Preferred Shares - Performance

As I explained in earlier posts, I had bought some preferred shares because they had gone down in price and was hoping to see a normalization of share prices before fear of inflation kicked in. It didn't really happen. Here's my investment performance on those preferred shares:

	bns	bce	cl	pow
buy price	20.25	22.00	23.39	21.70
sell price	18.71	21.67	24.85	21.00
buy date	11-Aug-09	4-Nov-08	11-May-09	10-Aug-09
sell date	8-Apr-10	23-Apr-10	8-Apr-10	8-Apr-10
net gain/loss	-54.81	155.50	131.13	-4.84
return	-5.41	4.71	11.21	-0.45
annualized	-8.23	3.21	12.33	-0.68

net gain/loss includes dividends and 20$ in trading fees for each security.

The total return weighted by shares per security was 3.46%. Annualized that comes out to 2.36%. Over that period, XBB, a Canadian bond ETF gained about 4% and the TSE gained about 16% without counting dividends or interest, compared to my 3.46% including dividends. So, all in all, not very good for me.

Forget NBG

Forget NBG. The spread of the downturn has created bargains elsewhere, such as Google. NBG's a good bank, but at the end of 2009, it had about 20% of assets exposed to greek gvt debt. That's over 20B euros, about 20x 2009 earnings before taxes. That's a looooong time for write downs.

National Bank of Greece

I took a look at NBG's Dec 2009 annual report to try to determine its exposure to Greek gvt. debt. Including loans to government and agencies, it appears to have 18% of assets in the Greek government. It is also apparently hedging its exposure to Greek government fixed rate bonds by buying German bond futures. Couldn't find any specifics. I hope it was hedging for rising interest rates!

If Greece defaults, then a fair-ish book value for NBG would be 2.89 USD/ADS share (based on a little algebra from the data at reuters.com). According to Reuters, NBG is trading at 2.71, for a P/B of 0.75. I would buy at 2.50, or a P/B of 0.7, and sell at a P/B of 0.8 (2.89 USD). Keep in mind that as the Euro falls, so does the book value. A P/B of 0.7 at today's exchange rate is not necessarily the same share price as a 0.7 P/B at next week's exchange rates.

US Bond Outlook - Update: Stay Away from Junk

In a recent post, I recommended investing in high-yield bonds since they still seemed to have some capital appreciation left. The performance of high-yield bonds is similar to the performance of the stock market as a whole. You can see below that in the last few days, the S&P500 is tanking, and along with it, a high-yield ETF.

So, I changed my mind. Stay out of the high-yield stuff until Mr. Market has calmed down. You might miss a bit of the run-up, but you'll still get a nice yield.