Mid Day Ramblings

All is good and kind of quiet in the interest rate markets today.  The 10 year is hanging around 3% without significant movements–this is good–we always love calm.

Today we added more shares of Spark Energy 8.75% fixed-to-floating  preferred to our personal holdings.  Again the sellers are out in force which kind of mystifies us–but we have now averaged down to a cost of $24/share.  The common shares have done well and the company has already declared dividends on the common and preferred for next quarter.  Obviously we could be wrong, but we think we will be right–eventually, but in the end the market is the market and we won’t buy more to add to our position after this latest add.  Sometimes stocks go down–there doesn’t have to be a good reason.  In this case we think a few big seller knocked it down and now we have to work our way back up.

The average preferred and baby bond is up 1 cent today so really quiet.

There are a number of new issues starting to trade (mostly baby bonds) and we hope to review those tonight.


40 thoughts on “Mid Day Ramblings”

  1. I hopped out at like $25.60 ish before the last interest payment. They cut their divy, which was a giant axe swing, and they are buying out their general partner to remove some incentive costs. Maybe you guys are sitting on a gold mine, but I’m sitting on the sidelines. I got probably 3 interest payments, and no loss of capital. Maybe they will turn things around, but I’ll watch. There are more interesting boring options out there.

    1. They are still listed as a small cap. If it was much larger, then maybe I would stick with you guys. Larger cap companies tend to ride through the waves.

    2. I have swing traded it a few times but only for small (real small) cap gains. Allowing for the time distance of how far away it is from exD, NSS jas largely been range bound since Oct. Unless finances deteriorate, it probably cant move much from par and that $25.60 ceiling from call risk.

  2. NSS keep in mind that those notes are subordinated which makes them sort of “Senior Preferred” without the risk of a dividend suspension.

    “NuStar Logistics’ subordinated notes and NuStar Energy’s preferred units are rated B1, two notches below the Ba2 CFR, reflecting their respective contractual and structural subordination to NuStar Logistics’ debt obligations.” – Moodys

    Moodys “Loss Given Default” rating for both preferred stock & NSS is LGD6 (99%), meaning 99% loss in the case of default.

    I own NSS but understand that the benefit of ownership is a nice yield while standing in front of the preferred, price preservation and likelihood of eventual call which limits being around for a default (which I deem very unlikely in the near to intermediate term).

    1. HI Blue–I think that most of the folks owning NSS understand (at least the ones I know of) – to a large degree – that there is some risk in the issue, but thank you for the detail which helps the ‘color’ for those that are tempted to buy believing there is no risk.

      1. Here is a bit of good news on NuStar nannies:

        • NuStar Energy (NYSE:NS) had its price target raised by analysts at Barclays from $22.00 to $23.00. They now have an “equal weight” rating on the stock. 6.7% upside from the current price of $21.55.

        • NuStar GP (NYSE:NSH) had its price target raised by analysts at Barclays from $12.00 to $13.00. They now have an “equal weight” rating on the stock. 10.5% upside from the current price of $11.76.

    2. Well stated, Blue, and exactly all the reasons I own. FWIW, my “line in the sand” going forward to continually holding is to watch the interest coverage ratio. If it follows managments guidance for 2018-19, I will continue to hold. It it doesnt start to improve by end of year, I will believe management to be spinning another tall tale again. I also will allow another preferred equity raise since Moodys and indirectly management have already stated as such to plug the negative cash flow from cap ex.

  3. Richard… I don’t think Tim “pushes” anything! or has ever.. he lays out the facts, discloses his position and YOU decide buy or sell.. as is fully disclosed in all his comments and both websites these many helpful years.

    (oh and of course I am with Fidelity.. so I miss some of the good trade ideas in my IRAs too.. oh well.. )

    1. Oh, I was not referring to Tim. Didn’t mean to make it look like I was. I was referring to some of the authors on Seeking Alpha who are constant cheerleaders for some issues. Tim’s work is above reproach. I don’t always agree with his picks but I respect his point of view on everything. No cheerleading on this site, just well informed opinions.

      1. No problem Richard. I do buy some clunkers on occasion but we all learn together. If you don’t agree that is just fine–none of us right all the time.

