Grin and 'Bear' It with PowerShares Preferred Financial ETF

Amid carnage and declining interest rates, angst and panic may well be a dominant emotion as we head through the week and for some time beyond. If one can "Bear" it, I recommend taking a strong look at PowerShares' Preferred Financial Portfolio (PGF) which delivers a solid 7% yield and has performed well during the past few months as financials have tested the will of the most speculative of investors.

I like the portfolio of this fund and after the expected sell off of financials, I would give PGF a look. A strong look.

Trading at $21.25 going into Monday, the fund has remained around that share price for months. Providing a monthly dividend, PGF has a market cap of $198m and lately has averaged about 111,000 shares per day in volume.

For those who place financials at the "Stearn" of investment ideas, hear me out.

PGF is tied to the Wachovia Hybrid and Preferred Securities Financial Index. 80% of assets are invested in preferred securities of financial institutions.The fund rarely holds the securities of over thirty financial institutions. As I mentioned back in early January, 2008, the PGF portfolio is about as good as I can fathom given the present situation.The top ten preferred holdings are Royal Bank of Scotland (RBS) (7,25% yield),ING Pref. Stock (ING) (7.38%), MetLife (MET)(6.50%), HSBC Holdings (HBC) (6.20%), ING Groep (6.38%), Wachovia Corp. Pref. (WB)(6.00%), Barclays Bank (BCS) Pref.(7.75%), Goldman Sachs (GS) (6.20%), Merrill Lynch (MER) (6.38%) and Aegon (AEG) (7.25%). These securities comprise about 46% of the portfolio. No, there is no "BS". Securities in the Fund are rated according to Moody's approximately 34% AA, 48% A, 17% Baa and 1% oops.

I would not advocate buying this Fund immediately. I would tuck this little gem into your portfolio candidates for purchase when you feel it is time to take the plunge. I have already taken it and have been even plus receiving dividend checks for a couple of months.

Franklin Roosevelt's " The only thing we have to fear is fear itself" is a good quote today. So is W.C. Fields' "Never give a sucker an even break."

"However beautiful the strategy, you must occasionally look at the results." - Winston Churchill

Full Disclosure: The author own PGF in his speculative portfolio.

Comments

[jse17]

I agree on the fund’s merits and increasingly so with today’s (03/17/08) dip in play.

The management fee for an indexed income producing security of 0.60% although not outrageous is anything other than inexpensive. Yes, expenses are a concern especially in fixed income investing.

Thank you for the alert on this issue.