Little Buying and Little Selling

Just a note on a few of the buys and sells I have done lately.

I sold some of my Tri-Continental 5% $50/shares preferred. I held 300 shares for years and this time as it trades up around $57.50 (and sometimes $58.40) I decided to ‘lighten up’. This issue has been outstanding since 1963 and likely will continue to remain outstanding, but with a call price of $55/share I decided to let some go–I am open to re-buying down around the call price.

I sold a 1/2 position of the Wesbanco 6.75% fixed-rate reset preferred which was a new issue from 8/4. I bought it for $25.50 and sold for $26.25. I am not buying any of these small bank issues to ‘hold’–just to flip.

I bought a full position of the new Federal Agricultural Mortgages 5.25% non cumulative preferred at $25.11 a day or two after it was issued. I see it trading at $25.58–think I will hold this position unless it goes totally crazy.

Lastly, I added a couple hundred shares of the Highland Income Fund 5.375% preferred (HFRO-A) at $24.86. While I am not thrilled with the Highland Income Fund (HFRO) as long as it is strongly investment grade (A1 from Moodys) and their asset coverage ratio remains reasonable good – 276% as of 12/31/2019 I will hold it as I can’t get investment grade issues with current yields of 5.40-5.50%.

6 thoughts on “Little Buying and Little Selling”

  1. I keep my powder dry because I don’t believe in the viability of today’s prices. Sold most of the utilities, most of my Canadian prefs and now I’m 15% up YTD and absolutely happy with my cash. I have exceeded my target for this year 1 1/2 times so now I can relax and simply wait for the next pullback.
    I want to say that I like investing in prefs more than in commons. There is practically no problem with finding an exit point.

    1. Yuriy, I am up that amount also, maybe a smidge more. I dont blame you at all for what you are doing. I have considered this myself, as my yearly goal is 10%. But other than a few days at a time, with failure to follow through, I have been near 100% invested and just keep the pedal to the medal and adjust the issues owned. They just keep melting north even with less trading lately. Personally, I can appreciate your logic and discipline!

      1. I’m not very good at timing the market, so at levels like today I probably would just get a nervous breakdown if I was 100% (or so) invested.
        I started investing in 1998 and very quickly went through maximum euphoria and almost complete collapse. After that, I became more cautious and was able to go through 2008 with minimal losses (which I did not expect either, and in many ways it was just luck).
        After 2008, I was finally convinced that there is nothing better than cash for me, and I try to never reduce its share below 20% of the portfolio. Usually I am in cash at 30-35% (now about 40%).
        Maybe I’m just a paranoid of course, lol, but so far, this strategy has worked reasonably for me. I am not overly nervous and am getting perhaps not so huge but steady annual capital gains and collect my divies )))

  2. The thing that keeps me away from HFRO-A is that 36% of HFRO is in Creek Pine Holdings which is a fund that’s affiliated with HFRO/Nexpoint/Dondero. It’s probably very difficult to come up with a fair value for Creek Pine and I don’t doubt that Dondero is inflating the value of that asset. Probably reason to mark down that asset by 50% or more from where they carry it on the books. That decreases coverage significantly. And who knows what kind of leverage Creek Pine is using and whether Dondero has shoveled his zombie companies into there. There’s a reason HFRO trades at a 30-40% discount to NAV. Maybe 50% isn’t enough of a haircut for Creek Pine.

    I’d rather roll the dice with some past call CEF preferreds trading above par. CEFs are historically very slow to call preferreds. Yeah, you’re taking some call risk but there’s risk with everything.

    1. Landlord–that is exactly why I am kind of leery–and just taking a tiny bite of the preferred.

  3. Nothing to argue with, especially AGM. I got in for only a couple hundred before the price ran away. I had planned to sell an equal number of “D” shares but I’m keeping them all for now.

    5.25% may seem meager but keep an eye on the 424s and FWPs on new issues at the SEC. Lots of stuff going out the door in the 0-2% range. Yes, there was an issue that went off with a zero coupon.

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