Stability to Return to Markets?

We see that the futures markets are showing stocks with a modest upward tilt this morning. Also interest rates are moving a bit higher as investors regain their composure a bit. I expect that while we may see tamer markets for the balance of the week, we are likely to see some multi hundred point moves–up and down.

Yesterday was a day when we saw preferred stocks and baby bonds move lower in a ‘baby tossed out with the bath water‘ move by investors heading for the exits to the safety of government bonds and/or cash. We note about 75% of issues moved lower yesterday, although most issues were lower by less than 2%.

Newer investors need to remember that we will have days that intuitively you would think income issues should move higher because interest rates are falling–but instead they fall. Yesterday was one of those days. Capital preservation was on the mind of some–maybe believing that the “worst is yet to come”. The key is to get positioned “comfortably” in your portfolio. This is something I have worked on for literally years and I am now in a spot where I feel good about what I hold and intend to hold through market turbulence. We saw our cumulative portfolios fall by around $300 yesterday, which is a rounding error, and was a surprising small loss for a wild day.

We did purchase some Saul Centers (NYSE:BFS-C) 6.875% preferred yesterday (NYSE:BFS-C). We made 1 purchase at $25.15 and a second at $25.10. This issue, which was a 5 million share issue, but 3 million shares were redeemed last year, is unrated. The next dividend payment is 10/15 so this is simply a move to capture a dividend (or 2 if we are lucky) prior to the likely redemption of the issue. NOTE that this was not an original idea, but one which was discussed on various message boards–I are more than happy to steal a good idea and this one was available all day yesterday–and maybe will be again this morning. Like always there is no guarantee this will work out like I hope so this is not a recommendation for anyone to follow suit.

10 thoughts on “Stability to Return to Markets?”

  1. Tim, I am under no illusion my Saul preferred purchase at $25.07 yesterday is going to be around long…I guarantee you the dumping is done by the “in the knows”. And that would be easy for them to know since this outfit is tightly controlled. The 87 year old CEO personally owns 45% of the common stock.
    They dont even give quarterly conference calls. Why? Well if you were 87 years old, founded and basically own the company, you wouldnt feel any need to answer to anyone either. Eat cake boys, Im da boss! I would do the same myself. Unless recently done no heir to the throne has been publicly declared.

    1. No doubt Grid that this is a short term play, but I went into it twice on Monday at a price that doesn’t matter at all. Apparently BF Saul is a legend in the DC area real estate market–he has a net worth of $4 billion–if you have $4 billion and you are that age you do anything you want to do–hopefully within the law (more or less).

  2. I took a shot on some ENR-A today. ENR convert has a 9.25% yield here with the discount.

  3. “The key is to get positioned “comfortably” in your portfolio. This is something I have worked on for literally years and I am now in a spot where I feel good about what I hold and intend to hold through market turbulence.”

    Me, too, Tim. Me, too. My big problem, though, is call risk and the outrageous prices the quality noncallables I covet are selling at or that I already own somewhat imprudent amounts of, like SLMNP, por ejemplo.

    But I’m still holding true to my no BDCs, no shippers, no MREITs mantra. Been there, done that, & bought the T-shirts that turned to rags quickly.


    1. Very wise words!

      “But I’m still holding true to my no BDCs, no shippers, no MREITs mantra.”

      No reason to get caught up in those issues when all you have to do is wait until some better is on sale. The waiting is the hard part. “Investing” is not an action word.

    2. camroc—it has really been years trying to correctly position in the quality, duration and coupon I want–of course a few capital gains were too good to resist harvesting, but all in all I feel really good about it at the moment. Of course I do have dry powder in money market looking for a more permanent home.

    3. Camroc, we have the same exact “no fly zone” areas… I am done chasing 5% perpetuals, too. I dabbled back into common stocks to “get some yield”. Yesterday I bought 200 shares of Xom at $70. And 200 shares yesterday of PPL at 29.10. This morning before teeing off on phone, I dumped all my PPX baby bonds and rolled it all into its common stock mother, PPL at $28.74. That was a 5.74% ute common divi yield rolling out of a 5.75% current price baby bond past call yield. PPL rebounded nicely today I see.

  4. I picked up some BC-C yesterday at 25.98. It is BBB rated and has a 6.375 coupon. I’ll take a look at Saul as well.

    1. Kapil: I bought BC-B early this year at 23.45, I really feel comfortable with the issue, but wrestling with taking $3.00 a share paper profit on 500 shares. One day it is yes, next it is no because I haven’t found anything I like to replace it 🙁

      1. Actually bought it late December, I remember I got it too late for the first partial dividend. Other one I am thinking on selling is TANZZ. Up a couple dollars on it also and I don’t get the same warm and fuzzy I do with BC-B.

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