It may seem strange for someone who considers himself a pure mico-cap investor to be invested so heavily in preferred. In GKK and NCT’s case, I like them because I consider them basically equivalent to net-nets- the two are trading for less than the value of their respective company’s net cash and investments after excluding non-recourse debt.
However, I also like preferred stocks in the right situation. Preferreds generally trade for a big discount when the market is concerned with the sustainability of their dividends. If you can identify why they trade for a discount and that the market is wrong to trade them at a discount, you have two very, very effective catalysts for value realization in the preferreds. The first is, obviously, the high yield will attract investor or guarantee you a certain return (providing the price doesn’t detoriate further, but if you correctly identified a mispricing further price deterioration shouldn’t be a long term problem). Second, preferred trading at a large enough discount effectively become the equity of the company. A potential distressed sale of the company or liquidation could be disastrous for common shareholders but could result in a par or near par payment for the preferreds.
So, with all that in mind, I’ve recently been researching a bunch of preferred stocks. Oddballstocks showed me quantomonline.com , which has a pretty comprehensive list of preferred stocks. I haven’t found any that are out of this world attractive to me yet, though people with a specialization in oil and gas might do well to look into ATPG’s preferreds (ATPGP)
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