Looking Around for Bargains

As everyone knows we have been holders of mostly term preferreds and baby bonds with shorter dated maturities.  This has served us fairly well in the last couple of years as interest rates have risen.  We had to give up coupons that were maybe 1% higher than we would like, but we most comfortable with the reduced volatility holding these shares bring with it.

We knew the time would come where one would have to start considering the purchase of higher coupons perpetuals (actually one never has to hold perpetuals if that is best for them) because interest rates discontinue moving sharply higher.  This time would appear to be now–or maybe in a couple of weeks.

Our intention is to move  into the perpetual issue area slowly–very slowly.  In fact early this week we bought a position in the CHSCN issue with a 7.1% coupon with a current yield of 7.05%.

For later in the month we are looking at a number of areas for potential buys.  We are looking at the high quality retail REITS–Kimco and National Retail.  Also we are looking at single family home owner REIT American Homes 4 Rent and all of the mortgage REITS (although with the current inverted yield curve these are riskier).  We are also looking at the various NuStar Energy high yield issues.  We would be looking at the high quality LNG ship owners, but we already own the recent new issue from GasLog Partners.  We consider the high quality LNG ship owners as decent holding for the next 2 years (after which many, many new builds come on stream).

No matter what we do we will do it slowly-very slowly.  Much of our buying will come from cash (money market) where we have dry powder parked.  We will continue to hold most of our conservative holdings–term preferreds etc.


62 thoughts on “Looking Around for Bargains”

  1. I thought preferred shares had fixed dividends, or is this a fixed to floating

    1. Gum,

      On or after 12/27/2018 distributions will be paid at an annual rate equal to the Three-Month LIBOR plus 7.151% provided that such rate shall not be less than the initial rate.

  2. Hunt Companies Finance Trust Pfs Shares Series A (NYSE:HCFT.PA) declares $0.2066/share monthly dividend, 13.3% increase from prior dividend of $0.1823.
    Forward yield 9.85%
    Payable Jan. 28; for shareholders of record Jan. 15; ex-div Jan. 14.
    Payable Feb. 27; for shareholders of record Feb. 15; ex-div Feb. 14.
    Payable March 27; for shareholders of record March 15; ex-div March 14.

    It’s the ex Five Oaks, (After 12/27/2018 dividend rate will change to 3 month libor plus 7.151%)

    1. Thanks Fabrib–that one looks interesting–like the monthly pay as well.

  3. Prior May, 2018 comment by Tim regarding KIM-M.

    “Hi Alpha – As I read on Seeking Alpha either authors or commentor’s have continuously talked about ‘call protection’—no one that owns these low coupon IG preferreds has to have a concern with call dates–they are what they are named ‘perpetual’.

    At this price these shares are tempting–but my own forecast of 3.25% on the 10 year by year end means these could be much tastier in December.”

    Much tastier now.

    1. Being $5 under par is pretty good call protection. Have to agree.

  4. If anyone needs help with the Canadian Issues you can contact me. I have
    most of the Enbridge issues in both Canadian and US funds.
    In the US I mainly buy baby bonds
    If anyone is interested the Canadian preferreds have been beaten to death so may be there is an interest. Also you are using US dollars so as of today you pay .33.5% discount in the exchange rate

  5. You guys are adventurous, good luck I bought a 3 year Wells Fargo CD paying 3.14% – monthly 🙂 That should be my first year of retirement so this will be my cash bucket for that year. I don’t think interest rates are done going up but I also think that the reaction since the ten year hit 3.25% shows that there is a definite ceiling on rates.

    1. timdman, I also purchased a 3yr CD today it’s paying 3.25%.
      Maybe the rate will go up a little more for a 3 yr CD if the Fed raises rates .25% on 12/19? I’m wondering if should buy a little more now or wait. I see the probability of an increase in Dec. went down to 70.6% today from 77.5% yesterday.

      1. I was watching but I’m ok with3.1. If you wait, you lose time when it could be earning. Oh for the days of 10% CDs (without 14% inflation though)

        1. Timdman, nothing to apologize for owning CDs. I just 2 weeks ago went to assist my dad and his wife in getting all their money in CD ladders through brokerage and out of managed accounts. They are happy and dont have to worry anymore.

          1. Just a heads up for everyone to get some dollars away from the crazy equity markets… UHaul Investors Club https://www.uhaulinvestorsclub.com/InvestmentOpportunities
            Has 30 year term: @7.75%
            U-Haul of Meriden
            284 E. Main St.
            Meriden, CT 06450 (though you could get some principle back in your payment stream) at 7.75% and/or
            12 year term @6.07%:
            U-Haul at Dunlap & I-17
            2701 W. Dunlap Ave
            Phoenix, AZ 85051
            Please do your own deep due diligence before investing any of your money. Wishing you profitable investing, Nomad

            1. Nomad, thanks for the reminder about U-Haul. I was able to take a look at the Meriden, CT property valuation. U-Haul is borrowing $238,000 against the property and the assessed value (per the City of Meriden) is $494,130. Did a little more research and generally speaking, CT requires property to be assessed at 70% of the fair market value of the property. I’m comfortable taking a small position in this loan even though my funds will be tied up for a long period of time. It’s my way of diversifying out of the volatile markets.

