A financial company is trying to take advantage of preferred stocks – which are riskier than bonds but less risky than common stocks.
Infrastructure Capital Advisors founder and CEO Jay Hatfield manages Virtus InfraCap U.S. Preferred Stock ETF (PFFA). He leads the company's investments and business development.
“When stocks are strong, when we come out of a tightening cycle like now, high-yield bonds and preferred stocks … tend to outperform other fixed-income categories,” he told CNBC's “ETF Edge” this week. Perform better.
Hatfield's ETF is set to rise 10% in 2024 and is up nearly 23% from last year.
His ETF’s top three holdings are regional finance, SLM Companyand Energy TransferLP As of Sept. 30, according to FactSet. All three stocks are up about 18% or more this year.
Hatfield's team selected companies they believed were mispriced relative to risk and return, he said. “Most of the top holdings are in what we call asset-intensive businesses,” Hatfield said.
The Virtus InfraCap U.S. Preferred Stock ETF has fallen nearly 9% since its launch in May 2018.