The Motley Fool Discussion Boards

Previous Page

Investing/Strategies / Bonds & Fixed Income Investments


Subject:  Re: Williams Clayton’s 7.75’s of  Date:  2/4/2013  3:38 AM
Author:  howardgt Number:  34755 of 37057


Yeah, Avaya’s price movement over the last 6 months was great for trading. Back and forth between 80 and 95 a few times. Congats on catching the cycles. But with the wide spreads and the narrow channel, I guess, like you said, it’s more like scalping than trading.

Actually, I’ve sometimes thought that I should take a small side trading position in some of my bond holdings. I’ve noticed that bond prices (unlike stocks) are not very efficient and react slowly to news. Many times after favorable earnings reports were announced, I was able to buy the bonds at prices that did not yet reflect the good news. Sometimes it took days for prices to adjust upwards. But of course we are in a bull market now and prices are near their highs, so I don’t know for how much longer this will continue to work.

You said you use some-sort of “alert algo” program. A few years ago, I considered writing a program script to scrape web screen data and try to analyze the results, but I never got around to doing it. Did you write your own code or are you using some tool and buying data? I assume you are happy with your results.

I mentioned that I thought a 43% payoff for Avaya made it a poor risk/reward proposition. This is because I compared it to my DEXO 12’s of 17 (cusip 25212WAA8). These are actually PIKs that are now paying 7% cash and 7% PIK and trade below 40. I bought my first lot in the 60’s and again in the high 30’s after their merger agreement with SPMD. Both companies have real trashy balance sheets (like Avaya), but they do have positive cash flow. If the merged entity can survive past 2017, I stand to make 3.5 times my money. I doubt I will get my principal back, but I’m hoping for some sort of exchange at maturity. Sort of what I expect with Avaya, but with much better payoff odds for DEXO. I will monitor future earnings to see if they can continue paying off their debt. If things look good, I will add more. For now I’ll just hold my position and clip my 7% coupons.


Disclaimer: I’m not advocating anyone buy DEXO. I’m just comparing payoff ratios.
Copyright 1996-2021 trademark and the "Fool" logo is a trademark of The Motley Fool, Inc. Contact Us