Sock Drawer Discussion

The intent of this area is to include items that all of us consider “sock drawer” holdings.

My definition of “sock drawer” is those issues I own that I consider extremely safe and don’t have to be watched to closely. Normally they would have more modest coupons, but you can sleep well at night (relative to safety)–you know the income stream is extremely safe, althought the share price may move around quite a bit.

Others may have their own definition–in fact I know they do–that is fine

For instance, I have held the Tricontinental 5.00% preferred (TY- or TY-P) issue for years and years. Tricontinental is a closed end fund managed by Columbia Threadneedle. TY was formed in 1929 and this small amount of preferred stock is the only leverage the fund uses–2.2% leverage. Because it is a CEF they must maintain a 200% asset coverage on the preferred stock–the last time I calculated the coverage it was over 4000%. This is a $50/share issue and last traded at $54.66. The issue is callable anytime at $55/share. Shares were issued in 1963.

191 thoughts on “Sock Drawer Discussion”

  1. I was just looking at my small collection of KTBA today thinking… I miss when I could buy this.

  2. I offer what could be the most eclectic mix of “sock drawer” holdings:

    1. How about calling it the lottery drawer? I’m in… I’ll skip lunch for a day and put that $ towards that for sure.

      1. Mr. Conservative – even sock drawer issues (at least mine) can be sold, but it would take a semi major event for that to happen.

        1. I have a few true “sock drawer” issues, but I am also weak willed for most of my sock drawer stuff.
          I keep putting things in that I want keep in the drawer but then someone will offer me a high price for them, and I will give in and sell (and hope I can repurchase at a reasonable price).

          1. Private – sometimes they ‘force’ you to sell I guess. Some issues I have had for a few years now–were down a bunch and now back where I want them – guess that is why I bought them

            1. To me, I might as well rename my sock drawer the Ron Popeil drawer. To make it into the drawer it has to have characteristics where I believe I can “set it and forget it,” and concentrate on the investments outside the drawer lying around the floor next to my other clothes, not my socks.

    2. Clayton–you are off into the weeds a bit with these. NLY? Goes to show we all define these things differently.

      1. Indeed Tim (see my prior comment). He didnt read your 2nd paragraph. These are all over the place and with nothing in common. Robinhood or Reddit recommended. The new generation is not putting forth the effort in research and want to read on their phone where $$ and conversations are going. I had to sit my kids down and explain to them this is a bad idea. So that is why I want to work on slicing. I setup a fund, decide the categories to create diversity. Then pick the top holdings in each area and decide %’s on where it will get disbursed. All they got to do is put in money.

        The opportunities for our generation will be great in the next several years as it seems everyone is dumping money into large 401k funds and we might see some amazing swings at end of month as this becomes the norm.
        I believe a good example is the billionaire from MN. He is giving away his fortune to several charitable companies (i cant remember if this is just the land or his investments as well). I am guessing he had a private wealth manager, and this might change.

        1. Thank you Tim and Mr. C. I greatly appreciate your comments, as I liked evoking a chuckle.
          I certainly read Tim’s second paragraph, and as for nothing in common, that’s the point. Yup, I do have a different definition. Even with ME, they still generate 9%. I’m 76, not the younger generation. I trade covered calls and uncovered puts, and currently have about 75% in CD’s @ 5.5%-5.92%, real estate, and gold.
          Hiding in the weeds, Clayton

          1. I salute you Clayton. You definitely got a chuckle from me and have big balls.
            I am glad that you are adding a ton of spice to your portfolio and limiting it to 25%. Just curious why you havent put that spice more towards high yield BDC’s? ex. main, bxsl, arcc, gbdc, tslx, tcpc for some yield boost with lower risk BDC’s and yet avoiding the penny stocks? Is it simply going for the home run and not just 7-15% ?

            1. Tim,
              I guess I got Religion and converted. Like 2WR, I have the TY-P and am down on it. But I am not interested in more or I would have a GTC lowball bid out there. I want diversity. So a little SOCGP, CHSCL, SCE-PL
              All these I don’t even bother to look at. Don’t care what they do, just collect the 5 or 6% and then I balance with some higher risk 7 & 8% preferred.

              1. Charles – Just sit tight with it. If rates look like they are going to scream higher get rid of it.

          2. After some months have passed should I conclude ME was not a very good investment? I am not even sure how it got mentioned on this area of the site as it was a common stock that paid no div that I could see. Covered call possibilities sure did not last very long. What was the point of this suggestion except to make me type this post out?

  3. Someone appears to be selling some UEPEP – the old sock drawer, low volume Union Electric preferred. Picked up a couple hundred shares today at 70.32 which is a yield just below 6.5%. Researching a bit I found it has made every quarterly dividend payment since 1972. I’m comfortable putting this one in the drawer.

    1. Retired, since you brought it up, yes I have bought Friday and today. . Its just part of my plan moving things around to own these. Its not a screaming bargain here compared to others of its ilk. Its just that there has been a dedicated seller around this price point past couple days making buys easy without fighting wide B/A. BTW it was issued in 1963 and never has missed a payment. I pay them my monthly electric bill so it helps to get a divi rebated back to me, ha. Looks like seller left as bid finally went back to $71 after being at $70.50 and below for almost a week.

      1. Grid, I sort of remembered you stating it had been around longer than 1972 but that is as far back as I could find any confirmation on dividends. Sixty years of dividends back to 1963 is even better than 51 years back to 1972. As I indicated, I’m happy to put this in the drawer, take my 6.5%, and forget about it.

        1. Retired, some of their preferreds are over 80 years old. Might have been used to pay off the Bagnell Dam built in the ‘30s, who knows. They will pay that is no problem, unless of course Callaway blows up and creates a Chernobyl disaster which I am not losing sleep over. Of course being on the pink sheets its a close step away from SEC monkeying with regs to cause trading issues, in addition to what ever market forces exert themselves on to every other fixed perpetual.

  4. It has been a couple of months since this section was used. I was dwelling on what might be a sock drawer purchase right now. I thought users here might be able to narrow down a few candidates to consider.

    I will offer up MET-E. 5.625% coupon. Current price is approx 23.75. Call date is 6/15/23 but when buying that far under par is not really a huge concern. Baa2/BBB rating. 5.93% if you bought today. It is QDI.

    Goals were trying to find something that is not a bank or a utility. Yes it is an insurance company but at least it is a different sector from many choices we discussed in the past. High quality CEFs are available with a similar yield but often not 100% QDI.

    Can someone suggest something even better to add to the sock drawer? I currently own some MET-E but was thinking to add or perhaps start a new position with some ideas tossed around here.

    1. fc i was looking at hfro-a according to QOL A1 Moodys trading today around 18.70-19 which is about 7%

      1. qx, HFRO has had a lot of drama over the last few years. There is a good article sorta summarizing it on SA. They are heavy into real estate it appears. I currently own it but not adding. I am not sure I am comfortable calling it sock drawer material compared to a CEF like GDV-H as an example. Obviously the yield is quite different between the two for the sleep well at night safety GDV offers compared to soap opera HFRO.

        1. fc thanks for the input, certainly see your point. I currently have 300@18.92. Probably won’t be adding. Maybe somebody will add an idea or two?

          1. I don’t know what you should do – and I don’t give that kind of advice.

            Off the top of my head, here are a few that I hold long term:

            In a taxable account, EPD. Currently pays about 7.5%. Solid and dependable. Issues a K-1, so it takes 3 extra minutes at tax time.

            MMP was also good, but it looks like it is being acquired by OneOK, which (IIRC) is a C-corp that issues a 1099. I need to do some digging on that one

            LBRDP is a hold for me.

