Saturday, December 29, 2018

Observations and Sample of Recent Trades: AHTPRI, EPRPRG, IDV, GIS, PSAPRE, SGZA, THQ



Markets and Market Commentary

The S&P 500 ETF (SPY) will finish 2018 with a negative total return unadjusted for inflation and taxes. As of 12/28/18,  the YTD total return stood at -5.39% based on price. The Vanguard Total Bond Market Index Fund ETF (BND) had a total return of -.37% YTD as of last Friday. 


Did a  Podiatrist Help Donald Trump Avoid Vietnam? Donald received a timely diagnosis of "bone spurs" in his heals that led to his military exemption for the Vietnam War. The diagnosis was given by a podiatrist, Dr. Larry Bernstein, who rented his office from Fred Trump. While Dr. Bernstein passed away in 2007, his two daughters claim that the diagnosis was given as a favor to Fred Trump. Donald would later say that his Vietnam was avoiding venereal disease in the swinging 1960s.  Donald Trump Calls Avoiding STDs His 'Personal Vietnam' |

Watergate reporter pens op-ed on 'inevitability' of Trump's impeachment

Trump's visit to Iraq prompts concerns about politicization of military

Refusing to increase the debt limit and shutting the government down in whole or in part, unless one political tribe agrees to a policy change, is just irresponsible. 

Trump is responsible for the current shutdown. More Americans blame Trump for government shutdown: Reuters/Ipsos poll Demagogue Don made it very clear that he was proud to shut down the government unless the Democrats gave into his demand for the border wall funding that Mexico was supposed to fund in the Trumpsters' Alternate Reality. The Trumpsters will not blame the Duck for anything, even if there is clear and convincing evidence that points the finger directly at him or proof beyond any reasonable doubt. 

The republicans do not have the votes to fund the border wall so they are holding the government and its employees hostage until the Democrats agree to a policy change. It is just that simple. 

The debt limit increase is necessary to fund existing programs and services and to pay creditors, employees and independent contractors. The Senate passed 100 to zero a debt limit extension but the GOP controlled House refused to take up that bill after Trump changed his mind under pressure from the far right reactionaries that now dominate the modern day GOP and dictate its policies, negotiating posture and unwillingness to compromise.   

Possibly, there can be deal where the republicans give the Democrats a path to citizenship for the DACA children and the Democrats agree to fund a good chunk of the wall. There would be both Democrats and republicans opposed to that compromise. 


1. Equity REIT Common and Preferred Stock Basket Strategy:

A. Bought 50 PSAPRE at $20.58-Used Commission Free Trade:

Quote: Public Storage 4.9% Cumulative Preferred Series E Stock (PSA.PE)

Last Round-TripItem # 4.A. Sold 50 PSAPRE at $22.37 (3/10/17 Post)(profit snapshot = $51.04)

I discussed buying that lot in a comment.

Issuer Information: Public Storage (PSA)

Issuer Investor Relations Website: Public Storage - Home
Preferred Stocks: Public Storage - Stock Info - Preferred Securities
Last Issuer Earnings Report: Public Storage Reports Results for the Three and Nine Months Ended September 30, 2018 

Security Description:


Par Value: $25
Credit Ratings: A3, BBB+
Capital Structure: Equity Preferred Stock, senior only to common shares
Dividends: Quarterly, non-qualified and cumulative
Optional Issuer Call: On or after 10/14/21
Stopper Clause: Yes, see page 14 of the prospectus
Yield at $20.58 TC = 5.95%
Last Ex Dividend: 12/11/2018  (after purchase)

Maximum Position: 100 Shares 

B.  Bought 50 EPRPRG at $21.06-Used Commission Free Trade:

Quote EPR Properties 5.75% Cumulative Preferred Series G

I discussed buying this lot in a comment.

Issuer: EPR Properties (EPR)

EPR SEC Filings
EPR 2017 Annual Report
Earnings Press Release for the Q/E 9/30/18

EPR Properties Website

Prospectus for $400M in 4.95% SU Bonds Maturing in 2028 (sold in April 2018)

Current Position: 50 Shares

Maximum Position: 100 Shares

Purchase Restriction: Small Ball Rule 

Dividend Yield at TC Per Share6.83%

Dividend: Paid Quarterly, cumulative and non-qualified as a pass through entity

Last Ex Dividend Date:  12/28/18

Security Description: IPO to the Public at $25 in November 2017 

The price has fallen IMO due to interest rates rising since the IPO. There may be some tax loss selling as well. 

