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  #11  
Old 11-26-2007, 11:32 PM
DesertCat DesertCat is offline
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Default Re: Conservative High Yield Investments

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oxymoron by definition

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QFT

Also notice OP's name is "Stuck in PGH" and he mentions PGH stock . . .

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He's a high limit player out of a PittsburGH.
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  #12  
Old 11-26-2007, 11:41 PM
stuckinpgh stuckinpgh is offline
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Default Re: Conservative High Yield Investments

superwhale - yes first thing I chuckled about when I saw the symbols

spex - this sounds interesting. Do you have any links where I can read more about buying discounted paper

I'm sure many of you agree that the stock market isn't looking too promising in the near future. I certainly understand "the long run" will produce good results in the market, but knowing that I will immediately lose money the day I invest more is really causing me to hesitate there.

edit: as always, Google is your friend. Would still like to see anymore links you may have.
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  #13  
Old 11-27-2007, 02:55 PM
spex x spex x is offline
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Default Re: Conservative High Yield Investments

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spex - this sounds interesting. Do you have any links where I can read more about buying discounted paper


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http://www.noteworthyusa.com/
http://www.creonline.com/cash-flow/
http://www.papersourceonline.com/

All very good.
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  #14  
Old 11-27-2007, 04:00 PM
Groty Groty is offline
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Default Re: Conservative High Yield Investments

I'm looking at income oriented closed end funds that trade at significant discounts to NAV. During November and December, the discounts typically widen out from tax loss selling pressure, so now is a good time to consider them.

DHG is one that I'm starting to buy. It yields almost 10%, has a monthly dividend payout structure, and recently traded at a 15% discount to NAV.

It's managed by value investor David Dreman. The portfolio is 80% invested in yield producing securities like corporate bonds and high yielding dividend paying stocks. The other 20% is devoted to a long/short hedged equity strategy. The fund is permitted to take leverage up to 33%, but at Sept. 30 they had used no leverage. It seems odd to me to combine a credit focused strategy with a long/short equity strategy. But David said on the most recent conference call that before they launched the fund, the strategy was back-tested to 1970 and they found it produced average annualized returns of about 15%. The long/short part of the portfolio is the drag on performance this year because the fund is short high PE stocks and long low PE stocks, which doesn't work well when growth outperforms value as it has this year.

The fund has consistently over-earned the payout, so the board is considering increasing the dividend. In addition, the discount to NAV prompted the board to authorize a 5% share buyback, and they claim to be in the market buying back the stock.

One final note, when closed end fund discounts to NAV get sufficiently large, activist hedge funds have in the past taken a sizeable stake and forced the fund manager to take actions to reduce the discount typically either by open ending the fund, tendering for shares, or liquidating it. The fund manager is often resistant to these suggestions, so the proxy fight or whatever the activist must endure to force the change means the discount has to be large enough to make the fight worthwhile.

I think DHG may become the target of an activist. The discount to NAV is large enough. The size of the fund is large enough. And the securities in the portfolio are liquid, easily tradeable securities which increases the likelihood the arbitrage opportunity from reducing/eliminating the discount to NAV can be realized. And you get paid 10% while waiting for someone to come in and shake things up.
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