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Fixed-Rate Preferred Stocks - Complete Review


  • We'll take a look at the main indicators that we follow and their behavior during the last month.
  • All the preferred stocks are sorted in categories.
  • What has changed over the last month?
  • I do much more than just articles at Trade With Beta: Members get access to model portfolios, regular updates, a chat room, and more. Get started today »


After my last preview article at the end of March, there was a period when there were no public articles of mine. The last three months were filled with high volatility and low liquidity, as the fear of the expanding new coronavirus had reached its climax. For two months, there weren't any new preferred stock IPOs, and the outstanding ones had experienced a very severe period of panic selling. Things were so dynamic that huge arbitrages were formed between all fixed-income securities which then had returned to fair prices in hours, even in minutes. Today, all the tension has already evaporated, and the market seems to be returning back to "normal". In my first article of the month, I review the most popular fixed-income securities, the fixed-rate preferred stocks, sorted into several categories. Something I post at the beginning of every month. There are a total of 365 issues in our database that trade on primary exchanges, excluding the convertible preferred stocks, 58% of which are part of the largest primary exchange-traded fixed-income ETF: iShares Preferred and Income Securities ETF (PFF). As we can see in the chart below, 37% of the PFF's market capitalization consists of fixed-rate preferred stocks, which corresponds to almost half of the fund's holdings. This means that we are talking around 5.7B 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

Source: TradingView.com

SPDR S&P 500 Trust ETF (SPY)

Source: TradingView.com

So far, it seems that this will be "the year of COVID-19". Every single news, every single thing, is indirectly or directly linked to the new coronavirus, which spread rapidly across the whole world and literally

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

Arbitrage Trader, aka Denislav Iliev has been day trading for 15+ years and leads a team of 40 analysts. They identify mispriced investments in fixed-income and closed-end funds based on simple-to-understand financial logic.

Denislav leads the investing group Trade With Beta, features of the service include: frequent picks for mispriced preferred stocks and baby bonds, weekly reviews of 1200+ equities, IPO previews, hedging strategies, an actively managed portfolio, and chat for discussion. Learn more.

Analyst’s Disclosure: I am/we are long SYF.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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Comments (9)

excellent - thanks
Thanks for your comprehensive review.
I do have many preferrds and I enjoyed reading your article.
the March crash was a great time for arbitrage. I was making trades left and right. Couldn't keep up with the falling prices but when they bounced back my profits showed up.
Then I sold off too much too soon and missed the last part of the rally.
Very informative piece. One additional way to slice it might be to distinguish those issues that are cumulative vs. non-cumulative. Especially for the non-IG issuers.

Thanks for this info.
Do you not cover the preferred stocks of CHS Inc.?
Same question for me. I've owned CHSCM for years, pleased with its performance. Maybe he doesn't cover unrated preferreds?
A Pragmatic Investor profile picture
With this "180 degree turn" ...
There are numerous opportunities, with different risk levels as well.
Due diligence is required !

Currently concentrating on the areas associated with government help (mostly Fed buying).
I believe their is still room for improvement in the mortgage REIT's.
What's your opinion o er REIT preferreds in the long run? Do they have good risk reward ratio. I'm thinking about adding some in the "pension" fund, which one will you reccomend?

"turned 18 degrees" :)
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