            I had been holding Visa since IPO and Exxon (some for a decade, the rest since for only a couple of years) but I am selling some of those slowly as their prices hit multi-year highs (my gain in them is huge, so I am trying to match sales to tax loss sales).

            I also keep some of the big miners – RIO, BHP, WDS. Watch your entry points, then just let them roll.

            I also have some long term, lightly traded bonds, but you have to watch and pick things like that up opportunistically.

            My problem is that I will flip just about anything when the prices get high enough, so only my MLPs are not flippable (too much tax work to do partial sales/buyandsell/etc.

            1. Private,

              I already own epd, et, mmp, and mplx. I own lbrdp. I own V and MA. I don’t own mining stocks but have a fair amount of physical.

              But there is something nice about finding a preferred share that pays a decent yield you can count on and forget about. Assuming the preferred has a decent yield above IG bonds, stocks, etc.

              An uncallable 7% QDI yield for example from a ridiculously stable business just sounds about perfect. Not there yet but 6% is in our sights right now in a lot of cases. I think we are getting to the point we may have to start considering our options as these possible sock drawer candidates potentially pop over 6% ish soon.

        2. fc–last time I looked at hfro they had a huge concentration in a timber trust in addition to the drama you mentioned–I am going to take another look at it.

    2. I bought a little MET-E at 5.97%, thanks. I really do have a sock drawer and ALL my preferreds go into it and they stay there. Unlike others who by the time they have posted about something being in their sock drawer, have already flipped in and out of it eleventy-six times and no longer own it at all. I had some PLYM-A just called so I need to reinvest the cash, although with money markets now paying ~5% it is not as urgent as when cash was earning nothing.

      1. Mea culpa, Larry. Mea maxima culpa.

        I have things I put in the sock drawer intending to hold them long term – but then somebody offers me a year or three worth of dividends to buy my them, and I succumb to the temptation and sell.

        I flipped one stock I had intended to hold for the long term three times in the last week for almost a dollar a flip. Ended up with it back in my account, but I confess to trading it a lot.

        It is a temptation I just can’t seem to resist. I guess it is just my personal weakness.

        1. Private, I been buying socks myself but things like TY-P are just too hard to pick up at a good price so I have no interest in flipping. I don’t even look at it. I was doing my local bank and flipped it 3 times for a 1.00 or 2.00 of profit but again it’s a low volume trade and decided banks are not where I want to be with the market gyrations right now for a low volume stock. In the 45 years I have lived here that bank stock was as solid as a rock and hardly any were available. Now the last year it like a yoyo

    3. FC – your comment in the Sock Drawer discussion was noted and appreciated. I’ve not posted on the site in over a year, but did want to make a comment even if it is deleted.

      Sock Drawer discussions are always a great idea. Buy and Hold. That is my general long-term goal, as it minimizes taxes. Many of the Sock Drawer investment ideas were posted on many, many other boards as they have other readers and were sold off to other investors at inflated prices. It happens. Bottom line is that a number of investors on message boards were using this forum to dump illiquid stocks to other investors for their personal gain. Once again, no offense to this website.

      But please notice – all of the great Sock Drawer issues are not owned by investors here now, as they have dumped them out to other investors. All intelligent investors can agree to disagree at times and wish you the best in the future.

      1. I did not mind everyone on the board dumping their ocean spray @ 15/16 per share. They might of made $1/2 on the flip but I made $11/10 on the redemption.

        Stock market is full of all different types and it would not be a market without everyone participating.

      2. kaptain lou,

        I follow what you are saying. If you own 500-1000 shares of some ill that you bought for 50 (or less ages ago) during zirp paying 4.85% and figured interest rates were on the way up it does not take much of a pump to get people convinced to buy it at 52-53 as a way out when 4.55% sounded reasonable for that short period of time. Or some variation of that. I get it. I also think I know what other forums you are talking about but I prefer this one. I stumbled upon them with google searches, I think.

        The thing is what you are describing was happening everywhere. People were starved for yield. New preferred were being issued with a yield of 4.75 area all day long during zirp. I think you are reading too much into this grand plan of a dump… when the going rate for yields were pretty much all similar when comparing apples to apples.

        As for OCESP/O that went ridiculously low due to the new rules causing it to go dark. No conspiracy there. It would be paying 22-24 before the dark news on a pump and dump that would qualify about what kaptain lou is talking about. I don’t recall that ever really happening. It traded rarely. I bought at 14 myself. 2000 shares total. So we definitely missed the pump on that one 😉

        My point is…. if sock drawer issues were dumped in the recent past to chumps… well now is the time to “sock” up because they are priced a lot better then before. You would have to go back to 2008-2010 or before 2003 to had a chance at better pricing based on a chart I can quickly glance at (I used CNLPL). So when were these pumpers actually buying this stuff to actually dump at a great profit? Or do you mean buy at 50 and convince others to buy at 51 a few days later? Dunno. After six months it hardly matters after a couple of divs roll in.

        I do not have a crystal ball to determine if they will get cheaper but 6-7% is a fine target to me. If they end up being even cheaper.. well I guess I will buy some more. I never got the impression that people here who post are gullible. Do we all make a mistake? Heck yea.. but I think others would post saying something at a certain price is not a good deal. Do I have some ills/sock stuff that is underwater? YES I DO. Have I averaged them down a heck of a lot? YES I DID. I will continue holding.

    4. fc – I too was looking at MET-E. Decided to pull the trigger on a position to balance out my current holdings with an insurance company,

  5. It has been 6 months since the last posting on this page, so I thought I would dust off the cobwebs with AGM-C at the risk of angering the purists on this page. It has a 6% coupon, it is trading at $24.85, it goes ex-div on 6/30 (2 days), and it floats at 3.26% plus 3-month libor on 7/18/2024. Assuming it uses 3-month SOFR + 0.262%, then the float rate today would be 3.26% + 5.05% + 0.262% = 8.57%. Who knows where is will be on 7/18/2024, but I’m betting it floats above 7.5% if they don’t call it. if they call it on 7/18/2024, then the return if bought at $24.85 today or tomorrow is 5*(.06*25)/4 + (25.00-24.85) = $2.02 = 7.67% in 1.06 years. Let the beatings begin.

    1. Whoops. The annual return would be 7.67%. The actual return in 1.06 years would be 8.13% ($2.02/$24.85).
      Also, SOFR would need to drop to 2.47% (6.0 – 3.26 – 0.262) for the yield to drop below the 6% coupon rate. I don’t see SOFR dropping that much in the near future. When (if) it does, I’ll flip this over to the other AGM perpetual preferreds. Slightly different socks, same drawer.

      1. Why is this a controversial pick? I’ve made good money regularly flipping the e/f/g issues this past quarter, but missed this one for a hold. Seems like a good recommendation.

        1. Agreed, but it isn’t rated. A while back I recommended a couple of stocks for the Sock Drawer that were split investment grade and were first brought to my attention by Tim (thank you very much – I’ve made nearly $3k flipping them). However, they weren’t investment grade, so they were considered junk and not worthy of the sock drawer by a reader. Ironically, in a market of rising interest rates, many of the perpetual IGs have been pounded down by 10%, 20% and even 30%, and the beatings were predictable using bond math. Further, they are going to stay down for a while because who will pay par for a 5% preferred when they can get a 6% agency bond or a 5.5% CD? I don’t regard any of the perpetual IGs to be safe until the Feds are done raising rates.
          In truth, I regard AGM-C as a safe buy but not a long-term hold because it will likely be called next year, which I think is what the market is saying by dropping it to par. Therefore, it doesn’t meet the definition for the Sock Drawer. I really just wanted to start a discussion because I see the value in the Sock Drawer and the discussions that it can create. If interest rates drop, then low-coupon perpetual IGs can become very hot for capital gains, but it won’t help us if we have all our money tied up in agency bonds, CDs, and treasuries. Therefore, the discussions become vital for planning and timing, and this can’t become a dead page. I would like to hear everyone’s Sock Drawer ideas so I can plan out how much to keep in money market funds in anticipation of buying beaten-down perpetual IGs.
          Sorry for the dissertation.

