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|In This Issue...|
For New Readers...
Welcome to all of the new CDx3 Newsletter readers who signed up over the last month. This is your first issue of the CDx3 Newsletter, a free monthly newsletter devoted to the interests of CDx3 Preferred Stock investors.
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This month's High Quality Preferred Stocks article lists the five highest quality preferred stocks that are selling for a sub-$25 market price and offering income investors an average current yield of 6.4 percent. Out of the 923 preferred stocks and exchange-traded debt securities that were trading on U.S. stock exchanges at the end of August 2014, our preferred stock search engine found five specific high quality issues selling below their $25 par value. (jump to article)
The Preferred Stock News article examines the preferred stocks offered by Affiliated Managers Group, Inc. AMG, an investment management firm, has a $10 billion market cap with two exchange-traded debt securities (ETDs) currently trading on U.S. stock exchanges. AMG closed Q2/2014 with its Affiliates having a record $625 billion under management, up from $544 billion at the end of 2013, offering more than 400 investment products to their clients. AMG's ‘strength through affiliation’ strategy has been working for AMG for several years, with the firm’s common stock doubling since January 2011 as had its net income at the end of 2013. And 2014 net income is up 28 percent over the same period last year. (jump to article)
The Special Announcement article announces the acquisition of PreferredsOnline (ePreferreds.com) by Del Mar Research, LLC, the parent company of the CDx3 Notification Service. The acquisition of the eleven year old PreferredsOnline service was completed on August 1, 2014. (jump to article)
The Preferred Stock Facts article is presented both here and on the PreferredStockInvesting.com website. Test your knowledge by clicking on any preferred stock question to see the multiple-choice answers. You will receive an automatic email that provides you with the correct answer and my explanation. (jump to article)
The Free Special Offer article explains how you can now have continuing preferred stock research delivered to you for free. Why wait until next month's CDx3 Newsletter to find out what is going on in the preferred stock marketplace? Throughout the month I post regular research articles on my blog and make them available to you for free. (jump to article)
Enjoy this month's issue. I look forward to reporting back to you in next month's issue of the CDx3 Newsletter.
5 Investment Grade, 6+ Percent Cumulative Preferreds Available Under $25
Preferred stock search engine finds these five out of 923 alternatives
The five highest quality preferred stocks that are selling for a sub-$25 market price are offering income investors an average 6.4 percent current yield in today's preferred stock marketplace.
As rates and prices move up and down over time, buyers buy when rates increase and prices fall below par ($25 per share in this case). Sellers sell those shares when rates fall again, pushing prices back above their original purchase price, enjoying seven percent (long-term average) dividends in the meantime.
This is why preferred stock investing is long-term investing, taking advantage of the known inverse relationship between rates and prices over time.
The search engine parameters seen in Figure 1 look for preferred stocks and exchange-traded debt securities (ETDs) that are currently trading below their $25 par value, pay a minimum annual dividend of at least 6.0 percent, have cumulative dividends and offer investment grade ratings from Moody's Investors Service.
Currently priced below par
Purchasing shares below $25 is an important consideration for many preferred stock investors. In the event that your shares are redeemed (bought back from you) by the issuing company, shareholders will receive the security's par value in cash in exchange for their shares. By purchasing shares below their par value ($25 in most cases and in all of the cases shown here), preferred stock investors are able to add a layer of principal protection to their investment while also positioning themselves for a downstream capital gain in the event of a future call.
Figure 1 shows the complete filter used to find these gems. Of the nineteen parameters that can be set, the four arrows highlight the keys for this search. Setting the "Currently priced below par" parameter to "Yes" does the magic here.
In addition to finding the highest quality issues that are currently trading below their $25 par value, this filter also limits the list to issues that have not suspended their dividend payments. Setting the "Dividend rate at least" parameter (center left under the Dividends heading) to 6.000 eliminates securities with very low, variable or adjustable dividend rates. And by setting "Today's price, at least" to $0.01 and "Today's volume, at least" to 1 share the filter will exclude less liquid issues (securities that have not traded today).
