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Friday Fixed Income

Update discounted bonds.

music selection:  “Operator (That’s Not The Way It Feels) — Jim Croce

Each Friday, I explore opportunities in the fixed income investing space.  Sometimes, this is closed end funds trading at a discount to NAV.  Sometimes, it is long stock ideas that turn up as an unintended consequence of my bond research.  Today, I’m reviewing my open discounted bond positions and my open limit orders.

Revlon has a 5.750 coupon bond with 15FEB2021 (CUSIP: 761519BD8) maturity outstanding.  It has traded with some volatility including some attractive dips deep below par.  I purchased 9 units on 5JUL2018 at 75.5000 cents on the dollar.  This bond has an indicated yield to maturity of 20.005%.  Current price at market close is 83.5000, resulting in unrealized capital gains of 160 dollars.  I remain eligible to collect the underlying coupon payments while I wait for the price to revert to par.

Monintronics International has a 9.125 coupon bond with 1APR2020 (CUSIP: 609453AG0) maturity outstanding.  This bond has recently traded deeply below par making for an attractive risk to reward setup.  I purchased 10 units on 2JUL2018 for 65.0000 cents on the dollar.  The bond has an indicated yield to maturity of 44.796%.  Current pricing is at 75.2480, resulting in unrealized gains of 1,025 dollars.  The yield on just the coupons for this bond is over 14% and I expect to do very well here.

Community Choice Financial has a 10.750 coupon bond with 10MAY2019 (CUSIP: 20367QAB3) maturity outstanding.  It has traded well below par.  I purchased 9 units on 3JUL2018 at 75.0000 cents on the dollar.  This bond has an indicated yield to maturity of 53.454%.  It currently trades at 79.9400, providing me with 445 dollars in unrealized capital gains while I collect the underlying coupons.

Amtrust Financial has a 6.125 coupon bond with 15AUG2023 (CUSIP: 032359AE1) maturity outstanding.  I have set a good till canceled limit order for this bond at 95.000 cents on the dollar.  This is a bond that regularly trades between 95 cents and par.  I want to buy at 95 and sell at 98 repeatedly.  A fill today would result in an indicated yield to maturity of 7.517%.  Current pricing is 97.1660 or 2.28% above my entry price.

CEC Entertainment has a 8.000 coupon bond with 15FEB2022 (CUSIP: 125137AB5) maturity outstanding.  My good till canceled order is open at 85.0000 cents on the dollar.  An immediate purchase would result in an indicated yield to maturity of 14.568%.  Today’s closing price was 95.2500 or 8.53% above my entry price.

Pyxus International (formerly Alliance One International) has a 9.875 coupon bond with 15JUL2021 (CUSIP: 018772AS2) maturity outstanding.  I have set a good till canceled limit order for this bond at 87.0000 cents on the dollar.  An immediate fill would result in an indicated yield to maturity of 16.624%.  Current pricing is 97.5620 or 12.14% out of the money.

Ravenous lizards playing the “home game” version of Financial Velociraptor are cautioned against chasing these bonds higher.  Pay no more than my entry price or limit price.  There is a lot of euphoria in the high yield bond space right now with the spread between corporates and treasuries near all time lows.  Patience while stalking prey is the raptor way.

Devour your prey raptors!

{ 2 comments… add one }
  • Chris B September 18, 2018, 8:00 pm

    What caused the change of heart in Revlon? Did the bond get cheaper? In April you didn’t like them.

    • The Lizard King September 19, 2018, 12:14 am

      Investing in stocks is very different from investing in bonds. A stock can be a dog while its bonds make a great investment. That’s where I am with Revlon. Equity holders are not likely to set the world on fire with REV. But the 15FEB2021 maturity bond holders have a near mortal lock on 20% annualized gains when buying around 75.

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