  6. I purchased more Ally-a to lower my position to $25.53. As long as they don’t call before next dividend date, my worst case is breakeven. As somebody previously posted they have determined what the dividend will be for next ex-dividend date, so I am gambling they do not call it before then. Very happy with 8%+ yield on an SIFI bank

  7. Tim,

    Thoughts on fixed to floating WFC – now below par and nearly 6% yield?

  8. Opened a new position on closed end fund,TPZ – Tortoise Power and Energy Infrastructure. Pays monthly and currently reflects a 12% discount to premium. May end up flipping, but would like to hold long term.

    1. Monk–hope it works out–maybe we will see OPEC help you get a good start.

  9. Sweet….Just bagged 200 shares of EBBNF at $17.93….I will gladly take that.

      1. Grid could definitely provide more detail but EBBNF is a preferred Enbridge Energy issue that trades OTC here in the US. Can’t trade it on Fidelity…big surprise…

        1. Retired, the world of the OTC grey market is a mystery. I think Vanguard must have access to some inventory on EBBNF. I will admit I put my 200 share bid in at $19. And it kicked me out the shares within 5 minutes at $17.93. Grey market issues do not have market makers so one just has to get lucky with what door is open there. If you have the wrong broker for wrong grey issue you can have a higher bid sit forever while shares are constantly selling below your bid price.

          1. Grid, you got the lowest price yesterday for EBBNF. It is a … current 6.91% yield. And if rates holds steady or go higher, the yield will go north of 8% on the reset day in four years. That was a good trade. Congrats.
            In the meantime, I found “Symbol Lookup” from TD Ameritrade
            In the search box just enter “Enbridge” and it will show all securities availabe for trading (including OTC)
            At least we can see OTC tickers EBBNF(ENB.PF.U on TSX) and ENBBF(ENB.PR.U on TSX)
            ENBBF(ENB.PR.U) is trading slightly lower (I guess due to reset rate a little bit lower 5 years US + 3.05% )

            1. LYR, I did take a beat down buying the second round, as my first round was $19.50 last week. I tell you I have lived a sheltered life in preferred ville. I have never owned a true preferred that has ever dropped a dollar on my watch until this one… But amazingly I dont care. Just glad I got more. I will sit on my present amount. Very glad to own them and owe you a thanks as you were the one that led me to the OTC grey ticker. I knew about them and had studied them before until I found out I had no access to buying them.
              I have tried fruitlessly in past to buy Emera’s, ERRAF, so I was surprised I could get EBBNF.
              Tim missed out on some of our conversations. And somehow he blamed me for finding this obscure issue. I dont know why he thinks I like those type of things, lol…But the facts are this one was your fault!!! 🙂

      2. Oh now you want to know…You havent been filtering all the conversions here, lol… Its an Enbridge preferred. This is a “knock off ticker” as it is a Canadian preferred. Issued in 2012. It currently is a live floater now. Its 5 year US treasury plus 3.15%. It resets every 5 years and will reset again in 2022. It stays fixed for 5 years off each resetand cant be redeemed except on reset date. The beauty of this issue is it reset off a 2017 lower point. At this price risk/reward on float structure is great since its live. Assuming viability of Enbridge of course.

        1. Grid, even my deep level 2 quotes can’t get a bid/offer on EBBNF. Do you mind sharing, what is the current yield, next EX date, are there Canadian taxes withheld etc etc etc Smile, Nomad

          1. Nomad its a grey market issue, so technically there is no market maker for the issue. That is why your level 2 shows nothing. Now mine from TD is showing a current 100 share bid of $18 but no ask. Generally there are no ask prices on OTC grey markets…Just “indications” which wont be posted until trade is confirmed.
            Go to CNBC quote site and it is there…They have chart action there also. It went exD Nov. 14. Pays quarterly at 30.99 cents a share. It resets in 2022 again. Here is a market watch link on it too. This is the series L issue if you look on Enbridge site.

            1. Gridbird:
              Is the EBBNF quarterly distribution rate of 0.3099/sh in Canadian dollars or US dollars?
              Is this QDI?
              In any case I assume would be subject to Canadian 15% withholding?

