Seeking Alpha
View as an RSS Feed

Doug K. Le Du  

View Doug K. Le Du's Comments BY TICKER:
Latest  |  Highest rated
  • Preferred Stock Market Q1/2015: Investment Grade Preferred Stocks Available Below $25 [View article]
    From the paragraph describing CTY under the second chart: "...CTY, presented here in green font, is an Exchange Traded Debt Security (ETD). ETDs are very similar to preferred stocks and are often labeled as such, but they are actually bonds that trade on the stock exchange..."

    Thanks for posting.
    Apr 7, 2015. 11:38 AM | Likes Like |Link to Comment
  • Preferred Stock Market Q1/2015: Investment Grade Preferred Stocks Available Below $25 [View article]
    Hello Bruce. With today's high prices, it surprises me that volumes for preferreds are so high every day. I believe this to be caused by value investors who are trying to treat an income investment (preferreds) as if it were a value investment (common stocks), looking for a quick cap gain.

    And thanks for the article idea!
    Apr 6, 2015. 03:58 PM | Likes Like |Link to Comment
  • Preferred Stock Market Q1/2015: Investment Grade Preferred Stocks Available Below $25 [View article]
    You are correct that 5% YTC is 5% YTC, regardless of purchase price. And purchasing above par exposes you to a cap loss in the event of a downstream call, whereas purchasing below par positions you for a cap gain in that event.

    Just remember that the lower the coupon, the less likely the issue will be called. Redemptions for preferreds with coupons below 6% are relatively rare while redemptions for preferreds with coupons of at least 6.5% have about a 92% probability of ultimately being called.

    See "Is Your Preferred Stock About To Be Called?" here:
    http://seekingalpha.co...

    A final clarification: Be careful with YTC calculations. The formula assumes that the issuer redeems the shares on the published call date (unlike many bonds, there is only one call date for a preferred stock so YTC is the same as Yield to Earliest Call), but preferred stocks are rarely called on their published call date.

    A preferred with a coupon of 5% is unlikely to ever be redeemed so YTC calculations are not meaningful for such an issue.

    Thanks for posting.
    Apr 6, 2015. 03:54 PM | 2 Likes Like |Link to Comment
  • Preferred Stock Market Q1/2015: Investment Grade Preferred Stocks Available Below $25 [View article]
    In addition to taking .5%, remember that the objective of those managing a preferred stock ETF is entirely different than, and disconnected from, the objective of an income investor.

    Where the objective of an income investor is reliable income, the objective of the ETF manager is to modify the holdings within the fund such that the market price of the fund matches the movement of an index (the BofA Merrill Lynch Core Plus Fixed Rate Preferred Securities Index in the case of PGX). The manager's objective is entirely unrelated to yours.

    The preferred stock research that I provide may be of interest to you:

    http://bit.ly/1mUvTa7

    Thanks for posting.
    Apr 6, 2015. 01:06 PM | 3 Likes Like |Link to Comment
  • How To Rate An Unrated Preferred Stock [View article]
    Alabama Power has some of the oldest preferred stocks that are still trading, with APRDN having been issued in 1946. All are rated A3/BBB+. Nine of their twelve current issues are cumulative.

    For many of today's buyers, the biggest considerations would be low daily volume and high price/low yield. On any given day, most of their twelve issues do not trade (no sellers). Their most recent issue, ALAWP issued 10/16/2007, is non-cumulative and offers the highest coupon of the bunch at 6.5%. But ALAWP is selling for $29.89 as I write this (250 shares), putting its YTC at -0.98 (call date is 10/01/2017).

    Sounds like you were fortunate to grab shares when you did. Thanks for posting.
    Mar 5, 2015. 12:15 PM | Likes Like |Link to Comment
  • How To Rate An Unrated Preferred Stock [View article]
    Great. Glad it worked out for you. Thanks for posting.
    Mar 4, 2015. 01:01 PM | 1 Like Like |Link to Comment
  • How To Rate An Unrated Preferred Stock [View article]
    CHS is unique in the preferred stock world. It is the only case that I know of where a company that is not publicly traded (no common stock), has preferred stock that is publicly traded.

    As an ag co-op, CHS is owned by its member/farmers, of which there are 600,000. But the co-op's bylaws allow it to offer preferred stock.

    Thanks for posting.
    Mar 4, 2015. 11:21 AM | 1 Like Like |Link to Comment
  • Preferred Stock Versus Common Stock Investing Results [View article]
    The upward price movement of preferreds during 2014 (just as with common stock shares) was caused primarily by investor's expectations of a continuation of low interest rates. Any time those expectations were re-enforced, prices ticked up.

    Most recently we saw this with the plunge in oil prices, especially since the second week of October 2014. Lower fuel costs reduce upward pressure on consumption-driven inflation (which the Fed has repeatedly stated they are watching very closely as an trigger for raising rates). With transportation costs plunging, taking inflation pressure with it, it is much harder for the Fed to justify raising rates, so we have seen preferred stock prices increase accordingly (fearful sellers become buyers).

