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Thin Volume Creates More Temporary Pain

The Hennessy Advisors 4.875% baby bonds just fell $2.36/share on a 1,000 share ‘get me out trade’. Very thinly traded issues can get hammered–for no real reason.

The bid is now $21.00 with an ask of $22.50.

Whoops–just as I was typing this someone stepped in with a 200 share purchase at $21.78. So now off 38 cents instead of $2.36.

13 thoughts on “Thin Volume Creates More Temporary Pain”

  1. Thank you for making me aware of this baby bond. I tend to check the gainer/loser list that’s also provided on this website from time to time (should be daily), but I was not aware of this issue.

    On that note, I need to create a better stock screener for my own personal use.

  2. I’ve seen several comments questioning why anyone would buy a preferred stock these days. I’d like to use SR-A (utility preferred stock) as an example. Spire has 19 consecutive years of dividend growth. SR-A has a 5.9% coupon and is callable beginning on 8/15/24.

    Just for fun, let’s say that interest rates turn and head lower between now and 8/15/24. Let’s also assume that SR-A is called on 8/15/24. You would realize an annualized return of 11.2%. You can make your own assessment on the likelihood that this type of return might beat the S&P 500.

    Also worth noting that if you hold this in a taxable account, the dividends would be qualified and you’d have a long term capital gain if held for at least a year.

    1. As somewhat of an interest rate hedging strategy, you could pair SR-A (fixed rate coupon) with NI-B, which has is a fixed rate reset.

      NiSource is a utility that has 11 consecutive years of dividend growth on the common. NI-B is first callable on 3/15/24. The current ask price is $23.90. The annualized yield to first call is around 11.2%. If NI-B is not called, the coupon will reset off the 5 year treasury plus 3.632%…if I use the current 5 year treasury rate, that would mean a coupon of 7.3% for the first reset period.

      NI-B and SR-A are a couple of my largest preferred holdings.

    2. I’m relatively new to this. Are there charts that show dividend growth and dividend payment information over a period of years or do you need to dig through years of financials?

      1. Paul – YAHOO FINANCE will show dividend payment histories. DIVIDEND.COM has extensive data on dividends. Just two sites. or do an internet search. Others here may be able to offer better information. Hope this helps.

      2. Paul, You can also get dividend history from the NASDAQ website NASDAQ.com for a lot of preferred stock. Preferred Stock channel also has dividend history. Both of these also have a lot more data you can review. The links below will show dividend history for NLY-G. The NASDAQ site can be tricky to figure out the ticker symbol they use. Preferred Stock Channel you can use the common stock symbol and then select which preferred you want.



    3. Dick, I hope they never call SR-A. My cost basis for this thing is way below zero now from trading over the years. I bought more at $23.15 today. If opportunity presents itself over time as in the past I will go oversized. I dont particulary like buying issues that go down. But this is the rare case. I become Numb nut Jussi and say “the more it drops, the more I buy”.

      1. Here is another lesson: no one ever gets better pricing than the man, the myth, the legend…the Gridbird.

        Thanks for coming to my TED talk.

        1. Dick, the good thing with a ute is they pay when worry abounds. Banks get offset on duration mismatch? They may go under…Utes get increased debt cost? Make a regulatory filing as it is cost of doing business and make the consumer pay for it. People dont pay their loans back? Bank could go under. People dont pay their utility bill? No problem, keep track of the accrued nonpayments then eventually submit a regulatory filing to increase rates to consumers who actually pay their bills. Dont every company wish they could play by those rules, lol…. Just dont go build a boondoggle cost overrun nuke in the wrong state, or possibly cause a $30 billion dollar fire….Or overpay for another company if its a hold co issue.

          1. I love utility preferreds.

            In the last month or so, I was able to grab 35 shares of SLMNP through Fido for an average cost of $851. That will be a 7% noncallable QDI yield unless I decide to pull an Elvis and “return to sender” by exercising my put option. Heck of a deal, right?

            Fidelity spells it all out in the “corporate actions” section of my account:

            Offer terms
            Latest Update:09/14/2022 5:29 PM ET

            Lyondellbasell Advanced Polymers Inc has announced an open conversion period on the Convertible Preferred stock.

            Each Convertible Preferred Stock you own is convertible into 19.1113 shares of Shulman A Inc common stock, CUSIP 808194104.

            Holders who convert will receive a total of $848.2742 per preferred stock ($42.00 plus $2.386 ($1.477 distributed on 2/4/19 + $0.909 distributed on 04/01/19) in place of issuing the CVR per share).

            Below is an example of the payment breakdown for holders who instruct one (1) preferred stock to be converted
            1 Pfd share = 19.1113 common share * $42.00 = $802.6746
            1 Pfd share = 19.1113 CVR * $2.386 = $45.5996
            Total Cash Payment per Pfd share = $848.2742

            Converting holders who instruct between record date and payable date will forfeit their interest.

            1. Another purchase of note recently was 500 shares of CNLPL for $52.37 on average. I’ve been trying to think a little longer term and set myself up with things I’ll want to own once we get on the other side of this rate hiking cycle. Hopefully these CNLPL shares don’t get called anytime soon and can go in the proverbial Whitman sock drawer.

            2. What was really amazing on SLMNP was that last quarter, the seller was there @ $850 the day before X-div date…. Even though I had owned SLMNP before and was well aware of the put details, I had to have someone point out what a great situation this was before the light went off again in my brain.. Forever grateful I bot a slug on Jan 11 @ $8 50. That seller @ $850 was there all January.

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