A Steady 7.9% Yield Trading At A Discount To Its Peer

Over the next couple months, I intend to branch out a little more from the mortgage REIT sector. With the common shares getting so expensive, I want to be able to offer the buy-and-hold or long-only crowd more great opportunities for catching some income when the market is being less than efficient. A recent issuance by a small insurance company fits the bill. It has a great credit rating, and its common stock is doing very well. The new issue is trading at a yield over 7.9%, and I see potential to capture a 3% to 4% gain within a month or so. Major risk factor on the play is duration risk, but the risk/reward profile looks great.

The opportunity comes in the preferred shares of Global Indemnity plc (NASDAQ:GBLI). GBLIL is a very new baby bond. The offering was just completed and underwriters are dumping a ton of preferred shares. Since the underwriters are there to make money off underwriting and don't want duration exposure, they are dumping the shares rapidly. This creates enormous volume (rare for preferred shares/baby bonds).

Source: Seeking Alpha

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