Two Ways To Play: Yale Goes Shopping for Debt
Strengthen your portfolio in good times and bad.
The Yale University endowment fund is starting to buy distressed debt, according to Bloomberg. After losing $5.9 billion in 6 months, the fund (run by David Swensen) sees "extraordinary opportunities in the credit world."
Swensen is a legend, both at Yale and in the investment community. He's increased Yale's endowment fund from $1 billion in 1985 to $22.9 billion in June 2008. Yale's fund, like nearly everything else, has run into trouble of late, losing $5.9 billion over the last 6 months.
Distressed corporate debt may be just what Yale's endowment needs; Swensen believes that it can provide "equity-like" returns. Everything is priced attractively (at least to him) from bank loans to bonds (both investment-grade and non-investment-grade).
If Swensen's call is right, it may be time to start paying attention to the debt markets.
From the Bull Pen: Sticking with the theme from this morning's article. Financially healthy big-cap companies could outperform in 2009. Take a look at Johnson & Johnson (JNJ); the stock has just broken though its 50 DMA. Look for an entry around $60 then slap on a two point stop loss.
From the Bear Cave: Metlife (MET) has doubled off its lows during the past month. The stock could be in for some weakness. Those bearish could look to sell it on a move to $38, use a tight 1-point buy stop.
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