Wow–Power to the People–or At Least to Commenters (corrected)

There is definitely power in the commenters on this site.

Sometime back in early December–maybe 12/4–someone (sorry I can’t find the comment so not sure who it was) mentioned that the 7.10% CHS Reset Rate perpetual preferred (CHSCN) was tumbling hard the last few days.

Probably by pure accident I took a look–since I scan hundreds of comments each day I don’t have time to check everything out–but I did on the 5th. Shares had traded as high as $28.28 and now had tumbled down to around $26.70.

CHS has always been a favorite of mine–for no particular reason–maybe just because they are local to me. Being that the company had an ex-dividend date coming up (12/16) for 44 cents I took a modest position (wish it was more) at $26.76.

Shares went ex on 12/16 and shares were ‘marked down’ by the dividend amount–but it never actually traded at that level (as far as I can tell).

Shares had closed at $27.13 on the 13th (Friday) and closed on ex-date (Monday) at $27.04. It closed at $27.25 yesterday–and now trading at $27.12 (corrected these prices from earlier incorrect prices).

I am exiting today–not because there is anything wrong in holding further, but more so because the account it is in holds almost no cash at the moment–and I need some dry powder.

14 days–3% gain.


48 thoughts on “Wow–Power to the People–or At Least to Commenters (corrected)”

  1. hi all
    i have exited a long in CHSCN at 28 today. was able to clip coupon plus cap gain for ~6% in about a month. only regret is it never retraced far enough for me to get more early in the trade, but the commentary here helped confirm my stance. i’m rather new here. thank you @tim for a great site.

  2. Just remember that investing is a noun and trading is a verb. Investors due research to make appropriate long term decisions while traders are looking for short term opportunities. Investors watch the market while traders participate in the market every day. You can do both but the areas of your portfolio where each takes place must be clearly defined or you will end up with a mess.

    Core / Satellite is an excellent approach to doing both.

    1. Agree Marc–I mostly do messing around in 1 account while the other 2 hold core holdings.

    2. There gets to be a grey area when I own stuff like PPX in my core portfolio. I’ve bought and sold it a number of times this year along with some other folks on this site.

      I don’t think there’s any harm in that.

      If I wasn’t going after all the low hanging fruit out there I would be severely underperforming the S&P.

      1. Jacob, if you are all in income issues, (which I am not suggesting is appropriate) I dont think using S&P as benchmark is appropriate. Its an apples to oranges thing. If you want a benchmark use bloated preferred fund PFF as your benchmark. As it is a preferred only fund. And a bad one at that so you feel like a winner every year! 🙂
        That is what I do. Anytime A4I, Alpha, or Inspy whips me on a better trade, I just think…Ya but I am still stomping PFF!

        1. Now Grid, I wasn’t going to mention it, but I did manage to unload SR-A this week at 27.03, which I do believe was a penny over your trade. lol. No worries though, your position as the iHOP master chef is secure.

          1. Alpha, Congrats, a hard fought victory! Now we just need 26.35 again….We blew it, and I knew it would happen and did nothing…ETI- (Texas Entergy preferred)….I re read details and it reminded me the first divi is going to be an overbloated first payment for basically 4 months instead of 3. And they hadnt declared it yet last week. Could have got on at 26.20 last week and didnt, as I lost out over fighting for an extra nickel and it got away from me…The divi got posted and many sites are extrapolating that first payment into a full year yield, misinterpreting the true yield. The dang thing exploded today to over $28 before falling back. That would have been big time easy money!!!

  3. I’ve had my best year investing this year and a lot of that is thanks to Tim and the people on this site.

    However, the returns on the Nasdaq and DJIA are so high this year that it’s been a struggle to match pace even with all the trading that I have done.

    In order to really be successful, I feel like I will need to have a year where I outperform the majors by a substantial margin.

    1. Jacob – One of the worst mind numbing things you can do as either an investor or a trader IMHO is to attempt to compare yourself to the rest of the world’s performance in its entirety as measured by your bogey of choice….. You’ll always end up being able to find where you lose by comparison. Begin with your first thought – that this year was your best year ever investing and try to figure out how you can recreate that performance year after year, no matter what NASDAQ or DJIA or your neighbor or your cab/Uber driver does and accept that as your most valuable comparison. Personally, I much prefer being up a relatively smaller percentage year after year than being up a ton one year and down a half ton the next. Guess we all have to know ourselves and be able to live and grow with that as our knowledge base from which to grow. I’ll now put my philosopher’s hat back away…

      1. I have to compare my results to the indexes or I feel I’m not being honest with myself.

        I’m not too concerned about lagging the indexes in positive years, but during the bad years I hope to make up for it. Thanks to the Feds Quanitative Infinity though, bad years for the S&P have apparently been cancelled.

