A Little Selling and a Little Buying
By: Tim McPartland,
We have made a few adjustments to the Blended Income Model Portfolio and wanted to convey those changes to all.
We have sold the Gladstone Commercial 7.125% term preferred shares (NASDAQ:GOODN). This issue is being called and rather than wait for the redemption date to arrive we have sold the shares. We had bought these shares (1000 shares) back in January to help get a chunk of cash invested in a safe security for a few months and they have served the purpose.
Additionally, we have sold the common shares of Emerson Electric (NYSE:EMR) which has been a poor investment since the minute it was purchased 19 months ago. The shares have performed reasonably well lately helping to alleviate some of the earlier losses, but with a current yield of 3.8% and prospects dim for future gains we will sell it while it is at a decent level.
These 2 sales generate proceeds of almost $36,000 which we have partially deployed into shares of the new Ashford Hospitality Trust 7.375% preferred (NYSE:AHT-F) as well as shares of the newer American Homes 4 Rent 6.35% preferreds (NYSE:AMH-E). We are not thrilled with Ashford Hospitality as a REIT, but we are not deterred from buying their preferred shares given that they have a somewhat higher coupon than any other recently issued preferred.
With the above actions we add some more cash to our cash pile which is now around 20%–with the number of preferreds and baby bonds being called it would be unwise to sell anything further at this point in time as the odds of finding a suitable investments to buy is getting near impossible. With the recent sales and purchases we increase our portfolio current yield by a bit, yet with the sale of Emerson Electric we forfeit any future possibility for further capital increases.
Also it is noted that we have varied from our “short duration” investment theme. Given that virtually all of the term preferred issues have been redeemed and many baby bonds have climbed way above $25/share there doesn’t appear to be many options available to income investors at this time. Of course one could move out on the risk curve to MLP’s, more REITs or into some income CEFs we don’t plan to go that direction at this point in time–it just doesn’t fit our profile.