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PIMCO Corporate & Income Opportunity Fund Message Board

  • marvelmeister2 marvelmeister2 Jan 31, 2011 6:54 PM Flag

    15% premium- Pigs gets slaughtered

    I have to say that any long not gratefully booking profits here and thanking their lucky stars for that huge Gross pump is just hopelessly greedy and begging for their windfall profits to get taken away by the market...and most likely also suffers from recurrent episodes of greed that generally curtail their market success.

    Does anyone really expect this thing not to drop at least .50 (quite probably more than that...possibly a lot more..but at least that) once the effects of the pump dissipate?

    Personally I'm short here(looking for low/mid 18s cover, depending on how it trades)- so of course I'm biased. but I honestly can't imagine what long are thinking here, and why everyone isn't heading to the sidelines until the pump has run its course (and then look for re-entry if one was so inclined).

    What's the bullish argument here? Not wanting to book a taxable gain..and instead holding for LTCG? (and that only really applies to longs looking to hold for more than year and with with very, very low cost basises). that's about all I can think of..as otherwise the short term risk/reward here is just horrible imho (upside likely very limited with a huge chance of an imminent .50-80ish correction).

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    • If you are going by premium to NAV why aren't you shorting PHK instead? Of course, then look how long that bloated premium has survived and you might think twice about your chances of success here with a relatively modest 15% premium altho "weaker hands" - or maybe just more prudent ones - seem to hold PTY.

      Also, PTY carries the risk, from the short side, of a dividend increase since it well over-earns its monthly dividend, unlike PHK which seems to do some creative accounting to overcome its frequent section 19 notices.

      Of course, you are not alone in your short view. Two months in a row some of my dividend payments have been "substitute payments", payments by shorts.

      • 2 Replies to theseriousinvestor
      • jdfunnell@sbcglobal.net jdfunnell Feb 2, 2011 12:08 AM Flag

        If you are getting paid by "shorts", that means your broker has loaned out your shares.

        When they loan out the shares, they get paid interest for it. You should ask them to pay you that interest rather than they free-riding your shares.

        Alternately, you could tell the broker you do not want your shares loaned out for shorting.

        Or you could put in a good-til-cancelled order to sell the shares at, say, $35, which would force them to un-borrow-out your shares.

        Bottom line, your broker is making $$$ on your shares...and you should be making that $$$, not them. Seriously...........Dave

    • I sold 2/3 of my PTY at 18.71. Feeling pretty stupid, but I agree that the premium is too high and is going to have to adjust soon.

    • Agreed! Someone must expect a dividend boost. Still If so, PFN just as likely for the dividend boost and much less risk as premium to NAV is relatively small.

      • 1 Reply to dfbraham69
      • jdfunnell@sbcglobal.net jdfunnell Jan 31, 2011 7:34 PM Flag

        I suppose the bull case here would revolve around some thought process that includes some level of special dividends coming out annually and putting a somewhat high annual return on that number.

        For example, if you took 50% of the average special for the past two years, added it to the $1.38 and said you wanted the two to give you 8% a year, then you would be willing to pay $21.25 to own this.

        That being said, last summer when this ran up, I sold 40% of our position at $17 and put in an order to buy it back lower. It took four months to fill, but it did, at $15.76.

        I just sold those shares again at $18.40, having reaped two dividends and the special in 2 1/2 months.

        (The original signal to sell was 17% premium to NAV.)

        I have GTC orders to buy the shares back in the mid-16's. It might take six months to fill, but I'm figuring angst will show up some time, and the missed dividends........well, the cap gain alone is 23 months of dividends, so I can afford to wait.........Dave

 
PTY
14.53-0.01(-0.07%)Jul 2 4:02 PMEDT