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Fixed Rate Preferred Stocks - Complete Review


  • I review the most popular fixed-income securities, the fixed-rate preferred stocks.
  • All the preferred stocks are sorted in categories.
  • What has changed over the last month?
  • Looking for more? I update all of my investing ideas and strategies to members of Trade With Beta. Start your free trial today »

In this article, I'll review the most popular fixed-income securities, the fixed-rate preferred stocks, sorted into several categories. There are 359 issues in our database that trade on primary exchanges, excluding the convertible preferred stocks, 60% of which are part of the biggest ETF for fixed-income securities: the iShares Preferred and Income Securities ETF (PFF). As we can see in the chart below, half of the PFF's market capitalization consists of fixed-rate preferred stocks, which also corresponds to almost half of the fund's holdings. This means that we are talking of around 7B in dollar value.

Source: Author's spreadsheet

First, let's take a look at the main indicators that we follow and their behavior during the last month.

TNX - CBOE 10-Year Treasury Note Yield Index ($TNX)

Source: Tradingview.com

iShares Preferred and Income Securities ETF (PFF)

Source: Tradingview.com


Source: Tradingview.com

The most essential thing for fixed-income investors for the past month is that the TNX continues to be well below the 3% yield mark. Supported by the dovish-than-expected Federal Reserve's guidance on its tightening cycle, released by the Fed last week, followed by the dovish Fed Chair speech in the press conference, the Treasury yields remain low. The fixed-income securities have continued its Christmas rally also in the New Year, and as we can see in the second char, the main benchmark PFF is up 5% for January. As for the equity markets, that had entered into a bear market and the S&P 500 recorded its worst December since 1931, everything seems to be behind us. Furthermore, investors may be happy with the January rally and the 8% gain of the S&P 500 since the beginning of the year.

The Review

1. Redemption Risk by Years-to-Call and Yield-to-Call:

The lower the

Trade With Beta

The Trade With Beta team has been submerged in the universe of preferred stocks and baby bonds for almost a decade, and we decided to share our knowledge and expertise through the inception of this service. We attempt to cover all aspects of these products, from IPOs to pair trades and portfolio picks and, last but not least, issues. Additionally, once a month we go through all different groups of fixed-income instruments to make sure that nothing has gone unnoticed.

This article was written by

Arbitrage Trader profile picture
Leader of Trade With Beta
Income arbitrage ideas along with managed portfolios and pair trades

Day trader whose strategy is based on arbitrages in preferred stocks and closed-end funds. I have been trading the markets since I started my education in Finance. My professional trading career started right before the big financial crisis of 2008-2009 and I clearly understand what are the risks the average investor faces. Being a very competitive trader I have always worked hard on improving my research and knowledge. All my bets are heavily leveraged(up to 25 times) so there is very little room for mistakes. Through the years my approach has been constantly changing. I started as a pure day trader. Later I added pair trades. At the moment most of my profits come from leveraging my fixed income picks. I find myself somewhere in between a trader and an investor. I am always invested in the markets but constantly replace my normally valued constituents with undervalued ones. This approach is similar to rebalancing your portfolio and I just do this any time there is some better value in the markets. I separate my trading results from my trading/investment results. I target 40% ROE on my investment account and since inception in 2015, I am very close to this target.

My main activity is running a group of traders. Currently, I have around 40 traders on my team. We share our research and make sure not to miss anything. If there is something going on in the markets it is impossible not to participate somehow. Some of my traders are involved in writing the articles in SA. As such Ilia Iliev is writing all fixed-income IPO articles. This is part of their development as successful traders.

My thoughts about the market in general:

*If it is on the exchange it is overvalued and our job is to find the least overvalued.

*Never trust gurus - they are clueless.

*Work hard - this is the only way to convince yourself you deserve success.

*If you take the risk it is you who has to do the research.

*High yield is always too expensive.

We are running a service here on SA. It is a great community with very knowledgable people inside. Even though we are not in the spotlight as often as we would like to our articles' results are among the strongest on SA. You can always contact me to share some of our articles and best picks so far.

Analyst’s Disclosure: I am/we are long CIO.PA. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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