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Traders Beware: Potential Buying Opportunity In A Leveraged Bet On High Yield

Published Mon, 17 Sep 2018 12:31:43 -0400 on Seeking Alpha

Main Thesis Between an expensive financing arrangement and a steadily declining distribution, there are a lot of fundamental issues with this closed-end fund. Considering the potentially maturing business cycle and the risky proposition of junk bonds, I cannot recommend this fund in a buy and hold strategy. Due to the widening discount to NAV, however, there may be a short-term trading opportunity if you’d like to bet on a recovery in the market price. Notwithstanding the inefficiencies of the CEF market, this is a risky strategy that will result in a negative total return if the trade goes against you.
The Neuberger Berman High Yield Strategy (NHS) Seeks a positive total return by investing in short duration high yield bonds Enhances returns using leverage Diversified holdings with exposure to various industries Assessing the Distribution
(Source: Original Image - Data from Yahoo Finance)
Because bond yields are still quite low, investors have been mostly forced to look elsewhere for income. Because of intraday trading and their ability to borrow at short-term rates, closed-end funds have been a popular pick to deliver income. With the benefit of leverage, this fund has offered a very good trailing 12-month yield of 7.23%. While most income investors would like to see more consistent distributions if they’re relying on their portfolios for income, yields over 7% are sure to pique your interest if you’re unsatisfied with what a core bond strategy (LQD)... Read more

Stock name Last trade   P/E Earnings/Share Dividend/Share Dividend yield
FRONTIER COMMUNICATIONS 1.15   0.0 -58.14 2.40 201.68


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