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Biotech / Medical : Biotech Valuation
CRSP 55.93-0.6%3:59 PM EST
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To: tuck who wrote (31883)7/28/2009 6:23:19 PM
From: Biomaven1 Recommendation  Read Replies (2) of 52153
 
For a taxable account you can still get some decent returns on financial preferred stocks - for example BACPRL still yields around 9% and is currently taxed at only 15%.

Looking ahead a few years, SLMPRB might be a good buy - it's floating rate based on 3-months LIBOR plus 70 basis points, so right now its yield is very low, but the yield is scheduled to step up to 3-months LIBOR plus 170 basis points in two years. Because the preferred is trading at a big discount, you have to multiply these figures by about 3.8 to get the actual yield. So in 2 years the yield will be about 5.75% plus 3.8*LIBOR. I have to figure that LIBOR will not stay near-zero forever, so longer-term this might be very attractive if we start getting into a more inflationary environment with higher interest rates. (Of course there is some credit risk here). (Please check my numbers before you buy this one!)

I also own some much less speculative tax-advantaged preferreds - yields here are around 6.5%.

Peter
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