Monday, October 4, 2010

Back to the Game

Just returned from vacation on Hawaii. Fresh and rested, I'm back to the game.

First order of business, made some changes to my fixed income positions. Out goes Wells Fargo (former Evergreen) Advantage Income Opportunity Fund (EAD). Fund curently trades at more than 5% premium to its NAV, that's too much. I'm really surprised with the rush to buy any corporate bonds which I see in the last four months. I'm all for high quality corporate bonds, but junk is bought in high quantities as well. Since EAD holds mostly junk, I don't see any reason to hold it in risky environment.
In comes more of American Capital Agency Corp. (AGNC). This is a REIT with 20% yield. There is a small risk, this company is about 800% leveraged, but it's risky only if interest rates are going up, which is highly unlikely in the nearest 12 months.

Full disclosure: at the time of publication author had a long position in AGNC and no positions in EAD.

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