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ETF Chart of the Day: Preferred Stocks

tlydon@globaltrend.com (Tom Lydon)

With Financial stocks continuing to demonstrate leadership as the 2012 rally continues, it should be no surprise that preferred stock ETFs that have a focus on the sector have also thrived.

Financial Select Sector SPDR (XLF - News) , for example, is up 18.23% year to date versus the S&P 500 Index which has gained 10.94%.

Specifically, in the “Preferred Stock” ETF category, the best performer year to date is PowerShares Financial Preferred Portfolio (PGF - News), having rallied 10.30%.

Outperformance to peers is clearly evident as the second best performer is iShares S&P U.S. Preferred Stock Index (PFF - News) which is up 8.93%, and then there is a significant leg down in the remaining funds in the category in terms of YTD performance.

SPDR Wells Fargo Preferred Stock (PSK - News) has rallied 6.59% year to date, followed by iShares S&P International Preferred Stock Portfolio (IPFF - News) having risen 5.48%, PowerShares Preferred Portfolio (PGX - News) is up 4.46%, and finally Global X Canada Preferred (CNPF - News) has added 1.95% YTD.

PGF clearly carries more risk than a more diversified approach to preferred names, as it focuses on one individual sector, but Financial equities have rallied nicely throughout the first several months of 2012 and thus the preferred stocks have performed well in tandem with the common stock issues of the same companies, not to mention that the preferred stocks offer a yield component that make the issues even more desirable to investors.

Currently, top holdings in PGF include preferred issues from companies including HSBC, Bank of America, ING Group, and Credit Suisse for example.

PowerShares Financial Preferred Portfolio

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