              1. Dave, It shows on US stock exchange 30.99 US cents quarterly. It has remained constant at that rate since it first float adjustment in 2017. It will remain as such until 2022. So this is the US payout. Remember its also pegged to the 5 year US treasury bill, not the Loonie. It is QDI, and to my understanding the 15% will be withheld from me since I bought in a taxable account. I will be able to use turbo tax to offset the withholding though to get it back. US/Canadian treaty allows for no withholding held in an IRA. But your brokerage has to do this correctly. I hear some do and some dont. But this is just chatter I read from US people owning Canadian issues, no personal experience. Sometimes people have had to yell at brokerage to do it correctly I have read. Looks like a few other people bought some it today.

                1. Looks like our replies crossed paths at roughly the same time.
                  I understand better now and thank you very much for bringing this one to our attention. I like the reset adjustment in November 2022. May help minimize the interest rate risk.

                  1. Dave the beauty of the issue is it was reset off US 5 year when it was around 1.80% last September. That is some nice cushion when bought around $18. Yes, they finished up fairly close, though EBBNF did come in a bit cheaper today. Usually there is a scalping going on, but that is the way it works when one doesnt have direct access to Canadian exchange, which I dont.

            2. Thank you for the background my friend. I had 2 seperate orders to initiate a position at $17.77 and then I raised to $18.07 with no luck. Vanguard was useless and ME actually got me a bid but said there was no offer both times I called. I added to a few positions today on nice dips like RLJ.A, ECCA and ECCX. I’m sure tax loss selling is not over and there will be other “bargains” that Mr Market will soon reveal. Stay Tuned, Nomad

              1. Nomad, I dont own RLJ-A, but Preferred Stock Trader from SA likes it. So in my mind that has to be a very solid purchase.

        2. Grid–not that I want any–but obviously the info available on the issue is near zip–just the kind you like.

          1. No Tim, there is a lot. I was trying to remember but in one of your posts last week a couple of us discussed it there quite a bit. I just cant remember which one it was…If you go to Enbridge website and look under investor relations, you will find their preferred link and see the preferreds. They also have an attached link to prospectus. The “real ticker” is ENB.PFU.CA. My preferreds on the surface look like their is little info, but its there…Sometimes I just have to go deep into the catacombs of SEC filings from many years ago to find it….But I do! Actually this issue is pretty liquid on Toronto exchange. About 10,000 shares daily volume on average the last I checked. Foriegn companies can assign some shares to be registered to be traded in US market. Enbridge assigned a few of these and the EBBNF ticker was assigned to it. Happens more than one thinks I believe Daimler and Nestle commons for example trade OTC over here the same way this issue does with depository reciept issues.

    1. Gridbird, My meager level of experience is showing. Having been unable to locate the 4245B for EBBNF either on Edgar or Enbridge Investor site, had to write the company to obtain the prospectus. Incredible how you dig these up. If introducing you; “Meet my friend Gridbird, in addition to other talents, he’s a Financial Geologist”. Thank you for the lead Gridbird, you are much appreciated.

      1. Alpha, the tricky part was knowing it was really a Canadian issue and then converting the OTC ticker to its true ticker. Once you had that Enbridge has a good investor site on their webpage that actually has the issues there and the prospectus to them. It becomes pretty easy once you are familiar with the goofiness of it.

      2. The company did file a registration statement on EBBNF but it wasn’t a 424 filing. I believe it was an amendment to an older N-2. It’s right there at sec.gov but very hard to find.

    1. Good to see some discussion of grown up bonds here, with CUSIP no less!

  10. Tim, I’ve been climbing the credit ladder with recent trades and still buying partial positions. That measured entry approach has been particularly valuable in my now nearly full position in long duration KTBA. LimitYourRisk and I should have many years of happy returns with this noncallable quality issue.

  11. I was probably going to anyways but I bought 200 more of NISOP at $24.72.
    I will consider my 600 shares a full position, whatever that means.

    1. Grid–seems like a good move to me. I bought a position but will hold a bit before reconsidering upping my position–perpetuals are still falling pretty substantially and as always I will take some shares a little cheaper.

      1. It could happen…If you catch a down market day, with a final blow out of underwriters tossing the rest out the door, you may get a decent bargain.

        1. Girdbird : Is there a set number of days that the underwriters have to get rid of all the issues? I am thinking 30 days but don’t recall if I actually read that somewhere or have dreamed it up on my own (wishful thinking)

          1. Steven, they have 30 days to list on NYSE. But usually its a couple weeks. The thing is with NISOP, is I am sure some institutional investors gobbled much of these 20 million shares on side deal purchases already. So I really doubt there are 20 million being pushed out. Many people dont realize just how rare and respected utility preferred issuances are….Real utilites, not fake ones… This is why the real men of the world were the underwriters on this issue…Not the piece of crap Ladenburg Thalmanns of the world.

  12. BC/PRB is now trading on Schwab, Fidelity, and Etrade. I am buying my initial allocation. Purchased some at $24.52

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