Even if I don't agree or decide to buy or whatever, like to hear what you guys are doing and what your mind set is. Always good to get a second opinion. This current market is not for widows or orphans.
I'm rebalancing: I've lightened up on some mREITs and now hold modest core positions in TWO and IVR. The mREITs will remain volatile for the next two (or more) years. I've also lightened up considerably on RSO; I'm down from 10,000 to only 3000 shares. These are all "free" to me and I'm good with holding -- pending they can maintain the 20 cents dividend.
I've recently bought PHT. It's paid a stable monthly dividend for several year. It's a bond fund that uses abut 30% leverage. It's bonds consist of 10% A-rated or better, about 8% B-rated, 22% BB-rated and 55% BBB-rated. This is not a "junk bond" fund since 65% is corporate grade. The bond durations are spread out as:
1 to 3 Years 11.81
20 to 30 Years 2.84
3 to 5 Years 24.75
5 to 7 Years 36.31
7 to 10 Years 13.80
I don't expect any capital appreciation, nor do I expect this to crash. (Pending 10Y Treasury yields don't spike to over 5% within a short period, say less than 2 years.) I fully expect PHT to be able to continue to pay 13.5 cents per month for several years; it's investment income is sufficient to fully cover its dividend. For what it's worth, PHT is rated 5-stars from MorningStar.
I'm looking for other CEFs. AB is starting to look pretty good; I may take a position if it drops. Maybe Congress and/or the Fed will create that opportunity?
Frankly, all the BDCs and REITs that I follow are fairly valued. NRF has some upside and pending the economy stays about where it is now, NRF should be trading at near $12 in two years.
Something must be in the air. Have been cleaning house on stocks recently. Sold my PNNT, CIM, BGCP, & a few others that had performed okay but not above 11% for the year. Bought into DOV & DOW before they ran up recently, FLR & AMT today. Bought AMT as kind of a recession play. AMT is a REIT that holds cell phone towers as their property. Was trying to figure out what people would still want in addition to electricity for their home & gas for their car in a recession - their cell phone. Figure AMT could be recession-proof.
So basically have eschewed the stocks under $20 for stocks $65 & up. Time will tell if the decision was good. Don't plan to hold these forever just until they hit my predetermined sell number.
Hi, Wayne: Thanks for your comments, I always enjoy reading them and value them.
Not doubting you, but from Connect CEF, the rating of PHT's portfolio seems to differ than what you posted here:
AAA 0.3% BBB 5.9% BB 6.9% B 52.6% CCC 22.2%
Do you know why such a big difference?
Also, its recent NAV is only 13.77, currently trading at 16.43 with a 10.04% yield, is it worth the risk?
sonnenwayne, so you think NRZ is fairly valued at this time? I could be off base here, but I think fair value is well over $7. Perhaps when the dividend gets upped from the current listed $0.07 to over $0.15 it will attract more buying interest and positive coverage. I keep buying more whenever it dives below $6.20
PS: The other thing I'm looking to do is lower my cost basis in some things. My cost basis in FSC is $10.88. I own 4000 shares and that's about all I want to own. However, if the price were to fall to say $9, I plan to buy 1000 more, then turn around and put a GTC order to sell 1000 at $9.50. (FSC is the only stock that I own where my cost basis is higher than current market price. But the same idea would apply to a flip -- since I can pick-and-choose which "lots" I sell.) However, I will emphasize that I'll do this only to a stock that I'm willing to hold for a long time.
I did this with IVR and TWO during 2011. I ended up holding "extra" shares for over two years. Example: I first got TWO at over $10, but doubled up with it hit $8. I sold the "extra" shares a few months ago at over $12. With ROC from a spinoff and other ROC, my cost basis is near $6. I've collected enough in dividends (including stuff from the extra shares) to now say that my 2000 shares of TWO is free. Nice!
Another idea which I've bought into a moderate position but might increase it should it fall another 15% is MOS (Mosaic). Good healthy finances, hurt by potash news but is a pretty diversified company that sells other products besides potash. Plus, given how cycles go, I expect potash prices to go back up at some point. I like MOS over POT personally just given the better cash/debt.
I thought about Agriculture too because Jim Rogers has been praising them but I am very reluctant to touch any of them. My favorite will be UAN which just reached its 12-mo low on 8/20 and it pays a dividend of about 10.13% according to E-Trade. TNH will be a good speculative one. I also like AGU and MON but some people hate MON saying it is evil. Well.
I like your comment "This current market is not for widows or orphans."
Now I wonder if you do have some widows and orphans who have one million dollar on which they would have to depend on getting a decent monthly income to live, say at least a 6% annual income without seeing their principal going down, what will your recommendations be?
This is for everybody. What will the "safetest" way they can invest one million dollars to get an annual income of about $ 60,000 without seeing their principal going down more than 1-2%? It used to be simple, you will advise them to buy utility stocks such as SO, but this simply will not work any more. Thanks in advance.
A million dollars in PSEC would get you at least 120k in dividends plus cap appreciation so there would be no loss of principal. PSEC is a much stronger entity now than it was 5 or so years ago at $17.00! I'm adding sub $11.00, not likely that will happen anytime soon so I'll live with the 20k! LOL!
When T-bills go up, you could get a "safe" return.But no where near 6%.
I would be happy @ 5%, with an annual income of 50K.
Noway to get 6%, or 5% without RISK.
I don't really like this market, but it's the only game in town I.E. better returns.
I think it would be impossible to get a 6% return without potentially risking more than a 2% principal loss. If somebody knows otherwise, I'm all ears. Perhaps a strategy of buying some covered call ETFs that juice the dividend yield from selling calls. But even those will tank if the market tanks.
As for me, I'm keeping a decent sized cash position for now, not buying too much (or selling what I already own). My NRZ buy order executed today at $6.08. I think that is a pretty decent price for a REIT that should see steady dividend payouts from buying mortgage servicing rights. Assuming a conservative prediction of $0.60 dividends for the next 12 months, that is right about a 10% yield. If you look at its more stabled peer HLSS, it is yielding 7.5% I think. That is quite a difference for two companies basically doing the same thing. Maybe part of it is the fact that HLSS is classified as a passive foreign investment company.