Plans for The Week

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We finally have time to outline some actions we plan to take this week.

We have decided to harvest profits tomorrow (Tuesday). We are selling 3 issues we hold and all 3 are profitable positions, although only 2 are true ‘harvesting’ of profits.

1st off we are selling the Resource Capital 8.25% cumulative preferred (ticker:RSO-B). This is not a true harvesting of profits, but instead is another step toward being out of perpetual preferreds. This is a bit painful as it is really impossible to replace the 8.25% coupon with anything that is remotely safe, but just the same for the long term benefit of the portfolio we are moving it out.  While the movement of interest rates has been lower instead of higher we are still making an assumption that short term rates will move higher later this year and while longer term rates might not move higher initially preferred stocks have the potential to react violently to any move higher.  We are willing to cut our average coupon a bit to be positioned correctly (in our mind). 


2ndly we are selling REIT Hannon Armstrong Sustainable Infrastructure (ticker:HASI). Hannon provides funding for wind and solar projects as well as other types of energy efficiency projects. While HASI has a high quality portfolio of projects and their financing is relatively senior on the food chain we are concerned that the shares have gotten ahead of themselves. We have a 27% capital gain in 3 months.  We find the company conceptually intriguing, yet are not certain that it will be a good longer term investment and the luster is coming off wind and solar.  We will watch the issue for a possible position in the future.

Lastly we will sell our CVR Refining (ticker:CVRR). We really like the variable rate MLP’s and as a refiner CVRR is definitely variable. With a 3 month capital gain of 17% we are happy to go ahead and harvest our profit.  Like Hannon Armstrong we will keep the variable rate MLPs on our radar screen (like refiners Northern Tier and Alon).

These sales will generate somewhere around $29,000 or $30,000. Of this we will immediately deploy a portion of the proceeds to Leisureword Senior Care (OTC Ticker:LWSCF), the Canadian senior care organization which we already own and to Gladstone Investment 6.75% term preferred (ticker:GAINO).  We will double both of these positions.  In particular Leisureworld while showing only a break even share price this year has skyrocketed in Toronto. The strength of the dollar has depressed the U.S. traded shares and masked true performance.

We will put the balance of the cash generated to the cash account.  We currently have almost 7% cash on hand and consider 9 or 10% to be an acceptable amount of dry powder.

Additionally as we mentioned last Friday we will liquidate the 2014 Model Portfolio – Blended Income tomorrow at the markets close. It makes no sense to operate 2 models that will end up looking identical.  This successful model ends up over 3% for the 1st quarter of 2015 and over 13% for the last 15 months. For this type of portfolio this is supurb performance.



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Tim McPartland
Tim McPartland is a private investor with over 45 years of investing 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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