This is just one example. Click on the filter image to see another one along with a more detailed explanation.
Figure 2 shows the results when this search is applied to our Preferred Stock ListTM database (please note that to protect the values of subscriptions to the CDx3 Notification Service, trading symbols are obscured here). Already a CDx3 Notification Service subscriber? See page 6 of the September 2014 issue of the subscriber's newsletter, CDx3 Research Notes, that you received on August 28 for symbols.
There were a total of 923 preferred stocks and ETDs trading on U.S. stock exchanges as August 2014 came to a close. Of these 923, five specific high quality issues are trading below their $25 par value (August 28, 2014 prices). This list is sorted by dividend rate (coupon) with the highest payers listed first.
The two securities shown in green font are ETDs (ETDs are bonds that trade on the stock exchange rather than the bond market and are very similar to preferred socks) while the remaining three securities listed are preferred stocks. All have a current market price (seen in the Last Price column) that is below their $25 par value (as shown in the Liquid Price column) and enjoy an investment grade rating from Moody's (the Moody's column).
Keep an eye out for sub-$25 buying opportunities such as those listed here. The lower your purchase price, the more principal protection you'll have. The preferred stocks and ETDs listed in Figure 2 are offering some of the best choices available to you as an income investor.
Please consider becoming a subscriber to the CDx3 Notification Service today.
Already a subscriber? The trading symbols for this example are provided on page 6 of the September 2014 issue of the subscriber's newsletter, CDx3 Research Notes.
Learn To Screen, Buy and Sell The Highest Quality Preferred Stocks
Preferred Stock Investing is one of the highest reader-rated books in the United States with 77 reviews posted at Amazon.
A new edition of Preferred Stock Investing is published every other year in order to keep up with current market trends and research. The new Fifth Edition addresses selecting, buying and selling the highest quality preferred stocks during the market conditions that we are expected to face throughout 2014 and 2015.
See: Reviews | Table of Contents | Free Excerpt | Paperback | eBook
Preferred Stock Investing includes the information, websites and other resources needed for you to be a very successful preferred stock investor. The Fifth Edition is now available at your favorite online retailer.
For those who would rather someone else do the research and calculations, I offer the CDx3 Notification Service. Subscribers to the CDx3 Notification Service receive an email alert whenever a new preferred stock or exchange-traded debt security is introduced. Subscribers also receive their own non-promotional preferred stock research newsletter every month, have their own website that hosts the Preferred Stock ListTM database and have access to the CDx3 Discussion Group, the only online forum just for preferred stock investors.
Invest in the best. Subscribe to the CDx3 Notification Service today.
Affiliated Managers Group Preferred Stock: Opportunities and Risks
Two Exchange-Traded Debt Securities with Investment Grade ratings
Affiliated Managers Group, Inc. (AMG), an investment management firm, has a $10 billion market cap with two exchange-traded debt securities (ETDs) currently trading on U.S. stock exchanges.
ETDs are very similar to preferred stocks and are often labeled as such on brokerage statements. But ETDs are recorded on the company's books as debt, rather than equity, and are actually bonds that trade on the stock exchange (rather than the bond market). As debt, ETDs are often considered to represent lower investment risk than the same company's preferred stocks.
AMG’s two ETDs, trading under the symbols MGR and AFM, offer investment grade BBB ratings from Standard & Poor's and current yields of 6.3 percent and 5.1 percent, respectively.
Description and history
Investment management firms come in a variety of sizes and offer an equally wide variety of investment products and services. Some focus on managing pension funds while others seek to attract high net worth individuals. Some are geographically diversified while others focus on specific locales or types of investments.
What small, boutique investment management firms are frequently able to offer is a level of personalized services that the big guys find difficult to match. But the big guys can offer a huge array of investment alternatives that the smaller firms do not have the bandwidth to stay on top of.
