Recent Buys and Sells

We wanted to quickly highlight some recent buying and selling activity on our part.

On a personal level, and as we reported here, we bought and then sold the new Global Partners 9.75% fixed-to-floating preferred (NYSE:GLP-A) which we had bought on the OTC Grey market during the IPO.  We had purchased these shares at $24.82 and as it rose by darned near a dollar in the next 10 days a Good Til Cancelled sell order was submitted at $25.90.  In this case we would have moved the GTC a bit higher, but we were vacationing on an island in Lake Superior and had darned little cell coverage and the issue hit our mark.  We had believed the sell could have been too early as the share price continued to rise to $26.25, but it has now settled back to $25.90’s.  If the issue would settle down by 25 cents from here we would be tempted to get back in the issue.  We actually think the current share price is primarily a result of the issue being priced incorrectly and that with dividend accrual over the next 2 months we could see a share price of $26.60 prior to ex-dividend date around November 1.

Additionally we picked up a larger position in the new Gladstone Investment 6.375% term preferred (NASDAQ:GAINL) with an initial purchase of 500 shares at $24.70 and a 300 share add on to our position at $25.10.  Needless to say the current share price of $25.38 is very pleasing to us–although we were more pleased that this issue ever sold for $24.70.

Lastly we made a modest purchase of the new Saratoga Investment 6.25% baby bond (NYSE:SAF).  We had to pay $24.98 for these shares, which was a bit higher than we anticipated, but obviously there was good demand as shares have now raced to $25.27.  Note that we will be adding 200 shares at $24.98 to the Medium Duration Income Portfolio (not added yet).

Further portfolio changes (models and personal) were the loss of the Gladstone Investment 6.50% and 6.75% issues to redemption and we had chosen to sell the 6.25% (GAINM) issue (after capturing the August dividend) as we believe it will be announced for redemption next month.

Obviously with the large positions we held in the Gladstone Investment issues we are left with a large personal cash position which we will need to deploy soon–always a challenge.

10 thoughts on “Recent Buys and Sells”

  1. Thanks for the update, Tim. While lower yield, these new issues are still very attractive for what we have to pick from at the moment.

    I’m holding onto my GLP-A, GAINO, GAINL, GAINM, GAINN, and the new SAF.

    GLTA

    1. Hi G–of course your GAINO and GAINN will be gone after today but the GAINM has only a minor risk of about a dime today. Can’t argue with your others—yes all things considered (maturity dates etc) I agree with your holdings.

  2. I’m not sure who is buying these preferreds for a premium a month after they IPO. I’m guessing it’s the ETFs like PFF?

    I’m not complaining

    1. Jacob–I’m not complaining either–thats for sure–August has been the best month I have had in a long time.

    2. Jacob

      I’m also confused about who is buying. I don’t think its PFF. My understanding is that PFF tracks an index, and that a preferred has to show some volume for a period of time before being added to the index. So I suspect managed funds are buying.

    1. Ruth, I think a preliminary question has to be asked. Do you have a full understanding of mandatory conversion preferreds in relation to how they are converted and at what price in relation to the common price, conversion details, and relationship to all of that in terms of buying at todays quoted price for FTV-A?

    2. Ruth – if you like the stock, buy the stock. Buying a mandatory convert is just a delayed stock purchase at an uncertain price. All while getting a below-market interest rate in the interim.

      If you’re looking for investment grade fixed income with this kind of tenor, you have lot’s of options. FTC itself has 8 fixed income issues outstanding, with terms from 1 – 25+ years.

      Unless you are very good at Black-Scholes option theory stay away from securities with complex imbedded options. Even then, I don’t like mandatory converts.

      1. Bob, I agree. I see these mandatory convertibles go bad especially bought without knowing what is going on totally. And like you said, really its just a play on the common and you need to believe in the common, so just buying the common would make sense. If there was some backside put on these types of issues it would be different, but they rarely have them and par largely becomes irrelevant. See generally see mandatory convertibles as a yield tease, that trades it baked in. I want a backside put protection or cash redemption put to ever be interested in a convertible, unless its some type of busted convertible where the true yield of the busted is alluring.

  3. Thank you for the Fortive advice. I did buy some at par and it’s gone up quite a bit so will probably flip. My understanding of this mandatory conversion is how Bob In DE describes it, so I don’t know why it’s climbed high so fast. I guess the market likes the spinoff.

Comments are closed.