Calamos Convertible Opportunities CEF: Down but Not Out

The Calamos Convertible Opportunities and Income Fund (CHI) is a CEF that attempts, through a combination of capital appreciation and current income, to provide optimum results investing in a diversified portfolio of convertible securities and below investment grade fixed income securities.

According to the Calamos Fund managers (John Calamos and son Jack),

the Fund's enhanced fixed income strategy uses all ranges of credit quality and a variety of debt instruments to achieve its objective. The strategy provides an alternative to investment-grade fixed income instruments. Offering potential capital appreciation while delivering an attractive, stable monthly distribution, the Fund may be suitable for investors who are focused on long-term total return and are looking for dynamic allocation to maintain a consistent risk/reward balance throughout the market cycle.

Lofty goals. CHI has been a disappointment over the past year, declining from a high of $20.49 per share in May 2007 to as low as $12.80 on March 17th of this year. Granted, the CEF features a dividend of 11.79% and pays it monthly, currently at fourteen cents. CHI has a market cap of approximately $677m and trades about 80,000 shares daily. The lack of insider buying over the past year does not bode well on face value for the short term prospects of CHI.The 1.20% management fee is not unusual for a CEF that is aggressively managed. In spite of the poor performance over the past year, investors taking a longer term view may find both the dividend and the securities selection of interest.

A representative basic sampling of convertible securities/bonds includes Intel Conv. Bond, VeriSign Conv. Bond, Freeport-McMoran Pref.,Schering Plough Pref., Mandalay Resort Group 8.38% Bond, Invitrogen Conv. Bond, Amazon.com Conv. Bond, Bayer Conv. Pref. Stock, Linear Technology Conv. Bond and L-3 Communications Conv. Bond.

The average rating of bonds held by percentage of quality works out to a BBB overall. High Yield, but I do not detect pure junk in their most recent roster.

Recent institutional investors in this CEF include Zaske and Associates, Citi Investment, Claymore Advisors, First Clearing LLC (the largest in dollar holdings for this Fund), Hollencrest Capital Management,Morgan Stanley, National Financial Services, Newgate Capital Management LLC, Charles Schwab and UBS Financial Services. A respectable lineup.

Disappointing, down, but not out, the investor seeking income may want to bottom fish and nibble at CHI, hoping that the Calamos family will pull their research together, roll up their sleeves and get this CEF moving forward,resisting long lunches at The Greek Islands or Papagus Restaurants of Greek renown within range of their headquarters.

Disclosure: The author's family holds shares of CHI.

Comments

[granger]

I have been a holder of another of their funds, CHY. I added aggressively last August and plan to hold long term. I have been very happy with Calamos over the years. They do a good job in most areas of their business. just my opinion.

[babyboomer47]

I currently hold CHI, CGO, and CSQ. The author of this article talks as if the current price of the ETF reflects the health of the fund. It is the underlying NAV that really matters. Anyone who buys an ETF at 20% above NAV is really speculating instead of investing for income (which is the purpose of these funds). One should never exceed 5% above, and it is best to actually buy at or below the NAV as long as the health of the fund is good. The NAV's are listed under XCHIX, XCGOX, and XCSQX. I sold CHI when it was 15% above, and bought back in when it was about equal to the NAV. Thanks to the speculators, I made a tidy sum.

[kowboy]

Hi Babyboomer 47,

What website or link did you find the NAV values on? I notice xchix and chi trade at different prices. Do these funds use hedging or short sales or other high risk strategies?

Thanks