Credit Ratings: Baa3 by Moody's/BB by S & P  


Par Value: $25

Capital Structure Placement: Junior to all bonds and mortgages and senior only to common stock 

Coupon: 5.75% per annum ($1.4375 per share annually)

Issuer Optional Call: On or after  10/30/22

Stopper ClauseYes. (see page S-25 of the prospectus)

The company can not pay a cash common stock dividend and defer payment of the preferred stock dividend. This clause is the means by which the preferred shareholders superior claim to cash is enforced against the common shareholders.

I pick up a higher current dividend yield with this EPR preferred stock compared to the convertible preferred, EPRPRC, that I sold earlier at a significant premium to par value. Item # 3.A. Sold 50 EPRPRC at $27.49 (10/21/18 Post) and Item # 1.B. Sold 50 EPRPRC at $28.48 (9/12/18 Post)---Item # 1 Bought 50 EPRPRC at $24 and 50 at $23.78 (4/23/18)Item # 3 Sold EPRPRC at Update For Equity REIT Basket Strategy As Of 4/6/16 - South Gent | Seeking Alpha (EPRPRC Trading Profits to Date +$563.23)

C. Added 20 AHTPRI at $18.52-Used Commission Free Trade

Quote: Ashford Hospitality Trust 7.5% Preferred Series I

I discussed this high risk equity preferred stock in my last post, mentioning there that I might buy 20 more shares. Item 1.B. Bought 30 AHTPRI at $21.86-Used Commission Free Trade (12/26/18)

The 20 share buy at $18.52 brings me up to my maximum 50 share position in this account.

The quarterly ex dividend date was on 12/28 or two days after this purchase. 

Current and Maximum Position in this Account: 50 Shares

Average Total Cost Per Share in this Account $20.52 

Dividend Yield at TC = 9.14%

Current and Maximum Position in All Accounts: 100 Shares    

2. Short Term Bond/CD Ladder Basket Strategy

January 2019 Maturities

SU = Senior Unsecured Bond ($1K par value per bond)
CD = Certificate of Deposit ($1K par value per CD)-FDIC Insured
MI = Monthly Interest Payments
Treasury: U.S. Treasury Debt ($1K par value per bill, note or bond)
IR: Investment Rate for Treasury Bills Bought at Auction

2 Sterling BK 1.55% CDs MI 1/8/19 (17 month CDs)
2 Disney 1.65% SU 1/8 (bought January 2018)
2 Total Capital 2.125% SU 1/10 (bought May 2018)
2 Ecolab 2% SU 1/14/ (bought July 2018)
1 Bank of China 2.25% 1/15 CD (6 month CD)
2 Dominion Resources 1.875% SU 1/15 (bought December 2017)
2 Kroger 2.3% SU 1/15 (bought June 2018)
2 Kroger 2% SU 1/15 (bought December 2017)
2 Great Southern 1.5% CDs 1/15 (14 month CDs)
2 Commonwealth Edison 2.15% SU 1/15 (bought June 2018)
1 Treasury 1.125% 1/15 (secondary market purchase)
2 Treasury  2.34% IR 53 day 1/15 (bought at auction) 
2 MB Financial 1.5% CDs MI 1/16 (15 month CDs)
3 Treasury 3M T Bills IR 2.315% 1/17 (bought at auction) 
1 Wells Fargo 1.75% CD MI 1/22 (13 month CD)
3 Treasury 2.355%% IR  54 day T Bills 1/22 (bought at Auction)
2 Wells Fargo 1.55% CDs MI 1/22 (2 Year CDs)
2 Treasury 3 Month IR 2.346% 1/24 (bought at auction)
2 MBank  1.8% CDs MI 1/24 (1 Year CD)
2 Treasury 3 Month 2.351% IR 1/31 (bought at auction)
4 Treasury 1.5% 1/31/19 (multiple secondary market purchases)

$43K (2 bonds that would have matured in January 2019 were redeemed early by the issuer last month)

In 2019 compared to 2018, I will increase my total dividend and interest payments by over 50%. That is mainly due to lower yielding short term bonds and CDs being replaced by higher yielding ones as well as some purchases of higher yielding intermediate and long term bonds. I have also been buying higher yielding ETFs, common stocks and equity preferred stocks.
Purchases Discussed Below: $5K:  

A. Bought 1 Treasury 1.625% Coupon Maturing on 6/30/19 (secondary market purchase-no commission)

YTM = 2.55%

I now own 3 bonds. 

