2 High Yield Bond CEFs With Recent Intensive Insider Buying

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 |  Includes: BIT, GHY, JNK
by: Markus Aarnio

The SPDR Barclays Capital High Yield Bond ETF (NYSEARCA:JNK) was trading below $20.00 in March 2009. The index is currently trading at $38.99, or more than 100% above the low made in March 2009.

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In this article, I will feature two high yield bond funds that have seen intensive insider buying during the last 30 days. Intensive insider buying can be defined by the following three criteria:

  1. The stock is purchased by three or more insiders within one month.

  2. The stock is sold by no insiders in the month of intensive purchasing.

  3. At least two purchasers increase their holdings by more than 10%.

1. Prudential Global Short Duration High Yield Fund (NYSE:GHY) invests in high yield "junk" bonds, which are subject to greater credit and market risks; derivative securities, which may carry market, credit, and liquidity risks; foreign securities, which are subject to currency fluctuation and political uncertainty; and emerging markets securities, which are subject to greater volatility and price declines.

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Insider buying by insider (last 30 days)

  • Stuart Parker purchased 1,500 shares on June 20 and currently holds 1,500 shares or less than 0.1% of the company. Stuart Parker is Principal Executive Officer.
  • Scott Benjamin purchased 1,000 shares on June 20 and currently holds 5,000 shares or less than 0.1% of the company. Scott Benjamin serves as a director.
  • Richard Greenwood purchased 2,000 shares on June 6 and currently holds 2,000 shares or less than 0.1% of the company. Richard Greenwood is Head of Research.
  • Terence Wheat purchased 750 shares on June 4 and currently holds 1,500 shares or less than 0.1% of the company. Terence Wheat is a portfolio manager.
  • Robert Spano purchased 2,000 shares on June 4 and currently holds 2,000 shares or less than 0.1% of the company. Robert Spano is a portfolio manager.

Insider buying by calendar month

Here is a table of Prudential Global Short Duration High Yield Fund's insider trading activity by calendar month.

Month Insider buying / shares Insider selling / shares
June 2013 7,250 0
May 2013 9,000 0
April 2013 0 0
March 2013 1,750 0
February 2013 1,000 0
January 2013 0 0
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There have been 19,000 shares purchased and there have been zero shares sold by the insiders this year.

Financials

The company reported the fiscal 2013 third-quarter, which ended April 30, financial results on May 29 with the following highlights:

Net Asset Value $19.17 per share
Net investment income $14.6 million
Net increase in net assets from operations $24.5 million
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Risks

The fund invests in high yield "junk" bonds, which are subject to greater credit and market risks; leveraging techniques, which may magnify losses and increase portfolio expenses; derivative securities, which may carry market, credit, and liquidity risks; foreign securities, which are subject to currency fluctuation and political uncertainty; emerging markets, which are subject to greater volatility and price declines; liquidity risk, which exists when particular investments are difficult to sell; currency risk is the risk that a value of a particular currency will change in relation to other currencies; and small- and mid-cap issuers, which may be subject to more erratic price and market movements than large-cap issuers.

The fund may frequently trade at a discount to its net asset value and contains anti-takeover provisions that may delay, defer or prevent a transaction or a change in control that might otherwise be in the best interests of the stockholders. Fixed income investments are subject to interest rate risk, where their value will decline as interest rates rise; and credit risk, which is the inability to make timely principal and interest payments. The fund's net asset value may decline over time to the extent that the fund buys fixed income securities at a premium.

My analysis

There have been five different insiders buying the shares and there have not been any insiders selling the shares during the past 30 days. The fund has a Net Asset Value of $18.43 per share as of July 3 and the fund has a dividend yield of 8.52%. I believe the fund could be a good pick below the Net Asset Value based on the intensive insider buying.

2. BlackRock Multi-Sector Income Trust (NYSE:BIT) is a closed-end fund incorporated in the USA. The fund's primary investment objective is to seek high current income, with a secondary objective of capital appreciation. The fund will invest in loan and debt instruments and other investments with similar economic characteristics.

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Insider buying by insider (last 30 days)

  • Richard Cavanagh purchased 100 shares on June 13 and currently holds 100 shares or less than 0.1% of the company. Richard Cavanagh serves as a director of the company.
  • Robert Crothers purchased 750 shares on June 10 and currently holds 750 shares or less than 0.1% of the company. Robert Crothers is Vice President of the company.
  • Akiva Dickstein purchased 500 shares on June 4 and currently holds 500 shares or less than 0.1% of the company. Akiva Dickstein is Portfolio Manager of the company.
  • John Vibert purchased 5,500 shares on June 4 and currently holds 10,700 shares or less than 0.1% of the company. John Vibert is Portfolio Manager of the company.

Insider buying by calendar month

Here is a table of BlackRock Multi-Sector Income Trust's insider trading activity by calendar month.

Month Insider buying / shares Insider selling / shares
June 2013 6,850 0
May 2013 2,600 0
April 2013 4,600 0
March 2013 0 0
February 2013 0 0
January 2013 0 0
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There have been 14,050 shares purchased and there have been zero shares sold by the insiders this year.

Risks

The trust may invest in securities of any quality, rated or unrated, including those that are rated below investment grade quality (rated Ba/BB or below by Moody's Investor's Service, Inc., Standard & Poor's Corporation Ratings Group, a division of The McGraw-Hill Companies, Inc., or Fitch Ratings, Inc.) or securities that are unrated but judged to be of comparable quality by the advisors. Such securities, sometimes referred to as "high yield" or "junk" bonds, are predominantly speculative with respect to the capacity to pay interest and repay principal in accordance with the terms of the security and generally involve greater price volatility than securities in higher rating categories.

My analysis

There have been four different insiders buying the shares and there have not been any insiders selling the shares during the past 30 days. The fund has a Net Asset Value of $18.14 per share as of July 3 and the fund has a dividend yield of 8.44%. I believe the fund could be a good pick below the Net Asset Value based on the intensive insider buying.

Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in GHY over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.