        1. Personally, I don’t think I’ve ever compared my results to those of the ‘indexes’. There is so much ‘window dressing’ and manipulation of these things that I trust them as much as the prediction that I won’t be here in 10yrs cuz of rising water levels.

          I think I gauge my performance off of the effort I put into my investing work. If I’m putting in mediocre effort, I expect to have commensurate performance. That’s why I bust my tail cuz I know it will pay off.

          But, I also believe that we each need to do what works for us individually – so to each his own.

        2. I haven’t used my current strategies in a bear market. After I do, I’ll find out if I’m really doing as well as I think I’m doing. Eight years of a bull market can create a false sense of invincibility.

          1. Thats exactly what I am thinking–like REITS which go up, up and up income issues have been quite kind to us.

          2. Amen to that.

            The love fest underway on some of those n’er do wrong SA REIT sites will go south overnight. More and more I reflect on the fact that we’ve basically had a near 40+ year downslope in rates which has an enormous impact on – well everything. Where exactly would the S&P, house prices or companies like Tesla be in say a 7% world (which happens to be the long-term average)? The landscape would be unrecognizable. But heck, at III, we’d be loading up on high IG, past-call well under-par (OK redemption value) issues – lots of utes.

  4. Tim,

    Is this the post and the feller’ you’re looking for? I’ve bot 3 additional lots of CHSCM since that posting.

    There were other postings dropped around the site in various articles during that time period, discussing both the M and L flavors and which one was the better bargain. Anywhooo, this was posted to your write-up on CHS that you did in late November:

    Mark Gottlieb says:
    12/05/2019 at 12:20 pm

    CHSCN looks like a good buy to me here. It got up to 28.25 or so a few weeks ago and dropped to 26.75 today and goes xdiv 12/16. I just bought more. I knew about CHS and the IPOs of CHSCL and CHSCN which I participated in because of Tim!

    1. Must be it A4I–looks like I hexed CHSCN today as it fell out of bed after I wrote–no worries–just trying to scare up a little dry powder.

      1. Looks like it got ahead of itself after ex-date, shooting up so quickly. I expect a slow ascent from here unless there’s been some crappy weather forecasts or other news related to the energy sides of this puppy that are driving down the price.

  5. CNP-B is one I’ve commented about multiple times and I know some of you took a bite when it got down to near $45 flat less than 1 month ago. It’s now trading $3/share higher in less than a month.

    Power to US, we the People!

  6. Looking for some input on investment philosophy in the current low dividend/interest rate environment. For the last several years I have sold good preferreds if I could pocket a profit worth 15+ months of dividends (7 to 10% profit). The assumption is that I would find another investment opportunity within a few weeks/months to replace the sold issues. Now, I am sitting on several preferreds with profits equivalent to 15 to 18 months of dividends and I am hesitant to sell. Hesitant because of the current low dividend rates being offered on new issues and concerned that I will be sitting on excess cash without a good investment opportunity. It is worth noting that I depend on dividends to provide approximately 30% of my annual income. Any comments would be appreciated.

    1. Larry,

      Being one of the younger (but not a young person) frequent contributors here, I can tell you that my philosophy is simple: My investing dollars are my employees and they better damned well be working for me all the time. I run a tight ship and I don’t give benefits. It’s a sweat-shop for real over in these parts of the neighborhood. Ha!

      I wouldn’t sell a thing unless there was something else of better quality or opportunity to buy. If you’re selling because you’re ‘worried’, well that’s OK but that’s maybe a sign that you need to adjust the diversity or areas of your holdings. Personally, I don’t think there is a need to raise lots of cash right now. We’ve had ‘some resolution’ to possible major market movers recently and I think that green lights the economy and the markets to keep it out of neutral. Just look at this week for example. With last nights historic event, the markets yawned and still went up. The cease fire with China is way better news than what it could have been. The holiday season is going well. Optimism and jobs numbers are fantastic.

      100% invested… Full steam ahead for me, but I know that to each his own for anyone who feels different.

      I try to remember this: I’m investing primarily for income. Even if a correction or a recession takes the value of my portfolio down 10 or 20%, it SHOULD NOT take down the income I am receiving. This is the mantra many DGI’ers live by and I think it applies whether you play on that side of the fence or stay in ‘fixed’ income.

      At the end of 2018, I was pulling money out of the sofa cushions to buy stuff – so to speak. While many were panicking and liquidating thinking that this was the big one, I was burning up my free trades with buy after buy order. I like that Warren B. saying. Be greedy when others are fearful….

      My portfolio income is up over 31% from last year.

