Shaking Up the Blended Income Portfolio

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When we last wrote on January 6th we said that we would be primarily purchasing short and medium duration securities in the Blended Income Portfolio in 2017.  With this theme in mind we have added 700 shares of Medley LLC 6.875% Senior Notes (NYSE:MDLX) to the portfolio today. Medley LLC is the operating company of Medley Management (NYSE:MLY) and is an asset management company.  MDLX has been trading under par since it began trading last August.  We have made our purchase at $24.00/shares giving us a current yield of 7.13%.  The notes have a maturity date in 2026 which makes them a medium duration issue which fits perfectly with our current strategy.  Being a debt issue the distribution is an interest payment and not eligible for preferential tax treatment.

Additionally, today we purchased 800 shares of The Carlyle Group (NYSE:CG), a MLP (master limited partnership).  CG is an alternative asset manager with about $169 Billion in assets under management.  The company made a few missteps in the last couple of years and paid a fairly heavy price for their errors with their share price being driven down to $11/share from above $30 3 years ago.

Rather than regurgitating all of the logic behind this purchase we are simply going to refer to an article today on Seeking Alpha written by Alpha Gen Capital which outlines the situation quite well.  Currently the distribution by CG is 50 cents/share giving a healthy near 12% current yield.  Readers should be mindful that CG is a variable payment MLP, meaning they can move the distribution higher, or lower and there is no guarantee that the distribution will remain at this level.


On January 6th we also mentioned that we would be harvesting some profits from the portfolio and today we have done so.

We have sold the Prospect Capital 6.25% notes (NYSE:PBB).  We had purchased these when Prospect Capital and related issues took a “beat down” about a year ago.  We paid $19.50 and sold them today for $25.35.  This is not to imply there is anything wrong with these baby bonds, but the current yield had fallen to 6.15% and we suspect there is no prospect of further capital gains left thus the 6.15% is a bit meager for us.

Additionally we sold the CHS 7.50% cumulative preferred. (NASDAQ:CHSCL).  CHS (Cenex Harvest States) is a large agricultural cooperative and while we love CHS we think it is time to lock in some decent capital gains.  With the rise in interest rates we have already given back a good share of gains and there is no reason to continue to hold this issue with a current yield of 6.78% just to give back more gains later this year.

Lastly we have sold our Johnson and Johnson common shares (NYSE:JNJ). We have a very tidy capital gain in the shares and with a current yield of 2.61% we think we can do better.

In summary these moves should raise our income level by a few basis points overall (on invested positions) as well as give us a fighting change at a good potential future capital gain on The Carlyle Group.  We have further cash to get deployed in the next 10 days and will announce that as it happens.


Tim McPartland

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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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