The market had been grinding and coiling for a number of months seeking the catalyst to nudge the market towards the path of least resistance. We've had a number of scares that agitated and excited the bear camp from the Fed induced "taper tantrum", to China's growth falling off the table (never materialized) to the most recent Brexit drama.

The markets reacted sometimes violently only to slowly grind back to loftier levels. The domestic fundamentals and economic indicators I follow were in a similar "bend don't break" mode. There was some soft periods only to see, in some instances robust snap backs that never warranted the aggressive selloffs witnessed in the major indices. We've used those bouts of weakness to add to positions and initiate new ones off our watch list. I thought I'd share some from our portfolio holdings. This will be part one focusing on our income producing holdings. Traditionally when we were building out this sector of our portfolio we'd look to good old US Treasuries.

However, in the current ultra-low Fed orchestrated interest rate environment investing our fixed income dollars here when 10 year treasuries yield less than 1 1/2% is, in our opinion not enough compensation and far too much risk. We thus look to treasuries alternatives. Which leads us to the following high yielding bonds, R.E.I.T's and preferreds:

RR Donnelly 8 82% 4/15/2031- Bond

Fairfax Financial 8.30% 4/15/2026- Bond

Freeport McMoran 6 3/4% 2/2022- Bond

Citigroup 6.30% callable 2/1/2021- Preferred

AmTrust 7 5/8% callable 9/16/2019- Preferred

Apollo Commercial 8 5/8% callable 8/1/2017- Preferred

Barclays Bank 8 1/8% callable 6/1/2013- Preferred

Energy Transfer Equity

Callon Petroleum 10% callable 5/30/2018- Preferred

Iberia Bank 6 5/8% callable 8/1/2025- Preferred

Kinder Morgan 9 3/4% 10/26/2018 

Medical Properties- Real Estate Investment Trust

National General 7 1/2% Callable 7/15/2019- Preferred

Sabra Healthcare-REIT

Senior Properties Trust-REIT

Hospitality Properties Trust-REIT

Teekay Offshore Partners-Limited Partnership

When we look to investing in income producing securities we have been very fortunate in having lived through some very turbulent times. During the financial crisis bank preferrreds were trading at less than fifty cents on the dollar and that was after the Federal Reserve backstopped the banks. Ahh, those were good times. We've seen similar opportunities more recently. Namely when the Fed attempt to telegraph their plans to hike interest rates four times this calendar year. The REIT sector took it on the chin early in the first quarter when the markets swooned overall.  

The REIT sector has snapped back smartly and will most likely the new positions we took on will continue to perform well for years as the Fed appears to have it's hands tied by global central bank policies and weak economic backdrop along with political uncertainty. Exiting 2015 we had been utilizing 7% as a floor for our minimal yields we'd consider. We had to adjust our models as capturing 7%+ was forcing us to consider issues too far out the risk curve for our comfort. Then we entered 2016 and the landscape changed at a rapid pace. I have to credit Rahm Emanuel who stated, "you never let a crisis go to waste", followed by a Buffet-ism, "be fearful when others are greedy and be greedy when others are fearful".   

So while we currently maintain our aggressive posture to the markets we never stop building out our watch list of stocks, bonds, REITs, preferreds we'd like to own at the right price. While we continue to build out our lists, we feel comfortable collecting our 7%+ in dividends building our war chest for the next buying opportunity.  

In our next pulling back of the curtain we'll be discussing our growth equity portfolio and share our analysis on each.