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JPI: Our Pick Among CEFs Focused On Preferreds


  • The CEF preferreds sector has begun to claw back some of its losses, however, it still remains attractive in our view relative to its pre-drawdown high.
  • Within the sector, we like the term fund JPI - one of a number of Nuveen preferreds CEFs.
  • The fund is trading at the widest discount in the sector with a very low discount sector spread. The term feature should provide an additional tailwind of 0.9% per annum.
  • This idea was discussed in more depth with members of my private investing community, Systematic Income. Get started today »

This article incorporates data as of Monday close.

The preferreds sector has begun to claw back some of its losses over the past week. At current levels, the sector could still push higher in both NAVs and discounts, assuming the market continues to normalize. Within the sector, we like the Nuveen Preferred and Income Term Fund (NYSE:JPI) for its very attractive absolute and relative discount, decent historic returns, and a potential tailwind from its term feature.

CEF Sector Still Provides A Good Entry Point

Taking a look at market performance of the iShares Preferred and Income Securities ETF (PFF), unlike some of the higher quality income sectors like agencies and munis, preferreds remain well underwater from the beginning of the drawdown despite lower interest rates, providing potential opportunity for further recovery.

Source: ADS Analytics, Tiingo

Taking a look at CEF sector discount moves, we can see that the preferreds sector had one of the largest discount widenings and one of the bigger retracements.

Source: ADS Analytics, Tiingo

The preferreds sector, along with everything else, has begun to recover from last week's sell-off. The sector, however, remains as one of the most beaten down in discount terms.

Looking at the overall move in discounts still leaves the sector with one of the biggest discount widenings which, in our view, still provides an attractive opportunity.

Source: ADS Analytics, Tiingo

JPI - Our Pick In The Sector

Within the sector, we like the Nuveen Preferred and Income Term Fund (JPI). In terms of allocation, the fund is quite financials-heavy with 77% of the portfolio composed of banks, financial services, insurance and capital market issuers. The fund carries about 30% of its assets in contingent convertible securities with total non-US securities clocking in at 41%.

The fund runs $885m total assets at a 1.33% fee which

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This article was written by

ADS Analytics profile picture

ADS Analytics is a team of analysts with experience in research and trading departments at several industry-leading global investment banks. They focus on generating income ideas from a range of security types including: CEFs, ETFs and mutual funds, BDCs as well as individual preferred stocks and baby bonds.

ADS Analytics runs the investing group Systematic Income which features 3 different portfolios for a range of yield targets as well interactive tools for investors, daily updates and a vibrant community.

Analyst’s Disclosure: I am/we are long JPI. 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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Comments (5)

rjm22 profile picture
Noticed JPI had an insider buy come out today. VP Paid about 2% less than today's close. Did not have a position prior to this buy.

03/03/2020 P 1,000 A $ 23.78 1,000

Form 4 Nuveen Preferred & Incom For: Mar 03 Filed by: Meyers William T.
10K WIZARD 10:17 AM ET 3/5/2020
Howard_JB profile picture
are you able to speak to the difference between JPI and JPS ? I have held JPS for a few years and am happy with it. Just wondering about how it is different from JPI
ADS Analytics profile picture
JPS is more CoCo and less US focused and is a perpetual fund. Discount valuation, historic NAV returns and fee pretty similar.
JPT is also a good choice if you "prefer" a term ending in 2022 rather than 2024.
ADS Analytics profile picture
JPT discount not as attractive for the reason you mention and yield is lower, otherwise agree.
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