  6. Well, thanks to that Dick guy, I picked up some UEPEO @ 78 the other day. My first foray back into the illiquid ute pfds.

    Back when all this started I sold out of its brother, UEPEP, @ 100.

    Interesting times.


    1. I have been on this one too, Camroc. Got 100 of it at 76.50 earlier in week, 100 at 78 also, and now a partial fill of 25 at $77. Probably just sit here for now. If it dropped $5 or more, I would add some more. Always nice to have my ute off set my bill with some divis coming back at me.

  7. I’m adding CTDD and CTBB to my sock drawer list. Both yielding above 9.5% and BB+ rated, although Qwest carries a lot of debt. I still think they could drop another $0.50 if the 10-year treasury hits 5%, but they are getting close.

    1. Both CTDD and CTBB bounced $2 in the last week. I’ll wait for another opportunity when (if) they drop again.

    2. CTDD has dropped back to $17.73, and CTBB has dropped back to $17.07. They are both yielding about 9.5%. Time for me to start buying CTDD again for the sock drawer.

      1. Let’s keep the commentary to high-quality “sock drawer” companies. CTDD and CTBB are junk-yield credit-quality.

        I know it is not intentional, but some of the people might not understand the difference in quality when they come to this specific thread as they are in search of high-quality positions

        1. GH – some thoughts.
          First, despite the fact that yields on IG issues are fairly decent now, there is almost no discussion on the sock drawer thread. Sock Drawer can go weeks with no discussion, despite the abundance of options.
          Second, I’m fairly certain the folks here can understand the difference in quality issues, and I’m also certain they can decide on their own if a stock is something they want to hold. I was just offering discussion.
          Third, one of the problems here is an absolute devotion to premises that 2022 has shot and buried, such as “pinned to par”, “buy only IG”, “buy and hold”, etc. Anyone that bought and held 4% to 5% perpetual IGs in 2021 are down at least 20% to 30% this year, and the math predicted those losses. Blind devotion to a concept is admirable, but I prefer money.
          Fourth, although CTDD is rated, it might not have the credentials of an IG thoroughbred, and I’ve have never said that it does. But, I only brought it up for discussion when it dropped below $18 because the math supports it at that price with treasury yields pushing 5%. Despite Lumen’s debt, it has a steady cash flow, they are reducing debt, and I’ll sleep well at night holding it and collecting the 9.5% dividend with a good potential for capital appreciation. But, if you read Tim’s description at the top of Sock Drawer, that is all that matters for this thread. The letters IG are not in the header description. I’ll change what I discuss if Tim changes the description for Sock Drawer.
          Fifth, if you want to be the hall monitor for the Sock Drawer thread, contribute something to it so it doesn’t go weeks without comments.

      2. CTDD now at $19.40. 9.4% gain in 2 weeks. Probably won’t stay there, but decent bump.

        1. goin2cali, are you socking away these two or are you holding a core amount then flipping some you bought ?

          1. CM – Both. Hard to turn down a 10% gain in 2 weeks. I had a full position of CTDD, but I’ll hold some and hope it drops again. They carry too much debt to hope they can fight the Fed, but I think they will be decent holds when (if) rates drop.

  8. I bought some MER-K at $25.00 today. That’s a “sock drawer” item for me, yielding 6.45% and about six weeks from going ex-div. It will probably go lower at some point soon, but that’s ok. If it does, I might buy some more.

    1. Retired if your interested in that kind of yield and dont trade, you can get IG utility debt on bond market. I just keep dabbling as yields rise to ease in, as a pair off to my floaters, but I picked up 5k of a neighboring utility Baa1/ BBB debt from Empire District at 6.7%, 2035, non callable under par at $92 and change. It was over 120 earlier in the year.

      1. Gridbird,
        Very interested in the Empire District bond that you mentioned; do you happen to have the cusp # handy? thanks in advance

        1. Be, I will try and get it to you late tonight. Off to a John Waite concert so I can’t dig it out now… if you Google 2035 Empire District Electric a cusip might come up. But I will check tonight. They have a 2033 bond I also own a bit in too that yields a bit less.

          1. Gridbird you seem to be very knowledgable my question is where does one start in building a portfolio of Preffereds and BB. So many out there. I am not a trader more of a Sock Drawer guy. Just bought a boat load of Treasurys but still 50% cash. Thanks

            1. Hey GMG, I guess the first thing you have to do is assess what credit quality you want. Then determine what sectors, Reits, utilities, banks, etc. you want to own. Then decide what risk variables you are willing to accept via, fixed perpetual, resets (adjust every 5 year off 5 year bond, plus a spread), floaters off short end (Libor/SOFR), term dated, etc. As they will over time react differently. Tim’s spreadsheets show a lot of various issues. OTCMarkets under their screener will show you all sorts of HQ IG utilities that are old pink sheet subsidiary preferreds and quality Canadian issues. Quantumonline has lists under icons too.
              Is there anything specifically you are narrowing in on? Everyone has a little slant they prefer, be it, term dated, credit quality, and or sector. Not a right or wrong thing as much as meeting and matching your specific goals.

              1. Gridbird, this is way over do but thanks for your reply. I prefer hard assets, REIT’s MLP etc but realize industry diversification is important. Haven’t bought anything but continue to follow you guys. Happy Holidays!

            2. If you’re not an active particpant then buy issues of several different companies. Look at bank preferreds, relatively safe and paying 7+% good deal unless rates keep rising but even then you’re collecting dividends for a net gain. Most io them have qualified dividends which is an advantage in a taxable account. Utilities and closed end funds are low risk but also low dividend. Better rate than treasuries though the longer term could be a problem. REIT preferreds pay the higher dividend if you can take on a little risk, They’ve had low default rate though defaults could happen in waves because of their hgh leverage.

            3. GMG, You’ll want this resource to get going.
              If you use them regularly, please consider donating to them annually.

              Also to get going:

    , and

              Most important: Vist here often, read, figure out what everyone is talking about – and figure what your “lane” is. Best wishes.

              1. A – what’s your experience with cefconnect? What I’ve found is that it is frequently behind on its information so it’s best to take info they have posted as a starting point only – meaning you need to double check what you see there because unlike the other great sites you’ve mentioned, cefconnect can be more frequently out of date… Still, having said that, I do go to cefconnect first first for closed end data despite the others cef specialty sites that have been mentioned here in the past such as ceranalyzer and cefdata.

                1. 2wr, Yes I’ve noticed the same. I’d thought maybe it was related to delay in receipt and processing of “official” data from companies, but that’s just a guess. I’d in the past done calcs from company’s financials to verify coverage ratios but that data is also dated…and I’d be happier refolding socks than extracting that info.

            4. GMG, Something else I’m sure everyone here would recommend…be sure you understand “both” sides of the risk/return equation.

            5. GMG, I recommend you spend some time and read over ADS Analytics “A Guide to Preferred Stocks.” ADS which has a Seeking Alpha service is run by Alex Sbityakov. He used to do fixed income research for Morgan Stanley and others. The free guide is 40 pages long and will get you started. After you go through it, you will be in a better situation to understand all of the moving pieces of preferreds. I do not personally know Alex and/or have any affiliation with his firm, Systematic Income, but think the guide is a pretty good start.


