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Genworth Financial, Inc. Message Board

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  • robchadwick robchadwick Mar 24, 2009 5:37 PM Flag

    GNW bonds

    Thanks.. seemed like a no brainer to me, but who knows these days.. Small chunks of BBB bonds out there with short maturities still seem to pop up, especially in the financials.. I'm sure there is a lot more potential to be made trading the underlying stock, but I feel OK about spreading out into short maturity bonds in companies that have what look to be serviceable balance sheets.

    I picked up a smaller quantity of bonds in $1000 chunks a couple of weeks ago that are backed by CIT at 16% YTM in November if I remember correctly. CIT makes me a little more nervous than GNW, but they've switched to a bank holding company, haven't yet eliminated their dividend, etc.

    Short term though, especially May timeframe, GNW seemed like a pretty safe bet as far as bonds go.

    Thanks all

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    • rob

      you might be interested in the 25% return available from ge for jan 2010

      not an actual bond but in effect works the same way as a zero coupon bond were you know in advance what your planned selling price is.

      buy 1000 shares of ge for $10.50 or $10,500 and then immediately sell the jan $10 2010 covered call for the $2.60 bid price to get back $2600 of cash immediately

      withe the commissions your total cost on the 1000 ge common shares is $8000.

      as long as ge is over $10 in jan, you will be taken and have made a $2000 profit on your $8000 investment...thats 25% for 10 months

      btw you will get the small dividend that GE still pays on their common shares as well.

      your $2000 gain will be a 2010 TAX event even though you get that portion TODAY.

      if exercised you will have a $2600 gain on the option sale and a $500 loss on the sale of the common shares.

      ideally the stock closes at $9.95 and you still own the shares to repeat the process for jan 2011.

      its kinda funny that bond investors by default have a known time and sale price target and the only decision they have to make is what price and time to BUY.

      most stock investors buy NOW and dont have a specific time and exit plan.

      jb

 
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