Stepping in for a Small Buy

We have stepped in for a small buy of the Global Partners (NYSE:GLP) 9.75% fixed-to-floating preferred (NYSE:GLP-A).

This is a newer issue which the company sold on 7/31/2018 and which we owned on the IPO.  We sold the shares for a tasty capital gain at $25.82 after buying at $24.82 14 days previous.

Today we bought at $24.95 and plan to hold the shares as a permanent holding–where can I get almost 10% on a relatively decent MLP preferred unit?

We would make another small add if shares were to sell off further.



9 thoughts on “Stepping in for a Small Buy”

  1. have been watching Hoegh’s HMLP-A, which issues a 1099 not a K-1, for possible buy.. but not doing anything pending the jobs and wage report 10-5.. it feels like this sell off and re-rating of income issues is not over..

    a lot of investors “discovered” preferreds in the last few years and I wonder what their tolerance is for capital losses..

    1. Yes Bea–it may not yet be over, but the jobs report (and wage component) will tell us if we get a bit of a breather.

      Yes because there are always new folks entering the preferred arena and many times they get to be ‘educated’ with a capital loss on a investment grade purchase they thought was ‘gold’ when we have these downdrafts.

      1. I got that education not that long ago. Things are different with preferreds than with most other investments and it is not an intuitive adjustment to make.

      2. Tim, I pound “2013 Taper Tantrum” as a reference point everywhere I go and to compare active preferreds that were alive then to now. And see the potential ass whipping that still may lie ahead. I think I have made a few wary, but probably havent enough to get a surprise that they didnt see. One risk is traded for the other and many do not know….Duration risk, market risk, credit risk, etc…Any or all can bite collectively or seperately.

        1. I look fondly on 2013, just like late 2008. And 2018 could reinforce that winning five year interval…

  2. Being a partnership, I see the financial reports are in a slightly different format than I’m accustomed to seeing. New learning opportunity! Net income is kind of lumpy, with a large negative in 2016. It looks like they’re getting back on track lately with ROIC, ROE, ROA and net margin recovering. Did they get pummeled by the same forces that floored Exxon-Mobil common, for example?

    There’s also the issue of a K-1 and possible UBIT tax. I face this in some of my real estate investments, although a potential purchase of GLP-A would be in a tax-deferred account. IIRC, the UBIT tax is for amounts greater than $1000 per account. Is that right? If it’s $1000 for all accounts combined, this is a non-starter for me. The tax is withheld at the highest individual rate, which hurts. If I keep the annual dividends below $1000, I suppose I’ll be safe, unless there are other guidelines. I know Gridbird has mentioned managing UBIT in his IRA accounts. Can I get some more details?

    Thanks for saying you plan to hold vs. flip. The metrics are very different for one vs the other.

    Thanks and good investing to all.

    1. Hi Bruce,

      The $1K limit is per account…. so if you have 10 tax – advantaged accounts, you can get up to 1K UBTI in each account before you have to file a 990 T.

      If you ever end up having to file a 990 T you also have to get that particular IRA an EIN since it cannot be filed under your Social Security number.

      Also understand that we often talk about the $1K UBTI **annual limit** but UBTI also comes into play when the units are sold. That’s a whole ‘nother complicated can of worms.

      1. Thanks Amy–glad you all jump in with input since I am continually buried with my ‘real job’ and don’t have time to participate much at this time.

      2. Wow, Amy, thanks for all that great info! Sounds too complicated for me right now. Maybe that’s foolish, but I’m trying to avoid playing the bigger fool. There seem to be a lot of other opportunities and I don’t need the high yield or a potential cap gain right now.

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