Customer Reviews

Preferred Stock Investing

5 star:		(38)
4 star:		(6)
3 star:		(3)
2 star:		(3)
1 star:		(4)

 

 

This is a good book but reader needs to be careful about the risk
involved in preferred stock investing. Half of the purchases made
by the author in 2006 was not sold yet, and as of Apr 27, these shares
are down on average about 15% in market value. Even if you count the
9-10% in dividends that had been paid, you are probably still 5-6%
underwater. One of the purchases is CFC-B, which went from 25 to 6
at one point only to come back to 14 as of Apr 27. I am not sure
if the average reader would have the stomach to withstand this kind
of draw down. Since many preferred stocks were issued by finance
companies, I suspect purchase made by the author prior to Aug 2007
may suffer even heavier paper losses.

Reader who buy this book with the expectation of getting 12% return
with very little risk and retire needs to be realistic
I have many stock trading systems that returned on avg of 30% for 6-7
years in back testing before Aug 2007 but are down 40% since then.

I would like to see more discussion on the risk of perferred stocks,
how they would perform in bankrupcy and liquidation, etc. Readers
also should not blindly follow rating agency's ratings.

Thorburg mortgage's preferred stocks went public last year with a 10%
coupon, and the price dropped from $25 all the way below $2 and has
come back to over $4 recently. I heard that Pimco's Bill Gross
bought some of those preferred below $2. It would be interesting to
understand how he analyzed the risk of TMA's preferred and made the
call.

Several things struck me about Preferred Stock Investing. Doug K. Le Du's writing style leaves you feeling like you're reading something from an old friend. The book is very comfortable to read and easy to understand. But the most remarkable part is how frequently I found myself feeling like "ah hah, of course this would work this way." Unlike many other investment books that I've read, it is really clear how and why the preferred stock investment method that is described in the book would work, with very little effort. And all of the preferred stocks for years listed in the book too so you don't have to take it on blind faith; the book includes the investment results, using the method that the book describes. In the beginning of the book, the author says that if you are a high-risk taking day trader looking for a quick 25% return, this book is not for you; this is correct. This book is for low-risk, methodical investors who do not want to spend a lot of time studying their computer all the time. I learn a lot and it was fun to read.

This book's advice is misleading, and this is unfortunate given that it's one of the only publications available on preferred stocks.

1. The author fails to point out the major underlying risks of preferred securities. Preferreds are only one step above regular stocks in credit safety, should the issuing firm declare bankruptcy. Firms that issue preferreds can and do fail, often wiping out the preferred investors. And yet the author suggests that the risk of preferreds is "CD-like" (FDIC insured up to $100,000) throughout the book. Not true!

2. The author conveniently ignores the reverse "cannonball" price curve in his visual graphics, thereby implying that most preferreds rise in price after issuance and then recede back down to par at the redemption or call date. When rates rise and/or the issuing firm suffers in performance (think Countrywide!) prices will fall and may stay low, NOT recovering to par at the first call date. An investor may not be able to "upgrade" without a loss. Again, the author is not being truthful about what actually can of often does occur.

3. The author fails to point out that investors can often purchase preferreds at well below par, taking advantage of market price drops when the issuer's health has not deteriorated. By acquiring only at/near IPO prices, investors who follow his advice may severely limit their upside.

4. The book reads like one long, and cheesy infomercial peddling the author's "subscriber" services. If you want to avoid the pain of losing money in preferred stocks: don't buy this misleading book or his services!

This well written book offers an entirely new approach to investing in preferred stocks (PS), an approach that will maximize your profits while minimizing your risk and minimizing your work effort. PSs are recommended for your investment considertion ONLY IF they meet 10 strict market and investment criteria. If a PS meets ALL 10 criteria, they pass the test to qualify as a "CDX3" stock. Well-written and precise guidelines are then given on how and when to buy "CDX3" stocks, even when market interest rates rise or fall. The author includes over 5-years of historical market results to document & support his approach. The monthly free newsletter to subscribers is an outstanding source of investing information. Highly recommend this book!