AMG is in business to take the burden of being small off of the back of the boutique firm through its “Affiliates” program. AMG’s formula goes well beyond administrative cost sharing (accounting, IT, HR, marketing, compliance). Since going public in 1997, AMG has established relationships with a multitude of boutique investment firms all over the world. And the relationship is not just on paper; rather, AMG makes a “meaningful” equity investment in the Affiliates they target.
Once on board, all AMG Affiliates gain access to the offerings of the other AMG Affiliates, hence extending the reach of the smaller firms while maintaining the level of personalized services that clients favor. AMG targets boutique firms in specific geographies that offer specific investment products and services that its existing Affiliates would benefit from having access to.
AMG closed Q2/2014 with its Affiliates having a record $625 billion under management, up from $544 billion at the end of 2013, offering more than 400 investment products to their clients.
Investment management firms look like heroes when markets are rising (and donkeys when they’re not). 2013 was a hero year and AMG and its Affiliates were no exception. The ‘strength through affiliation’ strategy has been working for AMG for several years, with the firm’s common stock doubling since January 2011 as had its net income at the end of 2013 (Figure 3).
Throughout the first half of 2014, AMG has posted a 28 percent improvement in net income over the same period of 2013 (Figure 4) and has taken on four new affiliates so far this year.
(Sources: Affiliated Managers Group Management Discusses Q2/2014 Results, July 29, 2014 | Q2/2014 Form 10Q | company website)
AMG’s Exchange-Traded Debt Securities
Taking advantage of the low cost of capital available at the time, AMG issued two ETDs, two months apart, in 2012. Note in Figure 5 how aggressively rates were falling at the time. After issuing MGR in August of 2012 at 6.375 percent, AMG was able to issue AFM, with a nearly identical prospectus, two months later at 5.25 percent.
The most significant differences between the structures of these two ETDs is their call and maturity dates. MGR offers a standard five years from IPO until it becomes redeemable on August 15, 2017. AFM, on the other hand, becomes callable in three years from its IPO on October 15, 2015.
Similarly, MGR matures on August 15, 2042 while AFM reaches its October 15, 2022 maturity date twenty years earlier. AFM's 2022 maturity date means that those buying AFM shares will have their cash tied up for a much shorter period of time than those buying MGR shares. So, even though MGR offers much higher dividend income, the market price of AFM is consistently higher than that for the higher-paying MGR.
(Source for preferred stock data: CDx3 Notification Service database, PreferredStockInvesting.com).
While AMG has done a good job at diversifying its Affiliates around the globe, investors should always remember that AMG’s fortunes are pegged to the performance of the global equity markets. While having one-half billion dollars in cash provides a certain level of comfort for today’s buyers, a widespread equity downturn could present a substantial challenge to such companies.
For risk-averse income investors
considering taking a position in Affiliated Managers Group ETDs, the
MGR issue consistently offers a better yield, does not become
redeemable until August 2017 and is consistently available at a
lower price (although still above this security's $25 par value).
More Preferred Stock Research
FROM DOUG K. LE DU
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PreferredsOnline (ePreferreds.com) Becomes Part of CDx3 Notification Service
Six month trial period ends with acquisition of PreferredsOnline subscriptions
I'm very pleased to announced that on August 1, 2014, Del Mar Research, LLC, parent company of the CDx3 Notification Service, acquired the subscriptions of PreferredsOnline (formerly located at ePreferreds.com). PreferredsOnline was founded in 2003 as one of the first subscription services available to preferred stock investors.
Monthly and annual PreferredsOnline subscribers are now enjoying the many features of the CDx3 Notification Service.
The acquisition process began last February when PreferredsOnline subscribers were notified by president David Landes that, until July 31, 2014, they would have "dual access" to both subscription services. This six month trial period allowed PreferredsOnline subscribers to become familiar with the many CDx3 Notification Service features and resources.