              1. Thanks for this reference Tex, I hadn’t seen it before. Always useful to review what one thinks one already knows.

  9. Call me crazy, but AGM-D,E,F, and G are all yielding 7.0% to 7.1% and seem to be good sock drawer preferreds. As perpetuals, they seem to be preferreds that you buy and hold forever. Haven’t seem much sock drawer discussion lately, despite the fact that there are many great options, so I thought I would enter these as contenders.

    1. I should add that I think all of these have the potential to drop another $2 to $3 and yield around 8% if the 10-year treasury clears 5%, so I’m just nibbling 5 to 10 shares at a time for now.

  10. Hello, I’m new to this site, and find it super informative. I used your spreadsheet to find what I think is the best safe BB/Preffered out there. Allstate series B.

    I bought 1,000 All-B a few days ago. Goes to float @ LIBOR +3.1% next year and its investment grade. So, to me it has very little interest rate risk, I just wanted something that earns a bit and is safe for my 1 year emergency fund. In my mind the idea of Allstate defaulting is pretty far fetched.

    Wondering if anyone has thoughts? Is it as safe as I think it is, or am I taking on too much risk?

    I also have a bunch of Citigroup Trust preferred , series N thats LIBOR + 6.something percent. I bought early this year seeing as how interest rates had no where to go but up. Its done really great so far. But, they could call it at anytime and despite an analyst at SA who says they won’t ever call it, theres always a chance! And its around 8% over call price!

    1. MHS, if you are looking at IG and FTF, you might also consider the following: PNC-P, RZA, and RJF A&B.
      A notch or 2 below ALL-B in credit quality, but better spreads to LIBOR.
      Also CBKPP and CKNQP, which don’t trade much.

  11. Picked up TY-P for under $51 yesterday. Only a very small nibble as I feel like I’m going to have better buying opportunities in the future, but it hasn’t been this low in quite some time. My next nibble will be at $48

  12. SJIJ baby bonds. Company going private what would be a concern of continueing to own this one?

    1. David, we have info here somewhere but I cant direct you to it. Largely the risk is, you buy it, you swallow it, and its staying in your belly until you die. They have already declared the issue will be delisted and deregistered. That is a flag that you have to base case assume its going to experts market and wont get an honorable exit price ever….Or it is completely untradeable,ala, WTREP, and you are an owner of private debt with no recourse to sell at all,until it matures 50 plus years from now.
      I have toed in a few and want 8% before I start getting a small mouth bite of this. But Im cool with size I will buy to hold as an unsaleable annuity. Of course the acquisition has to be approved though, but market isnt taking that chance it doesnt happen.

  13. The ole sock drawer area might need some more posting action soon. What are people wanting now days to consider it sock drawer yield and quality?

    MET-A yielding 4.5% without even considering the libor bump?
    DUK-A getting closer to par?
    Some PSA-x/USB-x?
    JPM-K paying basically 5.75%?

    Seems to me when IG is getting close to 6% in some cases it is time to start making a list and checking it twice! Any comments are welcome for ideas.

    1. A number of bank preferreds getting close to 6%. I started inching in and will gradually add as the divvies rise. Switching my taxable account out of Unqualified Dividends.

    2. Fc, I have been hugging mostly the call anchored, term and adjustables. But what I am eyeing is those sub 5% issues that have been torched. I want them to drop a little more and maybe get in high teens. At that point I would give up a small bit of yield to have potential for a cap gain down the road possibly.

    3. fc, thanks for all your posts. You may have spotted the 5.75% yield for JPM-K in the “Sortable Sheet.” If I am not mistaken, and not considering accrual, it would have to drop to approx 19.78 to be 5.75%. So Sortable Sheet appears to be showing wrong yield for this one.
      Best regards, No. 12

      1. You are exactly correct I was using the sortable sheet and did not verify what I was posting was correct. Good catch. The calcs above was using a div of .30 instead of .284. JPM-K is yielding 5.44% with today’s price. Quite the difference!

        I am slowly buying and added some DUK-A and SR-A. I wanted to add some utes for their predictability and quality. I cant always be stretching for yield. I have no idea if either will be called in 2024.

      2. That “Sortable Sheet” may be more than just a sheet, it may be a forecaster of the future. What do you know, as of 4/22, just over a month later, JPM-K closed at exactly $19.78 for a 5.72% yield. Now, how low with it go? Maybe time to load “SS” once again 🙂

    4. I know it’s a month later, fc, but noticed today that MGR is just under par, yielding c 5.9%. Rated BBB- a/o past October. Not QDI, sadly.

  14. Bought FRC-H today. Trading below par, 5.125% and callable in June.

    Seems like a decent short term play. Worse case I am stuck with a 5+ Bank issue. Am I missing something?

    1. I’m curious what makes you consider this a possible short term play? Just because it becomes callable??? Is that why you’re suggesting it to be a possible short termer or is there more to it?

      1. No simply that it becomes callable and they have called every expiring preferred up until now I believe.

        I’m sure you can get a higher rate but with that always comes some risk even if it’s minor in the Bank space.

  15. Any thoughts on FTAI-B. Hit par today with an 8% yield. Callable Dec. 2024.
    Past financials don’t look good, but they were spending on large infrastructure projects. Some of those projects are completed, so there is a big spike in 2022 revenue and earnings.
    Thanks in advance for comments.

    1. Just bought 200 shares on the price drop and upcoming div. Don’t know enough about it to risk much more.

    2. It is one of the guaranteed use of capital partnership securities.
      So as long as you don’t mind getting a fairly simple K-1, the income stream should be fairly secure.

    3. I’ve owned it since 11/26/2019 and this is the only preferred I have which I watch like a hawk. As you say, earnings are not good, but changes may be underway. I subscribed to their news releases and they have won a few new aircraft maintenance contracts recently. If the price ran up a bit I’d sell it and sleep better. If earnings improve I’ll keep holding and worry less. I have a small stake (1.4%) but it still concerns me. The yield is too good to dismiss, but the company is not on stable ground. It’s certainly not in my sock drawer…

      1. Bruce–FTAI is a B Riley deal–they have done so many marginal financial deals that I stay away from their junk.

        1. I never said FTAI was a sock drawer stock! On the contrary, I said it was NOT in my sock drawer. Please read the thread I posted in, (started 2/8/22), which I was following up on.

          This is the only problem with reading comments via RSS- you lose context.

  16. With the recent drop in prices I am wondering what folks are buying in the “Sock Drawer” – i.e buy and hold category these days? I am looking at the Bank preferreds in the 4.25 – 4.75 coupon area myself.

    1. some bank preferreds are approaching 5.5% yield. I’m holding out for at least that much before nibbling now.

    2. Bill W, I bought a couple jpm’s recently and a investment grade no leverage closed end fund NXP. today I added GDV-k @23.39 really big volume after this am. This is about as safe as a cumulative qualified div. comes to bad it’s only 4.54% ,but that takes me to the house.

      1. I bought quite a bit of the JPM/K when it hit around 4.8-4.9%. Happy to just forget about this one. If it heads over 5 I’ll buy more.

        1. WFC-L, 7.5% coupon. Some downside risk like everything in a rising rate environment. Yield around 5.4% (it’s a busted convertible and can’t convert unless Wells common gets to about $203, in which case the world is ending). It’s a $1000 issue trading at around $1400, but the price doesn’t matter if the yield is satisfactory (noncallable!). The only fly in the ointment is that it’s non-cumulative.

          1. Already had some BAC-L. Looking to add WFC-L after further drops. Patience is the key. If this is the bottom then all my other issues will be doing fine.

