TELZ's 8.25's of '28 (callable, 05/2

“FWIW I just bought a little TELZ (8.5%+ yield, 9 CDx3 rating) today - but the volume is so thin somebody decided not to sell more to me at limit even 2% above yesterday’s close.”


Good catch on TELZ.

Yeah, the spread is a bit wide. (Currently, 23.28x50.) And traders are dumping, like, the common is down (-7.64%) today. The company isn’t currently profitable, nor predicted to be so over the next three years, and earnings are forecast to decline by an avg of 13.2%/yr, and it has less than a year of runaway cash. So this is definitely a POS company. OTOH, according to a fundie website I trust, SimplyWallStreet, ST assets exceed ST liabilities, as do LT assets > LT liabilities, and the rest of their balance sheet looks decent. So I did my standard opening of 4 shares and will park them in the ‘speculative’ portion of my Pfd portfolio.

Again, good catch, and thanks for making the effort to post it. This board is going to die unless some of us start don’t posting again on a nearly daily basis. With interest-rates on the rise, the bond market has gotten interesting again. So there are lots of challenges to deal with and --hopefully-- to benefit from.



With interest-rates on the rise, the bond market has gotten interesting again.

This is so true! And in the panic of “rapid” rate raising, there will likely be bargains to be found in the panic. I’ll never forget all those ISM and OSM exchange traded CPI-linked bonds that I snapped up in the single digits and all the way up to under 20 during a previous panic. In the end, they all paid off at $25 (par).

I’ve discussed that here a number of times since 2005.

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Psyched that someone found this useful. I have probably taken much more risk with this one than warranted, given your input above and the new-to-me suggested approach of risk-based allocation levels on these.

The same day I got the execution, the price dropped 7%. Oops.

Here’s an update on the common: Tellurian received an upgrade from Zacks Investment Research on Tuesday. Just weeks after the firm lowered its rating from a Hold to a Sell. It seems that all it took was a few bearish sessions, as now Zacks has a rating of Hold once again for the stock. The stock currently has a consensus Buy rating from analysts and a one-year median price target of $6.24.… typical Zacks…

Gas company… might back off on the allocation on this one.

I’m speculating that even if interest rates go up to 3% in 2 years, a CDX3-9 rating on an 8.25% coupon will still be priced close to par. Then again, I could be wrong.


I, too, am glad that someone else has found this forum and is posting.

Yeah, timing one’s entries/exits isn’t easy, nor is determining one’s position sizes. Always there are regrets that one was too timid (or too bold), never mind the inevitable ‘unforced errors’.

I’ve got some other irons in the fire right now. I’ll get back to this thread after market close.



For sure, TELZ is ‘risky’, or it wouldn’t have come to market with the high coupon it did, nor be trading at the discount to its call price that it is. But “How risky?” is the research problem. So here’s some of the checklist I run through when trying to vet a preferred.

(1) Is it trading at a prem to a stated call such that YTC would mean a low total-return or even a loss? (Explanation: I care nothing about CY. It’s ‘total return’ I worry about, and TELZ gets a pass.)

(2) Does the issuer have a common, and what does Simply Wall Street --a fundie website I trust-- say about the financial health of the company and its current price in terms of its ‘fair value’? (TELL is ‘marginal’ on both metrics, but not an instant reject. Hence, TELL gets pass, but a weak one, as does TELZ.)

Clearly TELZ is a ‘spec-grade’ credit, probably a single ‘B’, which is as low as I’ll buy. Therefore, my position is going to be small, and here’s where I borrow from my bond investing. By and large, a single corporate isn’t marketable. Yeah, I’ve bought and sold singles. But the lowest executable min is typically two, with five being common. But I refuse to bet that big. If I can’t get just 2 of a spec-grade issuer’s debt, I don’t buy. I’ll go 5 with the mid-tier stuff and ten with top-tier debt.

For the sake of easy understanding, let’s call those three tranches ‘Defensive’, ‘Enterprising’, and ‘Speculative’, and I fund them on this scheme: 2x (Defensive), 3x (Enterprising), 1x (Speculative) on the basis of ‘par’, not ‘price’. Thus, I’m typically having to pay a prem for the best stuff. I get the mid-tier stuff at a slight discount. The lower-tier stuff at a significant discount. And I avoid the lowest-tier stuff, the triple/double/single C’s. But here’s where this scheme makes it possible to traffick in junk. I’m never betting much money on any of the risky issuers. But I am gaining enough exposure to the tranche’s higher returns that wins likely exceed losses by enough of a margin that “playing it totally safe” is being too cautious. My mantra is this. “Buy widely. Buy small.” Thus, even though TELZ is a risky credit, I need to buy some in order to reduce the ‘issuer-specific’ risk that would come if I were making focused bets.

Explanation: In Morningstar’s terms, I’m a ‘spectrum income’ investor, not a dedicated ‘junk-bond’ investor. Same-same with what I’m trying to do with preferreds. Schwab’s scanner for preferreds creates five tranches on the basis of CY: 0%-2%, 2%-4%, 4%-6%, 6%-8%, and >8%. By and large, the 0%-2% stuff isn’t worth looking at, though I’ve bought some of it, e.g., TVA and TVE (if I’m remembering the tickers right). But I’ll trade out of it when I can gain a ST profit. The 2%-4% tranche also offers slim pickings. But I have no problems with buying some of it, just because it’s unlikely to cause me grief. (That’s the “buy’em and forget 'em” stuff.) The next two tranches are where most of my buying happens. The 8% and better tranche is a shopping list I scan. But very little money gets put to work there, and as much to see what might happen as to turn a profit. Hence, I was glad you brought TELZ to the attention of the forum.



Great, informative post Arindam - thank you!