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Pimco High Income Fund Pimco Hi Message Board

  • newibminvestor newibminvestor Dec 19, 2009 1:50 PM Flag


    Can some explain in layman terms the following plzz??

    I just got the little booklet on PHKs investments and holdings.

    I didnt see anything playing 14%. I went through their bond holdings, paper, notes etc.

    How can they be getting an average of say 8% on everything and be paying 13, 14, 15%?

    It really makes NO sense to me, a layman in this.

    I am thrilled to be making over 14% return on my money and more on my principle but,,,,,,

    what gives here?

    How can they take in 8% and pay us 13 or 14 %?

    Thanks in advance!

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    • As we are chatting this stock is close to $12.00


      I think at $12.50 I will sell it all.

      It will be a great year for me in this stock. Dividend plus appreciation.

      I am pinching myself. I agree, this is a crap shoot but once in a while the house loses and the guest wins.

      Thanks for all the responses!!!


    • jdfunnell@sbcglobal.net jdfunnell Dec 20, 2009 12:10 AM Flag

      Dig deeper.

      Look at the leverage, which, though lower now than before, costs circa 20 basis points.

      Look at the CDS positions, which used to be a detriment and are now a plus.

      Look at the ROC, meaning that's not real return, but might not have happened in the past two dividends.

      If you own this, you need to understand what you own.

      If you do not, you have two ways to go: 1) buy something you understand, or 2) close your eyes and conclude that PIMCO and Bill Gross might know more about the bond market and how to trade it in real time.

      I don't own this, but I own gobs of PTY...........Dave

    • I wouldn't own anything I didn't understand. It is precisely because of people like you who keep buying this (high yield chasers) that this overpriced fund keeps getting even more overpriced. How long can this last?

      Here are the facts (as of today): Monthly distribution is $0.1219 per share. Annual distribution is hence $1.46 per share. The value of the portfolio (NAV) is 7.86 per share. So they're distributing 18.61% of the portfolio per year. Investors off-course only see 12.5% distribution because they're paying much more than 7.86 for the portfolio. In fact they're paying almost 50% more than that - 11.7!!! So you're paying 50% more than what it would cost you to buy the bonds this fund owns outright. 50% markup for a basket of generic bonds priced at 90%+ with an 8.34% annual interest payment? In other words you're buying $100 of junk debt that matures in 7 years on average and pays $8.34 pear year for those seven years and you're willing to pay $135 up front for that cash flow stream? What could possibly justify this insane pricing?

      Seems like an awful strategy, but IT KEEPS WORKING as there are so many fools out there who keep buying and pushing the price up...

    • Take the square root of pie. Divide by 13.3, square that, then. Hey, I don't know. I've been wondering the samething for the past year.

      Add to that the Alpha articles, questioning why phk is even standing. I like when a finacial channel does a story on high yield. They talk 5, 6, percent.
      Phk closed end fund, or others are not mentioned.

      How about short interest numbers. Losing money and paying the dividend. What the heck is that about!
      But the numbers don't lie.

      I'm here because of Bill Gross. What can one say about the guy. He's smart, well respected. I know others feel different.

      I'll be watching too. Seeing what people know.

      Good trading.


      p.s I'm up 18%, yielding almost 15%, ruff duty!

    • It's pretty simple; they didn't pay face value for the bonds. If you pay $500 for a bond paying 8% on par value, your return is 16%. So why would someone sell it to you at that price? Because the economy is going in the tank and the company will probably go belly up and the bond will be worthless. Get what you can out of it now.

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