ORH.A Today

[StubbleJumper]

ORH.A dropped like a stone today, for no apparent reason....  I picked up another nice chunk at $17.25.  ;D ;D ;D ;D ;D

 

 

Anybody else get in on this action today?

[Myth465]

Thanks for the update. I wrote the preferreds off due to the big December rally but will be buying tomorrow.

[kmukul]

isnt ORH-B cheaper? the div is almost the same? sorry i am kind of new to these preferreds and cant see a reason why orh-a is better then orh-b

[zarley]

isnt ORH-B cheaper? the div is almost the same? sorry i am kind of new to these preferreds and cant see a reason why orh-a is better then orh-b

 

Not really a question of better.  The ORH-B shares have a floating dividend rate (based on 3 month LIBOR) and the A shares have a fixed rate.  Since short term rates have come down considerably recently, the payout for the B shares will be less than the A shares for the immediate future.

 

At current prices the A shares are yielding almost 12%.

 

Disclaimer: I own ORH-A.

[Redskin212]

I was buying yesterday as well - mainly at $17.15 

Wanted more today but price has drifted up.

 

Redskin

[Guest misterstockwell]

Just an FYI--there appears to be someone with plenty of shares for sale anywhere above 17.20. I have pulled down a couple blocks of 5,000 with a bid above 17.20 and I am instantly filled. Get 'em while you can!

[kmukul]

Is there anything fishy which might be happening? or is it that the market is kinda stupid

[zarley]

Is there anything fishy which might be happening? or is it that the market is kinda stupid

 

It's very thinly traded, so one committed seller can keep the price down for a while.  If you look at a day's volume, it is usually in the low thousands of shares. 

 

[Guest misterstockwell]

Thinly traded stock with a single seller--no idea what motivates a seller like that, whether it be personal need, rebalancing a fund, a company mandate to eliminate financial preferreds, redemptions, etc. Whatever the reason, they have a nice number of shares available. I got most of the volume today, but even my last trade for 3000 was hit immediately, so there are more there.

[Clairveaux]

They're talking about making "naked" credit default swaps illegal or closely regulating them in Washington.

[Grenville]

Thanks for the heads up! It's hard to pass up a <10% dividend with a discount from par of <40%! I bought some ORH.A today.

 

my previous id on the MSN board: masterP3250

 

 

 

[Myth465]

thanks for the updates i got in at 17.25

[basl1]

:o For those of us who do not know, why is this share so special?

 

[zarley]

:o For those of us who do not know, why is this share so special?

 

Currently offering close to 12% in dividend yield and has the potential to be called by Odyssey for $25 after October 2010.  Best case scenario, you get ~$4 in dividends and a ~$7 capital gain by the end of 2010 if they call it asap (64% gain in ~two years).  Worst case scenario, you get a 12% dividend indefinitely from a well run and well capitalized company, which is majority owned by Fairfax.  It won't be a homerun, but I see it as a very safe bet that offers a good to very good return.

 

Here's a link to the issue prospectus: http://www.sec.gov/Archives/edgar/data/1137048/000090956705001607/t18226e424b5.htm

 

 

 

 

 

 

 

[StubbleJumper]

At these prices, I wonder whether ORH is buying on the open market?  They bought piles and piles of their common shares at 0.9-1.0 X BV over the course of 2008.  It would seem like a no-brainer to me for ORH to be scooping up their preferreds at current prices. ??? ??? ???  Heavens!

[basl1]

:o For those of us who do not know, why is this share so special?

 

Currently offering close to 12% in dividend yield and has the potential to be called by Odyssey for $25 after October 2010.  Best case scenario, you get ~$4 in dividends and a ~$7 capital gain by the end of 2010 if they call it asap (64% gain in ~two years).  Worst case scenario, you get a 12% dividend indefinitely from a well run and well capitalized company, which is majority owned by Fairfax.  It won't be a homerun, but I see it as a very safe bet that offers a good to very good return.

 

Here's a link to the issue prospectus: http://www.sec.gov/Archives/edgar/data/1137048/000090956705001607/t18226e424b5.htm

 

::) Thanks so much. Good opportunity here

 

 

 

 

 

[Hawks]

Also bought some ORH Preferreds in last 2 days.  Question: any other Preferreds out there, in Canada or U.S., that present real value and opportunity in this environment?

[StubbleJumper]

Question: any other Preferreds out there, in Canada or U.S., that present real value and opportunity in this environment?

 

Gosh, that's a tough question.  There were many opportunities in November and December, but I have not seen too many 50 cent dollars in the preferred market.  There are, however, a few issues that provide an opportunity to earn a solid (but not spectacular) return. 

 

ORH.A is one of these.  Assuming that they are never called and the company never runs into any serious trouble, a purchase of ORH.A today would have provided the purchaser with a perpetual dividend of about 11.75%.  You're not going to get rich quickly by investing in something like this, but historically it is a reasonable return on capital for a long-term hold.  If ORH should elect to call their preferreds, then the return will be spectacular!

 

On the other board, I made reference to having established a position in Harris Preferred Capital Corp (HBC-), which is a wholly owned subsidiary of Harris Bank, which itself is a wholly owned subsidiary of the Bank of Montreal.  Assuming that BMO maintains its ownership of Harris and that BMO itself does not run into any trouble, a purchase of Harris Preferreds today would have provided the purchaser with a perpetual dividend of about 13%.  Again, it's not a moonshot, but historically it would be a nice, tidy return for an investment in a Canadian bank!  Again, if it should get called the return is better.

