This selloff has been deeper and longer (in terms of the number of days) than I could have/would have thought it would be–that is obvious as I wouldn’t be holding a full position in GasLog Partners preferred (GLOP-C) if I would have known a downdraft was coming. While we have 7-8 perpetual preferreds they remain a small portion of our holdings–maybe 10%.
The good thing is that most of our holdings remain in short duration term preferreds, with a good chunk remaining in cash type investments (money markets) although term preferreds have begun to take ‘hits’ as well. Even the Kayne Anderson 3.50% term preferred (KYN-F) is trading under $25 at $24.86–we hold a massive number of shares in KYN-F, which will be redeemed 4/2020.
3 of our 4 investment accounts are now in the red–one is off 2%, and 2 others are off about 1%–we have 1 account which is up about 1%–disappointing, but not disastrous.
This is a good time (actually it was a good time a few weeks ago) for income investors to take inventory of their risk tolerance in these markets–as well as goals and needs. If you are a newer preferred stock or baby bond investor you likely have lost a chunk of money and as Bill Clinton said “I feel your pain”–we have all been there. Evaluate your needs in terms of returns, income etc. and invest accordingly. If you lay awake nights you need to lighten up a bit–at least now we have money market funds paying 2.25% (heading to 2.50%)-these options weren’t available 2 years ago when we had money markets paying .01%.
Our plan now is to hold what we have and probably NOT add anything new this week. We have our eyes on a number of issues in which we have begun some starter positions that we would like to add to, but we really need a bit of stability to add further–these issues are from CHS and American Homes 4 Rent issues (decent quality in mid 7% current yields) as well as some of the AAA rated AllianzGI issues for their safety–remember that in a rising rate environment these ultra safe issues will get hammered lower–but you will have the safety (from bankruptcy etc.) and income stream–this means you need to understand you ability to have net asset value erosion while maintaining an income stream.