Here Are 2 Stocks You Should “Fish From My Cold, Dead Hands”

Here Are 2 Stocks You Should “Fish From My Cold, Dead Hands”

I was heartened by the response to posting the links to the free-for-all version of my PREFS spreadsheet yesterday Real Money column. If you’ve requested access and haven’t yet been given permission to view the sheet… wait! I am working on it! This spreadsheet is, as the kids would say, the way I roll.

It has long descriptive copy-paste excerpts on each title from a website that is my fixed income investing bible, www.quantumonline.com. These descriptive snippets are very important and offer the types of information not available on schlock-filled sites like Robinhood (HOOD) or Searching Alpha.

This data – call dates, expiration dates, floating rate features, etc. – is vital to understanding bonds and preferred stock. I’m sorry if that’s more involved than hearing some inane nonsense like “BUY Netflix!” (NFLX) or “Elon Musk is unassailable” (TSLA) on FinTV, but holding capital comes at a cost. More homework.

That’s when things get tough and active asset managers like myself have to prove we can. Interest rates are on a sharp upward trend, the likes of which we haven’t seen in decades. The last period in the bond market – as I noted in yesterday’s column, I’m using the 12-month UST as a reference – that remotely approximates what we’ve seen over the last 12 months is the period from April 2004 to October 2007. everyone knows how that ended.

If you know interest rates are rising, you can choose the portfolio management decision to accept some write-down against the face value of your fixed income securities to capture the income streams. I am. PREFS is down 2.94% since its inception on 5/27/2022 since yesterday’s close and this morning when I checked, it’s down 3.02%. Oooooh. So what? PREFS yields 6.63% per annum, which will only increase as income payments are reinvested. How does this compare to FedEx (FDX) today?

And that’s the whole point. The great thing about investing against face value is that we can opportunistically reinvest dividend-income payments in securities trading below par. This gives us what I call “physical call protection”.

Six of the 10 names in PREFS are currently trading below par, and I’m a little surprised they haven’t all fallen below par. Two that do not are (CUBI-E) and (ENBA), securities offered by Customers Bancorp and Enbridge, respectively, that have floating rate features. These are gold in this price environment. Pure, unadulterated Charlton Heston names “pry from my cold, dead hands” right now. In other words, I don’t sell them.

But with six out of 10 names trading below par, it presents an opportunity to buy, which I do every quarter as income payments come in. These reinvestment transactions are only restricted behind the paywall on my website, www.excelsiorcapitalpartners.com . Hey, I gotta make a living!

Sales pitches aside, just be very be careful with your nest eggs here. Today is Four Witches’ Friday, so there will be some individual title shenanigans. Remember, however, that the numerical value of a security only really matters when the options are waiting to expire. But the real thing assessment of the company on which the stock is based always important, every day, even if the numerical value of the stock is not.

Meta Platforms (META) was precious to nearly $900 billion last September. Today? Under $400 billion and still sinking. This is real, and this is stagflation. Capital losses hurt. If you want to avoid them and can handle some minor, short-term price pressure from higher interest rates, PREFS is a nice way to go.

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