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Update Discounted Bonds

A limit order for a bond filled today.

music selection:  “Here And Now” — Letters to Cleo

Discounted bonds have been good to me. On 2AUG2016 I bought two of the 9.750 1JUN2021 expiry bonds of Enova International.  I paid 84 cents on the dollar as well as 2 dollars in commissions 34.67 in accrued interest.  During the holding period I collected 66.24 in coupon payments.  I sold today for 99.1 cents on the dollar, paying 7.75 in commissions and collecting 17.88 in accrued interest.  The trade was in force for 149 days and yields 48.76% in annualized commissions.

These kinds of yields are frequently available in the discounted bond space and can easily outstrip the return of stocks with lower risk.  I have earned 8,773 in profits from these bonds since I began tracking them on the blog.  That includes my unrealized losses which total 1,858.  The losses may never be realized however.  Bonds that go into bankruptcy often pay out a portion of the amount owed or provide the owners with equity in the debt free post bankruptcy company.  The shares are illiquid but can often see astronomical returns in the space of a couple years.  This was the case for me with Seventy Seven Energy.  I received shares in bankruptcy and the shares are being bought by Patterson at a significant premium, leaving me with a profitable position.  I expect to at least break even on my remaining underwater positions.

Devour your prey raptors!

 

{ 2 comments… add one }
  • financialfreedomsloth December 30, 2016, 6:53 am

    cigar butt investing at is finest! Although I have now a much more relaxed investing approac (which relies heavily on CfD’s, something not available to you Amercians I think) I must admin that your posts really make me want to get a bit more active again…

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