North American financial split co. (Symbol - FFN.TO)

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shellybear
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North American financial split co. (Symbol - FFN.TO)

Post by shellybear »

Appears to be some serious shortselling on FFN by anon sellers . The short position jumped from nearly nil to 7.39 % in the two weeks to OCT 15th.
Likely to do with the latest offering at 9.00 per share for class A and 9.90 for preferreds .
Looking at the companies they hold in their portfolio , i can only see green today... so hard to fathom why these shortsellers are targetting this financial split company, while the others are bouncing higher today. FTN, DGS , DF, etc....
Buying at 8.70 or lower , you are getting lower than than those who bought into the huge 69.2 million $ offering.
FFN shares are in no immediate danger of dropping below the 15 NAV per unit , which is the threshold for paying the monthly distribution of .10 per share. Nearly 14% annual at current prices.
FFN nav is actually the best of the bunch to OCT 13 , at 17.52 per unit, or 7.52 for the class A shares.
DF nav for example is only at 15.52 barely above the threshold, yet trading at the biggest premium hitting 8.18 today.
If i was to short any of these split shares it would be that one....
Thinking on buying some of these FFN and waiting for the short covering...
FFN holds these stocks weighted as such...
Holdings Sorted by weight as at September 29, 2017:

Bank of America Corp
Wells Fargo & Co
Goldman Sachs Group Inc
Citigroup Inc
JPMorgan Chase & Co
Manulife Financial Corp
U.S. Bancorp
Sun Life Financial Inc
Canadian Imperial Bank of Commerce
Fifth Third Bancorp
Toronto-Dominion Bank
Royal Bank of Canada
National Bank of Canada
Bank of Nova Scotia
Great-West Lifeco Inc
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Arby
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Re: FFN.to North American financial split co.

Post by Arby »

shellybear wrote: 20 Oct 2017 12:14 Buying at 8.70 or lower , you are getting lower than than those who bought into the huge 69.2 million $ offering.
Who cares what other suckers may have paid. Buying at $8.70, you are paying more than the NAV of $7.52.
Nearly 14% annual at current prices.
Have you calculated the Yield to Worst, which should factor in the potential capital loss at maturity of $8.70 - $7.52 = $1.18 loss

FFN nav is actually the best of the bunch to OCT 13 , at 17.52 per unit, or 7.52 for the class A shares.
DF nav for example is only at 15.52 barely above the threshold, yet trading at the biggest premium hitting 8.18 today.

FFN is rated by DBRS at below investment grade at Pfd 4 High. DF is rated at investment grade Pfd 3 Low.
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Re: North American financial split co. (Symbol - FFN.TO)

Post by shellybear »

Hmmm interesting rating by DBRS... i guess they dont like the big US banks and financials....they have the heaviest weighting in the FFN portfolio.
And who cares about capital loss at maturity,, i dont plan to hold this one forever, just til the shorts have covered...
in the meantime i can collect a 13.8 % distribution.... and i happen to like the banks in this environment where interest rates are being hiked...
So , i will likely take a small position here , as they are in no immediate danger of not paying the distribution, UNLIKE DF.to, who is barely above the threshhold, and isnt only in financial stocks. They actually hold some oil as well as telcos etc..
I am not a pro analyst , just like trading these when they get beaten down after overnite offerings etc... have done really well in the past year playing these.
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Re: North American financial split co. (Symbol - FFN.TO)

Post by AltaRed »

You will find over time that most members here are investors, not traders. Hence Arby's post regarding fundamentals and value. YTW is an important criteria in that assessment as is credit rating on underlying debt. Stocks like FFN don't get much play and stocks with shorts and activist investors (sharks) even less so.

Added: I recall a very recent conversation (elsewhere) on Concordia with a person musing about speculating on trading around its $1.21 stock price. Their debt is apparently trading at 12 cents on $100. Why would anyone get within shooting distance of sh*t like that? I see the price has fallen to 78 cents today, and likely heading to zero. Time to bring out the popcorn and watch the show.

