PRHYX PAXHX STHYX VWEHX GSHIX VAGIX JAHYX PHYDX NHFIX PFL PFN PHK
Above is a list of a number of High Yield Bond Funds....copy and paste them to a new YHOOO portfolio and you can follow how other funds are performing...you will notice that all are at rock bottom...phk is not
I agree with your analysis completely.
I will add a point also. If you buy a fund like PHK at a Discount, you can use a 10% (or so) Premium as a targeted sell point.
I did this last month on a number of PIMCO funds, which never should have sold at such a high Discount or Premium. (Take a look at PCN).
If you look historically, when a Closed End Fund is selling at a Premium, it is usually not a good time to be holding the fund.
How many stocks come with a built-in sell metric!?!
The fund must distribute the bond income (coupons) and any capitial gains (unlikely there is any) at the end of the fiscal year for taxing purposes.
So, the dividend of ALL collected income must be paid at some point in the year, probably late Dec, if that is PHK's year-end.
I have a different perspective on PHK, having only purchased it recently, and precisely because of the negative sentiment on high-yield bonds. I'm holding a number of HY bonds directly and all of the market values have fallen a lot, yet most are still paying interest and will probably reach maturity uneventfully.
A closed-end fund like PHK is a good way to get a well-diversified collection of HY bonds, especially when the price follows the NAV down. Unlike an open-end fund, the managers of PHK didn't have to liquidate on the way down. So except for some trimming to reduce the restore the 200% ARPS coverage, they can hold on to most of the bonds, until maturity if necessary. Even if this recession sees a 20% default rate on HY debt (much higher than normal), most of the original asset value in this fund will eventually be available to the holders.
The dividend interruption is an even better entry point for buying, since the price has fallen well below the NAV, yet the interruption is likely to be temporary.
Anyway, that's how I see it.
Yes, I am aware of the argument against chasing yield. A lot of very educated people have stressed that.
I will (and did) admit that a portion of my income-oriented portfolio, rightly or wrongly, was (and somewhat still is) in high-yield bond funds. I do want to stress that word "portion," though.
It is a mistake to invest in High Yield Bonds for income. You are chasing yield if you do.
It is a mistake to sell PHK when the dividend was suspended for the same reason.
Capital appreciation is the primary reason to invest in junk bond. That comes when risk spreads get high, like now. When spreads are low, yield chasers buy, when spreads get high, yield chasers sell.
Why were you liking the risk equation when spreads were 4-5%, but hate now at 15-17%? You are finally getting paid for the risk, yet you sell. DUMB! Or maybe not...if you buy it back.
Here's a Yahoo! YTD chart of the first five on your list, plus MHY, which I have been partial to on this site (and happen to own, as I do VWEHX too).
These are market prices. I kept with your first five for no other reason than to avoid overloading the poor Yahoo! chartmaker:)
Anyway, the chart compares the trading prices of those six funds with PHK.
If I am doing this right, PHK looks pretty dismal in comparison, don't you think?
Here is a question I have been dying to get answered,
and I am not really focusing on you, but perhaps you
will be honest enough to answer.
What could possibly be your motivation for posting here
when your sentiment is "sell"? Why even bother?
I didn't really think that anyone would be short a bond
fund, or at least not an individual investor just trying to
save for the future, or earn income in retirement.
So are you really just a nice guy trying to save us from