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Hybrid Securities

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Bill M said:
Repurchased SVWPA today at $86.30, gee I love doom and gloom. At this price it's a 12% gross yield.
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A courageous buy.

I was tempted to buy AAZPB at $85.50 during the dead cat bounce this morning, then I remembered that during the GFC they dipped to $32... so I was soon disabused of that idea.
 
Bill M said:
Repurchased SVWPA today at $86.30, gee I love doom and gloom. At this price it's a 12% gross yield.
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They finished at $85.03. I feel a bit more secure with SVWPA than AAZPB, given the differences in volatility of their two industries.

Disclosure: I hold SVWPA and not AAZPB.
 
Was an inch away from buying MBLHB....

But, then I realised... even at $66.66 it's yield is 10%.

That is bank territory.

EG: WBC went down to a low of $18.80, which, at a continued $1.50 divi, = 7.98% yield.... add franking credits and you are left with 11.4%.

11.4% with WBC v 10% with MBLHB.

Oh, and, that ignores other dividend stocks like Telstra.... or the ability to buy BHP/FMG 'cheap'.

Having said that, MBLHB did go green by over 1% today.... there is definitely potential capital gain, right up to (and past) $80.
 
Howdy,

I desperately, desperately, desperately, would appreciate a hand

MacBank had a list of Hybrids (primarily Convertible Preference Shares) on their website recently, (page title: CODI)... they recently took it away (perhaps you now need to pay?).
ComSec have had a similar list.... but I've never been able to find it, and I assume its only fo the big boys.

I really, really, really would LOVE a list of all hybrids/CPS on the ASX at the moment.

Would reallllly love.
 

That is very helpful.

If anyone can find a more complete one, it'd still be appreciatd. I need to do a presentation by Tuesday.... but my most important (and possibly hardest?) unii assignment in the last 5 years is due Monday afternoon.

FML.
 
Great thread this one.

Just thought I'd bump it and put a different spin on things. Obviously with the WOW offer out today there might be some hybrid security thoughts going around.

Does anyone use these as a replacemtn to say investing in Term Deposits? I'm talking mainly the big hybrids with VERY little risk of default like anz/cba/nab/wow etc etc.

I know there's always some level of uncertainty within the markets and every investment goal is different but if one was going to lock up a decent portion of their capital for a an extended period of time they might want to consider these investments over say a 6% TD with the cba?
 
Yea, I've considered it.

But, I've stuck with holding risky Hybrids.

GNSPA 15% profit + interest
FXJPB ~5% profit + interest
BEPPA 35% profit
MXUPA 1% loss + Interest

And they seem to have worked out quite well for me so far.

When I'm older (I'm still @ Uni), i fully intend to use safer CPS... At the moment, the circa 8.5% yield I can get is not enough. I'd rather cash for its pure instant liquidity and shares (for what I know best).
 
Oh, another thing that I forgot about - Remember CPA had a PERLS drop from $200 to $125 through GFC. Sure, this dropped was only a little bit over half what the Ordinaries dropped.... but, it's still very significant. They are trading at circa $178 now... so, still a 10% drop from when they were issued. (IIRC this is PERLS III, but, don't hold me to that).

Some Hybrids through the GFC were just utterly 100% ridiculously cheap. It was just madness.
 
I am at present buying more IMFG (IMF 10.25% Convertible Notes). They pay 10.25% on the issue price of $1.65 Their present price is $1.67. I would say they are low to medium risk.
 
yeah i mean obviously theres a chance of a capital loss if you all of a sudden need to sell them during a time of panic.

I guess I'm not looking to compare the highly rated hybrids to the lower rated hybrids but more compare higher rated hybrids with money in a TD. I mean if liquidity isnt an issue for you right now I feel the 8% given by a anzpa type security is just soooo much more appealing than what you can get in the bank. What are the realistic chances a major banking institution in Australia goes belly up?

Hindsight is 20/20 in regards to the GFC though, those hybrids look cheap as chips now but back then there was genuine concern/fear that these companies wouldnt be able to pay.