 

I have also taken a small preferred position in the Co-operators (TSX:CCS-C) when prices were lower than what they are today.  The Cooperators are a small company that have been selling P&C insurance in Canada for 50 or 60 years.  I was able to purchase their preferreds in December at CDN$11/share which provides a dividend yield just north of 11%.  For a Canadian investor, these dividends are treated very favourably for income tax purposes.  I'm not going to get rich off this, but it is a healthy return from a simple, well established business.  Prices have since risen, and yields today were roughly 9 percent.  Again, if the shares get called (as previous issues have in the past) then returns will be better.

 

None of these are home runs, and I certainly would not put a large percentage of my portfolio into them.  However, assuming that we don't have rampant inflation, 5 or 10 years from now I anticipate that I will be quite satisfied with the results from them. 

 

I have one more security of this type that I am currently considering, but as it is thinly traded I will withhold disclosure until I have made a final purchase decision.....and then I will probably post something to the board for feedback or derision!

 

SJ

[kmukul]

where do you find information on the preferreds for example what price and when can they be called? Can the dividend be cut for the preferreds or is it a liablity of the company to pay predefined preferred div unless they go bankrupt.

[Stone19]

I like this site

 

http://www.quantumonline.com/

[kmukul]

thanks  :)

[FFHWatcher]

I thought the same.  I believe I read in the prospectus that they are only allowed to redeem after Oct. 2010 and they have to pay at least the $25.

[oec2000]

Stubble,

 

Agree with you that it's a no-brainer.

 

However, until very recently, volumes have been too low to make repurchases meaningful. If I am not mistaken, there are restrictions on banks buying back their own preferreds. Not sure whether ORH is subject to similar constraints - I can't find anything in the prospectus that precludes them from repurchasing though.

 

Anyone familiar with these rules?

 

 

 

[oec2000]

where do you find information on the preferreds for example what price and when can they be called? Can the dividend be cut for the preferreds or is it a liablity of the company to pay predefined preferred div unless they go bankrupt.

 

For info on US preferreds:

 

quantumonline.com is good and free. Provides detailed terms and conditions as well as links to propectuses.

 

epreferreds.com is a subscription site ($300-400 p.a.). I just signed up yesterday. Provides some research (my initial impression - not that great), some analytics (yield, etc), and a search capability. I'm still evaluating the site but starting to feel that it may not be worth the cost (hey, can't help it if I'm a value investor!).

 

For Cdn pfds:

 

prefblog.com is THE SITE to go to. Operated by James Hymas, who is regarded as the high priest of Cdn preferred share investing, site has lots of interesting commentaries and links to articles as well as link to prefinfo.com, which is where you can get terms of selected pfd issues.

 

globeinvestor.com is useful if you just want to find out what preferreds have been issued by a particular company (click the Price Reports link once you have gone to the quote page of the issuer) and the indicative yield on the preferreds. Same info for US pfds also available here.

 

As to whether pfd dividends can be cut, the answer is yes but only if the dividend on common stock is suspended also. They are not like interest obligations on bonds. Pfd shareholders have no recourse if dividends are stopped. You have to differentiate between cumulative and non-cumulative preferreds though. Non-cum pfd dividends that are skipped are foregone forever; cum pfd dividends that have been skipped have to be made good before common stock dividends can be resumed.

 

 

 

 

 

[oec2000]

Question: any other Preferreds out there, in Canada or U.S., that present real value and opportunity in this environment?

 

Stubble's Harris Bank idea makes a lot of sense. (Thanks for bringing it to our attention!)

 

Like Stubble, I saw many opportunities in Nov/Dec in Canada. The best opportunities were mainly in the Split Corp preferreds with monthly retraction features. Case in point: BAM Split Corp B (BNA.PR.B). For 3 consecutive months (Oct, Nov & Dec), I was able to buy the B preferreds and surrender them for retraction at the end of each month for 20%, 20% and 45% returns respectively - actual returns, not annualised - giving a compounded return of 100% (not annualised!) over 3 months. Not bad when everything else was tanking. (Paid for my loss on BCE!) A related pfd, BNA.PR.C, also traded to levels where you could lock in a 20+% yield to 2019 maturity.

 

Other BAM pfds also traded to very attractive levels in Nov/Dec but have since rebounded sharply. I had pointed this out then on the old message board although I was not specific about issues because I was still buying.

 

Unfortunately, after the rebound in Jan Cdn pfds are no longer super-cheap (except for one I am still accumulating so can't disclose) so I would wait for another market dislocation before buying. Cdn pfds are underfollowed and information is hard to get - this gives the diligent investor a huge edge.

 

Right now, my focus is on US bank preferreds. WFC has a convertible pfd with 13% yield; BAC pfds carry high teens yields; C in the 20s; RBS in the 30s. This does not take into account potential capital gains since they are trading at about only 50%, 25%, 30%, and 20% respectively of par. True, these are not for widows and orphans and certainly the risk of suspension of dividends is high. But, if you believe that in this post-Lehman world, govts will not let any major bank go under, the pfds of survivor banks will eventually trade back much closer to par.

 

This is where I disagree with Stubble's comment that there are no home runs in the pfd mkt. My turn to ask for your feedback or derision, Stubble. :)

 

On my to-review list - Fannie and Freddie pfds. Assuming their par values have not been written down permanently, could one possibly look at these as no-expiry calls on FNM and FRE? If the govt keeps them afloat until the housing mkt recovers, they should eventually get back to health and possibly reinstate their pfd dividends. Am I delusional?

 

Stubble, as to your concern about inflation, this can be taken care of by buying floating rate issues , issues with short fixed maturities or retraction rights, or fixed/float convertibles.