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Update For Exchange Traded Bonds And Preferred Stocks Basket Strategy As Of 6/29/16

|Includes: ASH, IEP, KSS, Navient Corporation (NAVI)

I am publishing an update on this topic out-of-order again since most of my activity over the past 2 months relates to $1K par value bonds, exchange traded bonds and equity preferred stocks including Canadian cumulative preferred stocks.

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This topic was last updated here: Update For Exchange Traded Bond And Preferred Stock Basket Strategy As Of 6/24/16 - South Gent | Seeking Alpha

Fixed coupon exchange traded bonds and preferred stocks have what I call asymmetric interest risk between the owner and the issuer that clearly favors the issuer.

I discuss the asymmetric interest rate risk of exchange traded fixed coupon securities here: Update For Bond And Preferred Stock Basket Strategy As Of 9/10/15 - South Gent | Seeking Alpha

I discussed the interest rate risk and other material topics here: Update On Bond And Equity Preferred Stock Basket Strategy As Of 8/14/15 - South Gent | Seeking Alpha (scroll to following titles in the Appendix section: Interest Rate and Lost Opportunity Risks for Fixed Rate Coupon Equity Preferred Stocks; Credit Risks; Volatility Risk for Equity Preferred Stocks)

The following table includes only exchange traded securities. I do not have a table showing my existing $1,000 par value bonds bought in the bond market. I will discuss some of those trades here.

As noted earlier, I am building a bond ladder concentrating on maturities between 2020 to 2025. I will trade these bonds.

This basket would be my largest based on the number of holdings. I counted 53 securities.

Basket as of 6/29/16:

Closing Prices Today 6/29/16:

TLT: $138.39 -1.07 (-0.77%): iShares 20+ Year Treasury Bond ETF

IEF: $112.70 -0.46 (-0.41%): iShares 7-10 Year Treasury Bond ETF

PGX: $15.21 +0.04 (+0.26%): PowerShares Preferred Portfolio ETF

LQD: $122.31 -0.04 (-0.03%) : iShares Investment Grade Corporate Bond ETF

I do not have the inclination to discuss all trades $1K par value trades. The issuers are well known, and any bond investor needs to become familiar with the company in order to independently assess credit risks.

Some purchases made prior to the publication of this post will be included in the next update.

I am in part responding now to the lower for long interest rate forecast.

The bond ghouls are not pricing in a .25% FF increase prior to 2018.

Forget December. Forget Next Year. The Fed's Done Hiking Until 2018 - Bloomberg

The current odds of one .25% increase on or before 2/1/2017 is at 17%. Countdown to FOMC - CME Group These odds can change based on better than expected growth numbers and higher than currently expected inflation.

So I am just going with the flow with my purchases over the past two months, even though I find it disgusting that I have to go so far out to pick up a 4% YTM in a BBB- or higher rated corporate bond.

I am now starting to buy some BB+ rated bonds since I have exhausted the BBB- bonds that fit my criteria:

The bogeys for the corporate bond purchases, up to now, include the following:

1. Investment Grade Ratings (this one is starting to be waived)

2. YTM's Greater than 4%

3. Purchased at Below Par Value

4. Available for Purchase in 2 Bond Lots and

5. Maturing between 1/1/20 and 12/31/2025 (easily allowing me to hold until maturity)

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1. Sold 2 Kohls 2025 Senior Unsecured Bonds at 100: This is the first profit clip in the recent flurry of investment grade corporate bond purchases.

Trade Snapshot:

The $2 Fidelity commission is reflected in the 99.9 adjusted price.

Profit Snapshot: $103.82

When purchasing this bond, I paid $30.22 in accrued interest to the seller and received $38.25 from my buyer. Net interest was $8.03 and my total return was $111.85 or 5.9% annualized with a one month holding period.

Common Stock Quote: Kohl's Corp. (NYSE:KSS)

FINRA Bond Detail

I have to admit to being slightly nervous about department stores in general.

2. Sold 50 ISM at $24.4:

Quote: SLM CPI-Linked Medium Term Notes Series A Maturing in 2018 (ISM:NASDAQ)

Trade Snapshot ($1 Commission):

Profit Snapshot: +$145.97

Item # 4. Bought 50 ISM at $21.44: Update For Exchange Traded Bond And Preferred Stock Basket Strategy As Of 2/29/16 - South Gent | Seeking Alpha

Security Description: ISM is a senior unsecured bond issued by the student loan company Navient Corporation (NASDAQ:NAVI), formerly known as SLM Corporation or just Sallie Mae, that makes monthly interest payments at a 2.05% spread to a CPI calculation based on a $25 par value.

This note matures on 1/16/2018.

Prospectus

Company Profile | Reuters.com

Company Website: Navient

Our History - Navient

NAVI's senior unsecured bonds are rated at Ba3 by Moody's and BB- by S & P, or well into junk territory.

This exchange traded bond is thinly traded with large bid/ask spreads most of the time.

ISM Chart

Trading Profits Navient CPI Floaters= $1,850.64 plus monthly interest payments

Scroll to Coupon: Inflation Linked at Baby Bonds - South Gent | Seeking Alpha

Common Stock Quote: Navient Corp. (NASDAQ:NAVI)

3. Sold 50 of 150 TANP at $25.43-Highest Cost Lot:

Quote: TravelCenters of America LLC 8% Senior Notes 10/15/30 (TANP:NYSE)

Trade Snapshot ($1 Commission)

Profit Snapshot: +$9.97 (viewed as a successful escape)

I kept the 50 share TANP lot in my IB account that was bought at $23.7 and is briefly referenced in the following link. I also still own a 50 share TANP lot in another taxable account.

