Tag Archives for " trader mailbag "

Trader Mailbag: What’s the Deal with PHK?

Hi Mike, You have been in PHK for a long time. What is the reason for the heavy selling? -Tom Hi Tom, Thank you for the question. Indeed, I have been in the PIMCO High-Income Fund (PHK) for a long time and it has been clobbered, dropping from a peak of $10.15 in August to $8.55 today. PHK is a closed-end high-yield bond fund that uses leverage to juice its returns. Closed-end funds are significantly more volatile than plain-vanilla ETF’s and mutual funds. And PHK has been trading at a giant premium to net asset value (NAV). So with the high-yield market coming under pressure on the decline in oil prices and pre-election jitters, PHK has gotten slammed, with that premium to NAV closing hard. As I’ve discussed before, I only like buying volatile closed-end funds like PHK on extreme down days. Why? Because they get absolutely destroyed, creating attractive buying opportunities. As far as my long-term strategy with PHK goes, it’s a buy and hold position for me, and I just leave it alone with dividends reinvesting. That helps cushion me against the short-term volatility, which can be pretty extreme. I’d only consider another outright buy on a dip below $8.