            1. A small bank with an unusual preferred (FIISO). Very thinly traded. Non callable and cumulative with an 8.48% coupon. Can buy with a yield of about 5.5% the few times it’s available. Is this “Sock Drawer?” It’s not rated but the bank (Five Star Bank) seems well run and solvent (as are all banks when times are good). May meet all of you criteria other than investment grade. This issue was part of a TARP settlement with the FDIC back in 2008 or so. But, it seems secure.

              1. OldmanRb,

                I was this close to calling Ally and buying it but I have no wish to overpay in this env. I have a GTC bid of 145 sitting there for months and after thinking it through I think it should be lowered to 135. I passed on it.

                It is definitely sock drawer material but I don’t feel like seeing 300 shares being sold 3 months from now for 130. On top of that there might be more liquid choices coming up with a 5.5% yield. Can’t hurt to be slightly more mainstream now days even if you never plan to sell.

                1. FC, FWIW I agree with you. I bought 300 of this at $92 several several years ago and could have bought 500, but screwed up. Sold at $150 a couple years ago. The best time to buy these at this current yield is when market expectations are for lower yield and you are wanting to hang onto the yield you have without a call taking it away from you.
                  This issue is largely owned by one of the founding families. The bank gets rumors every now and then of someone wanting it. Though the issue is uncallable, I dont know if that extends to a takeover from another company if that ever would happen.

                  1. As an aside on this, this was issued by the holding company and not the bank, so it is cumulative, unlike practically every other bank preferred.

                    1. Actually the reason its cumulative is it is grandfathered Tier 1 capital as it was issued in 1990s when this was allowed. This was genesis capital from the banks creation. This is because its under that $15 billion or whatever it is now threshold. That allows grandfathered status. But I assume it would just have shifted to tier 2 cummulative unless terms dictated a change clause. I have only seen smatterings of the issues guidelines, so I dont have clear answers of any change of control or tax implication changes.
                      A nice issue would love to own again around $125 which means I wont, ha.

  17. FLC trading at 6 month lows with 3x of avg volume. Do not see any news so perhaps some big investor or fund trying to exit for year end tax loss / re-balancing.

    Not quite a stock but a good actively managed CEF holding preferred shares with over 6.7% yield past few months and trading at relatively lower premium for FLC

  18. AATRL – anyone know what’s up with it? I was trading it but eTrade is “warning” me about it now. And, I get no bid/ask quote. Ideas? I have a few shares left but am wondering if I should sell them or just leave them be at this point.

    1. I can’t find any news on it. I entered a test trade for 10 shares offered at 62 at Vanguard and the order went through without any warning, although no bid/ask showing.

  19. WFC-L the busted non-callable Preferred making new high today. Still yields 4.88% at current $1545-ish price, so still attractive for some but I see more downside risk than reward at these highs

    Sad, but selling some here and hope to buy it lower …

    1. MSquare, exactly my thinking.
      Great (or dumb?) minds think alike?
      I Had to sell some I bot @ $1318, and left open orders to sell more if higher and buy back some when lower. Things begin to not make sense to me anymore.
      Sell WFC PRL 10 Limit$1,544.00 Executed 7/14/2021 12:58 PM
      Sell WFC PRL 10 Limit$1,588.00 Open
      Buy WFC PRL 10 Limit$1,455.00 Open

      And like wfc-l, I have a few others that I know I should sell,…
      Notice also that the similar bac-l which used to trade quite in tandem with wfc-l, is now @ $1441 (yielding just > 5%), so I bot some of these to offset the increasing % of cash in my acct.

  20. The 20-year trend on a 10-year Treasury yield has steadily declined ( There have been periodic spikes but the trend line is clearly down. Early in the last decade the rate hovered between 3% and 3.5% and rarely approached this level since. Even when the Fed “tightened up,” increases in rates were short-lived and low in terms of absolute rate. Coupled with this is a national debt that’s increased to formerly unbelievable levels ( The key beneficiary of low rates is the U.S. Government. Significant spikes in rate will further increase debt, so there is a whole lot of self-interest in keeping rates low. Immersed in all of the Fed’s gobbledygook is the notion that we will make our debt far less appealing to buyers if the nation’s solvency deteriorates (a truism if ever there was one). A Catch 22! Higher rates should attract Treasury investors but higher rates could catapult our debt and materially injure the market for our “newly created” capital.

    My concern is that few of us recall owning preferreds, particularly “sock drawer” issues, in a high-interest rate environment. Over the past 10 years, part of my sock drawer holdings have been in the traditional, illiquid utility utes, mostly from Ameren, Connecticut Light and Gas, Pacificorp, Etc. I’ve been content slowly accumulating positions a few shares at a time with an overall “illiquid portfolio yield” of between 4.9 and 5%. Like most, I own these issues to supplement a reliable income stream. I can tolerate a correction in pricing because my income won’t suffer. Nevertheless, I’m wondering about the level of pain likely to be inflicted if the 10-year went to 4 or above and stayed there. Rates are beginning to rise and I ask myself the question: Will this time be different? Could my sock drawer portfolio value suffer a 40%, 50% loss? Most of my ute illiquids have been around for more than 50 years, so I’ve looked at pricing from long ago. It wasn’t pretty, with some issues now trading between 100 and 110 getting into the 70s. Is that apt to happen again with a real spike in rates? Common sense would say yes. But, with the permanency and reliability of the illiquid utes, something that may not have been fully understood 40 or 50 years ago, I think there’s a possibility that they (particularly those not subject to redemption) will hold up much better in a higher rate environment than do more traditional preferreds . I’d like to hear readers’ thoughts about this. My comments about what might happen are purely speculative. Thanks.

    1. OM – I believe that in the long run the math wins. If rates were to go high and stay high you can see low coupon sock drawer issues go to the teens. The income as you point out won’t change but if you have a mark-to-market mentality it can be bothersome to see values decline.

      And if rates go low and stay low more of the “uncallables” will get called. Assuming, of course, they are callable. My fingers are still singed from AILLL and I have unloaded some sock drawer issues that were past call and trading a year plus over redemption.

  21. In the spirit of the sock drawer today I bought some SCE-L, 5% coupon, trading below par and with a call date of 9/22. A tick below investment grade but I believe a pretty safe place to park cash for a bit.

      1. Good point on the G. Nothing would make me happier than a qualified 5% for longer period. If it hangs under par for awhile longer I may up my stake.

    1. It did dip to over $1.55 (6Q worth of dividends) in end-March not that long ago. So not exactly a good ‘sock drawer’ ?

  22. A simple question on IPLDP. I was airing out the sock drawer today. Why are these considered socks when the call date is 2018? What normally happens to these type issues? Even if they are socks, we still have to look out for another issuance at a lower rate for possible redemption?

    (I scooped up a few handfuls during the last interest rate spike, wondering if I should continue to do so…)

    1. Hster. About a month ago, someone posted here that IPLDP was getting close to par on a selloff. I bought a ton, and was happy to put it in my sock drawer. I looked at the price today, and was shocked, I let them all go today for $26.40. Very big capital gain. I let my STL-A all go today as well. That one is not a sock drawer issue… but i bought that a month ago at $25.50, and have sold all of them this week and last week for $26.60. Im building up too much cash. Lots of high flyers and lots of cap gains in the last few months.

      1. Dear Lord another forced name change. The tickers of Indianapolis Power and Light wont change, but now they are called AES Indiana now. Kind of odd since AES doesnt even own 100% of IPALCO anymore as they sold about 20% of the shares off a few years ago.
        Seems like “Power and Light” is another politically incorrect term added to the long list.

