Quiet Board - what are folks thinking about these days?

I am thinking that I need to accelerate my plans to raise cash and convert growth into dividends as I hopefully approach retirement.
I did buy some ANSS at a 12% discount to the post deal value of the SNPS takeover.

Slowly working my way out of my FFNW shares, selling as the price increases above the cost of the tranches I bought after the deal didn’t close in Q4.

CZBS seems attractive at a P/BV basis - added some there.

Vinnie G

When you say dividend, what do you have in mind? Dividend paying stocks or preferred stock?

King,
Dividend payers. My screen is basically companies with 10 year total return CAGR > 10% and 10 year dividend growth CAGR >10%.
Vince

Hey, Vince,

Have you considered dividend ETFs in place of individual stocks? The usual trade-offs, of course, but somewhat below your hurdle rate. But even a basic VYM has 5-6% dividend growth over time, well-diversified, and a decent dividend today.

Lemme know how the ANSS trade works out.

Jim

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Jim,
Will do. There are two aspects to this trade. SNPS was attractively priced using a reverse discounted cash flow approach and there was the deal arb that was once single digits and moved up to 12%. I considered locking in the 12% by shorting 34 or 35 shares of SNPS but really this was a way to buy SNPS at a discount. I should add that the deal pays $197 cash plus .345 shares of SNPS for each share of ANSS.

As for dividend ETFs - I am hoping to add the VIG from Vanguard as an option for my company’s 401k. They focus on companies that increase dividends each year.

Vince

underrated advice! My personal experience of investing in dividend paying stocks is not great, actually they are bad. I switched to modified approach, of doing covered calls where dividend+call premium gives me 10% return and depending on the name, I look for 20% to 30% downside protection, i.e., if the stock is 10, write covered call for $8 to $7. Often they could get called away bit early, but this worked better.

Now, I am looking at some preferred’s where I don’t mind locking in 6%+ return. Of course my non-treasuries fixed income is 1%.

King,
Thanks,
How do you screen for preferreds?

Vinnie G

PS - ANSS/SNPS arb is still above 11.5%

Some brokerages like fidelity, have a screen for that. Mostly I stick with the names I am already familiar with like Bank and REIT preferreds. These are not going to be very long-term, but to park cash and provide cash when I want to buy stocks.

There is a possibility of interest rate hike. Yeap, for now Fed is at pause and it could resume cuts, which I doubt. We will see rates go up a bit and come down later!!! That is, the tariff in the short-term will lead to inflation and FED will raise rates to fight that, and all DOGE cut, inflation is going to shock the economy and Fed had to start cutting to help the economy.

Don’t take these views very seriously, even I don’t :joy: :joy: :joy:. I just need a framework, that’s all it is.

King,
Given your framework - high probability of an increase before another cut, why would preferreds be preferred? Rates up, prices down THEN buy seems a better option especially when cash pays 4% in the MM. I generally agree with you that expected cuts may not materialize and the chances are meaningful that a hike will preceed further cuts.

Because these are not long-term buys. I have cash and some more cash coming via covered calls maturing and some planned sales, etc. Eventually they will be deployed. But I need a parking place. Cash in Fidelity, IBKR earns 4% or so, but in E*Trade it earns nothing. Lastly, Just because I am anticipating doesn’t mean rates have to go up.

Let me expand a bit more on this. US treasury issues bills (which are short-term < 1 year) notes (2 to 10 years) and bonds (20, 30 year) maturities. Currently there are give or take $6 T bills, these mature all through the year and need to be re-issued. The Treasury secretary was very critical of this and wanted to increase the tenure or convert them into notes and bonds so that treasury doesn’t have to issue lot of bills. (Separately, I wonder it is possible, given the size of the money market which is $6T+ and they are a big buyer of these bills :slight_smile: ), In any case, if he ends up converting some of these bills into notes, and bonds, then that will likely end up increasing the long-term rates, until we find equilibrium. Also, there are reports about gold-bonds (lot of gold, cryptonites in the administration), and Trump himself talking about arm twisting US allies in buying zero coupon bonds with 50+ year maturity!!! These are very difficult to predict how it will play out. It could come in the form of liquidity crisis to variety of things and treasury rates could temporarily spike.

Long-story short, Trump administration is moving very fast, making lots of changes, I fully expect it could end up breaking something intentionally or not. And that may provide opportunities for investors. If you are prepared for that. I am not looking forward to it, but expect it .

Prepare your watchlist. It may never materialize it, but if it happens and we are not prepared that is a shame.

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SNPS reported a beat and a raise today. Merger is on track to close in 2Q 2025. EU and UK have approved it, China is the last hurdle. Deal arb is now under 9%.

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