Jul

23

Junk bonds aren’t as junky as investors think – which makes them a good contrarian buy

Tim Melvin writes:

I was looking at BB and BBB shorter-term bonds yesterday…4-6% on five years and less. I prefer to own the bonds because it has a stated maturity….If junk market does go south I still get paid my principal at par at maturity.

Junk closed end fund discounts still well below levels that marked turning points in the past so more volatility and downside not out of the question.

Michael Brush responds:

Thanks Tim always happy to hear your views and I thought of you when I posted that here.

Ethics being what they are, people post our work. Also for future reference we do formally share with MSN so you can often find columns there. And with MW you get a few free hits so you can get around the paywall to some degree by using a different browser.

The T. Rowe manager is overweight CCC for the higher yield and greater rebound potential in a (junk and overall) market recovery, which does seem to be under way now.

Tim Melvin comments:

a gutsy move in the CCC but big returns if he is correct about broad rebound. I just want more one more year of 15%+ junk yields from decent businesses ala 2003 and I promise not to piss the money away this time.

Michael Brush responds:

P*ssing money away can be a lot of fun, but I don’t know what you bought and I am definitely not asking.

Kim Zussman scores:

"decent businesses ala 2003 and I promise not to piss the money away this time"


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