Not suggesting FFN is similar, but below investment grade doesn't cut it for most 'investors'.
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Re: North American financial split co. (Symbol - FFN.TO)

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Seems strange that DF.to would be investment grade , but FTN.to isnt. NAV for DF. is approx 5.50 and is trading at 8.20 , under 5 $ and they dont get a distribution, FTN's NAV is a stellar 7.72 and trading at 8.70, not such a bad premium, and seems to me to be much safer as far as dropping to point of no distributions Keep in mind these are both split share funds ran by Quadravest, so same money managers. They also hold several of the same financial stocks. As i said in an earlier post, DBRS MUST REALLY think lowly of the US big name banks, as these are the heaviest weighting in FTN.
I am not as bearish on them. But i am no professional. I am in for about 1500 shares at 7.70 for a starter. I saw more anon selling today and suspect more shortselling. By the way DF had the same shortselling last December when they announced the overnite offering , and DGS, also saw around 800K shorted in MArch on theirs. Both times i bought on the selloff, and both times i collected very handsome dividends while waiting for the stock to climb back up the 6 or 7% it had dropped.
Pardon me, but seems like a very successful strategy...
I know many think these split funds are ponzi schemes, where they keep adding shares to pay the distributions. DGS scheme has survived over 10 years and rarely missed paying the distributions to the A shares.
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Re: North American financial split co. (Symbol - FFN.TO)

Post by shellybear »

Well i had to go and look for myself... and both DF and FFN are rated pfd 3 (low) and that rating is for the preferred , and not the A shares.
not sure how to read the rest of it, as to downside protection in the capital shares etc...
Appears to me FFN, the safer of the two...
http://dbrs.com/research/317471/split-s ... 3-2017.pdf
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Re: North American financial split co. (Symbol - FFN.TO)

Post by gsp_ »

Investment grade is Pfd 2 or better.
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Re: North American financial split co. (Symbol - FFN.TO)

Post by shellybear »

Ok good to know... what does " Pfd 3" stand for?
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Re: North American financial split co. (Symbol - FFN.TO)

Post by shellybear »

Again , thought it best to look it up for myself. I was under the impression those ratings were for preferred shares.
PREFERRED SHARE RATING SCALE
Dominion Bond Rating Service
Pfd-1 - Preferred Shares rated Pfd-1 is of superior quality, and is supported by entities
with strong earnings and balance sheet characteristics. Pfd-1 ratings generally
correspond with companies whose senior bonds are rated in the AAA or AA categories.
Pfd-2 - Preferred shares rated Pfd-2 are of satisfactory credit quality. Protection of
dividends and principal is still substantial, but earnings, the balance sheet, and coverage
ratios are not as strong as Pfd-1 rated companies. Generally, Pfd-2 ratings correspond
with companies whose senior bonds are rated in the “A” category.
Pfd-3 – Preferred shares rated Pfd-3 are of adequate credit quality. While protection of
dividends and principal is still considered acceptable, the issuing entity is more
susceptible to adverse changes in financial and economic conditions, and there may be
other adversities present which detract from debt protection. Pfd-3 ratings normally
correspond with companies whose senior bonds are rated in the higher end of the BBB
category.
Pfd-4 – Preferred shares rated Pfd-4 are speculative, where the degree of protection
afforded to dividends and principal is uncertain, particularly during periods of economic
adversity. Companies with preferred shares rated Pfd-4 generally coincide with entities
that have bond ratings ranging from the lower end of the BBB category through the BB
category.
Pfd-5 – Preferred shares rated Pfd-5 are highly speculative and the ability of the entity
to maintain timely dividend and principal payments in the future is highly uncertain.
The Pfd-5 rating typically coincides with companies with bond ratings of “B” or lower.
Preferred shares rated Pfd-5 often have characteristics which, if not remedied, may lead
to default.
“D” This category indicates preferred shares that are in arrears of paying either
dividends or principal.
Note: “High’ and “low” designations after a rating indicate a company’s relative
strength within the rating category
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Re: North American financial split co. (Symbol - FFN.TO)

Post by AltaRed »

