preferred stocks


B

beliavsky

The latest (Feb 9) issue of Barron's has a bullish article on
preferred stocks

SATURDAY, FEBRUARY 7, 2009
It Only Looks Like a Wipeout
By ANDREW BARY
Preferred stocks may harbor fewer risks, more rewards.

The article lists several preferred stocks trading at yields exceeding
10% and well below par value (typically $25). The risk is that the
companies may be forced to stop paying dividends on the preferred. A
closed-end fund mentioned in the article is

"Flaherty & Crumrine Preferred Income Opportunity (PFO), now at around
$4.50 a share; it has a 13% current yield, and trades at a 4% discount
to its asset value."

There is an informative report "Preferred Valuation After the TARP
(Jan 5, 2009)" at http://www.flaherty-crumrine.com/ . Of course, a
manager of funds specializing in preferreds will tend to be bullish on
them.
 
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D

dapperdobbs

There is an informative report "Preferred Valuation After the TARP
(Jan 5, 2009)" athttp://www.flaherty-crumrine.com/. Of course, a
manager of funds specializing in preferreds will tend to be bullish on
them.
If you look at the stocks they actually hold, financials and insurance
co.'s are about 50% of the portfolio (including Merrill Lynch, for
example). For all the fancy risk modelling and academic verbiage,
their returns lag averages.

Preferred stocks generally are more stable, but the same basics apply:
look at the company's earnings first.
 
H

honda.lioness

Quantumonline.com has Moody's and Standard & Poor ratings of preferred
securities issued by, for example, Bank of America and Citigroup. I
think it's interesting that BAC and C's preferred issues are either
still rated at investment grade or just barely graze into junk
territory. (The ratings I saw are about a month old and should be
double checked with another source.) Wells Fargo's preferreds are
rated about the same as BAC, which I find interesting, since my
general impression was WFC was in much better shape than BAC.

Of course, Moody's and Standard & Poor's appear to have played a huge
role in the market crash, providing ratings when they were not
equipped to analyze the underlying securities.

As has been written here many times now, trust has been lost. I would
not buy a bank preferred stock unless I could live without the money.
Allocating a tiny amount to a fund of such distressed securities may
not be a bad idea, though, again assuming one could live without the
money.

Utility preferreds are not yielding as much but seem a much lower risk
than the bank preferreds. Plus the utility preferreds typically yield
more than CDs these days.
 
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I

Igor Chudov

Quantumonline.com has Moody's and Standard & Poor ratings of preferred
securities issued by, for example, Bank of America and Citigroup. I
think it's interesting that BAC and C's preferred issues are either
still rated at investment grade or just barely graze into junk
territory. (The ratings I saw are about a month old and should be
double checked with another source.) Wells Fargo's preferreds are
rated about the same as BAC, which I find interesting, since my
general impression was WFC was in much better shape than BAC.
I have lost my trust in those rating agencies, to the extent that I
personally fully disregard all their ratings, as if these companies
did not exist.

i
 

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