As a relative newcomer to the field of investing, Preferred Stock Investing is easy enough for a beginner to understand but sophisticated enough for a savvy investor. I especially like the method the author uses to teach the CDx3 income engine - the examples taught me "how" and "why", not just "what." He uses real preferred stocks to show how to do it, and he walks you through it step by step. The monthly newsletter is like getting a new chapter the book each month. The question and answer section of the newsletter provides real life examples of the preferred stock investing method. I highly recommend the book!

1. This book is a giant advertisement. 90% of this book is just an infomercial for his CDx3 subscription service. Excerpt " Unless you are a subscriber to the CDx3 Notification Service (in which case this research is done for you), figuring out ______ can be a bit time consuming (not to mention tedious)." That's the tone of the whole book - "here's the information (which coincidentally my other service already provides to subscribers), and here's a time consuming way to figure it out for everyone else."

2. Direct quote: "One thing you can say about a period of increasing interest rates is that it is ALWAYS followed by a period of decreasing rates." He proves this point by showing a graph of rates from the 80's - 2009, which trended downwards the whole time. If interest rates start trending up over the next 30 years, everyone buying his preferreds will get stuck with lower than market yields and no capital appreciation as there would be no reason to call them.

3. He neglects to inform you about quantumonline, which he throws in the "pay service sites" category. Quantum is by far the biggest resource of free information on preferreds and provides much of the information he claims is hard to find anywhere outside his service.

Summary: It's an ok primer, but oversimplifies the risks and spends most of the book pushing his subscription service. You'd be better off going with Paul Joseph's book, which gives you the same basic information and a better awareness of risks.

I've purchased three copies of this book: first one for me, and then after I started following the CDx3 method, one for my financial advisor, and one for my Dad. My copy is highlighted and marked with Post-Its because I don't remember everything from one reading and I like referring back from time to time. I set up my preferred stock investing system in a binder that I only need to pull off the shelf once or twice a month. For that small investment of time, I am very pleased with the results from following Doug's approach, so clearly spelled out in the book and made even easier with his subscription service doing all the legwork, so I can invest wisely while still having time for everything else. Contrary to some reviewers' remarks (did they actually read it cover to cover???), it's easy to successfully use the system described in this book without an interest rates crystal ball and even if you want to avoid issuers in certain industries, as part of a balanced investment plan. The book is educational, clear, fun, easy to read, and pays for itself many times over! Go for it!

What I really liked about this book was that it eliminates the mystery of preferred stocks. It not only teaches what I needed to know, it provides a structured method for selecting which preferred stocks to buy and how to tell when you are best off to sell. Just from the dividend income I am earning about double what I would have with bank CDs at, to me, about the same amount of risk. The author's description of how and when to sell for a nice capital gain are the simplest and clearest that I've read. I made back many, many times the price of this book with my first preferred stock investment.

I never felt like the author was trying to sell me on anything. He presents his research in a very easy (even fun) writing style and lets you draw your own conclusions. And he shows you how to do this completely on your own if you want to.

This is a no-brainer.

It provides very little info and tries to get reader to subscribe to investment letter. Amazon description extremely deceptive.

The basic thing that this book presents is using high quality, low risk preferred stocks that meet certain criteria to make stable dividend income but (and this is the good part) sell them for a huge capital gain if you choose to do so. Most people who invest in preferreds do so just for the dividend income. That's great, but what if the market price of your preferred reached a point that, if you sold, you would triple your return? Why not sell it, pocket the gain, then just buy another preferred and return to the dividend income until another selling opportunity comes along. This book teaches you that the market price of your preferred stock is most likely to peak on a certain day each quarter - so that's the only time you need to check the price to see if it's time to sell. The author also provides a formula to calculate your Target Sell Price - if the market price goes over the Target Sell Price on the big day, you should sell since, as the research data in the book shows, the market price is unlikely to be much better down the road. The book shows you how to find out about new issues, how to screen them to find the gems, how to buy them and the day and price you should look to sell them for a big gain later. It's well written and easy to follow - even for a novice like me. I made a 13% annual return on my first one (CDs at the bank were paying about 4% at the time) and made back many times the price of this book.