Qurate Retail: I Am Buying The Heavily Discounted Preferreds

2025-01-27 13:56:25 ET

Summary

• Qurate Retail's preferreds are trading lower and now offer a 21.8% yield on cost on the back of their $8 per share annual coupon.
• I'm picking these up for 37 cents on the dollar in exchange for moderate credit risk against positive free cash flow and long-term debt that's been declining.
• The retail group is pivoting to online streaming and social media platforms with a full rebrand to QVC set to take place in the first quarter of 2025.

The fixed-income universe has been materially disrupted over the last few months and Qurate Retail's ( QRTEA ) 8.0% Series A Cumulative Preferreds ( QRTEP ) have seen their value dip by 31% from their 52-week high. The preferreds have realized a selloff since October, following a spike in long-term US Treasury yields that has formed the primary headwind for fixed-income securities. Hence, the preferreds currently offer income investors a yield on cost of 21.8% as they pay out an $8 per share annual coupon. The yield is elevated versus its historical range with the preferreds trading at a deep 63% discount to their liquidation value at $100 per share. To be clear, I am picking these up for 37 cents on the dollar in exchange for heightened but still moderate credit risk with upside from a reduction of current bearish exuberance on long-term US Treasury yields. ...

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