Goldman sachs preferreds, screaming buy?

Goldman Sachs (GS) preferred B shares (GS-PB on Yahoo Finance) currently trade at $22, about 12% below par ($25). And they pay a fixed dividend of 6.5%. The shares currently yield around 7.3% with perpertual maturity(GS can redeem in 2010 you get $25)
I dont think Goldman is going under in a million years, I dont care what they are hiding

 

Why not the A, C, or D shares???

 

Don't listen ot the other guy. I 100% agree with you Daal, nice call.

 

I was asking a question. What's wrong with the other GS preferred's?

I wasn't endorsing a purchase of them.

 

Are the dividends cumulative? The credit crunch would be a nice excuse to skip a payment and not worry about it if the shares have noncumulative dividends.

 

if they are not cumulative its not worth it i say. Are they also convertible to common shares?

 

Have you read the prospectus?

I just looked at the prospectus for the A/B/C/D series preferred stock, and they are ALL NON-cumulative.

Not worth it I say.

If it was cumulative I'd jump on the Series D Libor + 67bp (minimum 4%) preferred for ~ $18 in a heartbeat.

 

Thing is, its all about relative yield. There are ton of corporates that also aren't going under in a 100 years but are not fetching tremendous yields. GS preferreds just one of 100's.

This is why stocks fall every day. Fixed income markets so screwed up and there are so many presumably "cheap" securities out their with huge current yields that really it makes no sense for anyone to buy shares of stock in a company right now.

 

Precisely correct! In addition in a recession, some corporations can be bankrupt. A lender is always in a better position than an equity holder in a bankruptcy. So either bonds have to go up, and equities have to go down before this bear market ends.

 

This situation is not as uncommon as you think. Honestly, unless you trying to move big dollars, this trade is not worth it. I tried smth like this back in 2005, when I look back, the wait was nowhere worth the return, although the risk was quite low.

A lot of hedge funds do just these types of trades as their core strategy, so my guess is that they are staying clear of the financials for now. As for Goldman going under, it can happen easily within 5 years. They have few real assets, most of it is just paper.