The Prudent Man’s ‘Trading Diary’ now open for business

We hope that by sharing our trading activities with our readers, we can all learn to read a new kind of news-driven tea leaves with greater precision—and considerably more profit.

NYSE trading floor.
NYSE trading floor, circa 2008. (Public domain, via Wikipedia)

WASHINGTON, November 7, 2016 – Welcome to the revival of Market Maven’s other column, featuring his practical alter-ego, The Prudent Man. We’ve used this column as a grab bag of financial information for years and will continue to deploy it to feature further episodes in our ongoing “Investing 101” educational series of articles on stocks, bonds, funds, partnerships and how to invest in them.

But primarily, this column will focus more closely on our trading and investing activities on a daily basis as we share with you our attempts to make a few bucks in this, the most confusing market of all time. I.e., this is the stuff we’ve been covering in the Trading Diary section of Market Maven. That column will continue to be devoted to the news and views that increasingly influence market tone as we move into an age where the personal really is the political (alas).

Read also: Wall Street’s YUGE Monday rally. Because Comey caved, right?

This column, in turn, is for readers who are interested in the investing activities we conduct each and every day in our own accounts. Small investors are somewhat of a vanishing breed in the aftermath of the 2007-2009 debacle. That’s what we are, for better or worse, and we hope that by sharing our activities with our readers, we can all learn to read a new kind of news-driven tea leaves with greater precision—and considerably more profit!

Although we’re glad to get this column going again, we suspect our initial installments may be quite short. That’s because, on Election Eve 2016, markets are likely to get wildly out of control at least in the short term. As the smoke clears, however (which we certainly hope it will), we may once again begin to see more clearly which stocks, industries and market groups will become tomorrow’s winners.

Today’s Trading Diary

As we’ve just promised, nothing much today. We are happily noting the continuing rally in our beleaguered Allergan Preferred shares (symbol: AGN/PRA, your broker’s symbol may vary). Since these shares are convertible at any time for Allergan common shares at a ratio of around 2.8+ common shares for one preferred share, they are linked to the common by that thread.

When Allergan (AGN) reported lousy earnings last week, they were considerably lousier than even the pessimists had predicted. Hence, the common stock viciously crashed, taking the already-ridiculously underprice preferred shares down hard as well, dropping them from the mid-$800 per share range to a dangerously pessimistic $700 and pocket change handle.

After catching its breath Friday, AGN/PRA soared roughly 15 more points to the upside today and it’s currently sitting at 738.93 which is making us feel better. Purchasers of this rather expensive stock today will find that the original 5.5 percent dividend is worth roughly 7.5 percent for anyone buying these pancaked shares today. Better yet, AGN/PRA goes ex-dividend this Thursday, November 10, meaning that anyone owning shares on that day will get a handsome dividend payout on December 1. That handsome payout: $13.75 per share.

All good things do come to an end, however. On March 1, 2018, Allergan will redeem these preferred shares at face value: $1,000.

Now, AGN/PRA is sitting at roughly $739 per share this afternoon. Let’s see, a $739 stock will be redeemed for $1,000 in a little more of a year from now. That’s a long term capital gain of $261. Per share. Plus 5 more of those $13.75 dividends per share before redemption. What’s not to love?

Well, what’s not to love is what happened to AGN/PRA last week. But that said, this massive pharmaceutical company, now based in Dublin, Ireland, will be one of the last companies to go belly up when they turn the lights off. Which means a high likelihood owners of the preferred will get that swell capital gain in 2018. So perhaps it’s worth enduring a coronary or two in the meantime to hit that $1,000 jackpot, which is the kind of thing that almost never happens.

On other fronts, we’ve paired back on our holdings, sometimes at a modest loss, as we just get the sense that markets will continue to be irrational until we find out who America’s next president will be. There are a lot of weird things that can happen, and we still remember what happened in 2000. So we’ll hunker down in our investment fallout shelter and await the “all clear” signal before we start getting aggressive in the markets again.

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