I bought on 1/29/16 a 50 share of the functionally equivalent TANO at $24: Item # 2. Added 50 TANO at $24: Update For Exchange Traded Bonds And Preferred Stock Basket Strategy As Of 2/3/16 - South Gent | Seeking Alpha

The TravelCenter exchange traded senior unsecured bonds plunged in price earlier this year. I want a better buying price before increasing my position in one or more of them.

TANO Interactive Stock Chart; Prospectus

TANP Interactive Stock Chart; Prospectus

TANN Interactive Stock Chart; Prospectus

Common Stock Quote: TravelCenters of America LLC (NASDAQ:TA)

TA bonds makes me slightly nervous as well.

4. Bought 2 Ashland 4.75% Senior Unsecured Notes Maturing on 8/15/22 at All-In Price of 100.58:

Company Website: Ashland Inc | Specialty Chemical Company

SEC Filed Company Presentation June 2016

The all-in price includes the $2 Fidelity commission but excludes accrued interest paid to the seller which has no impact on my cost basis.

Trade Snapshot ($2 Commission)

FINRA Bond Detail

Moody's Rating Ba1 (09/22/2015)
Standard & Poor's Rating BB (02/20/2013

Prospectus

Ashland SEC Filings

Last Earnings Report: SEC Filed News Release

10-Q for the Q/E 3/31/16 (debt listed at page 19)

I also own 1 Hercules junior bond which is currently an Ashland obligation. Item # 2 Bought 1 Hercules 6.5% Junior Bond Maturing on 6/30/29 at 86 (6/24/11 Post) That bond is lightly trade with the last trades near my 2011 purchase price: FINRA Bond Detail

Ashland is in the process of spinning off its Valvoline operation: S-1

Ashland Inc. announces plan to separate into two independent, publicly traded companies

Ashland Inc. provides update on its planned separation of Valvoline {"Ashland plans to pursue an initial public offering (the "IPO") of up to 20 percent of the common stock of Valvoline as a first step in the separation. . . Ashland currently expects that it would distribute the remaining common stock of Valvoline to Ashland's shareholders upon expiration of the IPO lock-up (typically six months after completion of the IPO)."}

The company discusses risks incident to its operations starting at page 8 of its Annual Report: 10-K

Common Stock Quote: Ashland Inc. (NYSE:ASH)

Common Stock Closing Price Today: ASH: $112.51 +2.42 (+2.20%): Ashland Inc.

ASH Analyst Estimates

Ashland Profile at Reuters.com

Ashland Key Developments at Reuters.com

5. Bought 2 Icahn Enterprises 4.875% Senior Unsecured Bonds Maturing on 3/15/19 at 96.78:

Trade Confirmation:

Prospectus

Moody's Rating Ba3 (07/08/2015)
Standard & Poor's Rating BB+ (05/17/2016)

FINRA Bond Detail

YTM at total cost of $96.98= 6.098%

Current Yield at $96.98= 5.03%

I previously discussed Icahn Enterprises here: 3. Bought 2 Icahn Enterprises 6% Senior Unsecured Bonds Maturing on 8/1/2020 at 96.728-ALL IN: Update For Exchange Traded Bond And Preferred Stock Basket Strategy As Of 5/26/2016 - South Gent | Seeking Alpha

The general idea will be to sell the 2 bonds maturing in 2020 and to keep the 3/1/2019 bonds.

There is no timetable on that pare. The 2020 bond was trading mostly over 105 until November last year.

Common Stock Quote: Icahn Enterprises L.P. (NASDAQ:IEP)

Common Stock Closing Price Today: IEP: $52.94 +1.39 (+2.70%): Icahn Enterprises L.P.

IEP Analyst Estimates

10-K for 2015

10-Q for Q/E 3/31/16 (debt is high and listed at page 35/Icahn is a debt junkie IMO)

Icahn Enterprises Company Profile at Reuters.com

Icahn Enterprises LP Key Developments at Reuters.com

Icahn's debt addiction makes me nervous. I have no debt so debt junkies make me nervous since I am so conservative and pay cash for everything. I have seen many debt addicts go up in flames over the past six plus decades, including Icahn's good buddy and our next President? Once you start talking to them in private, they seem to be confused about whether debt is an asset or a liability.

Disclaimer: I am not a financial advisor but simply an individual investor who has been managing my own money since I was a teenager. In this post, I am acting solely as a financial journalist focusing on my own investments. The information contained in this post is not intended to be a complete description or summary of all available data relevant to making an investment decision. Instead, I am merely expressing some of the reasons underlying the purchase or sell of securities. Nothing in this post is intended to constitute investment or legal advice or a recommendation to buy or to sell. All investors need to perform their own due diligence before making any financial decision which requires at a minimum reading original source material available at the SEC and elsewhere. A failure to perform due diligence only increases what I call "error creep".ERROR CREEP and the INVESTING PROCESS Each investor needs to assess a potential investment taking into account their personal risk tolerances, goals and situational risks. I can only make that kind of assessment for myself and family members