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Subject:  Re: QTS-B convertible Date:  4/26/2019  2:23 PM
Author:  JimLuckett Number:  84695 of 86784

Regarding the comparison to QTS-A, with the A series you have a guaranteed capital loss. If rates and credit quality stay constant, some day it will be called at $25 and you lose a little on the price. If rates rise or company deteriorates, the A (and the B) will go down and you lose that way. With the B, while you have a lower current yield, you have unlimited capital gain potential and only a little more downside risk than the A. QTS common is up 11 points year to date. It's a fast-growing data-center REIT. Wells Fargo estimates 3 - 5 year growth rate of 12%

I have an allocation to REIT preferreds that I promise myself to keep filled. I've gotten bounced out of Well-I by forced conversion (with an 18% capital gain and years of dividends). I have very nice capital gains in my ARE-D, EPR-C and EPR-E convertible preferreds and I won't be able to keep them forever either, if all goes well. So, I'm very glad to have a new convertible to add to my portfolio. They don't come along all that often. I buy very large positions in them when they do, because I can do so within my risk-tolerance limits, and they have treated me well. My favorite, from long ago, was CNT-B. CNT was a gazelle REIT I would not have bought in quantity through the common. But I was able to take a large position within my risk-tolerance zone through the convertible preferred (which I learned about through this board) and it gave me a very nice ride.

I gladly give up a point of yield and have the potential for double-digit capital gain. My capital gain in ARE-D is 33%, in EPR-C it's 31%, in EPR-E it's 24%. I forget the magnitude of my gain on CNT-B, but it was big. So, I like convertible preferreds. I like even busted convertibles, because of their lack of a call option for the issuer, and will accept a lower yield to get them.
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