    2. Larry, my goal is to not trade at all. And I don’t unless something is making me uncomfortable call-wise or quality-wise. The last major upheaval I had was selling a large holding of my Conn L&P preferreds because they got so far over the call price. And they still haven’t been called. lol

      The flipping machinations going on here make my head spin. It seems like way too much work to me, but many here love it and thrive doing it. A man’s gotta know himself.

      So I have a list of things I look at when I have a few coins to reinvest and I try to buy more of the ones that seem most reasonable at the time. I never try to time the market or guess where rates might go. I also don’t care about cap gains, just steadily increasing income. Gimme that & I’m all good.

      But you should know that I’m probably one of the oldest persons on this site. I retired so far back it’s hard to remember when I wasn’t.

      “Ah, but I was so much older then; I’m younger than that now.” –B. Dylan

      Good luck, Larry.

      “Wishing you the best of good buys.” –P. Kangas

      1. Camroc, Flipping helps keep me out of the sportsbooks and satisfies that urge without as much risk, ha. And Im sweating now…Cashed my 7.5 Titans over, but have Titans 8 ovr also. Thats a push and get my money back but I need another win….And oh The ‘Boys….Im on life support at 8.5 over. Got the Rams gift, but they gotta beat the Eagles and Skins or its “rip up the ticket” time. 🙁
        But…The Blues 96 over is a near lock and that will be sweet come April to cash that ticket!

      2. Larry and Camroc—I’m probably older than you and, when I was younger, used to enjoy betting the ponies, NFL games, whatever. However, I just don’t have the urge to do so anymore. Some of the guys on this site still have the urge (as well as the energy level and time) to place short term bets on preferred stocks and probably do okay. Like you, I just don’t have the interest to play that game.

        What I have trouble deciding is when it makes sense to sell a preferred stock that I bought around par ($25) a few years ago and is now trading at $27 or $28. I have done it a little bit, but not very much because I am hesitant to buy new issues trading under 6%. I guess what I am saying is that I have no clarity on the future direction of the rate curve in the next 12 months.

        At the same time, I am sitting on too much cash at Schwab earning 1.5% in a money market fund which is costing me dearly. If recession fears are really going away, the yield curve should steepen and preferred stock prices should come down a little bit. I guess what I’m saying is that, in my mind a little bit, I’m between a rock and a hard place. However, I do enjoy analyzing the pros and cons of the issue.

        1. I second that. Paul and Suzie on the Nightly Business Report came out of Miami. It was pure financial news without all of the CRAP you see on CNBC for example, plus no advertisements. IIRC, once per week on Friday they would have some forecaster/analyst come on with their reading of the tea leaves. But it was a minor part of the whole show. And there was no discernible bull/bear bias like the CNBC hype machine. The good old days. . .

    3. You may have answered your own question. If there’s nothing wrong with what you’re selling and nothing to replace it with, then don’t sell. I don’t believe in target prices because the situation is always changing. My decision to sell is based on the current situation not the situation when I bought it.

    4. Holding and sitting on gains is OK, if the call date is over 6 months or even longer. If you are sitting on cap gains and the call date is approaching, your gains are probably not going to be gains for long with the never ending redemptions. Once the call date has passed you could re-enter.

      In my opinion there is ALWAYS something to buy and stay invested in each and every month. Every month there is some sort of sell off on a preferred or baby bond. To name a few: CNP-B, EP-C, PSA-X, PSA-W, BXP-B, THGA, IPWLK, TCF-P, DLR-G, VER-F, AGNCM, INBKL, WFC-P, RCP, KYN-F, ETP-D, … I have about 60 preferreds and baby bonds, and there is always something each month to dump money into.

      This year has been very profitable in picking up sale items, as well as getting rid of callable items when there is a couple months left, and you capture the big gains. Uncle SAM is going to make out like a bandit with well into double 6 figure gains this year, with most of it coming from buying in Dec when people were throwing away investments. With more and more people investing in passive funds, the opportunity for capturing price fluctuations is becoming more and more. Most people dont want to look for opportunities and simply park money in funds. And… I get/understand that. Personal time for people can be priceless.

    5. Larry, No matter what, the base case by default is these are income issues, and traditionally are meant to be held until maturity or needs change. The biggest concern I suspect you have is worry about a cap loss on a redemption. Are these issues you are sitting on call protected still? If not, some pencil figuring may be in order if you can find suitable replacements with less call exposure if those companies are the type to redeem.
      If rates jump almost all issues will drop. The yield trapped anchored to “par” issues from above market yields from being past call would be the ones that hold up the best.
      Im like A4I and Mr. Lucky keeping fully invested (all in preferreds). I presently only own 4 issues above par and past call. But worries of being over par are secondary to me. As I have some non callables, some term dated, adjustables, and a lot of resets well below par (Canadian resets) with some perpetuals blended in. And my yields are as varied as my issues are. From almost 10% from PFX all the way down to 4.08% from UELMO. I look for an overall ball park 6% ish yield but actually dont look for that specific 6% ish buying individual issues though.

