Corporate Bonds With Big, Solid Yields
In an era where everyone is chasing yield, corporate bonds are a great place to look for safety and total return.
That's one opportunity where if you're comfortable with the name and the sector and you're looking for some kind of turnaround play while the rest of the markets are moving higher, that's one example where you know the bonds are down significantly. And if you make the right call, it can be a total return play.
And there are plenty of ideas again in the coal space; they've gotten beat up pretty good. Steel, anything commodity-related. If you see any kind of turn in China, if NatGas continues to increase, some of these other pockets certainly can offer total return plays, as well as just your state of the yields to maturities that you're looking to achieve.
Gregg Early: Right. And I guess the steel sector, for example, that's just essentially an economic play. Once growth starts again, then you're looking at people starting to use steel again. But it's down now and you can take advantage of that probably better on the fixed income side at this point, at least from the standpoint of being more of a stakeholder in the company than you would if you were just an equity holder.
Chris Heffeman: Absolutely. I had mentioned earlier MT bonds are yielding 8% on the long end of the curve. You have AK Steel (NYSE:AKS) bonds and United States Steel (NYSE:X) bonds, more domestic oriented, that are yielding upper single digits, lower double digits.
There are opportunities, and what we do here at SumRidge Partners is we try to combine ideas for every type of account. A lot of the accounts here that are looking for just generic, "give me relative value ideas versus the rest of the sector. I don't need to make a ton of money on a total return play, but just give me something that looks cheap and give me the reasons why," as well as total return plays.
What's been hit very hard? Where can I achieve equity-like returns where you're capturing principal appreciation as well as the income that you're getting for single, upper single-digit, double-digit type returns that I was used to for so many years, when equities were rising significantly and when yields in fixed income were much higher? That's what we try to do here.
Look at the report: there are 25 opportunities in there that I mentioned. If you're familiar with the company or the industry and you're bullish on it, or you think at least rates are going to stay low for years and risk is low because they're being held up by the central banks around the world, there are certainly some opportunities out there for you.Editor's Note: This article was written by Gregg Early of MoneyShow.
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