    2. Thanks Bea–I do get a bit overly ambitious occasionally but “to each his own”–we all learn together.

      1. sure/ sorry Richard.. guess I am getting overly sensitive.. I migrated from yahoo msg boards to sa several years ago because the y boards were getting snipey and rude.. less investing discussions and more personal attacks..

        the sa comment sections have gotten nasty-especially since the election- and it is really getting so off topic in the comments.. even prominent contributors put rude comments in other contributors comment sections.. one prolific reit author is great for this!

        and for this, they want you to pay $600/yr to access old articles and comments now! best to all in your investing!

        1. Agreed, Bea – I miss the good ole’ days on SA, before the proliferation of pump and dump and political stupidity. I’d rather message with you all here any day!

  4. Tim, we look like geniuses! SPKEP is up over 60 cents a tit from where I added yesterday. THANK YOU for helping me prop it back up after it plummeted. The whole market should be thanking us for what we did ourselves!!! 😉

    Also, added more NSS today. Loving the sale price and that LIBOR influence…

    1. Hi GW–yes that is a refreshing move—we’d be more geniuses if we would have backed the truck up–oh well I am in the green with my average price and I have recd 1 55 cent dividend already.

      I will probably be back in NSS Monday–my Arbor money hit the Fidelity acct, but not the eTrade acct yet.

      1. SPKEP losing some of those gains now, but still up nicely.

        Question for you about the GAIN mopayer’s. I saw that you were holding these in both personal and model port’s. Are you still a believer in them? GAINO and GAINM as well as GLADN and LANDP…

        Thanks for your thoughts…

        1. What a clunker–oh well we’ll get them next week.

          Relative to GAIN I am holding, but haven’t looked at the company financials etc for quite a while. Unfortunately I get a bit too comfortable on occasion–and shouldn’t. I do have a fair amount of trust in David Gladstone. I don’t buy the Gladstone Commercial preferreds as they are regular preferreds and I only do the term preferreds.

          1. Tim,

            The financials on GAIN actually look pretty good.
            For the past 3-4 years straight, gross profit has increased each year (Year over year)…
            Also, same goes for operating income.
            SG&A expenses are growing like a weed on steroids…
            Net income is a bit lumpy but overall, definitely on the positive side of the ledger.

  5. Grid… I think I’ll pass on WHL and RAS preferreds. I’d like to keep a little retirement money. I seem to be pretty good at losing money at times but that’s really asking to much 🙂

  6. I previously had a position in the Spark Preferred but sold it months ago. Bought it when it traded on the OTC board before it listed on it’s primary exchange. Wish I could have picked up some today but like all Fixed to Float issues, Fidelity won’t allow online trades in my IRA in these types of issues once they are listed on their primary exchange. Fixed to Float issues are not the only income securities that I can’t purchase at Fidelity. A security such as SAB and many others like it are also off limits. A real drawback of managing an IRA account at Fidelity.

    1. Hi Richard–yes we have 1 Fidelity account–which unfortunately unsually has too big of a cash position because of their policies. Of course we have 2 eTrade accounts and those remain fully invested.

      1. I’ve been very happy with Merrill Edge and enjoying the 100 free trades per month for years. I think they’d let me buy groceries if I gave them a list. Never had an issue buying anything – but for some items that trade thinly or on odd exchanges, they do have you use a fob that generates a security code number.

        1. I’ll have to check out Merrill Edge. I’m pretty sure that Grid…is correct in that I could call and have the order placed by a rep but what a hassle! I once did an online chat with a Fidelity rep and they gave me the run around about a trade that was unavailable. The excuse was the issue was thinly traded but that doesn’t hold water for all issues that are on the “restrictive” list and some of the issues that I can buy rarely trade at all. If you want to buy CTWSP no problem but any fixed to float that trades 30,000 a day is a no go. LOL!

          1. Now that is a nanny state! But hey you can load up on all the “low risk” Wheeler and Rait common stock no problem! TradeKing will only allow you up to $9999 in Pink Sheets. But you can either call them to override, or break it down into multiple 10k purchases though.

          2. You’d be happy with them, I bet. You’d get up to $600 cash for each type of account you bring over to them and depending on your amounts deposited, you get from 30 to 100 free trades per month – but you can find out all the particulars on their website. I’ve saved thousands in fees just with that one perk. I went thru at least 3 other brokerages over the years and they are the best without a question IMHO.

            They also allow you to DRIP divvies on just about everything and don’t charge when you reinvest, meaning, it doesn’t come out of your allotted free trades each month.

