Up and Up They Go

I have been watching a few of my holdings recently trying to determine the right selling price–assuming I decide to sell and today I pulled the trigger on a couple. Where oh where is the top in the preferred market?

As I mentioned last week I was going to exit part of my Highland Income Fund 5.375% (HFRO-A)–I am sure you all recall that last week the issue swooned a bit as a related company filed for bankruptcy. Anyway I let go of a little last week and then today sold some more—so I have about a 1/2 position left which I will just hold. All in all I had a gain of just 1% for my 5-6 week hold–not much, but at least not a loss.

Today I decided to let go of my Gladstone Commercial 6.625% perpetual preferred (GOODN). I am a big fan of the various Gladstone term preferreds which are issued by Gladstone Investment (GAIN) and Gladstone Land (LAND)–or the relatively short term debt issued by Gladstone Capital (GLAD) – I own them all–BUT I have never been a fan of the Gladstone Commercial preferreds because they are perpetual. For whatever reason the market loves them — I have exited for about a 4.5% gain in a month.

A big one I have been watching is the New Residential Investment 7.125% (NRZ-B) which was a real dog for a bit, but now has picked up some steam. As I mentioned on 10/11/2019 (here) I held through the ex-dividend date on 10/11/2019–so I picked up the 44.5 cent dividend and now shares have bounded back strongly to $25.48 right now (I think I bought around $25.04). This was bought as a flip and I have held it for 10 weeks–sometimes things don’t go as planned–regardless, a little patience has that position now up 3.5% (with the dividend which isn’t paid until 11/15). I’ll watch a few days and if the move is over I will exit–it is a full position.

Currently I still am holding the WR Berkley 5.625% Sub Notes (WRB-B) which I had hoped would bounce back a little better after ex-dividend. Right now with the dividend I have a very short term gain of about 1%. Shares are trading at $25.15 right now and with a call possible at any time investors are resisting the urge to push it higher. Honestly I am always happy with a gain–even 1%–it beats a loss.

So with some selling I think I am around 30% in cash–if I sell the NRZ or WRB it will be some higher. Hopefully I find the time to ferret out a few buys–or get a new issue with a coupon above 5% that I am comfortable holding for a while.

30 thoughts on “Up and Up They Go”

  1. Tim- This site makes it hard by giving us too many winners. Now I have to think about what to do with my new Saul Preferred you told us about that is up 7% since its issuance. I just wanted to buy and not think about what to do with it for a couple of years. Keep up good work. These are the kind of problems I need.

    1. SDMarc–we should all have your problem–haha. Many I don’t buy because this damned day job of mine keeps me away too much–too often.

    1. When AEH, a grandfathered Tier 1 security, is called, not much is sacred any more. This clears AEG out entirely. i don’t count AEB.

  2. i keep looking at NI-B, of which I have a lot with good gains. It keeps rising….I guess 3% plus YTC isn’t bad from a utility issue when treasuries yield less….and treasuries aren’t qualified dividends.

    I can’t sell this year because of the Obamacare cliff. The subsidy is worth way more than the amount I may lose in any given security.

    I have too much cash in my IRA and am looking for opportunities there….but finding so few.

    1. Lol, yes that cliff is penal…I was checking my ACA premium…$660 a month for over 6k deductible. If I was under the cliff (less than zero chance since my pension blows by threshold) my premium could be down to $20 a month with $600 deductible. So yes that is certainly very important staying under cliff!

      1. Gridbird…VERY important for me! Bronze premium is almost $1,000 a month for me. With subsidy…Zero!!

  3. Wow! I am so out of step here. I know nozink about timink. Never have.

    I keep a steady stash of cash, about 12%, in old treasuries with floored yields ~4%. They’re my rock in case of emergencies. I don’t know what ima do in 2022 when they all start to mature. (I should live so long. lol)

    Meanwhile, my cash ain’t nothin but trash. It’s even worse now that I can trade a few dollars commission free. Lawda mussi…

    That said, I don’t buy anything shaky, i.e., that I think might not pay me for the foreseeable future.

    And my portfolio income has never been higher. That’s my overriding goal.


  4. I am up to about 25% cash across multiple portfolios, tax+non-tax. Have been selling into strength for about 9 months already. Yes, $Prices on some earlier sells drifted higher, yet, I wanted to also reduce position-size exposure. Reduced holdings or exited on TNP-Prefs, TOO-prefs, AFSI-notes, AHT-prefs (plus added on $PPS drops), CLNY-prefs & others.
    Somewhat hesitant to enter the Pref-IPO ring.
    Instead have been slowly restructuring holdings, increasing and expanding CEF holdings substantially.
    Would like to re-build debt/pref securities. Yet, with current top-prices coupled with not-so-attractive %Yields, am waiting for some type of market change. In the meantime, have increased derivatives trading activities. Mostly for Premium generation.

  5. Dumped HFRO-A, believe it or not I don’t do risk. Holding on to GOODM simply because I don’t want to sell too much at once. Bought heavy on the NRZ-B ipo, gradually selling off still holding an above average amount, just traded some for NRZ-A at a 54-point difference. Cashed out of WRB-B too soon. BML-L has been a good one for me lately.

  6. Bought NRZ-B at IPO as my new money market “sweep” account as mentioned in another income focused forum several times.
    I predicted $25.50 at some point based on where NRZ-A was trading ($26+), and here we are. I only sell shares when a better opportunity pops up (like PEI-C bought early last week and enjoying a big bump since).