The treasury purchases discussed below were made in the secondary market and were made as fillers in my short term bond/CD ladder. Schwab does not charge a commission as reflected in the following snapshots. 

B. Bought 1 Treasury 1.625% Coupon Maturing on 3/15/20

YTM: 2.743%

C. Bought 1 Treasury 1.375% Coupon Maturing on 1/15/20
YTM:  2.726%

D. Bought 1 Treasury 1% Coupon Maturing on 10/15/19
YTM = 2.604%

E. Bought 1 Treasury 1.5% Coupon Maturing on 4/15/20
YTM: 2.759%

3. Long Term Bond Basket Strategy-Potentially Long Duration Exchange Traded Baby Bonds:

A. Added 70 SGZA at $24.39:

Quote: Selective Insurance Group Inc. 5.875% Senior Notes due 2043 (SGZA)

Two Year History This Account:

Issuer:  Selective Insurance Group Inc.
SIGI Analyst Estimates
SIGI SEC Filings
SIGI 2017 Annual Report (debt discussed staring at page 113)

Selective Reports Strong Results for the Third Quarter of 2018 - Net Income per Diluted Share of $0.93; Non-GAAP Operating Income1 per Diluted Share of $0.99; Dividend Increase of 11% to $0.20 per share

Last PurchaseItem # 5.A. Bought 30 SGZA at $24.8 - Used Commission Free Trade (5/31/18 Post)

Total Cost Per Share = $24.56

Yield at Total Cost = 5.98%

Current  Position: 100 shares

Maximum Position: 200 Shares (any additional purchases will be in my IB account) 


Interest Payments: Quarterly

Par Value: $25

Issuer's Optional Call: On or after 2/18/18 at par value plus accrued and unpaid interest (callable at anytime now at the issuer's option)

Maturity Date: 2/9/43 unless call earlier at issuer's option

Trades Flat (accrued interest is not paid to the seller and whoever owns the security on the ex interest date receives the entire quarterly payment)

Fitch Affirms Selective Insurance's Ratings; Outlook Stable (5/3/18)(SU bonds rated BBB+)

S & P at BBB
Moody's at Baa2

Selective Insurance Company of America-Best's Credit Rating Center

$1K par value bonds maturing that are rated the same by Moody's and S & P and maturing in 2043 have lower current yields and YTMs: 

CVS 5.3% 12/5/2043 
General Mills 4.15% 1/15/43 
Ingersoll Rand 5.75% 6/15/43 
FEDEX 4.1% 4/15/43 
Markel %% 3/30/43 
Northrup Grumman 4.75% 6/1/43 
Time Warner 5.35% 12/15/43 

While I did not examine the prospectuses of those bonds, they all probably have make whole provisions that penalize early redemptions.

SGZA can be redeemed now by the issuer. 

The make whole provision becomes important in pricing bonds in low interest rate or falling interest rate scenarios. 

The comparison in yields does not mean that any of these bonds are correctly rated or that any will prove to be worthwhile investments. 

Exchange traded bonds have asymmetric interest rate risk in favor of the issuer.

Total SGZA Trading Profits to Date = $384.75

Prior Round-Trip Discussions:

Item # 5.F. Sold 50 SGZA at $25.51-In a Roth IRA Account  (9/11/17 Post)South Gent's Comment Blog # 6: Bought 50 SGZA Roth IRA at $24.1

Item # 5 G. Sold 50 SGZA at $25.53 (9/11/17 Post)-South Gent's Comment Blog # 8 Bought at $23.53 (comment posted 12/29/16)

Item 2.A. Sold 40 SGZA at $24.83 (3/25/17 Post)-South Gent's Comment Blog # 6: Bought 40 SGZA at $23.5 (comment posted 12/20/16)

Item # 3 Bought 50 SGZA at $20.6 (10/19/13 Post)-Sold for a $140.58 profit in May 2014)

Please note the the 2013 interest rate spike knocked this security to the $20 area, with the ten year treasury yield peaking at 3.04% that year. SGZA Stock Chart 

When the ten year yield treasury yield made a sustained march to 3.12% recently, SGZA barely budged below its $25 par value. While I could provide a few explanations, none would make much sense to explain those different reactions and consequently I would not attempt to do so.

