Well we are heading into the weekend with very strong gains in the $25/share preferred stock and baby bond arena. After a strong December and a flattish January, big jumps in most sectors (not all) of the income issues have propelled us to a week which is up 12 cents in the overall $25/share marketplace with Banks up 21 cents and Investment Grade up 19 cents (through noon CST today).
Of course this means that anything I sold this week is now moving higher–oh well the story of a sellers life in the last few months.
I don’t track the shipping preferreds on this chart, but they are off a whopping 45 cents since last Friday. As some have discussed here the GasLog LTD (GLOG) and GasLog Partners (GLOP)issues have lead the way lower. Also there have been some ex-dividend dates playing into the lower prices.
Common stocks are down around 3/4% today in spite stellar employment numbers. Interest rates are in sync with the stock market and are off 6 basis point with the 10 year treasury trading at 1.58% right now.
A number of commentors have mentioned they believe, based on business experience, that the corona virus could turn out to be much worse than is currently reflected in the marketplace. I agree that there could well be something lurking out there which could depress GDP in the months ahead–BUT historically these have been a short term blip in markets–but we just don’t know and this is the problem. If we were to see a batch of confirmed cases in the U.S. (say a group of 50 or 100 cases) with social media and potential for ‘fake news’ there is no predicting where this could take markets–I have my eye on it, but really am not reacting in my investing in any way.
There has been some chatter on the website this week about some of the CLO (collateralized loan obligations) companies. This would include Oxford Lane, Eagle Point Credit, Priority Income, Oxford Square Credit, OFS credit and others. Many of these companies have term preferreds outstanding. I ran across a short article from 3 months ago that would be good to review if you are a newer investor to these securities. It is here.
Nice chart! From the more experienced preferred-ers in here, when, if ever, do you decide to sell if your mindset is longer-term income. I have built a nice portfolio of preferreds over the past year and a half that has crept upwards in principal value. I set the bar for me to not pay more than about 1% over the $25 level for the 25s and most have been purchased in the upper $24 to right at $25.00. Most are investment grade but I have a couple of outliers to add a bit of yield. And, most most at least 3-5 years from earliest possible call.
Anyway, most of these holding have gone to the $26.00-$26.50 level and it occurs to me that at some point I may want to take profit and add back at lower levels. Any words of wisdom here from those of you that have invested in these vehicles for the long term???
Yaz, I have to have a specific reason or a better value in mind for me to sell. For example:
I recently sold 2/3 of my SLMNP because I was waaaaaaaaay overweight and it’s a foreign chemical company, not a US ute.
I also replaced a lot of my BAC-L with ute pfds when BAC-L got way up there. It’s since come down a bit, so it’s still on my radar.
FWIW, I listened when Grid said he needed to ramp up his ute holdings because they don’t call it ‘utilityrupt.’
And now I too feel safer with what I’m holding and that’s the key for me: safe and steady, boring even.
JMO
Yes – thanks camroc – sorta my mindset as well…. SWAN while bring in some decent yield
“Utilityrupt”, I like that.
Bob, I just got a phone call from a Vanguard rep informing me about the OTC preferred changes. I guess they saw what I own in there and figured they better warn me. Or maybe they notice I never check my brokerage sent emails, ha.
What’s everybody’s take on Arbitrage Traders comments on current preferred market at seeking alpha? He sees, if I read, it right, no alpha in any preferreds here.
I really respect his analysis……but wasn’t he 100% out of the market 2019 too?
If You Prefer, He has been saying that for months. He looks for pricing imbalances between issues. So his investing criteria is a bit different than most. I agree he is a good honorable guy. But we all have moaned about high prices largely for 3 years. But moaning and buying anyways has always been the successful pain trade.
But as you know it gets to a point where sitting out isnt really that costly on relative terms with some of these preferred issuances. Im not sitting out though. Any time a yield increase sniff has occurred past 10 years it has been beaten down quickly. Tomorrow, who knows….
Haha exactly!!
He and his team are traders. They are in and out of investments.
In the last 2 months I have only bought 1 U.S. issue which I consider a long term hold. Everything else has been an exchange, a flip, or some other short term move. And I’m by nature buy-and-hold.
So, I agree with AT. I’m not yet willing to accept 4% as the new normal.
Nearly unbelievable gains when you consider the chart covers just a 10 week period! I’ve done so well since the beginning of December and I don’t want to see my gains evaporate. What to do now?
Check out performance of the premier Preferred active ETF – FFC
https://finviz.com/quote.ashx?t=ffc&ty=c&ta=1&p=d
Up 4.47% 1month, 14.05% 6-month and over 22% in a year.
I used to own a big chunk of it but sold 5% ago, thinking how much higher can it go! Guess, good to have got 15%+ in a year
I own the sister fund, FLC. Performance of both funds has been outstanding over the last 6 months. I sold 60% of mine at $23.50, and have been waiting for a pull back to rebuy. JPS is another preferred fund that has very good performance. Both funds use approximately 33% leverage, so let the buyer beware.
FFC and FLC are not actually ETFs, they are CEFs. Check gains on NAV rather than price for a more accurate picture (they are still great).
I would describe both FFC and FLC as high risk holdings right now. The underlying assets are very richly priced and the premia to NAV for these two CEFs are close to 3-year highs. Not an entry point for new money.
Just when you think they can’t go much higher! Even today, there is zero fear out there in credit land.