The 2 Best Bargain-Priced ETFs for Super Income AND Unlimited Upside

For those of you who want to take a more conservative route (but a potentially very profitable one) to invest in preferred shares, I suggest a preferred shares-focused exchange-traded fund (ETF).

At Trade of the Day Plus, we are certainly advocates of buying individual stocks.

However, when we see a big opportunity unfolding, it’s a good strategy to “play the field.” That way, you can avoid investing in a company that ends up with unique problems – and therefore a declining price – even while the big opportunity rages on.

That’s why we’re recommending purchasing the Invesco Financial Preferred ETF (PGF) and the Invesco Preferred ETF (PGX).

These ETFs hold preferred shares from a wide assortment of companies and are an attractive alternative to selecting one or even a few different preferred stocks on your own. Even more appealing for the income-oriented investor, these ETFs pay big dividends on a monthly basis.

Invesco Financial Preferred ETF

The fund seeks to track the ICE Exchange-Listed Fixed Rate Financial Preferred Securities Index.

The index is designed to track the performance of exchange-listed fixed-rate U.S. dollar preferred securities. These are securities that the Intercontinental Exchange (ICE) believes are functionally equivalent to preferred securities issued by U.S. financial companies, such as banking, brokerage, finance, investment and insurance companies.

The Invesco Financial Preferred ETF generally will invest at least 90% of its total assets in securities that make up the underlying index.

Currently, 91.82% of the portfolio is invested in preferred shares and the remaining percentage is in cash.

The index is a market capitalization-weighted index. Holdings are weighted according to the total market value of their outstanding shares. I like this method because companies are represented according to their market capitalization, which is a good indicator of importance in the economy and in the stock market.

The main thing to keep in mind is this ETF is well diversified. The fund currently holds 113 different investments.

Right now, there’s a strong case to be made for holding the Invesco Financial Preferred ETF in your portfolio.

One of the biggest reasons right now is the uncertainty surrounding holding individual financial services companies after the failures of Silicon Valley Bank and Signature Bank – which were the second- and third-largest U.S. bank failures, respectively.

The Invesco Financial Preferred ETF is less risky over the long term than individual stocks.

The portfolio is currently invested in four industry groups.

And the ETF is invested in very solid companies within those industries…

Of the fund’s top 10 holdings – which make up 20.2% of total assets – four are from JPMorgan Chase, two are from Wells Fargo, two are from Bank of America, one is from Capital One Financial and one is from Chesapeake Financial.

And the fund is huge, with nearly $1.2 billion in assets and average daily trading volume of more than 525,000 shares.

The Timing Is Right

The Invesco Financial Preferred ETF is currently yielding 5.48% and is selling at a 2.2% discount to its net asset value (NAV)!

NAV represents a fund’s per-share intrinsic value. Similar to the book value of a company…. NAV tells you how much one share of the fund should be worth.

And most surprising to me is that the fund is down 16.5% from where it traded one year ago.

As you can see from the chart below, the fund has had its ups and downs over the past year but is currently trading near its lowest levels of the past year!

As a new investor, you’re buying the shares at a bargain-basement level compared with what they were selling for 12 months ago… you’re buying shares at a discount to NAV… and you’re grabbing a big yield.

This ETF enables you to capture the performance of the best of the financial services sector with a single, well-diversified investment.

Action to Take: Buy the Invesco Financial Preferred ETF (NYSE: PGF) as long as the yield is above 5%.

Invesco Preferred ETF

The Invesco Preferred ETF is based on the ICE BofAML Core Plus Fixed Rate Preferred Securities Index.

Normally the fund will invest at least 80% of its total assets in the securities that make up the index.

The index being tracked is a market capitalization-weighted index designed to measure the performance of the fixed-rate U.S. dollar-denominated preferred securities market.

The fund is big. Net assets total nearly $5 billion. The fund is also well diversified, with 289 investments currently. And the ETF provides a top-notch yield of 5.79%.

The fund does not purchase all of the securities in the index it tracks; instead, it uses a “sampling” methodology to create its portfolio. This strategy allows the fund to mirror the index while keeping turnover and trading costs in check.

Here are the top industry sectors in the fund.

Another aspect of this methodology is the fund includes only securities that are rated BBB or better. The index’s lowest-rated companies – in the C and D categories – are not included.

I like the fact that this ETF steers toward high-quality firms with consistent dividend payments and dividend growth, resulting in a portfolio that generally falls in the large growth company category.

For example, of the ETF’s top 10 holdings, five are preferred issues from JPMorgan Chase and the others are from Wells Fargo, Capital One Financial, Bank of America, Tutor Perini Corp. and Aetna.

Undervalued and Poised to Move Higher

The Invesco Preferred ETF is selling below its NAV… the fund has a juicy 5.79% yield… and shares are selling near their 52-week low.

 

This is a great opportunity for new investors like you.

I think the safety, high income and excellent capital gains potential of this fund are about to be recognized.

In addition, investors can count on the Invesco Preferred ETF to fund their short-term goals, diversify a stock- or bond-heavy portfolio, or simply generate income during retirement.

Currently, this fund is a bargain hunter’s dream!

This is an opportunity you should jump on…

Action to Take: Buy the Invesco Preferred ETF (NYSE: PGX) as long as the yield is above 5%.

Super Income and Unlimited Upside

Today, investors are facing a combination of investing challenges not seen for generations…

Historically high levels of inflation, a rapid rise in interest rates and a slowing economy.

It’s a triple whammy of challenges for investors.

That’s why it’s time to rethink your portfolio allocations – in particular, your fixed income investments.

These two Invesco preferred share ETFs provide a diversified fixed income investment with a substantial yield and significant capital gain potential.

Don’t settle for minuscule returns from traditional bank savings accounts. You’ll never retire comfortably that way.

Instead, add some Super Income and unlimited upside to your portfolio.