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Unplanned Buy on Dump

Yesterday just after I wrote I planned on doing nothing this week investors decided to dump one of the issues I mentioned that I would like to buy more of–but was overweight in already. Those shares were the RiverNorth Opportunities Fund 6% perpetual preferred (RIV-A) which fell by 40 cents on 30,000 shares of volume which was 4 times the normal volume. When I saw this occur I decided to add a small amount of shares $22.70. So now I am overweight–plus a little more. Thus if over the next few months shares claw their way higher at some point I would lighten up a bit.

Last night AG Mortgage (MITT) priced their new baby bond at 9.50%–as expected. I took a quick glance at the financials of this company and they have ever decreasing net interest margins–without any sort of deep dive I wouldn’t ever be considering these baby bonds–the risk/reward isn’t there.

I don’t plan to buy or sell today or tomorrow–but as I proved yesterday one never knows when a decent bargain will appear.

10 thoughts on “Unplanned Buy on Dump”

  1. TOP Pick of the day:
    PWF.PR.Q (Power Financial Corp. Pref serie Q)
    Current Yield: 9.91% (3MTH FLOATING + 1.60%)
    Price: CAD 16.30
    Rating: S&P A-

  2. I did have MITT preferreds long ago. I don’t remember anything different versus most of mortgage Reits. Anything happened lately?

    1. MITT is above average risk, at one time they were quite high risk now maybe not so bad just below average thus the higher dividends. Some concern about the number of preferred and baby bond issues they have but they’re not big sized issues. I like trading between MITT-A and MITT-B there are enough price divergences to make arb profits but the spreads are big you have to be sharp and patient with the limit orders. Makes it worth the risk.

  3. The MITT baby bond is similar to MITN recently issued. Are they over indebted now? I own MITT-A and MITT-B paying about 1% more with price upside and easy to swap between but they’re perpetual. I’ll stick with A or B and ignore the baby bonds unless the price is favorable.

    1. “Are they over indebted now?”

      The stated use of proceeds is to pay off existing debt, specifically the Sep 2024 convert inherited from WMC.

      This debt is expense no doubt, but also remember they can call in 2 years.

      1. Maine – I know I’ve seen Use Of Proceeds statements in the past that are much more definitively written than this one regarding the convertible note specifically… They do leave an out in their language, however, I would bet they do use proceeds to call.

        “We expect that the net proceeds from this offering will be approximately $62.4 million after deducting the underwriting discount and commissions and our estimated expenses. We plan to use the net proceeds from this offering for general corporate purposes, which may include acquisition of Residential Investments and Agency RMBS, subject to our investment guidelines, and to the extent consistent with maintaining our REIT qualification and exemption from registration under the Investment Company Act, and for working capital, which may include, among other things, the repayment of existing indebtedness, including the repurchase or repayment of a portion of the Convertible Notes.

        “As of March 31, 2024, we had approximately $79.1 million aggregate principal amount of the Convertible Notes outstanding. The Convertible Notes bear interest at an annual rate of 6.75%, can be redeemed at our option on or after June 15, 2024, and mature on September 15, 2024.

        “As described above, we may use the net proceeds from this offering to repay indebtedness, which may include the repurchase or repayment of a portion of the Convertible Notes. To the extent any of the underwriters or their affiliates own any of the Convertible Notes, and to the extent that we use any net proceeds to repurchase or repay the Convertible Notes, such underwriters or their affiliates may receive a portion of such payment.”

  4. Thanks for the heads up. I added to my RIVA today. I didn’t get a price as low as you did, but I did manage to lower my average cost.

  5. Tim, nice score w RIV, a true sleep at night issue. I have my eye on another CEF pref.
    BTW, if you are looking for a MREIT starter position, check out PMTU.
    Penny mac has a one of the simpler balance sheets , with a diverisifying strategy of agency MBS and MSRs. Another starter name is AGNCO.

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