One ETF Destination for Apple Preferred Shares
Apple might issue preferred shares, a class of stock that has both debt and equity traits.
Greenlight Capital's David Einhorn, who wants to see Apple return more of its massive $137.1 billion cash hoard to investors, last week sued Apple over the proposal. The hedge fund manager is alleging the company is making it more difficult to issue dividend-paying preferred shares by asking shareholders to approve such action.
In one corner there is Greenlight Capital and in another, defending Apple, is the California Public Employees Retirement System. The largest public employees pension plan in the US owns 2.7 million Apple shares, according to Reuters.
Bottom line: Apple might issue preferred shares, a class of stock that has both debt and equity traits, but it appears unlikely that will happen overnight. If the company does move forward with that plan at some point in the future, investors that want to access Apple preferreds via ETFs might have just one option. That being the Market Vectors Preferred Securities ex Financials ETF (NYSEARCA:PFXF).
When the Market Vectors Preferred Securities ex Financials ETF debuted last July, naysayers could have viewed the fund as a niche play, a gratuitous grab for yield-starved investors' attention or both. The reality is PFXF quickly proved to be one of the better new ETF ideas that debuted in 2012.
An assets under management tally of $138.4 million speaks to that fact. That number, along with average daily volume of over 97,000 shares, a solid amount for a new ETF, highlight the fact that investors have been looking for something new when it comes to preferred stock ETFs.
The "something new" is why, barring the introduction of a copycat ETF, PFXF will be the first ETF home for Apple preferreds, assuming the company issues that stock. Unlike every other preferred stock ETF on the market today, PFXF is not excessively weight to the financial services sector. As one example, the SPDR Wells Fargo Preferred Stock ETF (NYSEARCA:PSK), which has $347.5 million in AUM, devotes 83.5% of its weight to preferreds issued by financial services firms.
On the other hand, at least nine of PFXF's top-10 holdings, are not preferreds by way of financial services companies. The ETF's top-10 holdings, which account for over 37% of the fund's weight, include issues from General Motors (NYSE:GM), Apache (NYSE:APA), and United Technologies (NYSE:UTX).
PFXF's sector breakdown includes an almost 30% weight to REITs, a 23% allocation to utilities and a 12.5% weight to automobile manufacturers. It may not sound like it, but that is diverse by the standards of preferred ETFs.
Obviously, since Apple has not confirmed it will issue preferred shares, there is no way of knowing whether PFXF will ever be home to Apple. For income investors, that is alright for now because PFXF has a 30-day SEC yield of 6.07% and an expense ratio of 0.4%, the lowest among preferred ETFs. In the past 90 days, PFXF has outperformed PSK and two other major preferred ETFs by decent margins.Below, find some more great ETF and market content from Benzinga:
Apple Accused of Price-Gouging Australian Consumers
Pope Benedict XVI Leaves Behind a Mixed Legacy and the Catholic Church Considers a Canadian Replacement
Tesla Falls Ahead of Earnings as Model Stalls Out
Benzinga Pro covers this and all market news in real time. Get your free trial here.
The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.
Copyright 2011 Minyanville Media, Inc. All Rights Reserved.
Daily Recap Newsletter