    Other than that, always fully invested and margined to boot. Daring companies to call preferreds trading post-redeption date, and not spending one minute waiting for the next “crisis.” I own ABR-A and ABR-C and a bunch of ABR by the way. Have for a number of years. Sitting tight on all.
    Love this market!

  7. Most all my positions are up strongly. JPM. C from 25 is now at some 28.50 with a 6% coupon from Jan….. Meanwhile I have a jpm 6.75 bond that’s up only 2% in five years. Yes 25 dollar preferreds are pricier but that’s where the action is

  8. I to have several perfereds that have gone to 26 and higher,but if i sell have no new candidates to place cash. So just holding and collecting avg 6.5% gain.

    1. I have 9 issues all call protected, some as high as 28 a share in my long term bucket. I maintain 2 buckets. My long term holds and my tactical trades.

      I should sell some of the long terms also yielding 6.5%. Same issue as you, no place to go

    2. I agree. I bought a double position in GOODN. Sold have for an $800+ gain, but kept the rest. I don’t know where I can find a current of 6.27% with 5 year call protection. Just hope its a good company.

  9. My best play this month was TOO-E. I’m still holding it and think it will be firm at least until the x date.

  10. 24.5% money market cash, 20% tax free “cash”(municipal bond mutual fund), and 55.5% preferred issues. So I consider myself 45% cash.

    I also am holding WRB-B at 0.7% gain. To me, as long as interest rates don’t climb, this should stay near par and return 5.625% dividend. Good deal.

    I only have one Gladstone which is the new gladstone issue and only at 25% of my normal position. I will hold for awhile.

    Sold out of HFRO-A for marginal loss.

    I also took positions in WFC-T (6% coupon). Same logic as WRB-B. I will not lose money, as long as it is not called, I will receive 6% after the next payment date. When I say I will not lose money in WFC-T, if they call in Dec, I will make the same as my 1.7% money market rate would have paid. So a true no risk for me. I like this approach in this market for the time being.

    1. I feel like the Grim Reaper planning on the next market crisis but I feel it’s coming. Like I gather you do!

      You’re gonna be well positioned.

      1. Bob-in-DE–I’m right there with you–I feel it too, but want to stay invested with a good chunk.

        1. I am with both of you. Trying to be invested while waiting for the next market crisis. I am shocked we haven’t had it yet, so who knows maybe we are all to early but we are not wrong, something has to give

  11. Tim, I’ve been trimming 1%-2% per week of the most over-priced holdings (like AXO when it hit a 1.59% YTC yesterday) and finding few acceptable replacements. Cash is growing.

    Separately, I’m missing something on HFRO-A. Are the management issues enough to undermine the A1 rating and 200% coverage? Even before last week’s news HFRO-A’s price action was weak. What is my lack of experience missing here?

    1. alpha8–no there should really be nothing wrong with it–I was overloaded and now have gotten back to 1/2 position for now. Like all CEF preferreds I like it–but just have a little jitters after last week and don’t want to be overcommitted–makes little sense, but it ‘feels’ better for now.

  12. I still see some catch-up potential for the GLOP family, after that I think I will hold 50% of cash waiting for …Godot aka a real correction.

    1. Been doing the same. Trimming. Today it was BFS-E, $26.70 is just too expensive for unrated 6% shares. Also trimmed some PPL. Been on a tear, should have held onto PPX too, but who knew 5.9% past call debt could run to such a premium. I’m using this time to trim marginal holdings and hit a few singles. BPYPO May be the next candidate

      1. Timdman–yes, I have been hitting lots of singles this month and without dividends, which come in the end of the month, I am up 1/2%–shoujld be up 3/4% for the month which I am most happy with.

        1. I am more concerned with CALL risks these days. Sold all my CTG-D and most of the UNMA all based on YTC. I am not terribly concerned with unrated but defacto eREITS, such as BFS-D because the Xmas “massacre” was not due to Taper Fear but market’s violent reaction to Fed’s mis- interpreted the economic condition and over-reach. I suppose that I do follow Doug Le Du’s teaching or rather his EXCUSE when his subscribers started to complain whenever there is Taper Fear, “what is the problem, will you rather pay more to buy preferreds since the price is lower. You can buy with the dividends received.” Of course, that is the wrong logic. He does realize the risks of perpetual ownership. Some of the eREITS do seem to do fine. Even the Malls, very volatile indeed, are unlikely to file for BK. The two jokers in the deck are the private equity money. Blackstone (which I zero position) and Brookfield. Brookfield’s preferreds, eREIT shares (currently with headwinds, renewables, BEP (I sold some and bought them back with a different broker), BIP (I do not own), TERF and now TOO. I certainly do not want to buy more of my 220 shares of TOO-E. With eREITS just like any other common stock, entry point is important. eREITS are under pressure today. MAC is the worst of all Malls in market action. CBL has made a 5 year loan from a consortium of banks, CBL-D continue to hold its value despite JC Penney closed a few more stores plus Forever 21 or something. I sold all my NRZ-A but kept all NRZ-B again based on YTC.

    2. Gabriele–you may be correct. It seems we are rotating around to those that are priced below $25 and then even the junkier ones move higher–as long as the economy keeps moving ahead without recession it might be a decent place to be for the adventuresome.

    3. Gabriele, Godot never showed up, but I think your correction will. My 2 cents is on the catalyst being liquidity issues or ratings downgrades or both. If there’s a crowded exit, some of these open-end funds may not be able to keep up with the redemptions without causing a chain reaction.

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