          1. Howdy stranger! Glad to see you finally paid the electric bill that was in arrears so you can plug back into the grid and post again! 🙂
            I tell you what Azure, its tough out there now. If they would allow unlimited IBond purchases this year, all my jack would be in them and there would be nothing to discuss! You arent going to disappear again for 2 years are you?

            1. I truly have been extremely busy in my early retirement. I just sold a few of my properties and businesses just before the end of the year to lock in the capital gains taxes for 2021. I’m sure with our fools in Washington pushing us past $30+ trillion of debt all of our taxes will be going much higher. Truly have missed you all and hopefully you will all welcome me back into this brilliant and helpful community again ⭐️⭐️🥇⭐️⭐️

            2. BTW, I’m guessing you still own our little Phoenix? I keep hoping they will call it, but am happy to take their quarterly distribution another 10 years 💎

              1. Ha, yes I still do! I guess I have had it 5-6 years by now. At this point being its private and an insurer which makes truly understanding the financials impossible, I dont even think about it until the quarterly interest payment shows up. And I hope it does until maturity early next decade!

                  1. Insurance companies know where every dime is allocated. I’m always surprised that they wouldn’t call a $300MM bond and refi at a better rate. I’m happy to hold as it’s so far under par and collect the quarterly distribution. Viva La Phoenix 🥳

      2. Mr. Conservative, Congratulations on being on the winning end. I myself being a more retentive sort can’t seem to take the gains and run even at $26.50 as I don’t see a better place to store that cash.

        1. i continue to sell. I sold 6,000 shares of MNR-C today. It should be called this Fall, and there is not much meat left to make on it if held to a potential call. Maybe .15. This is another one i wanted to hold, and bought much of it under par, and large gain. I will be upping my qrtly estimate payments with uncle sam, as i am well over 6 figures this year and it is only April. But… i think I am getting close to 40% in cash. eeeh. I like to be fully invested, and I dont feel good about sitting in a lot of cash.

          1. Mr. C – See this is what I don’t get about what you’re saying….. You’re saying you’re close to 40% cash and you don’t like it, but you sold MNR-C anyway… Where do you stash your cash???? If you believe MNR-C is going to be called on Sept 15 as I do too and you sold today at let’s say 25.61, that means holding instead of selling would be the equivalent of having your cash earning 1.5% give or take instead of moving it over to truly earning nothing in cash? If you believe in the call, then you also figure the price will not fluctuate much between now and then and will gradually appreciate toward the next x-div date, so why not just keep it until you’ve identified that vehicle that will make you get over your bad feeling about sitting in a lot of cash… Having said that, admittedly, 1.5% YTC is pretty stingy even for a sitch like this, so thanks for mentioning it…. If nothing else, it is time to at least put a throwaway sell order out there at a near 0% YTC…. BTW, I’m always sitting on way too much cash so that’s why I ask the question as to your rationale for selling instead of holding until you’ve found the alternative you’re looking for.

            1. 2wr. Everything I bought in the Fall all the way through Feb just went through the roof.

              It does seem like every once-in-awhile an opportunity comes up however for a need for cash. Since I am way up for the year, I think i can sit with patience and wait for rebalancing, or false calls, etc.. Ex. I threw some money at the dip in ET-x preferreds the other day. If I was fully invested in things like MNR-C where I already have some gains and very little left to gain, I could earn more by these opportunities. That is a 9% return in a week. It seems like the dips that are pointed out here and other places, it has been very worth while to use the cash for that.

              This weekend I will research more on pinned to par issues and re-invest more. I guess I have been selling 2-3 times more than buying. It is not like I am not buying at all. I have done some buying… I bought some SESCF, AFINO, STAR-I, UEPEP, PRIF-B, ET-E based on all the discussion here. I was a lot more in cash :-).

        2. A few that I still sit on with large gains is ET-E, ASRVP. I bought ET-E on the recent selloff to $23 and it is higher than ever. Picked up 7,000 shares and should have bought more. I could sell, and be close to my avg tax reporting for int, div, and gains for the year. I continue to hold on that one. ASRVP i picked up last spring in the covid sell off at a great price as well. Looking for pinned to par…

  23. PPWLM selling for $155 today, lowest price in months. Pacificorp, 7% coupon, not callable, 4.5% yield (looks good now; in the future, who knows). Company is AA-rated and owned by an affiliate of Berkshire Hathaway.

    1. Apparently Pacificorp is defending a class action lawsuit alleging negligence that resulted in some of California’s recent fires. Anyone know more? Real risk? The company is far better capitalized than was PG & E. It’s two noncallable preferreds are mainstays in my sock drawer.

      1. Oldman,
        Is PC part of PGE ? or a part of a holdco? There was so many fires last 2 years across Northern Calif, Southern Ore. and all the way up to Portland.
        Locally Sonoma county DA got a warrant to search PGE offices and seized files as part of a lawsuit.
        Hard to keep track of all the investigations going on.
        Between individuals, businesses, cities, counties, State etc. is why I am holding SCE preferred not PCG

          1. Thanks Grid. What’s your risk assessment? Berkshire tries hard to camouflage individual holding’s financials. Difficult to evaluate actual risk. Have held the two non-callable Pacificorp preferreds for a long time and my greed prevents me from exiting and taking a profit. Yield on basis is about par and that cannot be duplicated. Company’s bonds remain Aa rated. Didn’t the agencies quickly downgrade PG & E bonds after the fire-stimulated class action filings?

            1. Oldman, if memory serves agency’s were painfully slow to truly down grade PCG debt where it needed to be. But of course there is so many moving parts to it all, it was just a guessing game as the end game came out differently than many thought.
              Pacificorp is a bit different. That newspaper article suggested a billion potential. PCG was around $30 billion but its also a bigger ute. Its just at the guessing game stage as this takes a while to unfold. But Pacificorp is acknowledging the risk setting aside some money in addition to the insurance they have..
              California and Oregon 2020 Wildfires – Contingencies – See Note 16 to the financial statements
              Critical Audit Matter Description
              The Company has loss contingencies related to the California and Oregon 2020 wildfires (the “2020 wildfires”). The Company has recorded estimated liabilities, net of expected insurance recoveries, of $136 million as of December 31, 2020, which represents its best estimate of probable losses, net of expected insurance recoveries, as a result of the 2020 wildfires.
              We identified wildfire-related contingencies and the related disclosure as a critical audit matter because of the significant judgments made by management to estimate the losses. This required the application of a high degree of judgment and extensive effort when performing audit procedures to evaluate the reasonableness of management’s estimate of the losses and disclosure related to wildfire-related loss contingencies.
              SCE had billions in wildfire claims and has still been able to raise common stock dividend. Pacificorp doesnt have inverse condemnation in Oregon like what is in CA. So that is a different variable also.

              1. Hi Gridbird,any thoughts on the Pacificorp`s preferred dividend safety with no common to cut?
                Thanks in advance B/L

                1. Big Lou…Hey have you ever heard those “Big Lou” life insurance commercials? Hilarious… Big Lou is like you as he is on meds too.. Or Big Lou is like you and is divorced too. And my second trophy wife wants a lot of insurance on me too.
                  I hold Pacificorp preferreds all the time. The trouble is I cant keep them as somebody will bid them $8-$10 higher so I have to sell. I recently bought last month at $134 and sold off at $142 a week or so later. I have been well aware of these fires, but it hasnt concerned me. Buying and selling at right prices have been more of a concern for me.
                  As far as paying common dividends, that is complicated and probably not relevant like a public company…Technically Pacificorp is a holding company, owned by holding company, and in turn that holding company is owned by hold co Berkshire. Holding companies dont typically ask or need quarterly dividends from subsidiary. In fact at times they are pumping money into them instead of extracting cash and may go years without extracting a cash divi.
                  Granted Oregon is an eco state like CA, but they dont have inverse condemnation like CA does. So that means anyone who claimed to got fat and diabetes over the stress of the fire cant collect also. So its not the same. Personally, if I get a satisfactory entry point again, I wont hesitate to buy. But I make no claims of expertise here. This fire risk isnt near what EIX had and they have kept on ticking even with annual divi increases.