    2. That is so odd you cant purchase them. If you called desk, I wonder if they would manually do it for you? I have had several that were blocked online, but I called in and they did it for me. Speaking of fixed to float, I went back one last time for another bite of the NSS apple. Added 400 shares so I am oversized here. Earnings call today was good enough. The danger here is loving the process more than the product. I wish every issue was Libor plus 6.73%, near par, debt, and past call…..

      1. Again? Grid… you were fighting going in for more NSS pretty hard. What did you hear on the call that made you feel comfortable going to the promise land again?

        1. Well, GW, they really arent in a position to call it. But the market has to respect it. If Libor keeps rising then it could force their hand though. But I suspect their first goal is getting their interest coverage ratio down first. Im really focused on price support now, more than finding price appreciation. Which means I appear to be trying to buy into calls….Except I hope they linger on… When you have a considerable amount of owns money tied up into these 4 issues….WFC-J, BGCA, NSS, and AILLL, it gives off the impression of one being a call suicide preferred call kamikaze. But latter wont, and the formers arent that far over par allowing for accruel. Ol WFC-J just keeps creeping up daily, now.

          1. I’m going to try and snag WFC-J after the next divvy is paid and it drops. It’s just not dropping that much, though.

      2. I may go back in on NSS–I held it for year but sold a month ago (or something like that–after the last ex date).

        Talk about owning something bigly–I have 1400 ABRN and all the cash comes home in the redemption tomorrow. I NEVER take a position this big–just this one time. Buckets of cash to find a home for.

        1. At least Tim, you have had over a month to endure the grieving process. I ripped the bandaide off the wound and sold the day the call leaked out.

        2. Tim, reading the conference call transcript, it is very apparent NSS is going nowhere… As they mentioned it in Q&A reiterating this debt issue is getting to be counted as equity to maintain covenant compliance…Ah…The magic of accounting….As long as everyone agrees to change the rules and are in agreement, anything goes! Clearly they need this and will well until 2019 minimum. As Moodys already said a few months ago they hinted strongly at another round of preferred equity for their cap ex needs this year either through public or private means. So owning NSS will keep ones rear end sitting above even more preferred equity…I like that for a worst case scenerio. Plus debt always just trades stronger and the past call assists in price support too.

      3. Grid–Maybe you should get some “fake utilities” like the Spark issue (SPKEP).

        1. Tim the only money I would use to buy that fake utility preferred, is with the money of the preferred I bought that now issues a fake dividend…PCG-A! 🙂

      4. NSS ? I tried to get that one a few months ago and…restrictive from online trades also. Refuse to bend to having to call the trading desk to do so. My stubbornness has probably cost me $, lol. I really need to move to another brokerage.

        By the way. Tim’s site is one of my favorites. I’ve never really posted much in the way of comments but I followed Tim on his old site and I’m sure glad to have found him again. Same goes for you Grid… Love reading your comments. You have a way of looking at issues I hadn’t thought of. Makes me think. You should publish on SA. You’d have a lot of followers.

        1. Richard, I think they would turn on me when asked why I dont like SPKEP. Providing such insight as “I dont buy fake utilities” might not bring many followers…..Or…Why wont you buy BDCs?… Because I dont want a separate middle man who could cook the books in addition to the company they invested in could also be doing some separate cooking also, lol.
          But when a company strikes my interest I try to dig as deep as I can to understand. The trouble is I dont like to do it often. And even then I am heavily relying on other sources to help me. I understand all the numbers, but not necessarily how they all correspond together.

          1. 🙂 Always look for your comments because as I said; you make me rethink what the author is pushing. Keep commenting.

            As for your “fake utility” and “fake dividend”: Very funny! Don’t look at your PCG-A dividend in that way. You’ll get all those suspended dividends someday, right? Well…maybe! Didn’t they declare bankruptcy back in 2001 ? I can’t believe this issue still trades near par. Boggles the mind.

  7. I like the call, Tim. I also own it and averaged down. Major activity in the name today, that’s for sure. Yesterday or the day before, somebody bought 100K of the common shares in one swipe and sent the common soaring.
    They have hired JPM Chase to review strategic alternatives, so they are looking to merge or be bought out.

    1. I agree GW. I said I wasn’t going to buy more but I may–see what moves me. This a ridiculous price. The have earnings coming up soon I think so we may have new news.

    2. CFRA (S&P) rates them a STRONG BUY and the numbers are heading in the right direction with regards to revenue and EPS.

      I added a small lot right at the end of the day at 23.55. Still 2 months away from ex-date.

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