until 9/15/2023. Assuming that they are well capitalized and since WB owns an absolute boatload of the common I feel this is one of the better buys out there. Probably would qualify for your “SOCK DRAWER”. LOL

    1. Irish–only you can answer that question. I sold the 2 issues mentioned because they were the lowest quality I had (although Brookfield has a strong parent) and on the Golar issue while it may bounce back–it could go lower.

      Depending on your situation maybe you don’t want to sell–my sales are to keep cash levels high–I want to have plenty of dry powder to deploy on quality issues (or at the right level even non quality issues).

      On the other hand if your ‘stash’ is of such a importance to your lifestyle in the future you probably want to sell until you can sleep. In the end know that virtually all issues will survive and probably rise in the future.

      Remember that selling is simply a conversion of shares into cash–at the end of the day they are equal.

    2. As Tim said, it depends. What is the quality of the stocks you hold, what’s your asset allocation like and most importantly when do you need the money? Lower quality stocks/bonds could drop more and may take longer to recover or not at all if it’s a highly indebted company that goes under. So go through your portfolio and don’t focus on yield. Focus on the quality and see if you want to hold or sell. When this all started a month ago I went through and trimmed lower quality holdings but everything is getting killed regardless of quality. I’m down a bunch on several stock positions but I’m comfortable with the amount and quality of my holdings so I’ll continue to hold what I have and will look to add to these same holdings at some point but not yet.

      1. As Tim said, this is a “perfect storm”. Oil war + COVID-19. Our former respected NI-B last trade $24.85 with bid 5 x 24.75 vs ask 9 x $25.20 Day range: $21.29- $25.0. Bank preferreds from IG rated banks, presumably well capitalized are on the block for fire sale. Someone at Silicon reported that dividends increase was around 40% with October 2008 near financial collapse. I am glad that I sold just 200 shares of bank preferred to pay tax (glad that I can offset tax liability with too much estimated tax paid). Lots of panic selling. NI-B has just changed to bid $24.8 vs ask $24.81. Ridiculous IMHO. Almost 11 am EDT. GLD also down. Best place to keep cash is internet bank 1.6% Ally or slightly higher for some obscure names all insured by FDIC (still good) until the storm calms down.

      2. AKJ, I have mostly high quality issues and have no concerns of getting my dividend. But there is still a thing called mark to market. So with that being said, I will busy with my boards out back to build the woodshed that must be constructed for the beating behind it I must recieve.

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