Anyone have any thoughts on the woolies hybrid? mark up looks pretty good and there were no major holes in the terms that I could see.
 
Not quite sure if the WOW Notes really count as Hybrids, being unable to convert into Ordinary shares... but. Again, they seem fine, a touch lower than I would have thought (so, I expect the margin to be closer to 3.5 than 3.25).....but, they don't fit with my investment goals (10%). I do like the fact taht they step up after around 5 years. 4.5% above the BBSW is probably quite expensive.

If the market over-reacts to any news, and these drop to $95 or so, I'd probably jump over these like a rash.

The 8%+ that you can get from a bank is tempting. I would not use a TD, I would use that. In fact, I'd probably go so far and buy the riskiest safe bank I could, to try to get more like 8.6% - as opposed to 8.1%. I think our 'riskier banks' (BEN, BOQ, ETC) are still safe enough for me.

However, I am happy with some cash, but very most of my 'assets' in shares (inc. risky CPS).

IIRC, MQG have a note paying something like 10.25% on face value, but they are trading at a 4% premium. IIRC they only have a couple of years till maturity, so the YTM is under 10% p.a.

My aim is more than 10%, but they are the sort of thing I would snap up. In fact, if I could get >10% YTM on a MacBank security, I would buy it.
 
Any thoughts on MXUPA?

It just seems stuck in the $72.5-$77.5 range.

I can't see why it can't shove to and past $80, to be honest.

I would have thought the rumours of an upcoming redemption probably would have been enough - let alone the actual risk/dividend analysis.

MXUPA is probably the asset I'm most comfortable holding. 3.9% + 4.75%.... I'd buy it at $85 - > 10% yield, with a chance of 25% gain on redemption.

GNSPA is up another 10%. Remeber, it was just two weeks ago that you could purchase it for $32.xx.

Now its $61 + ex-div of $2.65....

So, effectively, increased in price by over $30 - over 100% in two weeks.

Who says you can't make money from Hybrids? Who says hybrids are boring .
 
I hold MXUPA and am quite comfortable with it. Would def top up at these prices if i needed to increase my allocation
 
Glad that GNSPA has done so well lately. Thought about getting out, and jumping in front of the $70 seller...

But, then I realise that it doesn't appear that GNS is buying GNSPA on-market yet, as they alluded that they might.

If this is how it's going to react, before GNS even start buying on-market, what will happen when GNS start buying on-market, or a pulp mill financer comes to the party?
 
Julia said:
ASIC is sounding a clear caution on hybrids. Item on last night's "7.30" is worth watching for fans of these instruments.

http://www.abc.net.au/7.30/content/2011/s3398644.htm
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Whilst the story certainly gave warnings of what can go wrong it failed to highlight some of the positives. Not all hybrids are the same and as So Cynical says, it's all up front and in the prospectus. Shareholders nearly always rank lower than hybrid holders and in most cases if interest payments are stopped for any reason then no dividends are paid on fully paid Ordinary shares either (That is the case for most hybrids). Then there are hybrids that pay cumulative interest payments. What that means is that if for any reason payments stop then the payments that should have been made accumulate and eventually must be paid to the holder. Whilst those payments are withheld ordinary shareholders get nothing.

As with any other investments, there are no guarantees. None of the hybrids I know of are guaranteed. When a conservative investor is contemplating buying a hybrid there is one very important question for that investor to ask his broker, "is the issue 100% guaranteed"? A broker would have to advise that they are not (usually) in which case they shouldn't buy them if they are that concerned.

The only guarantees right now are the federal government bank ones for money deposited in banks. You can be super safe and get low interest on your money (in the bank deposits) or can you take AA rated risks and double the interest received by buying bank hybrids. Each to his own and as always mentioned everyone must read the relevant prospectuses.

I might also add that the hybrids and floating rate notes that I held through the GFC all kept on paying the interest/dividends throughout, unlike a lot ordinary stocks at the time. Hybrids can be a good source of income, SVWPA is looking good again.
 
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