4. Income Generation-Commission Free ETFs

A. Added 5 IDV at $29.65; 5 at $29 and 5 at $28.3 (commission free for Vanguard Customers)

Quote: iShares International Select Dividend ETF Overview

Last Substantive DiscussionItem # 1.A Bought 10 IDV at $30.82 (11/25/18 Post)

Last Sell DiscussionItem # 5 Sold 51+ IDV at $33.58 (2/15/18 Post)

Current Position: 25 shares

Maximum Position: 100 Shares

Purchase Restriction: Small Ball Rule with commission free trades only

Average Cost Per Share: $29.72

Dividends: Quarterly at a variable rate

Last Ex Dividend Date: 12/18/18  (20 shares participated)

2018 Dividends Per Share = $1.7 

Dividend Yield at Total Average Cost (assuming $1.7) = 5.72%

5. Small Ball: Income Generation-Highly Disfavored Common Stocks

A. Bought 2 GIS at $40.25; 2 at $39.45; 10 at $38.3 and 5 at $36.75-Used Commission Free Trades:

After GIS broke through $39, I have started to increase the size of my purchases from 2 share lots.  

Perhaps my perseverance and tolerance for pain will be rewarded at some future point in time. 

Quote: General Mills Inc.

GIS Analyst Estimates
General Mills: Brands overview
Annual Report for the F/Y Ending on 5/27/18 (SEC Form 10-K)

Current Position: 56+ Shares

Maximum Position: 200 shares (approaching at less than turtle speed)

Purchase Restriction: Small Ball Rule (each subsequent buy in the chain has to be at the lowest price in the chain)

Average Total Cost Per Share = $43.91

Dividends: Quarterly at $.49 per share or $1.96 annually (currently frozen to help pay for the Blue Buffalo purchase)

General Mills, Inc. - Stock Information

Dividend Yield at TC = 4.46%

Next Ex Dividend Date: 1/9/2019

General Mills Quarterly Dividend Declared

Dividend Reinvestment: Yes

Last Discussed Common Stock BuyItem # 1.C. (5/10/18 Post)

Last Sell DiscussionItem #2.A. Sold 10 GIS at $56.18-Used Commission Free Trade  (12/21/17 Post)

Realized Gains 2007-2016: $1,809, snapshots at Item 1.B (no realized losses)

Last Earnings Report Issued Prior to these Purchases: First Fiscal Quarter Ending 8/26/18 

General Mills Reports Fiscal 2019 First-Quarter Results    

General Mills tops profit estimate as sales fall slightly short - MarketWatch

Earnings Report Released After These Purchases

General Mills Reports Fiscal 2019 Second-Quarter Results And Reaffirms Full-Year Guidance 

See Discussions of Report: What's Next For General Mills After Encouraging Q2? (NYSE:GIS) | BenzingaGeneral Mills Makes Progress Toward Steadying the Ship-The Motley Fool

6. Sold THQ at $17.65-Used Commission Free Trade

Quote: Tekla Healthcare Opportunities Fund (THQ)

Closing Price Last Friday: THQ $16.77 +$0.29 +1.76% 

I will trade this CEF. 

Fund Sponsor's WebsiteTekla Capital Management LLC

THQ Page at CEF Connect 

Dividends: Monthly at $.1125 ($1.35, currently supported by ROC)


Profit Snapshot: +$46.03

The preceding snapshot includes a profit on a 100 share lot sold last June. Dividend reinvestment was turned on and off. Some monthly dividends were received in cash during 2017, while most were reinvested to buy additional shares. 

This leveraged CEF was primarily a dividend harvest play where I am satisfied to escape with a profit on the shares. 

I had better luck trading THQ last year when I harvested $555.76 in profits: 

Last DiscussedSold 100 THQ at $17.38-Used Commission Free Trade (7/2/18 Post)

Last Buy DiscussionsItem # 3.C. Bought 10 THQ at $16.1 (3/29/18)Item 2.A. Bought 10 THQ at $16.96-Used Commission Free Trade (3/8/18 Post)

THQ Interactive Chart

DisclaimerI 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". Stocks, Bonds & Politics: 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.