Investment Q&A

Q: Just noticed GXI.DB and it yields over 10% to maturity. Would you recommend this convertible debenture for the bond side of one's portfolio?

Thanks

Q: could you give me the paticulars on the Black Berry convertible debentures. Whats it's ticker how much and when is yield payed out, how many shares of stock will one be able to get from one convertible debenture, etc. Any information that would be useful. Also will there be dilution issues if Fairfax converts all there convertible debentures

Q: Hi there

I am up 17% on BAM.PR.M (Brookfield Preferred) over the years and have been very happy to collect the dividend but the preferred looks like it may reach the end of its life at the end of December 2015. Just wondering if I should sell now with the gain or wait until December 2015. It trades now for 22.68 and it looks like that Brookfield would have to pay me $25 to redeem. An I missing anything e.g. could they roll it into a new preferred at a lower interest rate?

Much thanks

Stuart

Q: I'm trying to get a better understanding of preferred shares and possibly start a position. When the BOC reduced rates why did the value of CPD decline? I expected the perpetual prefs to increase in value offset by a decline in the rate reset prefs.

Considering CPD is paying a 5% dividend it seems now is a good time to start a position. The BOC seems to have backed away from another rate decline and we are paid 5% to wait. Also a rate increase should benefit the fund if a rate decrease hurt the fund. Let me know if my logic is sound. I dont have any pref share exposure and all of my income portfolio is with CBO. Most of my money is in registered accounts.

Thank-you.



I dont have any exposure to pref shares.

Q: Hi Peter,

In recent questions re my convertible Deb holdings, I sold a majority of my energy based CV's. My IT 8.5% was also just called very recently well before maturity.

I currently want to maintain that % in my portfolio of Convertibles.

Can you please recommend 5 or 6 convertible bonds that you recommend I replace my sold and redeemed CV holdings with.

Keeping in mind return, ability to be redeemed in full at maturity and finally perhaps some upside potential due to equity growth.

Thanks very much.

Q: Hi Peter,

Had you written the article on PFD shares and I read it about 5 years ago I would have probably been much better off.

At any rate over the years (since the financial crisis I invested in many Pfd share resets, all at ipo price.

Amongst them are :AX.PR.E, DRM.PR.A, DC.PR.B, FFH.PR.F, NPI.PR.C,AIM.PR.A,INE.PR.A and C, PPL.PR.G AND TA.PR.F.

Obviously I am not concerned about the solvency of these companies, however I am underwater substantially on all of them. Can things get worse and can they fall further?

Or should I hold my nose and just keep them?

Small portion of my overall portfolio and income from them is marginal. I am retired.

What say you?

Thanks

Q: Thank you for the article on Preferred Shares. My former advisor at RBC-DS did not explain 90% of what was in your article. I lost a significant amount on the preferred shares he sold me. My question is this: Generally, at large brokerage firms, what kind of behind-the-scene commissions or "incentives" do advisors earn for flogging preferreds?

Q: Your recent article on preferrers only alluded to resets, which are now over 60% of all preferrers issued. So, I don't know how much I can take from the article. For example, I would like your opinion on efn.pr.e. You have recommended fen several times recently, and this preferred yields north of 6.5%. I believe I get my 25$ back in another four years, as long as the company is solvent, right? And the reset spread is around 4.5%, so I either get my money back or i get a very good yield when this five year term expires, right? I realize I am not participating in the cap gains, but I traded that for a 6.5% yield that seems quite safe and getting my money back in the end (i.e. 5 years). Am I missing anything?

