Bondsquawk’s High Yield Bond Portfolio

 

By Rom Badilla, CFA

Updated on December 19, 2012 to include analysis on DISH 7.875% 9-1-2019. High Yield Bond Portfolio originally posted on December 10, 2012.

In last week’s post, we covered why it makes sense to invest in individual bonds versus using a fund. A fund’s “one-size fits-all” approach can be convenient but may not be suitable for an individual who is looking for a tailored solution toward reaching their investment goals. By choosing to own individual bonds, you will have greater control that could lead to better performance. Furthermore, you should have a better grasp of your investments and where you stand today in reaching your goals.

Below is Bondsquawk’s High Yield Bond Portfolio which consists of 12 bonds, one from each diverse sector.  The model is used to illustrate an active High Yield portfolio that has bonds rated from BB+ or lower. The goal of this model portfolio is total return so both income and price changes are considered in determining the allocation.

CUSIP Company Ticker Coupon (%) Maturity Price ($) Yield (%)* S&P Reason
85375CAX9 Standard Pacific Corp SPF 8.375 05/15/18 116.00 4.97 B Analysis
704549AK0 Peabody Energy Corp BTU 6 11/15/18 105.25 4.97 BB+ Analysis
48020UAA6 The Jones Group JNY 6.875 03/15/19 103.81 6.13 B+ Analysis
25470XAB1 Dish Network Corp DISH 7.875 09/01/19 118.50 4.64 BB- Analysis
12543DAL4 Community Health Systems CYH 8 11/15/19 108.88 5.89 B Coming Soon
80007PAL3 SandRidge Energy SD 8.75 01/15/20 108.56 6.30 B Analysis
688225AD3 Oshkosh Corp OSK 8.5 03/01/20 111.13 4.97 BB Analysis
880779AX1 Terex Corp TEX 6.5 04/01/20 106.88 5.01 B+ Analysis
81180WAF8 Seagate Technology STX 7 11/01/21 104.81 6.08 BB+ Analysis
852061AM2 Sprint Nextel Corp S 11.5 11/15/21 136.25 6.16 B+ /*+ Coming Soon
345370BJ8 Ford Motor Co. F 8.875 01/15/22 126.93 5.13 BB+ Analysis
983130AT2 Wynn Resorts WYNN 5.375 03/15/22 106.31 4.32 BBB- Coming Soon
Bondsquawk High Yield   Portfolio 7.80 7.4 Years 112.78 5.38

* Yield shown is the Yield to Worst measure which is calculated by using the lower of either the Yield to Maturity or the Yield to Call on every possible call date.

Notes

  • CYH 8.0% 11-15-19 is currently callable. The next call date is 11-15-15 at 104.00
  • SD 8.75% 1-15-20 is currently callable. The next call date is 1-15-15 at 104.375
  • OSK 8.5% 3-1-20 is currently callable. The next call date is 3-1-15 at 104.25
  • TEX 6.5% 3-1-20 is currently callable. The next call date is 4-1-16 at 103.25
  • STX 7.0% 11-1-21 is currently callable. The next call date is 5-1-16 at 103.50
  • WYNN 5.375% 3-15-22 is currently callable. The next call date is 3-15-17 at 102.688

Information and market quotes on the bond investments are provided by Trade Monster’s Bond Trading Center.

The portfolio can change at any time. Bonds can be removed if price targets are achieved or original thesis is no longer valid. Analysis on current bonds will be posted along with changes to the portfolio on Bondsquawk.com. Be sure to visit Bondsquawk.com and subscribe with your email (on the side bar of the home page) to receive updates as well as other bond portfolio strategies and insights.

Guidelines

High Yield Ratings (BB+ to C- ratings by Standard & Poor’s Ratings Services at time of inclusion)

1 to 30 Years Maturity

Taxable Bonds

Fixed Rate Coupon

U.S. Dollar Denominated Only

Disclaimer
The above content is provided for educational and informational purposes only, does not constitute a recommendation to enter in any securities transactions or to engage in any of the investment strategies presented in such content, and does not represent the opinions of Bondsquawk or its employees.

 

 
Bondsquawk’s High Yield Bond Portfolio

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6 Comments

  1. Amir F. says:

    Hy portfolio managers like to buy bonds with a price lower than the call price.

    • Rom says:

      Hi Amir,

      The higher cash flow from the coupon justifies the premium dollar price. This is reflected in the Yield calculation. Check out our article found on our website that explains the importance of using Yield to Maturity calculation. At the end of the day, a higher Yield to Maturity is all that matters.

      As for bonds with the call feature, the Yield shown is the Yield to Worst measure which is calculated by using the lower of either the Yield to Maturity or the Yield to Call on every possible call date. So if you are concerned of the early call date, the yields which are still positive given their premium dollar price reflect that possibility.

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