  24. GDL-C

    Having not seen the official announcement as I thought was due, this was received from IR – no surprises. BTW – Can’t post to Reader Initiated right now

    The Board has determined to continue the annual rate of 4% for the Series C Preferred Shares, effective for all remaining quarterly dividend periods. 

    The Series C Preferred may be put back to the Fund during the 30-day period prior to March 26, 2020 and March 26, 2022 at the liquidation preference of $50.00 per share, plus any accumulated and unpaid dividends, and redeemed by the Fund, at its option, at the liquidation preference of $50.00 per share, plus any accumulated and unpaid dividends, on March 26, 2021 or March 26, 2023.  The mandatory redemption date for the Series C Preferred is March 26, 2025.

  25. @GridBird or anyone else, any reason why AILLP went down big today? Is it just of interest rates spiking? Thanks in advance.

    1. Rajn, it went down on a recent 100 share purchase. This one trading down though isnt surprising. Its only a 4% par issue. As rates rise more pressure will come. It was at top end pricing. Its longer term more recent home is more in $94-$96 range

      1. “Why did my $100,000 Cadillac Escalade drop in price to $90,000?”
        The MSRP is $75,000, and people are still paying $90,000 for it. ¯\_(ツ)_/¯

        Another analogy… 2 guys take a 1 foot rubber band and one of them walks out 10 feet, to stretch it out. Now, the guy on one end walks 3 feet closer to the other guy. The 1 foot rubber band is still stretched to 7 feet.

        Pricing is much like that. You dont see very often a 1 foot rubber band stretched to 50 feet, and you shouldnt expect it to stay there very long if it does. This is why you look at several years of pricing history through different financial cycles, and not just the last month or two of pricing.

        1. @Mr. Conservative – A lot of words to say prices fluctuate.
          @GridBird, @Bob-in-DE thanks for your help as always.

  26. AATRL – We’ll see if it was a good move or not but just sold 300 of my 400 shares of AATRL at $54.49. My average buy was just a tad over $40. Seems to be a bit rich at this point but I guess it can get richer!

    1. Nice price–looks like someone paid top tick for them. I need to re-look at this also.

      1. I stuck all 400 shares out there at $54.49 on the ask and got 100 hit and then 200 more. Now the ask is lower – I’ll keep the remaining 100.

        1. Oh, so I have you to blame, huh, yazzer??? I’ve had a sell in daring someone to pay 54.60 and it didn’t quite get there yet because of you! Booo hiss………:)

          1. oh – hahaha – sorry – I was just thinking to sit it at 1c under $54.50 and someone might bite! Sorry to front run – had no idea!

            1. Posted on this on RIA. Is the run-up because the “busted” convertible not completely busted now?

              1. Assuming original conversion price hasn’t changed for any reason, AMG still has almost 40% higher to go to make conversion economic. I’m no expert on convertibles, but I’d guess that if there’s a norm for issuing convertibles they’re probably issued with a premium about 20% above current price when issued, right? So imho, convertibilty is still a little bit too far off to be a major factor.. HOWEVER, what about this little feature in the prospectus as well????

                “The trust will pay contingent distributions to holders of the trust preferred securities during any quarterly period commencing on or after October 16, 2012, if the average market price of a trust preferred security for a ten trading day measurement period preceding the applicable quarterly period equals 130% or more of the liquidation amount of $50.00 per trust preferred security. The contingent distribution payable per trust preferred security in respect of any quarterly period in which contingent distributions are payable will equal an annual rate of 0.25% of the average market price of a trust preferred security for the ten trading day measurement period.” I wonder why that was inserted into the language? AATRL would have to hit 65 for that to happen and that would seem hard to imagine when they’re currently callable, but this one’s got such a crazy structure, who knows???? Justin, what would be the tax consequences to the company if they called this one??? Would the consequences be any different than on a normal plain vanilla issue?

                1. Conversion rate has changed at least a little. .2558 per last year 10-Q. Still a way off but probably not worthless feature either.

                  1. Thanks, nhc… Glad to know the current figure = $195.46 now, not $200. I should have said “too far off to be a major factor QUITE YET.” That would have more clearly stated my point. In other words, personally, I wouldn’t think conversion factor would be a strong influencer of market price for AATRL until mkt price of AMG gets within 20% of the conversion price, i.e., 156.37. So we agree, it’s still a little way off at least, but certainly worth noting now after AMG’s strong run up from $112 in just the last 8 trading days since the quarterly earnings report on 2/8. It would only take another 3 trading days at the average rate of increase AMG has had over the last 8 before we’re in the major influencer range. Well worth noting.

                    1. Good to know 2WR. I let mine go. Gigantic run up. Usually investments stay in a range, and since this is out of its normal range. Can it run up another $5+ … it could. I’m fine with the big cap gain and sending more helicopter money to Uncle Sam. I let winners run… but when they have been racing for awhile I cut them loose. Plowing money back into things like MNR-C and other pinned to par ones. I’m happy with the gain since Tim posted the recommendation on this one. If it runs up more, I wont be looking back and playing Monday morning quarterback.

                    2. So I get to blame you, too, for my mistake of setting my dream sell price just a tad too high, huh, Mr. C? …. It’s your fault… lol. I guess my AATRL is going back in the drawer for now…..

                    3. Some more food for thought on this one.
                      Let’s say the value of AATRL consists of two components: 1) the value absent the conversion feature, plus 2) the value of the conversion feature.

                      Given the $2.575 coupon, low IG rating, and roughly 16.7 year maturity, I would put the value of AATRL absent the conversion feature at right about $50 in present market if held in a non-taxable account, maybe a tad more.

                      Valuing the conversion feature is even more subjective. However, I note that JPM is now trading at about the same price as AMG. A January 2023 JPM call option exercisable at $195, about 35% above the current JPM market price, is around $7. I would think that the AATRL conversion feature is worth at least as much, given that: it is out there for 16.7 years vs. about 2 years for the JPM option, AMG dividend is much lower (meaning shareholder return has to come from price increase), and AMG is (I think) more volatile than JPM. On the other hand, AMG can limit the upside by forcing conversion if the AMG common goes above $254, with no such limitation on JPM the call option, but I would say that this is less of a concern.

                      This subjective and highly theoretical analysis implies a value of at least $57 for AATRL. I lightened my AATRL position over the last couple days, but I’m having some second thoughts now.

                    4. nhcoast,
                      I’m just relying on your comments as I haven’t looked at the details of AATRL itself, but it sounds like holders of AATRL are long a call option with a strike price of about $195, but also short a call option with a strike price of about $254. The difference between those is the net value you would apply to the conversion component of the price. As you have found, you can’t get a market price for any 16 year options, but you can use the Black-Scholes model to come up with theoretical values.


                      For such a long-term option, the value will be very sensitive to the volatility assumption. In this case, since you have a long and short call, that issue will be less problematic than usual because the two cancel each other out to some extent.

                    5. KC – Thanks for this.
                      If I plug in a 40% annualized volatility, which seems consistent with AMG call option pricing, I get a net value of about $8. Still trying to get my head around whether ability of AMG to force conversion is equivalent to being short a call option with $254 strike price. Whatever, it’s still pretty much just theoretical.

                    6. nhcoast. yes it’s a short call. Think about it this way: you have a call option with strike of $195 and the company has a call option with a strike of $254. You get the upside between those amounts.