Credit rating on one class (prefs) pretty much defines credit rating (one notch aboove or below) on other classes, given that Prefs are subordinate to secured debt, but ahead of common equity. If prefs are below investment grade, it does not bode well for the robustness of common equity. To have a sturdy house, one needs to have a sound foundation.
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Re: North American financial split co. (Symbol - FFN.TO)

Post by shellybear »

So up .07 on FFN, i should take my 100$ gain and look for something better?
Or wait and collect the 150$ dist end of month and then sell.....
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Re: North American financial split co. (Symbol - FFN.TO)

Post by deaddog »

shellybear wrote: 23 Oct 2017 11:18 So up .07 on FFN, i should take my 100$ gain and look for something better?
Or wait and collect the 150$ dist end of month and then sell.....
What was you plan when you bought it?
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Re: North American financial split co. (Symbol - FFN.TO)

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Plan was to hold this until the shorts had covered. The previous plays i bought into always regained previous levels after the selloff when they announce offerings. Still thinking i should gather a few more and wait for 9 $....or so. And i suppose should see how the bank stocks are doing, as that should have a big bearing on how this split fund trades.
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Re: North American financial split co. (Symbol - FFN.TO)

Post by deaddog »

shellybear wrote: 23 Oct 2017 20:53 Plan was to hold this until the shorts had covered. The previous plays i bought into always regained previous levels after the selloff when they announce offerings. Still thinking i should gather a few more and wait for 9 $....or so. And i suppose should see how the bank stocks are doing, as that should have a big bearing on how this split fund trades.
Follow your plan!!!
Hope you have a plan for what to do if the price continues to fall or if the dividend gets cut.
I think you are OK; the dividend has been pretty steady but the price has been a lot lower.
+13% is a pretty good return.
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Re: North American financial split co. (Symbol - FFN.TO)

Post by shellybear »

Yes , definitely continue on the with the plan today. Every stock in their portfolio is up today, heaviest weighting the big 5 US banks/financials which all are up. The Canadian side also all up.... my target on FFN is the 52 week high, then take some profits. Meanwhile collect some fat distributions.
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Re: North American financial split co. (Symbol - FFN.TO)

Post by shellybear »

Added more yesterday , now have 2200 shares at average 8.74. Anonymous sellers are the main culprits holding this back, basically sold 57K of the 81 K sold today. Last at 8.84....
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Re: North American financial split co. (Symbol - FFN.TO)

Post by shellybear »

Added more today.. now up to 3000 shares. Had sold off some of my DGS.. so rolled the funds into this one.
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Re: North American financial split co. (Symbol - FFN.TO)

Post by Bril »

I have used the strategy to buy the preferred side of the split when a new offering is announced as they are now discounted to the previous price. Buying the capital share in this circumstance is riskier.
On the subject of the shorts covering I believe that the shorts came from persons participating in the offering. Once the offering is completed they will cover the shorts with the shares they receive. They will not go into the market to cover .
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Re: North American financial split co. (Symbol - FFN.TO)

Post by shellybear »

Shares acquired in the offering were priced at 9$ and appears majority of the shorts (looking at the volume trades) was on Oct 5 at an average sale price of 8.80 or so. So covering with shares acquired is a losing proposition. Over 7% of the OS share count was shortsold and the only volume that was big enough was OCT 5 thru to the 12th.
Who ever was shorting was doing so anonymously, so no guarantee they were in the offering.
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Re: North American financial split co. (Symbol - FFN.TO)

Post by Bril »

The NAV for the unit was $17.23 on Sept 30. With the preferred share worth 10 gives a NAV for the capital share of $7.23. Capital shares were trading at a premium of over $9.00. Perhaps some of the shorts were due to the premium on the shares? I am interested to see if there is any change in the shorts in the early November report. One question, where are you obtaining the short information? free or subscription?
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Re: North American financial split co. (Symbol - FFN.TO)

Post by shellybear »

