I had mentioned a week or two ago that I have made some nibbles on some good until cancelled orders for some baby bonds. I wanted to get the details out here and then I will update my ‘laundry list’ of holdings.
I made 3 small purchases of the Hennessy Advisors (HNNA) 4.875% Notes due in 2026 (HNNAZ).
8/10/2023 $22.55
8/16/2023 $22.55
8/23/2023 $22.25
Note that I had a good til cancelled order in at $22.55 for the 1st 2 ‘nibbles’–which was lowered to $22.25 for the last nibble.
Now do I want this low coupon security that bad? No–but it has a maturity on 12/31/2026 and the yield to maturity was just over 8%–and I do want the 8%. These nibbles were added to what was already a full position–and while I don’t necessarily want more I have a $22/share good til cancelled order in right now.
It should be noted that I am very comfortable with this small company (Hennessy Advisors)–they have a market cap of just over $50 million so definitely a small cap. They advise open end funds and thus are paid on assets under management which have trended down in recent years, but finally they have assets moving higher and are taking over management of other funds which should drive assets higher.
Their latest earnings release is here.
Additionally the company carries a high cash balance of $59 million and essentially has no debt EXCEPT the HNNAZ issue which is $39 million.
Here is their most recent (6/30/2023) 10-Q.
This is not a recommendation to buy this security–but maybe a yield to maturity of over 8% is attractive to someone. Please fully understand how they make their money and the motivations of managers to secure more assets under management (money of course).
I will add these to my laundry list of securities owned soon.
This looks like an interesting option that I was not aware of. Portfolio debt securities are an interesting sub sector. I think that I might have posted this before, but some might find this interview with a Portfolio Manager from Eagle Point to be interesting.
https://insuranceaum.com/an-intro-to-the-inefficient-world-of-portfolio-debt-securities-with-dan-spinner-of-eagle-point/
Tim – How long ago did you make your nibbles? It looks like you got a really good deal…. At today’s last of 22.90, taking out .23 in accrued, YTM is still 8.11% using online calculators.. If you bot at 22.25 on 8/23 (snagging the bottom) then your YTM calculates at 8.97% for that trade using FIDO’s calculator or https://quantwolf.com/calculators/bondyieldcalc.html. Nice!
2wr–the 3 nibbles above have the dated listed. Previous full position was bought around an average of 23.90—so overall still underwater (not including interest payments received). I have held some of this over a year.
Well duh! Good reading, there 2wr…. ha! I should have gone back to reread before writing… No matter what, it looks like you got good bargain yields…. BTW, I know that underwater feeling, but isn’t it nice to know that when you’re dealing with these shorter maturity issues, be you underwater or not at the moment, barring BK, you’re guaranteed to get what you signed up for initially on a yield basis on a day quite visible on the horizon….
2wr–I love the short maturity issues!!