Why Subscribe to PrefLetter?
Preferred shares can make an excellent substitute for corporate bonds in taxable portfolios. As discussed in the publication Why Invest in Preferred Shares and in the May, 2006 edition of Canadian Moneysaver, the after-tax return to an investor in Ontario's highest marginal tax-bracket has historically been about 50bp higher through an investment in preferred shares vs. corporate bonds - with return figures calculated using index values and therefore ignoring the potential for excess returns in what remains a highly inefficient marketplace.
An assessment of after-tax fixed income possibilities for taxable investors is not complete without at least some consideration of preferred shares.
The preferred share marketplace is a relatively tiny portion of the capital markets and there are very few sources of informed opinion available for consultation. Even if such a source should be found, it is very difficult to find a conflicting view which will allow a decision to be made after informed debate.
Hymas Investment Management Inc., the developer of HIMIPref™, is independent. There is no axe to grind, there is no sponsorship of the firm by the issuers, there is no need to clear out inventory, there are no underwriting fees to be earned. No fees are earned by HIMI as a result of client trading.
A full service broker will generally charge close to two percent of value to execute a preferred share trade - that's $500 on an order for 1,000 shares. That $500 will cover a two year subscription to PrefLetter - with enough left over to execute three such trades through a discount broker.
Fixed income lends itself to mathematical, quantitative analysis and Hymas Investment Management has developed HIMIPref™ to deliver it. The relative valuations of the issues are determined in accordance with a set criteria that is examined and tested continually. Emotion plays no part in the analysis: each factor contributing to the system's evaluation of the issues has been found to have useful predictive power in the past - and each factor has a rationale that can logically be expected to have such predictive power.
A recommendation produced by HIMIPref™ and published in PrefLetter is based on these fundamental predictive factors, which have a track record of delivering superior results over a wide variety of market conditions.
HIMIPref™ does not use technical analysis. Each fundamental factor has a fundamental meaning - yield, for instance, or the relationship of a particular issue to the yield curve - and may be discussed in polite society without fear of ridicule.
Different clients may have different objectives in their portfolio - they may also have different biases in their risk-aversion. Therefore, a wide variety of issue types each contribute to the list of recommended issues; clients will find at least one recommendation monthly for each major sector of the market - and, when necessary, some notes to explain why a particular issue has been chosen as "the best horse in the glue factory".
HIMI has a small unit trust, Malachite Aggressive Preferred Fund, which has used the recommendations produced by HIMIPref™ to achieve extraordinary (and audited!) returns since its inception in March, 2001.
HIMIPref™ was conceived, developed and programmed by James Hymas, CFA, a successful quantitative fixed-income Portfolio Manager.