I own 2 different issues of BrightHouse Financial (BHF)—I own the BHFAP 6.60% issue and the BHFAN 5.375% issue. As I surveyed holdings this weekend I said to myself ‘what the heck were you doing buying that issue’? This was in reference to purchased the 5.375% issue on October 1, 2024. I already was highly suspicious of owning perpetuals at that time and I paid a price for this ill advised trade taking a loss that could well have been avoided.
I have no problem with Brighthouse fundmentally, I simply want to own fewer perpetuals with inferior coupons (inferior at this time). Moves lower in interest rates in the next month or two are maybe not likely (of course we have to see the data)–with a new administration everything is hazy in this regards.
I noticed today that CD rates continue to drift very slowly downward–most at 4.30% – 4.40% on the 3 month at Fidelity and eTrade. Still a reasonable rate to hide out in until other opportunities arise–hopefully in short duration issues.
TIM; I have a question for you on “BHFAP”. As I type this its at $22.16 which gives it a “YIELD of 7.44%” which by my definition is pretty damn good these days. I see its been callable since March 25th, 2024. My question is two-fold. Have you done any recent DD to make sure they are financially ok?? And why do you suppose with that high coupon of 6.6% they didn’t bother to call it??? I think this is the Old Met Life division that they spun off a number of years ago but I freely admit I have done no DD on the company. The other thing I will add is even if they decide to call it it still becomes a good deal for the guy that bought it at the $22.16. The volume right now is 36,483 so that doesn’t seem to be an issue either.
It’s cheap equity. Theoretically if they were issuing today it would be at a 7.44% yield minus an underwriting/issuance discount of 3% (off of the $25 face they would receive).
High coupon of 6.6% relative to what? Their incremental borrowing rate? The 10 year Treasury rate?
Bought a couple hundred more SAJ and one hundred more OXLCN for lack of finding anything better with a short maturity date. Been slowly adding QDTE (ETF) just to juice things up a bit.
I also bought perpetuals earlier this year when it seemed like rates had a long runway down. I haven’t sold any, and I am beginning to look to buy more. The prices beside being down from the backup in rates, also seems to be down from meaningful spread widening. If the 10 year gets to 5% we may get a great chance to lock in 7.7% to 7.9% qualified dividend rates in BHF preferred’s (and other). It is hard for the USG to finance our debt if rates stay high – so although the new government is talking inflationary polices we will need to see what happens.
Goldshoe, I originally got into the illiquids and perpetuals as I thought the same thing. I put in GTC orders say with the thought to capture a 7% to 7.5% return and I also look at the history on their charts long term. I don’t do what r2s does and run data to see a trend.
I’m more of a sniper as I just lay in wait and put in low ball GTC bids at a price I want to own. Now with not knowing the direction of longer term rates it doesn’t look good to be holding illiquids and perpetuals.
But since my past buys were at a cost and return I was comfortable with I am ok with what I consider lower risk holds.
I have never been in the group willing to flip holdings. For one thing, it takes me a long time waiting to accumulate at my price and income I want.
Example, I bought WAFDP partly on Grid’s posts and my research confirming it’s a strong regional bank in its sandbox. I bought around 13.50 to 14.00 now should I have sold it around 18 to 19.00 ? Maybe, but how long would I have to wait to ever see those prices again?
I’m in the 7th or 8th inning of the game. When I was in the 3rd and 4th innings back in the early 80’s I bought San Diego gas and Electric on the Amex with a yield if I remember around 16% I wish I had kept it, but I wanted to buy my first house. The lesson I learned was to hold my nose and buy something you know is solid and hang onto it when others are panicking because you never know when that opportunity will come again. I forgot that concept until getting older reminded me.
Using SGOV instead of CD’s. Pays 4.8%, no state taxes, safe, liquid, no duration risk.
SGOV 30 Day SEC Yield as of Dec 19, 2024 4.48%
https://www.ishares.com/us/products/314116/ishares-core-sp-500-etf
Sweaty do you mean the equivalent yield once taxation is figured in is the same as a 4.8% CD for you?
Bought BHFAL in the beginning of the year. It’s up 11% plus paying 6.4%. I originally took interest in it when it was mentioned by Tim. Good investment for me.
Now I’ll have to take a closer look. BHFAL does have a mature date but that is 2058 and I won’t be around by then. Call date 9/23.
BHF seems like one that ought to be bought. Looks oversold to me. Obviously I could be wrong., have a bid out there for BHFAN
pig-
It looks to me like BHFAN is at an important low…or it’s only halfway there. Wish I knew. Stay safe.
Tim – I can commiserate with you on the perpetual front. I am holding more than I would like to at this time. Some of this I can justify as “sock drawer” issues. In hind sight, I would like to be lighter on perpetuals. My current mix across 20 issues is approximately 60% term versus 40% perpetual.