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

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
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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