    6. All,

      Thanks for the comments. You have given me more to think about. My current thinking is to hold onto the preferreds in the $26+ range until either 1) I find good replacement candidates, or 2) they approach the 6 month to redemption date.

      Happy investing.

  7. Tim- I’m making a New Years resolution to comment and hopefully contribute more to the exchange of information on this outstanding site and community. I tend to shy away because I’m insecure in my knowledge. But I’ve grown a lot this past year. You all , collectively, saved me from making serious mistakes since last December.
    Thank you, Thank, Thank you., and Merry Christmas/Happy and Safe Holidays to everyone!!!

  8. I want to give a shout out to JDubs today for his post on CIVBP. made me quite a nice buck on short.

  9. I want to thank Kaptain Lou. Back on 4/16/19 he mentioned RPT.D was a buy under $50. My purchase on 7/1/19 for $49.60 has been one of my best buys this year as it is trading at $58.35. Wish I had bought a lot more than I did.

    1. I also participated in that exact RPT-D trade recommendation. Purchase price was just below $50 and got out a bit early at $57.

  10. I looked back at how all 5 issues traded, and CHSCN was the only one with that dip.

    It is trading at $27.12, not $25.12. If it were really at $25.12, I would be an eager buyer.

    1. That’s the beauty of your site, Tim. Everybody adds something and everyone who reads picks up a little knowledge everyday.. thanks and enjoy a little dessert with your steak dinner.

        1. Tim McP, Did you toe in more to nasty MBNKP since it has stabilized and appears to be drifting up?

          1. Griddy,
            I pounced on multiple lots yesterday and am now riding the wave up. Financials suck for these people, IMO, but for a flip, I see this working its magic thru the end of the year as it melts up to 25.35 where one can punch eject quite easily.

            I also dumped AGM-D after booking massive gains. Yield is dipping down to 5.2% and so I can certainly do better and stay with the QDI that I like (CHSCM, MBNKP, or chance a bit more on LTS-A).

            1. A4I, It has creeped up past two days after uninspiring opening day. I dont have an exit number, but should be thinking of one. I suspect I will keep a few hundred long term just to show myself what a wild party animal I am.
              I rarely flip out at top penny but dont like catching a fall. PBI-B is a prime example. I bought it a couple weeks ago and a few days later flipped it for a buck higher. A bit too early and left a quarter on the table…Or maybe not because in past few days it cratered and is now well under my original purchase price already. Probably not playing there for a while again.

              1. Grid,
                I plan to hold it longer term, so long as I don’t see the financials rotting any further. I know they’ve done a lot to decrease the junky parts of their lending but still, this is a spec play in my encampment. No way it is allowed to go above 400 shares for me. I rate it right on par with LTS-A, which people make fun of me for holding but like this one, they still pay me with checks that I can still cash and get QDI to boot.

                I can’t comment about PBI-B. I’ll get yelled at again for being unpatriotic. 🙁 LIGAF is the new ticker I am fond of. Ha!

                1. A4, no need to take grief for holding LTS-A. My largest and longest held QDI preferred. The amount of bile thown at this over the years could fill an entire septic system. And all have been wrong.

                  In case you are unaware, LTS is merging with another firm, causing a trigger of the change of control provision in the prospectus for LTS-A. As such, holders now have a put option @$25.00 cash once the merger is completed around mid 2020. Until then, prices stays locked in around par and you collect the monthly QDI dividend with little or no price risk.

                  I have moved to extreme overweights in all accounts and am treating this as my personal “SWAN” issue going forward.

                  1. Quick, I love the prose…Good stuff! Im a bile guy too. But my reference is always to the financial structure of a company. But good finances can equate to poor investments and poor financial companies can make great stocks.
                    My opinion hasnt changed (which shouldnt mean anything to anyone but me, I freely admit), but that doesnt mean I wont clean a huge heap of meat laying on the bone…I made some great money between $2-$3 a share on all 4 of those baby bonds when they collapsed because of who is acquiring them. And then they dipped back down a bit past week so I bought a very small 300 share position back as a longer wait and see hold.
                    BTW, did you know some LTS shareholders have filed suit to block the transaction? Dont know if it has any merits or not.

                  2. Quick,
                    I’m good to go with LTS-A. Glad I got out of LTSH a few days before it crashed.
                    That “put” is golden to me and the exact reason I’ve not sold a share of this great 8%’er. In fact, I’ve been adding… The QDI just makes it merrier!

    2. Thanks Be Here Now–corrected. Yes, being the only dipper made it more attractive.

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