Opinions
Hank Cunningham
Brookfield Office Properties
BPO-T
COMMENT
Jan 29, 2014
Stock price when the opinion was issued
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Floating rate Preferred shares. Yielding about 3.7%. Rated P3. If interest rates go up, the yield goes up. The one downside is the concentrated real estate, but their portfolio is so large and diversified, it is hard to think that they would be hurt. That is the only negative thing he can think of.
(A Top Pick June 14/13. Up 32.72%.) This no longer exists (Still listed, so don’t understand the comment.), but you can now own it in the form of Brookfield Property Partners (BPY-N) or (BPY.UN-T) (Not sure which one.), which he likes, and is trading at about $22, and is a $3-$4 discount to his NAV estimate. Gives you about a 4.5% yield. Thinks there is 20% upside in this name.
(A Top Pick Jan 29/14. Up 3.1%.) 5.29% bond maturing April 25/17. This was part of his “rolling down the yield curve” strategy, to take advantage of the steep yield curve. You buy 3, 4 and 5 year corporate bonds, and as they get shorter in term, they fall in yield and up in price, because they're getting closer to maturity and the spread narrows also, because there is less credit risk as the bond shortens.
4% bond maturing April 16, 2018. Thinks this is an undervalued bond, but is also an example of what kind of return you get in the short-term bond market. Yield is just over 2%. He likes the company, which has done very well. This bond is higher yielding than mostly anything in that term.
Preferred Shares. Use this as a GIC? This company has a huge presence in the preferred share market, with several different types of structures. He is a little hesitant on this. There is a newer one with a floor feature, an investment grade product. However, there are some out there that are still quite volatile, vulnerable to a change in an interest rate environment. He would recommend that you really know the specific issue that you have. You want to be really careful in your selection, and possibly get some professional help. He is underweight holdings with this company.
Preferred shares F series. A floating rate preferred. Yielding about 3.75%? There is an attractive after tax yield to anything that pays a dividend, whether it is a preferred or common share. Floating rate notes are not his preferred preference. It is very possible the primary could go down, given the recent softness in our economy. Would be happier if you were in the common shares.