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This chart
compares the price performance
of two very different preferred
stock investing strategies
during the Global Credit Crisis
– (1) building your own
portfolio of high quality
preferred stocks as explained
throughout Preferred Stock
Investing or (2) investing
in a preferred stock Exchange
Traded Fund, specifically
iShares PFF.
Take a look at these two
alternative approaches to
preferred stock investing since
the Lehman Brothers collapse on
September 15, 2008. After that
watershed event, the preferred
stock market saw both extreme
downward and extreme upward
movement.
High quality
preferred stocks are those that
meet the ten selection criteria
from Preferred Stock
Investing (e.g. rated
investment grade, issued by a
company that has never suspended
dividends, have cumulative
dividends, have yet to reach
their call date, etc.). The book
refers to these high quality
issues as “CDx3 Preferred
Stocks.”
A
portfolio of high quality
preferred stocks fell far less
than shares of the iShares PFF
Exchange Traded Fund at the
bottom (-17% compared to -33%)
and gained much more ground as
the crisis came to an end (+40%
compared to +20%).
That’s about half the downside
and twice the upside by building
your own portfolio of the
highest quality preferred
stocks. |