I have a subscription to stockwatch. Shows time and sells , house positions for the day or the month etc. and short positions posted twice a month.
If you look at all the split shares currently trading, FFN has one of the smaller premiums to NAV that you will find.
DF, another Quadravest split fund , is trading at 8.18 today after pulling back .05.
Their last stated NAV was 5.39 . They hold some of the same stocks as FFN, but do not own the big US banks , which are FFN's biggest weighting.
While the canadian financial stocks were down, all of FFN's US stocks were up today.
FTN another financial split stock i own, has a NAV for the A shares of 7.44 and they own a very similar mix of US and Canadian financial stocks.
They are trading up at 10.68.
If anything FFN likely suffers from a smaller share structure, so not as easy to move in and out of a position. The recent offering may help to alleviate that problem.
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Re: North American financial split co. (Symbol - FFN.TO)

Post by shellybear »

This is a cut and paste from stockwatch short history on FFN. We wont see the numbers to Nov 1 until about the 7th usually.
I can go back further to check the history.. but this is from the start of 2017
Short Positions for FFN
Symbol Report Date Volume Change Shares Issued % Float
T : FFN 2017-10-15 868,388 868,288 11,750,470 *** 7.39
T : FFN 2017-09-30 100 -3,400 11,750,470 ***0.00
T : FFN 2017-09-15 3,500 2,798 11,750,470*** 0.03
T : FFN 2017-08-31 702 -5,298 11,750,470*** 0.01
T : FFN 2017-08-15 6,000 -28,700 11,750,470*** 0.05
T : FFN 2017-07-31 34,700 22,600 11,750,470 ***0.30
T : FFN 2017-07-15 12,100 4,400 11,750,470*** 0.10
T : FFN 2017-06-30 7,700 -7,900 11,750,470*** 0.07
T : FFN 2017-06-15 15,600 15,600 11,750,470*** 0.13
T : FFN 2017-05-31 0 -400 11,750,470**** 0.00
T : FFN 2017-05-15 400 295 11,750,470**** 0.00
T : FFN 2017-04-30 105 -533,695 11,750,470**** 0.00
T : FFN 2017-04-15 533,800 513,074 8,917,470*** 5.99
T : FFN 2017-03-31 20,726 16,626 8,917,470 ***0.23
T : FFN 2017-03-15 4,100 -6,800 8,917,470*** 0.05
T : FFN 2017-02-28 10,900 600 8,917,470*** 0.12
T : FFN 2017-02-15 10,300 9,100 8,917,470*** 0.12
T : FFN 2017-01-31 1,200 -22,103 8,917,470*** 0.01
T : FFN 2017-01-15 23,303 1,303 8,917,470*** 0.26
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Re: North American financial split co. (Symbol - FFN.TO)

Post by adrian2 »

shellybear wrote: 01 Nov 2017 00:27 Shares acquired in the offering were priced at 9$ and appears majority of the shorts (looking at the volume trades) was on Oct 5 at an average sale price of 8.80 or so. So covering with shares acquired is a losing proposition. Over 7% of the OS share count was shortsold and the only volume that was big enough was OCT 5 thru to the 12th.
Who ever was shorting was doing so anonymously, so no guarantee they were in the offering.
It could have been the underwriters who did not sell all the shares they were counting upon. Their cost base is about 5% lower, so selling at $8.80 was a winning proposition for them.
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Re: North American financial split co. (Symbol - FFN.TO)

Post by shellybear »

Yeah not sure on that one... it is not free to short shares... as I understand it, you must pay out the dividends if you are still holding it short at dividend date. These distributions are substantial , over 1% per month and over 13% annually. I doubt they sit on this short position for very long.
Where did you read that the underwriters received that much stock at that big of a discount?
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Re: North American financial split co. (Symbol - FFN.TO)

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shellybear wrote: 02 Nov 2017 09:51 Where did you read that the underwriters received that much stock at that big of a discount?
The modus operandi of an offering is that the underwriters (e.g., TDW, Action Direct etc) buy in bulk all the offered shares from the company's treasury and then distribute those shares to their clients. For that, they get a discount of about 5%. Whatever shares they do not manage to get expressions of interest for, they dump in the first week or so after the new offering closes.
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