{"id":3741,"date":"2008-11-01T20:38:17","date_gmt":"2008-11-02T00:38:17","guid":{"rendered":"http:\/\/www.prefblog.com\/?p=3741"},"modified":"2008-11-01T20:38:17","modified_gmt":"2008-11-02T00:38:17","slug":"best-worst-performers-october-2008","status":"publish","type":"post","link":"https:\/\/prefblog.com\/?p=3741","title":{"rendered":"Best & Worst Performers: October 2008"},"content":{"rendered":"

These are total returns, with dividends presumed to have been reinvested at the bid price on the ex-date. The list has been restricted to issues in the HIMIPref\u2122 indices.<\/p>\n

\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n
October, 2008<\/b><\/td>\n<\/tr>\n
Issue<\/td>\nIndex<\/td>\nDBRS Rating<\/td>\nMonthly Performance<\/td>\nNotes (“Now” means “October 30”)<\/td>\n<\/tr>\n
BAM.PR.B<\/td>\nFloater<\/td>\nPfd-2(low)<\/td>\n-36.5385%<\/td>\nWas also the worst performer in September<\/a> – it has been hit not just by the general downdraft in BAM issues, but by expectations of continuing drops in prime. Is it any wonder it is starting to attract interest<\/a>?<\/td>\n<\/tr>\n
BAM.PR.K<\/td>\nFloater<\/td>\nPfd-2(low)<\/td>\n-34.6667%<\/td>\nAlso a poor performer in September.<\/td>\n<\/tr>\n
BSD.PR.A<\/td>\nInterestBearing<\/td>\nPfd-2(low)<\/td>\n-33.0673%<\/td>\nAsset coverage of 0.9+:1 as of October 24 according to Brookfield Funds<\/a>. Now with a pre-tax bid-YTW of 17.21% based on a bid of 5.87 and a hardMaturity 2015-3-31 at 10.00 … though as pointed out<\/a> by Assiduous Reader prefhound<\/i>, use of $10.00 maturity value is, at the very least, something of a leap of faith. Brookfield Funds has announced<\/a> suspension of dividends for the capital units and suspension of retraction rights.<\/td>\n<\/tr>\n
BAM.PR.M<\/td>\nPerpetualDiscount<\/td>\nPfd-2(low)<\/td>\n-19.4846%<\/td>\nNow with a pre-tax bid-YTW of 9.46% based on a bid of 12.81 and a limitMaturity<\/a>.<\/td>\n<\/tr>\n
BAM.PR.N<\/td>\nPerpetualDiscount<\/td>\nPfd-2(low)<\/td>\n-19.3038%<\/td>\nNow with a pre-tax bid-YTW of 9.50% based on a bid of 12.75 and a limitMaturity<\/a>.<\/td>\n<\/tr>\n
…<\/td>\n…<\/td>\n…<\/td>\n…<\/td>\n…<\/td>\n<\/tr>\n
POW.PR.B<\/td>\nPerpetualDiscount<\/td>\nPfd-2(high)<\/td>\n-0.0971%<\/td>\nNow with a pre-tax bid-YTW of 6.57% based on a bid of 20.58 and a limitMaturity<\/a>.<\/td>\n<\/tr>\n
NA.PR.N<\/td>\nFixedReset<\/td>\nPfd-1(low)<\/td>\n+0.2053%<\/td>\n <\/td>\n<\/tr>\n
ALB.PR.A<\/td>\nSplitShare<\/td>\nPfd-2(low)<\/td>\n+0.3040%<\/td>\nAsset coverage of 1.5+:1 as of October 30 according to Scotia Managed Companies<\/a>. Now with a pre-tax bid-YTW of 8.29% based on a bid of 23.10 and a hardMaturity<\/a> 2011-2-28 at 25.00.<\/td>\n<\/tr>\n
BMO.PR.I<\/td>\nOpRet<\/td>\nPfd-1<\/td>\n+0.4246%<\/td>\nCalled for redemption<\/a>.<\/td>\n<\/tr>\n
PWF.PR.D<\/td>\nOpRet<\/td>\nPfd-1(low)<\/td>\n+1.9405%<\/td>\nNow with a pre-tax bid-YTW of 5.05% based on a bid of 25.16 and a softMaturity<\/a> 2012-10-30 at 25.00.<\/td>\n<\/tr>\n<\/table>\n<\/div>\n

Just as in August 2007<\/a>, BAM issues are over-represented in the poor performers’ list … and I am just as unable to find a convincing rationale for this.<\/p>\n

Consider, for example, BBD.PR.B. It’s a ratchet-rate issue, paying a maximum of 100% of prime on its par value, minimum 50%. On October 31, DBRS<\/a> confirmed Bombardier’s preferreds at Pfd-4. Since Brookfields floaters in the index, BAM.PR.B and BAM.PR.K, both pay 70% of prime on their par value, we can assume that, given equal credit quality, BBD.PR.B should trade at 100\/70 = 1.43 times the price of BAM.PR.B\/K (since a reduction in BBD.PR.B’s rate will occur only if it trades significantly above par, which does not appear too likely in the near future).<\/p>\n

BBD.PR.B is quoted at 12.00-23, implying – roughly speaking – that if it paid 70% of prime it would be trading at 8.40. Compare that to BAM.PR.B\/K, at 9.90-98 and 10.78-11.66, respectively – there is not much premium being paid for the difference between Pfd-2(low) and Pfd-4!<\/p>\n

Compare also (as Mr. Nagel did) to TRI.PR.B: it’s also rated Pfd-2(low) and also pays 70% of prime, but is less liquid … and is quoted at 18.05-00!<\/p>\n

I will suggest that the Street is trading the BAM issues as if their credit quality is significantly worse than it actually is.<\/p>\n

If you like floaters, you’ll probably like the Brookfield issues – but remember! While Brookfield is a good name, it is not so good a name that it may be overweighted with abandon! Investing in Brookfield is a bet on their credit quality, the same way as investing in any fixed income issue is a bet on credit quality. Recognize that occasionally you’re going to be wrong and keep your bets small in order to give the statistics a chance to work.<\/p>\n","protected":false},"excerpt":{"rendered":"

These are total returns, with dividends presumed to have been reinvested at the bid price on the ex-date. The list has been restricted to issues in the HIMIPref\u2122 indices. October, 2008 Issue Index DBRS Rating …<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[13],"tags":[],"class_list":["post-3741","post","type-post","status-publish","format-standard","hentry","category-issue-comments"],"_links":{"self":[{"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/posts\/3741","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=3741"}],"version-history":[{"count":0,"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/posts\/3741\/revisions"}],"wp:attachment":[{"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=3741"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=3741"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=3741"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}