Portfolios

Advice to the Advisors

Sheaff Brock Institutional Group | marble columns | value in preferred securities

Recent Events Have Led to Uncommon Value Across the Preferred Securities Market

Preferred stocks, as measured by the S&P Preferred Stock Index, were trading at their highest prices in over two years in mid-February until suffering a (36%) decline through March 19th amid the Coronavirus panic. Prices have recovered, but the index is still down substantially from the average price it has traded over the last 10 years. We believe the sell-off in these shares was the proverbial “throwing the baby out with the bathwater” type of decline and driven by a [...]

Advice to the Advisors

Bulldog wearing a tie | Dogs of the Dow | Sheaff Brock

Different Takes on “Dogs of the Dow”—Part Two

The long-time appeal of the “Dogs of the Dow” concept, Gordon Scott of investopedia.com postulates, is that “it presents a straightforward formula approach.” Out of the 30 stocks that make up the Dow Jones Industrial Average, investors, at the start of each year, select those ten with the highest dividend yield. Based on the principle that the dividend payout can be used as a measure of the average worth of the company, a high yield is seen as signaling [...]

Advice to the Advisors

Sheaff Brock Institutional Group | Dogs of the Dow | Jack Russell "superhero" dog

Different Takes on “Dogs of the Dow”—Part One

While some analysts may write off the nearly thirty-year-old “Dogs of the Dow” theory as antiquated, Ian Cooper of chasingmarkets.com disagrees. “Plus,” Cooper adds, “we have to remember that each of the Dogs also pays a healthy dividend.” Antiquated or not, “Dogs of the Dow” is hardly new to investor vocabulary. The concept—out of the 30 stocks that make up the Dow Jones Industrial Average, the strategy involves choosing the ten with the highest dividend yield. The premise, as Investopedia explains, [...]

Advice to the Advisors

Elevator panel controls | Sheaff Brock | Option Overlay for Additive Returns

For the Right Clients, Option Premiums Can Offer Additive Returns

“Most economic indicators are benign,” James B. Stewart commented in a New York Times article towards the start of 2019, noting the exceptionally low unemployment rate and low inflation. In an earlier First Trust Monday Morning Outlook report, Chief Economist Brian S. Wesbury made some positive observations of his own that may still be relevant: “As the summer goes on, we expect evidence will continue to show that the economy isn’t slipping into recession.” Wesbury makes note of several [...]

Advice to the Advisors

Sheaff Brock Institutional Group | "cheat sheet" on Preferred Stock

Preferred Stock 301+

(As an advisor, you’re in the know, but perhaps your clients can use a 101+ quick “cheat sheet” on Preferred Stock). Then, keep reading for some more advanced insights … By issuing preferred stock, a company combines the characteristics of both debt and equity. Advantages to the issuing company include: Issuing preferred stock as opposed to bonds keeps the company’s debt-to-equity ratio lower, a situation favored by investors. Ratings agencies tend to give a more favorable analysis for preferreds as [...]

Advice to the Advisors

two puppies | the difference between SPX and SPY | Sheaff Brock Institutional Group

Have Your Clients Warmed to SPY and SPX? What’s the Diff?

“Many advisors have warmed to using options and products that use options in their portfolios in 2018,” Christopher Robbins writes in Financial Advisor magazine. “They have been encouraged by both more volatile markets in stocks and bonds and by the increasing ease and efficiency of applying the strategies.” In fact, not that long ago, the Chicago Board Options Exchange reported a new monthly volume record in October 2018 for S&P 500 options, at 41.4 million contracts traded. Two of the most [...]

Advice to the Advisors

On Paddle Board | Active Management of Preferred Stocks | Sheaff Brock Institutional Group

Elements of Active Management of a Preferred Portfolio

No question as to which side of the ongoing debate about the merits and shortcomings of active vs. passive management is exemplified in the Sheaff Brock Preferred Income portfolio—it’s run using an actively managed strategy, and there are reasons why. With the two-part goal of generating income while preserving capital, Senior Portfolio Manager JR Humphreys utilizes both institutional and retail preferred shares. So, how can advisors set about explaining to clients the distinction between active management and a passive approach? Passive [...]

Advice to the Advisors

Cityscape for REITs and New Tax Law Savings | Sheaff Brock Institutional Group

New Tax Law May Not Be the Only Reason to Pay Heed to REITs

Remarking on the fact that the Tax Cuts and Jobs Act is set to deliver over a trillion dollars in tax savings over the next decade, adding fuel to an already healthy economy, those tax savings can stand to generally improve the tax efficiency of REITs and other real asset investments,” JR Humphreys, portfolio manager of the Sheaff Brock Real Estate Income & Growth strategy posits. One of the central features of the tax bill is a 20% deduction on [...]

Advice to the Advisors

Upside Volatility on Wanted List | Sheaff Brock Institutional Group

Put Upside Volatility on the Wanted List?

Far from doing everything possible to avoid volatility, downside volatility is the only type to avoid. We should all want portfolios that have higher levels of upside volatility, Craig Israelson asserts. Traditionally, one advantage of building a broadly diversified portfolio is reduced volatility of returns. When higher standard deviation results in impressive upside performance, that is hardly something to be upset about, he observes. Well worth explaining to clients, the SPDR S&P 500 (NYSE symbol SPY) is the most widely traded contract [...]

Advice to the Advisors

Sheaff Brock Institutional Group | Featuring Option Strategies

Who’s Talking About Option Strategies?

The study results, published just a year and a half ago, represented good news for both Registered Investment Advisors and the Options Industry Council. The OIC had commissioned global research and consulting firm Cerulli Associates to find out how much interest and involvement there is among financial advisors when it came to including options in client portfolios. The report highlighted three important developments: One-third of financial advisors were already using options in 20% of their client portfolios. Advisors expected to [...]