Adding to PGF

Not much to report following the past few weeks, as markets held onto their trading ranges, leaving technical traders waiting for a breakout.

I have been looking to increase my equity exposure as the world heads out of recession, but have not added to any positions since adding to EEM a few months ago. I guess I too, am looking for the breakout (hopefully to the down side).

I did get the idea to add to positions which I felt are still undervalued despite the impressive run up, and found financials to be attractive. This is because investors are still wary of betting on banks to recover, but I have no doubt that financial institutions are here to stay and will continue to make massive amounts of money. Right now, the ETF PGF (which consists of preferred financial stocks) has  PB ratio of only 1.37 but is yielding nearly 9%, which is much better than S&P’s PB of nearly 3.5 and yield of 2.11%. Of course, the reason why banks are still selling slightly cheaper is because investors are also not sure about the value of assets held on their balance sheets (and hence the true book value), but I think that the odds in favour of them not being as bad as what people thought are quite high. I would caution, however that PGF holds preferred shares with no voting rights and hence should behave more like bonds than equities. But what can I say.. I am sucker for dividends. For those wishing to gain true capital appreciation I would recommend taking a look at XLF instead (PB @ 1.4 and yield at 1.42%). If the market breaks to the downside I might sell my PGFs and move into XLF.