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Getting ETF Clues From Single Stocks

Lastly, the Fed's explicit guidance for 0% rates into 2013 has created a mad scramble for yield. Nearly half of the new 52-week highs on the NYSE are preferred-stock shares, including Public Storage preferred (PSA-PE), Gabelli Dividend & Income Trust preferred (GDV-PA) and Alabama Power preferred (ALP-PLN).

Although there are three suitable ETFs for an aggregate ETF for the preferred-shares space, the same dilemma that existed in 2008 exists in 2011: Roughly 75% of all preferred shares come from the financial company arena.

For instance, sift through the top holdings of the iShares Preferred ETF (PFF) and you will find issuers such as Deutsche Bank (DB), HSBC Holdings (HBC), Merrill Lynch and JP Morgan Chase (JPM).

Personally, I see J.P. Morgan Chase preferred shares as golden. Yet Merrill Lynch? With Bank of America receiving (requiring?) capital from Warren Buffett? And German bank exposure to European sovereign debt doesn't make me fawn over Deutsche Bank.

In essence, with so much exposure to financial companies, you may not want to put up with the volatility of a preferred-stock ETF at this time. Individual preferred issues that yield hunters may like include utilities like Constellation Energy (CEG-PA) and DTE Energy (DTE-PA).

You can listen to the ETF Expert Radio Show "LIVE", via podcast or on your iPod. You can follow me on Twitter @ETFexpert.
Disclosure Statement: ETF Expert is a website that makes the world of ETFs easier to understand. Gary Gordon, Pacific Park Financial and/or its clients may hold positions in ETFs, mutual funds and investment assets mentioned. The commentary does not constitute individualized investment advice. The opinions offered are not personalized recommendations to buy, sell or hold securities. At times, issuers of exchange-traded products compensate Pacific Park Financial or its subsidiaries for advertising at the ETF Expert website. ETF Expert content is created independently of any advertising relationships. You may review additional ETF Expert at the site.
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