                      But it’s not exactly a strike price of $254 because the price actually has to be higher than that and it’s not known exactly what the conversion price would be. So you could use a somewhat higher number as a guess.

                2. If they called it, any gains or losses are ordinary, not capital regardless of your holding because of the below market interest rate they got when selling it initially triggered a special tax code provision.
                  That is the biggest difference.

                  1. Justin – What I was asking was not the implications for the AATRL shareholder but the implications for MGR should they call…. I suppose they’re involvement is the 5.15% Junior Subordinated Deferrable Interest Convertible Debentures due 10/15/2037 that’s the underlying and not the preferred created by the Trust, but that issue has all the unusual tax implication that generate the same for AATRL, doesn’t it? So I was wondering whether or not you have an opinion as to whether or not all those tax issue could possibly act as a deterrent to MGR for calling the Debenture.. I know it’s callable 3/30/24 but don’t remember if that’s merely a plain vanilla call option.

                    1. 2WR – Justin will correct me on this if I’m wrong, but as I understand it, if it gets to the point where they can force conversion, it’s in their interest to do so as far as the income tax consequences go. If the debentures are ultimately redeemed at $50, AMG has a major tax bill. They have been accruing a deferred tax liability to recognize this. On the other hand, if the debentures are converted, AMG can mitigate, or even possibly eliminate, that income tax liability, as they will be deemed to have surrendered something of value in excess of $50 per unit to extinguish the debt.

                    2. He is correct. They will face a significant tax liability when the conversion occurs.
                      Long story short. Standard redemption language in case of an unplanned event outside their control with an add-on for the market price of the common trading at a particular level.
                      Here is the redemption language from page 5.

                      “AMG may elect to redeem the junior subordinated convertible debentures prior to maturity, without payment of premium, for 100% of the principal amount plus accrued and unpaid interest and other amounts to the date of redemption:

                      in whole at any time or in part from time to time on or after October 15, 2012 if the closing price of AMG common stock for 20 trading days in a period of 30 consecutive trading days ending on the trading day prior to the mailing of the redemption notice exceeds 130% of the then prevailing conversion price of the trust preferred securities; or

                      in whole, but not in part, at any time following certain specified events relating to a change in the investment company or tax laws that adversely affects the status of the trust, the trust preferred securities or the junior subordinated convertible debentures.”

                    3. Thanks, Justin, however if I’m reading correctly, you’re not really agreeing with nhc, you’re saying the opposite…. where am I going wrong? nhc says “if the debentures are converted, AMG can mitigate, or even possibly eliminate, that income tax liability,” while you’re saying, “They will face a significant tax liability when the conversion occurs.” As per usual tax treatment simplicity just doesn’t ever seem to exist with AATRL under any circumstances or at least tax consequences goes far over my head for sure.. lol

                    4. 2WR – I don’t want to put words in anyone’s mouth, but I think that Justin may have intended to say “when the redemption [at $50] occurs” rather than “when the conversion occurs.” As I recall, I had asked about this same matter some time back, and Justin confirmed my understanding. Maybe he can clarify here.

            2. I bought back 200 of the 300 shares I sold yesterday for $54.49 for $51.80 for $2.69 turn-around profit – it’s like get a year’s worth of divvy in a day! Now back to 300 shares – will look to add another 100 at 50-ish.

              1. Nice trade. I sold AATRL at 54 just now, interested to see if you get your next purchase near 50.

                1. I went ahead and bought that last 100 shares at $52.00, so back to my 400 share allotment. Those 300 shares traded yielded a +$2.56/share profit in my tax deferred account – almost a year’s worth of divvy. I just noticed AATRL traded at $57.01 today!

                  1. I saw that trade on AATRL at 57.01 and thought it interesting, since earlier today I put my last 100 out at that price that (picked at random), even more interesting that the market maker selected someone elses lot and there are shares available cheaper.

  27. Folks, I am reviewing discussion on AATRL below and don’t understand why it has (practically speaking) no risk of call.

    The prospectus at says

    “Convertibility of the Trust Preferred Securities … At any time prior to the maturity date of the junior subordinated convertible debentures, AMG has the option to unilaterally and irrevocably elect to settle its obligation to deliver shares of AMG common stock with respect to trust preferred securities converted following such election in cash, and, if applicable, shares of common stock. If AMG makes this election, upon conversion of a trust preferred security, a holder will receive an amount in cash equal to the lesser of (i) the liquidation amount of such trust preferred security and (ii) the conversion value, determined in the manner set forth in this prospectus.”

    Based on subsequent reading in the prospectus, it appears that the conversion rate can somehow vary from the nominal 0.2500 shares of AMG common stock per trust preferred security. So that (and the ‘lesser of’ wording above) implies to me that the conversion rate could be set in such a way that AMG has the right to call at less than $50/share.

    What am I missing (apart from the chance to buy AATRL back in March;-)?

    1. @Bur Davis -The paragraph starts with ” Holders may convert their trust preferred securities at any time into 0.2500 shares of AMG common stock per trust preferred security (equivalent to a conversion price of $200.00 per share) subject to adjustment as described in this prospectus.”
      I think the rest of the paragraph that you quote applies the the situation where the holder initiates the conversion not when the trust initiates the call. I may be wrong so hopefully someone more knowledgeable than me will answer.

      1. danzeb, I think you’re right: Holder chooses to convert, then AMG has an obligation to settle the conversion request. I read “unilaterally” too quickly and thought that meant they could initiate the conversion, but on rereading I think it just means they can choose to settle in cash if they want (it says “cash, and, if applicable, shares of common” but I assume they mean “and/or”).

        I still am confused about how conversion rate is determined, but if the conversion is always and only initiated by the Holder, I guess the question is moot.

  28. Would readers view CBKLP (CoBANK 6.125% non-cumulative preferred Series G; currently redeemable) as having “Sock Drawer” characteristics? I’ve not read the prospectus; any idea why it hasn’t been called? Thanks.

    1. I do, but it is past its call date and not likely to trade at a level where you don’t risk something. It is possible, but would be difficult to pick up shares where you don’t risk something.

      I picked up another 300 shares under par during the dip.

    2. You have to be careful which brokerages you use for CBKLP.
      If you are at schwab, for example, they will let you buy it (if you are jump through hoops to be a qualified investor), but (for practical purposes), they will never let you sell it. To sell, they will require you to go find another qualified investor (on your own), then they will process the transaction for you.

      If you plan to hold it until it is redeemed, this may not be a big big problem – but if you ever want to sell, you are in trouble.

      1. RE: Private on CBKLP.
        That’s curious. I’ve seen plenty of examples the other way around (you can transfer a security into a custodian, but can only sell it once you get there), but have never seen a “buy only” restriction.

      2. This is exactly why I am moving everything out of TD. Their site already states on the opening page (paraphrase) ‘a subsidiary of Charles Schwab’
        Free candy trades are for the general public and the Big 1000 American Listings Fodder. Good luck pivoting toward the rest of a globalized world when the basic menu of American Issues is getting smaller and smaller, esp just when you may need to make a move. Who wants to go through a work-through?
        ADRs? OTC? ETFs? CEFs? ETNs? Curcuit Breakers? Brokerage/Clearing Liquidity? These are real Investment Risks too.
        Alan Parsons: “Just when I need you, you won’t be there…”
        Never forget who wrote the regulations and who they are in ‘business’ for.

  29. Loaded up on FHN-B today after it fell 60 points. Only reason I can see is it fell with the tide because of the news cycle. Fell too far on high volume typically means an institutional investor dumping shares. Could be a 5 year sock drawer holding though that’s not my intention.

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