Q: My questions is concerning the debentures of companies such as Partners Real Estate and Temple REIT . I own debentures of these companies (1 yr debenture for PAR.db and 2 year debenture for TPH). My thinking is that the risk of default is very low despite the poor performance of the shares. The yields are high and the companies before defaulting they will need to cut the dividend/distribution of the common shares and reduce debt by selling assets. The other risk is being paid the principal in shares (in which case one needs to hedge that possibility).
I would appreciate your thoughts on this with regards to the difficulties these companies are facing. (In fact .. I don't see why investors own the common shares and not the debenture).
Thanks in advance for your comments

Q: I own come some reset preferred shares (including BCE) They have lost a lot of their value. In your opinon, will these shares regain their value.What will it take for this to happen.
Thank you

Q: hi experts; with a 6%+ yield would this be a good choice for a income seeker.thanks brian

Q: I own shares of BRF.PR.A. On April 30th, 2015 holders of these preferred shares will have the option to convert to floating shares or retain them as BRF.PR.A. The floating shares will start trading on May 1, 2015 under the symbol BRF.PR.B

My question is: Should I convert to floating shares or not?
A leading expert on preferred shares advised today the holders of BRF.PR.A should not convert. I am looking for a second opinion.
Thank you again for your valuable advice.

Q: Hi team, I have been watching ZPR for some time now at this level is it beginning to look interesting? I don't have any holding specifically in this area so I was looking for some diversification. Or would HPR be a better buy? Any thoughts would be appreciated, thanks again.

Q: I understand the general idea of convertible debentures, but specific cases are puzzling to me. For example, AXL.DB.B, maturing June 30, 2017, has a conversion price of $1.70/s, but the stock is currently trading at around $0.07/s.

The debentures are substantially discounted; at today's price, $10000 face value would cost only $4750. But given the conversion price of $1.70/s, the 5882 (10000/1.70) shares you would receive in 2017 would be worth only $412 (assuming the stock price remained the same.)

Yes, the loss of conversion value is somewhat offset by the yield; with its discounted price, AXL.DB.B currently shows a yield-to-maturity of around 50%. But this only nets the purchaser around $2375 ($4750 @50%); $412 plus $2375 is still well-below cost.

If just breaking-even requires a ~600% recovery in the stock price, what, then, could be the incentive to buy the debentures? Or is there an 'at-par' conversion option I'm missing here?

Q: Recently the unit price of subject ETF has been steadily eroding each trading day. Could you please give me your analysis of why you think this price erosion has been occurring. Is there a bottom to this thing?

Thanks

Q: Hi Peter
Vereseen has issued another Preferred series E Reset for proceeds of 200 million.I own the A series which yielded 4.4% at the park value issue price of 25.00
Unlike a bond they will never be redeemed at 25.00 by the company, the shares are down by about 22% which sure seems steep to me,so what are my chances of the shares getting back to 25.00 so I can recover my original investment.
Are these reset Preferreds just being flogged by the underwriters for commissions.
Is there a good chance that Vereseen might default and I loose all my money.
Finally would you recommend taking the 20 percent hair cut and dumping my shares.
thanks Gord

Q: Hi guys, for educational reasons only.
Why is CPD selling off. Is it the fear of higher interest rates.
It seems excessive to me. Thanks for all you do.

Q: Would you please provide commentary on the effect of the recent sale of assets on the strength of the balance sheet and the viability of the remaining business going forward.

What would be your risk assessment of the Conv. Debentures?

Thanks, Hugh

Q: Preferreds have had a rough ride with some pundits suggesting that the rate reset preferreds are driving the declines in an ETF like CPD. My understanding of the argument is that resets are occurring at "unexpectedly" lower rates and that future yields will be lower. The Globe had a pretty negative article the other day which seemed to suggest that rate resets are too complicated for retail investors to understand. I didn't really think the rate reset concept was all that complicated but perhaps I am daft and don't really understand them. My question for you is what happens when interest rates start going up? If issues start to reset at higher than "expected" yields would this have a positive impact and start supporting the price of an ETF like CPD?

Q: This is a Preferred Reset that has lost almost 50% of it's value. Is there any concern about picking this preferred at a price around $13, such as default. I believe the next reset isn't for another 5 years. Thanks