Eagle Point Income Preferred Stocks: Very Undervalued And Very Misunderstood

Summary

• The thesis of this article is that you can generate much higher returns by investing in unrated preferred stocks and baby bonds. This is where the bargains are.
• This is also an educational article on how one might rate or value an unrated security in order to see if it is undervalued versus similar or similarly rated securities.
• We do this case study by using the unrated Eagle Point Income’s term preferred stock ticker EICC.
• Spoiler alert. EICC is very undervalued relative to securities with similar credit risk.
• Given its safety, EICC should trade with a 5.5% to 6.0% yield-to-maturity (YTM), yet it trades near an 8.0% YTM.

Caroline Brundle Bugge

Analyst’s Disclosure:I/we have a beneficial long position in the shares of EICC either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.