December 17, 2019. Today we are buying John Hancock Preferred Income Fund (HPI). HPI tends to cycle up and down, and most recently went from $22.17 in March, up to $24.00 in August, and is now down to $22.31–starting to trend up again. We like to buy on the “lows.”
It pays a very nice 7.8% on a monthly basis. HPI gives us immediate exposure to over 125 preferred stocks across several sectors and uses 35% leverage to boost its income.
HPI has a significant exposure to utilities, energy, real estate and telecommunications.
|FUND DESCRIPTION: John Hancock Preferred Income Fund is an exchange-traded closed-end fund or a closed-end ETF which is officially described in its prospectus as a diversified, closed-end management investment company. INVESTMENT OBJECTIVE: The Fund’s primary investment objective is to provide a high level of current income, consistent with preservation of capital. The Fund’s secondary investment objective is to provide growth of capital to the extent consistent with its primary investment objective. FUND STRATEGY: The Fund seeks to achieve its objectives by investing in securities that, in the opinion of the Fund’s investment adviser, may be undervalued relative to similar securities in the marketplace. Under normal market conditions, the Fund invests at least 80% of its assets (net assets plus borrowing for investment purposes) in preferred stocks and other preferred securities, including convertible preferred securities|
Here is an article from realinvestmentadvice.com which we suggest you read. Full Article.
Cracks In The Bull Market Armor
While we did increase our exposure to the markets, as the bullish trend does currently persist, there is growing evidence of “cracks” appearing.
With the Fed flooding the system with liquidity to fund short-term repurchase operations, this is not normal and suggests that something has “broken” in the system.
Given the current rally is built on substantially weaker fundamental and economic underpinnings, weaker earnings growth, and an exhausted consumer, increases in equity risk could very well be reversed in short order. This due to the following reasons:
- We are in the latter stages of the bull market.
- Economic data continues to remain weak
- Earnings are beating continually reduced estimates
- Volume is weak
- Longer-term technical underpinnings are weakening and extremely stretched.
- Complacency is extremely high
- Share buybacks are slowing
It is worth remembering that markets have a very nasty habit of sucking individuals into them when prices become detached from fundamentals. Such is the case currently and has generally not had a positive outcome.
What you decide to do with this information is entirely up to you. As I stated, I do think there is enough of a bullish case, technically, to warrant taking on some equity risk on a very short-term basis. We will see what happens over the next couple of weeks.
However, the longer-term dynamics are turning more bearish. When those negative price dynamics are combined with the fundamental and economic backdrop, the “risk” of having excessive exposure to the markets greatly outweighs the potential “reward. “
NOW IN OUR 8TH YEAR. NOTE TO NEW READERS: Before you buy anything we discuss here, GO to the Core Portfolio tab to see a CURRENT listing of holdings. Dividend Income Investor is designed for investors seeking income by using preferreds, BDCs, REITs, Closed End Funds, baby bonds and corporate bonds. Don’t forget to hit the like button. Go Here For “About“ Our host WordPress is running ads in the blog and we receive NO compensation from this advertising.