I primarily invest in relatively high yield, fixed-income, cumulative preferred equities. To earn these yields, I am willing to accept the additional risk these investments demand. Because of this, a majority of my investments are in preferred shares offered by enterprises involved in shipping; NM, SB, TNP,  CMRE, GSL, TOO, and SSW; oil exploration and production (admittedly most are long gone as a result of the 2015 oil price collapse); pipelines and storage NS & DCP; financials LTS, and a variety of REITs, AHT, TWO, and NYMT. I am also invested in one particular pharmaceutical R&D which morphed into a drug manufacturer, Avid Bioservices formally Peregrine Pharmaceuticals, CDMO. 

However, because of the nature of preferred investments, I believe that much of my risk is moderated through the application of a sound investment strategy. To accomplish this I found it necessary to thoroughly and completely understand preferred investing. Not only the advantages and disadvantages they present as compared and contrasted with commons and bonds, but the different types of preferred investments offered and how they compare and contrast to each other, and what each has to offer particular investors.

The basis of this article involves the steps necessary for learning how to successfully invest in preferred investments. First, it's important to understand that investment safety viewed through the eyes of a preferred investor is, and should be, viewed differently from that of the common shareholder. Unfortunately, from my perspective, company and investment safety is commonly reported from the perspective of the common shareholder, not the preferred shareholder; primarily because of the vast numbers of investors who invest in common shares as opposed to the limited number of preferred investors. 

The common shareholder is primarily concerned about price fluctuation that is often influenced by quarterly financial reports and conference calls. Granted, they are important, but they should not be viewed as critically by the preferred shareholder, whose investment goals and objectives might not necessarily be aligned with those of the common shareholder. Common shareholders invest with the idea of earning a profit in two distinct ways: stock price appreciation and dividend distributions—if, in fact, the companies they invest in even offer a dividend at all.

Preferred shareholders, for the most part, invest with an eye toward a continuing stream of fixed income, not necessarily preferred price appreciation. This is apparent because most preferred shares, unless seriously distressed, trade within a narrow range of par value and rarely exceed that value under normal circumstances. This is evident because, if and when, a preferred is called, it is called at its par value, not the value it might be trading at the time. If par value is $25.00 (the most common preferred par value) and it was purchased at $26.00, the holder will lose $1.00 when it is called, even if it were trading at $26.50 at the time. That's the reason for the unbreakable glass ceiling of preferred investment appreciation.

Allow me to digress in order to explain how that glass ceiling might be shattered. Occasionally, during times of extreme volatility, a company might experience a severe existential threat, whereby to survive the company might find it necessary to suspend the preferred dividend as a way of preserving the liquidity it might require to pay its creditors or simply to continue operating. How long the cumulative preferred distributions have been suspended will determine how high above par the preferred price will rise, if and when it becomes evident the company will survive and recover. Or might be acquired by another stronger company. Because missed cumulative payments accumulate and are owed the holders, and must be repaid before the company can continue business as usual, the company will do everything in its power to make up those missed payments as quickly as possible. Supertel Hospitality, SPPR, which ultimately was acquired by Condor Hospitality CDOR is one example.

Ultimately, as a cumulative preferred investor, I am primarily interested in: what are the future prospects of the company I want to invest in? And by future prospects, I want to know whether or not this company is built to survive. Because as far as I'm concerned, I will lose in the event of a bankruptcy, or because I was forced to exit my position because of a margin call or some external event whereby I needed the cash to pay bills. In my reality, preferred price fluctuation means little unless it portends some serious company existential threat, or threat to my entire portfolio, as I mentioned above.