Regarding Goldman Sachs (GS), I today added to my positions in the Preferred Stock Floaters in the Taxable Income Model:
GS PRA (as traded on IB) is GS.PA on Seeking Alpha (where I've written on it) and GS-A on Google Finance
GS PRD (as traded on IB) is GS.PD on Seeking Alpha and GS-D on Google Finance
I have holdings in both in the Taxable Income Model.
Goldman Sachs common stock (GS) is not under-followed. I believe the common trades on the net present value of expected future earnings. The Preferred Stock Floaters are far more suited to my interests. There are fewer people trading them, fewer analysts evaluating them, and the security is an income security. Its intrinsic value is less subject to swings in future earnings.
The risk that had limited my current interest in the Preferred Floaters at the depressed prices until today was a cascading of the SEC case. Preferred is an income product and is less directly tied to swings of Goldman's profits.
I desire Preferred Stock Floaters because they are significantly less subject to interest rate risk. I believe that the interest rate risk which most severely affects traditional bonds is very much under-appreciated by investors. Bank of America's BML PRG is the largest preferred stock Floater in the Taxable Income Model.
The allocation discipline of the Taxable Income Model: "Seeks to mitigate the interest-rate risk posed to the model’s market value by increasing allocations to securities anticipated to pay coupons or dividends of a dynamic nature."
