Wfc-prl 7.5% convertible preferred

Investment Analysis Clubs Macro Economic Trends and Risks
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For those interested in a nearly perpetual 7% yield, Wfc preferred are trading at about 1065- 1070. If Wfc trades at or above 203.72 for 20 of 30 days conversion can be forced. Works out to about 22% cap gain if it happens and 7% while you wait in a bank that has been in the past too big to fail. Wfc trades at 80 now, so it’s a long way to 203.

Jk

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2

It’s an excellent option for a blue chip preferred. If the price of .gov debt keeps falling, this preferred will continue to fall as well.

I’m making an early call that this issue will trade below $990.

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I bought a stater position,will add up to 80% more depending on price. If it takes 10 yrs for a forc3d conversion yield rises to 8.4% if it takes 20 yield is 7.53. Waiting to add at par or below, I agree it may trade below 1000 in the next twelve months.

Jk

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4

Maybe. But lately bank stocks are not as stable as they once were and can be quite volatile. WFC, for example, moved from $40 to $80 in about 2 years. Similarly , C moved from just under $60 to over $130 in about a year.Similar for BAC, etc.

If we do indeed see stubborn inflation then this 7% doesn’t change with inflation. Meanwhile we see 10-year TIPS at 2.87% (+CPI) and 30-year TIPS at 3.27% (+CPI). These are close to record real yields on TIPS! Obviously for someone who needs the current income, TIPS don’t work, but for someone who has this as an element within an overall portfolio, sometimes things can be balanced to work.

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Ahh… but that “7%” does. This is why the purchase price matters. If 10+ year treasury prices keep falling (rising yields), I expect all preferred issues to fall in sympathy, precisely because they must compete with .gov bonds.

If we see interest rates rise to 9+%, the price should fall in the range of <$830’s, for this preferred.

Of course, locking in that kind of return during that dislocation (if it proves to be one) would entitle the owner to an extremely nice combined (interest + capital) return should rates return back to the 5% range again.

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When you see where they traded during the GFC you might be sad you didn’t load up then. The $1000 par traded in the $300s

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