On July 1, 2014, Landes explained in an email letter to PreferredsOnline subscribers that "Our decision was based, in part, on the fact that we don’t currently have the expertise in preferred securities that we feel is needed today to address an investors needs. We feel that the CDx3 Notification Service and Doug K. Le Du offer that knowledge."
I want to thank David Landes and his team for working with us to make this transition a very smooth one for all involved. And, once again, welcome PreferredsOnline subscribers to the CDx3 Notification Service (be sure to check your inbox for a special email message that you received from me on August 1)!
Test Your Knowledge With These Preferred Stock Facts!
There's a lot to like about preferred stocks. And many aspects of selecting, buying and selling the highest quality issues are misunderstood. Here are a few frequently asked questions that illustrate some of the more subtle points of preferred stock investing.
Clicking on any of the below questions will open a new window on your screen. Each question is presented with multiple-choice answers. Test your knowledge by submitting your best guess and I will automatically email you my analysis with the correct answer (and no spam, ever).
Preferred Stock Market Research Now Available All Month Long - Free
Automatic Email delivery of preferred stock market research now available
Readers do not have to wait until next month's issue of the CDx3 Newsletter to stay plugged into the market for high quality preferred stocks. Preferred stock research articles, marketplace observations and preferred stock news from the financial press and other information are posted to the Preferred Stock Investing Reader's Forum (my "blog") throughout the month.
To receive articles by email automatically without having to visit the Forum, click here
A separate window from FeedBurner (a Google service) will open on your screen. Enter and verify the email address that you want articles from the Forum to be emailed to as instructed. And don't worry - you'll never receive any spam from me and your email address will not be shared.
By receiving the articles as I post them via email, you do not have to visit the Forum in order to stay plugged into my research regarding the marketplace for the highest quality preferred stocks.
Please accept my invitation to receive articles by email and visit the Forum.
to screen, buy and sell the highest
quality preferred stocks by
the new Fifth Edition of my book, Preferred
Stock Investing (see
retailers). The book identifies
the resources that you need to be a very
successful CDx3 Investor completely on
your own. If you would rather we do the
research and calculations for you I
CDx3 Notification Service
17 of Preferred Stock Investing
includes a list of all of the CDx3
Preferred Stocks issued since January
2001 and the investing results you
would have achieved had you invested in
them using the CDx3 Income Engine.
take a look at
And if you
someone who might be interested in simple
for non-experts please have them
sign up for this free monthly preferred
stock research newsletter
They will automatically
begin receiving this monthly CDx3
next month (plus a
CDx3 Special Report) - all FREE.
Chapter 17 of Preferred Stock Investing includes a list of all of the CDx3 Preferred Stocks issued since January 2001 and the investing results you would have achieved had you invested in them using the CDx3 Income Engine.
Please take a look at www.PreferredStockInvesting.com.
And if you know someone who might be interested in simple investing for non-experts please have them sign up for this free monthly preferred stock research newsletter at www.PreferredStockInvesting.com. They will automatically begin receiving this monthly CDx3 Newsletter next month (plus a CDx3 Special Report) - all FREE.
Many Happy Returns,
Doug K. Le Du
Copyright (c) 2014 by Del Mar Research, LLC.
Preferred Stock List, CD Times 3, CDx3, CDx3 Income Engine, CDx3 Investor, CDx3 Portfolio, CDx3 Preferred Stock, CDx3 Perfect Market Index, CDx3 Bargain Table are trademarks of Del Mar Research, LLC. All rights reserved.
DISCLAIMER: The content of this CDx3 Newsletter is to be regarded as educational, rather than advisory. There can always be exceptions to trends and/or generalizations that may be discussed herein. Consider your financial resources, goals and risk tolerance before investing. You, and not Del Mar Research, LLC, are solely responsible for your own investment decisions.