We are certain that many of you have already read some of the READER INITIATED ALERTS, but we wanted to make sure that everyone caught the S&P U.S. Preferred Stock Index rebalancing.
Effective January 22nd the S&P U.S. Preferred Stock Index will trade with a rebalanced composition. The Index is representative of the entire U.S. preferred stock market and most recently contains 283 issues.
The key item to know is that there is a very large ETF which tries to mimic the performance of the S&P U.S. Preferred Stock Index–to a fair degree. This is the iShares US Preferred Stock ETF (NYSE:PFF). PFF has $14 billion in net assets and holds 293 individual preferred stock issues and moves markets when they sell (maybe less so on the buy side). To match up with the index, when changes to the index are made every 3 months, PFF will sell issues which are being removed from the index and purchase shares in the issues being added to the index.
The press release announcing the index changes was published last Friday, January 4th. The press release is here.
For folks wishing to do further research you can look over the holdings of PFF here.
So when you see unexplained drops and increases in prices of issues that are being dropped from or added to the index you might have an idea of what is happening–and just maybe you will find a real bargain in the mix.