Investing Some Portfolio Cash

By: ,

September 25, 2017

By  Tim McPartland

We are investing some of our excess cash in the Blended Income Portfolio, because as we all know, holding cash is a real loser in the current interest rate environment, per my Sept. 12 update.


As such, we made a number of purchases last week attempting to up our income stream. As announced in the article, “We’re a Buyer of This Low-Coupon Preferred,” we did buy 700 shares of the Ellsworth Growth and Income Fund 5.25% (NYSE:ECF-A) cumulative, perpetual preferred stock for $25.02 in a Grey Market trade.

Part of the reason we bought an overweight position in this issue is because we have ZERO concern on the safety of this issue. On the other hand, we know from history that if interest rates rise substantially, these low-coupon perpetual issues can take substantial hits to the share price.

After a couple of years of worrying about rising interest rates, our concern has lessened dramatically as it appears they will stay low for longer.

Ellsworth Growth and Income Fund is a closed-end fund (CEF) and must maintain a 200% asset coverage ratio. Additionally, the shares are rated A1 by Moody’s. We should note that we bought shares in two personal portfolios as well.

Additionally we bought 400 shares of Colony NorthStar 7.125% (CLNS-J) perpetual preferreds for $25.03/share in another Grey Market transaction. Colony NorthStar is a large diversified real estate investment trust (REIT) and we have little worries about owning its preferreds as long as the general economy remains relatively stable.


Lastly, we purchased the Newtek Business Services 7% (NASDAQ:NEWTL) baby bonds. Newtek has a 7.5% baby bond outstanding and we own some in the portfolio. While we pondered buying more of the 7.5% issue, it is now callable and the $25.67 price is just a bit too high to pay because of the potential call. The 7% issue is also callable now, but we believe it is safe for the next few years. These baby bonds mature in 2021.

These moves in the Blended Income Portfolio drop our cash position down to 12.92%, which is a good level. Unfortunately, we had shares of the Harvest Capital Credit 7% (NASDAQ:HCAPL) baby bond, which has been called and we need to adjust the portfolio to reflect the call.

In addition to the above, we are making some portfolio moves in the coming week in the short-duration portfolios and we will write about those next week.

Tim McPartland

Tim McPartland is a private investor with over 45 years of investment experience. His analysis, research and writing is devoted to the hunt for income producing securities of all types, but in particular specializing in preferred stocks, exchange traded debt and Master Limited Partnerships.


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