Keeping up with Buffett
Today's Financial News - Posted February 10, 2009
Warren Buffett is making many investors jealous. The Oracle of Omaha is making moves most investors do not have access to. But if they follow the steps outlined below, they can get dang close.
By Andrew Snyder, TodaysFinancialNews.com
Baltimore – (TFN): All eyes are on Warren Buffett. The mega-billionaire and investing legend has made deals all over the place during the heart of the financial meltdown.
When so many investors are putting their money on the sideline, Buffet is writing checks for hundreds of millions of dollars. Most of it is going towards investments the average Joe can’t make. Traders are left wondering how they can make similar moves.
Unless you have a few billion dollars in cash stuffed under your wall or buried beneath an old oak tree in the backyard, you cannot call Harley Davidson (NYSE:HOG) or General Electric (NYSE:GE) and order a few hundred million dollars worth of preferred stock that pay a double-digit dividend.
You can try, but all you will hear is laughter on the other end of the phone. Even Harley is not that desperate.
But there are options. Sure, they will not be quite as lucrative as Buffett’s wonder-deals, but then again, they will not be as risky and they are far easier to get your hands on.
Preferred stocks, the assets Buffet has been grabbing by the bushel, are a perfect investment for the current market. They combine the best attributes of the bond market, solid, reliable payouts, with the appreciation potential of an equity investment.
In an economy where bankruptcy is always a threat, preferred stock adds a barrier of protection. While they are still fairly low on the hierarchy, preferred shareholders always have a superior claim to common shareholders. In a bankruptcy filing, instead of pennies on the dollar, preferred shareholders may get nickels or even dimes on the dollar.
With so many advantages and relatively few disadvantages to preferred stock, it is easy to see why investors like Buffett are buying billions of dollars worth of the stuff.
Prefer profits over losses
So what is the easiest way for you to get your hands on some preferred stock? Certainly, you can go to the secondary market and buy shares in individual companies. But that requires lots of research and added risk.
The best way to take advantage of bond-like payments and stock-like appreciation potential is through an exchange-traded fund (ETF) like iShares S&P U.S. Preferred Stock Index (NYSE:PFF) or PowerShares Financial Preferred (NYSE:PGF). They pay out a 9.5% and an 11.65% annual dividend, respectively. Even better, both ETFs are near the bottom of their recent ranges, giving investors plenty of appreciation potential.
You may not have a portfolio that contains as many zeroes as Buffett and you may not have the power to write your own deals, but at least you have the opportunity to make some of the investments right on par with the sage’s most-recent trades.
In today’s market, you need all of the protection and security you can find. Preferred shares may offer exactly what you need.
Next Article: Gold is getting sexier by the minute
Be the first to leave a reply.
Your comments are welcome
Follow TFN via RSS or Twitter |
 |
 |
 |
Advertisement
Latest Headlines
- The Big Picture for Sinobiopharma, Inc. (SNBP)
- Beazer Homes USA, Inc. (BZH) and Hovnanian Enterprises, Inc. (HOV) up despite horrid housing news
- The FDA catalyst: 2010 moves in MannKind (MNKD), Roche Holding (RHHBY), Acorda Therapeutics (ACOR) show it still works!
- Steepest drop since Feb. 2009: Here we go again!
- Is the silver run over? Coeur d’Alene Mines (CDE), Silver Wheaton (SLW), Alto Group (ALTO), Hecla Mining (HL), Endeavour Silver (EXK) close down