    Earlier in 2014, Russia's activities in Ukraine cause instability in global oil markets. That uncertainty made it difficult for the Fed to raise rates, given that the turmoil could lead to an economic downturn. With the Fed seen as less likely to raise rates at the time, preferred stock prices increased then as well.

    I'm also watching the activity in Greece/Europe again. With the Greek election results reviving fears of default and/or wider euro instability once again, European investors may start moving their capital to U.S. fixed-income securities (bonds, preferreds) as they did a couple of years ago (as with the Cyprus clawback event mentioned in today's article).

    It's all about perceptions of what the Fed is going to do with rates, by how much and when (as has been the case for several years now). During a period of high prices (now), it is important for preferred stock investors to purchase preferred stock shares for sub-$25 prices. The best way to do that is to purchase new issues during their wholesale distribution to the market as described here ("Preferred Stock Buyers Change Tactics For Double-Digit Returns"):

    http://seekingalpha.co...

    Thanks Dave. Good to hear from you again.
    Feb 2, 2015. 01:35 PM | 1 Like Like |Link to Comment
  • Preferred Stock Versus Common Stock Investing Results [View article]
    I'm not a fan of preferred stock ETFs for a variety of reasons.

    For one, there is a gross disconnect between the objectives of the investor and that of those managing the fund (buying and selling positions with your money). While the investor's objective is stable income, the fund manager's objective is to buy and sell positions in order to match the movement of a specific price index; how your money is being invested has absolutely nothing to do with your objectives.

    There are several other important issues that make preferred stock ETFs questionable for most risk-averse income investors. See the article titled "Preferred Stock ETFs: The Downside That Preferred Stock Investors Can Avoid" here:

    http://seekingalpha.co...

    Thanks for posting.
    Feb 2, 2015. 01:14 PM | 2 Likes Like |Link to Comment
  • Preferred Stock Versus Common Stock Investing Results [View article]
    It's not so much that I failed to mention it; this article is comparing the preferred stock price gain with the common stock price gain, as reflected by the S&P 500 Index, throughout 2014.

    To actually realize those gains, both common stock investors and preferred stock investors would have had to sell their shares at year end.

    Thanks for posting.
    Feb 2, 2015. 01:02 PM | 3 Likes Like |Link to Comment
  • Preferred Stock Versus Common Stock Investing Results [View article]
    You are correct to point out that those investing purely for income might not be concerned about price fluctuations (up or down).

    But those who are looking to add a layer of principal protection when facing a period of increasing rates (which has been a week away for several years now) can do so by purchasing their shares for wholesale prices. The lower your purchase price, the more time you will have to sell (if that's what you choose to do) when/if prices fall.

    Preferred stocks are unique in that there is a simple way for individual preferred stock investors to purchase shares at wholesale prices while the new shares are being distributed to the market using the Over-The-Counter stock exchange. The article titled "Preferred Stock Buyers Change Tactics For Double-Digit Returns" explains how to do so and shows the results from 2014.

    http://seekingalpha.co...

    Thanks for posting.
    Feb 2, 2015. 12:46 PM | Likes Like |Link to Comment
  • Preferred Stock Versus Common Stock Investing Results [View article]
    You might be interested in the article titled "How Well Do Government Money Rates Predict Preferred Stock Dividend Trends?" here:

    http://seekingalpha.co...

    The article provides correlation coefficients for the relationships between preferred rates and government money rates (federal funds, 10-yr Treasury, and 5-Yr Treasury).

    Thanks for the idea John.
    Feb 2, 2015. 12:34 PM | 1 Like Like |Link to Comment
  • Preferred Stock Versus Common Stock Investing Results [View article]
    Your might be interested in my book, "Preferred Stock Investing," first published in 2006, now in its Fifth Edition. The book is written in plain English for non-experts and focuses on how to screen, buy and sell the highest quality preferred stocks. You can see the book at Amazon here:

    http://amzn.to/Hv4YhA

    The book is one of the highest reader-rated books available in the US. You can see its 80 reader reviews here:

    http://amzn.to/1BVAEFN

    Thanks for posting.
    Feb 2, 2015. 12:29 PM | 1 Like Like |Link to Comment
  • Preferred Stock Buyers Change Tactics For Double-Digit Returns [View article]
    This article's analysis was an attempt to measure the effect of OTC pricing on newly introduced preferred stocks. Including Greek shipping companies and upstream oil producers would have measured something entirely different; including them would have measured the effect of specific geopolitical events that occurred during the study period of this analysis which is not what I was after.

    Thanks for posting.

    Jan 7, 2015. 11:59 AM | Likes Like |Link to Comment
  • Preferred Stock Buyers Change Tactics For Double-Digit Returns [View article]
    The approaching call date of GRX-A may explain some of this, but more likely the extremely low daily volume of these two issues is at play here. These two securities are often trading less than 1000 shares per day (no sellers) so the prices are going to be very volatile and will often seem inconsistent.

    Thanks again.
    Jan 6, 2015. 12:05 PM | Likes Like |Link to Comment
COMMENTS STATS
639 Comments
374 Likes