Are Preferreds Staging a Comeback?

Along with both high yield and investment grade bonds, preferred stocks have also staged a decent rally off of their recent lows. After making a nice double bottom on November 20th, the iShares S&P US Preferred Stock Index ETF (PFF) is now trading above its 50-day moving average. Up until its recent break above, the 50-day acted as heavy resistance for PFF in the prior six months. A turnaround in both preferreds and corporates are key to any recovery in this market, and the recent action in both is definitely a positive.

Comments

[Rob Viglione:]

There's pros and cons to holding preferred shares. High yields, cash flow preferences, and special tax treatment. Downside can be somewhat substantial, however, since preferred shares do not participate in dividend or price growth of the common stock. If markets rally, preferred shares should lag.

Still, in this tough financial climate, preferred shares do have additional allure:

www.thefreedomfactory..../

2008 Dec 27 10:48 AM

[E Nuff Sed:]

I agree with the authors insight. Preferred's are indeed coming back.

Investment grade corporates have already come back. Look at the chart of LQD. Very bullish. The prices are tracking at the upper bounds of the bollinger bands - strongly rising volume. LQD made a triple bottom in the Sept - Oct period (but stayed strong in Nov). My price target is 110 for LQD in Q1.

PFF seems to be following LQD's bullish pattern - but a month or two behind. I am looking at price target of 40 by Q2.

Same with HYG (high yeild corporates) which is exhibiting a strongly bullish pattern.

2008 Dec 27 01:20 PM

[hrant:]

in 2009 I am looking for income period . PFF fits the bill .

2008 Dec 27 01:56 PM

[homerbart:]

write covered calls instead


On Dec 27 01:56 PM hrant wrote:

> in 2009 I am looking for income period . PFF fits the bill .

2008 Dec 27 05:10 PM

[Syl:]

I would like to see a few more names of preferreds instead of just one or two. One or two stocks do not necessarily reflect the whole sprectum. Why is PECO 4.4% never mentioned in these columns? At today's price they offer an excellent yield. Preferreds offer an average person a way of getting a good return without investing $10,000 or more as required in bonds.

2008 Dec 27 05:25 PM

[Lilliana:]

Preferred's..Agree,
Try Nuveen Funds..they have some interesting investments..at the right price. ..during these days of gloom and doom.
we are into JPS and others...and reaping the benifits covered by dedicated management and supervision.
However, Do your own D.D...
This is not a a plug..only a private comment...given without prejudice.

2008 Dec 27 09:17 PM

[shootpar2001:]

Look at Blackrock preferred funds; (PSY) (PSW).
Balance your risk/reward however.



On Dec 27 05:25 PM Syl wrote:

> I would like to see a few more names of preferreds instead of just
> one or two. One or two stocks do not necessarily reflect the whole
> sprectum. Why is PECO 4.4% never mentioned in these columns? At today's
> price they offer an excellent yield. Preferreds offer an average
> person a way of getting a good return without investing $10,000 or
> more as required in bonds.

2008 Dec 29 10:46 AM