Tuesday, June 19, 2012

Chesapeake Preferred ($CHK $CHKDG) - Still Cheap

I was thinking about buying more of the CHK pref today. It's offered at 74, while the NYSE listed one CHK-D (with a lower coupon and higher conversion price) is trading at 81. To be equivalent on a yield basis, ours should be trading at ~90.

So, ours is just very visibly underpriced by 22%. Not counting that the company will probably get taken over relatively soon with pref holders receiving at least par (optionality on even higher upside). Meanwhile, there isn't any credit risk that we can see.


Allan Folz said...

Funny you mention CHKDG. I was just looking at it and marveling at the poor sod that must have got his clock cleaned by the market order that crossed at $79.

I also tried putting an order in for PTQEP (BTW your headline has the ticker for it wrong) today after seeing it slammed down. That one seems to trade by appointment or something. The bid & ask showed as N/A at Schwab. I put a limit order in, above the last trade even, and nothing happened. Could be a Schwab problem, I don't know. But it's another one, that I wouldn't touch with anything but a limit order. Even then, I wonder if there is an unstated bid/ask spread of $32-35. It's going ex-div next week. Would be nice to pick up some at sub-$32 before then.

Allan Folz said...

BTW, if Stag Mark is lurking, how's the listed vs. OTC spread compare to the latest TIPS ladder? This might be the risk-free trade you've been looking for -- short the listed, long the OTC.

Of course, leave yourself plenty of margin. And use limit orders. Probably take a few weeks to put it on in any real size. ;-)

CP said...

Yeah the PTQEP is super illiquid.

Hard to believe it is trading at 60 cents; yielding 11%. The company is not very levered, good cash flow coverage, etc.