PIMCO High Income Fund: Sell This Overpriced CEF Before It's Too Late
- PHK trades at an over 50% premium to net asset value.
- Although the massive dividend payment and past performance are impressive, the price of PHK is too steep.
- Sell PHK before investors realize just how overpriced this CEF is.
Will The High Premiums For The PIMCO High Income Fund Continue To Erode?
- Two PIMCO closed end funds with long-term high premium valuations have seen erosion of those premiums over the past week.
- PIMCO High Income Fund has lost nearly 12%, all of it to erosion of its premium. The premium for PIMCO Global Stocks Plus has also turned downward.
- Other funds provide comparable returns with more sustainable valuations.
The Carnage In Pimco's High Income Closed-End Fund
CEF Weekly Review: Focus On PIMCO High Income Fund
PIMCO High Income Fund Cannot Support Its Share Price
There are no Transcripts on PHK.
Nov. 20, 2014, 3:09 PM
- There was a sizable knee-jerk selloff in Pimco closed-end funds, particularly those managed by Bill Gross, when he announced his sudden departure from Pimco in late September, but the lofty premiums for some have returned, writes Morningstar's Cara Esser.
- The Pimco High Income Fund (NYSE:PHK) to take one example, by October 20th traded for a slightly higher premium than it did the day before Gross' exit, and today sells for a 49% premium to NAV.
- Other CEFs formerly run by Gross: PTY sells for a 17.6% premium, PCN a 3.7% discount, PFL a 1% premium, and PFN a 3.2% discount.
- Others of note: PDI a 3.8% discount, PGP a 54% premium, RCS a 12.8% premium.
Oct. 2, 2014, 12:13 PM
- Seasoned Pimco managers Alfred Murata and Mohit Mittal have assumed portfolio manager duties at the Pimco High Income Fund (PHK -1.5%), the Corporate & Income Strategy Fund (PCN -0.8%), the Income Strategy Fund (PFL -0.6%), and the Income Strategy Fund II (PFN -1.2%) following Bill Gross' departure from the firm.
- Noting the tenure and track record of the two, Fitch doesn't expect much impact to NAVs. Thus far, the NAVs are off an average of 0.63% (inline with the broader market) though the stock price premiums/discounts have narrowed/widened by considerably more.
Sep. 26, 2014, 11:49 AM
- Pimco's closed-end funds and ETFs are plunging in the wake of Bill Gross' exit to Janus: PHK -8.7%, PGP -8.5%, PTY -6.2%, PCN -4.2%, RCS -4.3%, PFL -3.6%, PFN -2.7%, PKO -2.5%, PDI -2.2%, PCI -1.4%, BOND -0.2%.
- "A lot of people bought into Pimco because of Bill Gross, who was the face of the organization, and so they’re shooting first and asking questions later,” says Motley Fool Asset Management CIO Bill Mann. "Investing is a personal business, and the market is saying it trusted Bill Gross.”
- Meanwhile, headlines indicate Dan Ivascyn, Pimco's (OTCQX:AZSEY, OTCPK:ALIZF) deputy chief investment officer, will succeed Gross and take over portfolio management; WSJ had written earlier this week that Ivasycn already was growing in popularity among Pimco investors, who had been putting more money into his fund even as they were pulling it from Gross’ fund.
May. 23, 2014, 4:14 PM
- Several weeks after Bill Gross purchased more of the Pimco Dynamic Income Fund (PDI) for his own account, its roughly 5% discount to NAV has disappeared.
- The same, however, isn't true for Pimco Dynamic Credit Income (PCI), though it's also managed by well-regarded Dan Ivascyn. One reason for caution might be the relative newness of the fund, writes Brendan Conway.
- In the meantime, two Pimco CEFs which are known for sporting towering premiums to NAV continue to do so, the Pimco Global StockPLUS & Income Fund (PGP) and the Pimco High Income Fund (PHK). Two other Pimco CEFs at discounts: Pimco Income Strategy Fund (PFL) and Pimco Income Strategy Fund II (PFN).
Mar. 21, 2014, 11:30 AM
- "When times get tough, on Wall Street or in Newport Beach, Calif., the tough turn on each other," writes David Weidner, not seeing anything too unusual in the Pimco saga. These sorts of ugly partings happen all the time amid the massive egos on Wall Street. Consider Citigroup with Sandy Weil and Jamie Dimon, Morgan Stanley with Phil Purcell and John Mack, and Bear Stearns with Jimmy Cayne and Warren Spector.
- "In every case, the splits occurred under tremendous pressure. Much like a marriage headed for divorce, long simmering incompatibilities, jealousies and flaws rose to the surface ... When push comes to shove, it is always better to be king. No. 2’s instinctively need to watch their backs. You want normal? That is normal."
- Allianz (AZSEY)
- Pimco CEFs: PTY, PDI, PMF, PGP, PKO, PFL, PFN, PCN, PCM, PHK, RCS, PMF, PML
- Previous: Gross becoming "increasingly illogical and irrational."
Mar. 20, 2014, 4:42 PM
- It turns out it was three, not two lined up to be deputy CIOs to Bill Gross amid the departure of Mohamed El-Erian. One - Marc Seidner - resigned in January just hours before he was to be publicly announced in his new position. Seidner - who followed El-Erian to Pimco in 2009 - reportedly had found working there increasingly difficult over the last 18 months, with Gross becoming "increasingly illogical and irrational."
- In other news Pimco has lost a $1.3B bond fund mandate to TCW.
- Pimco's parent: Allianz (AZSEY)
- Among Pimco's closed-end offerings are: PTY, PDI, PMF, PGP, PKO, PFL, PFN, PCN, PCM, PHK, RCS, PMF, PML. There's also the ETF version of Bill Gross' Total Return Fund: BOND.
Mar. 19, 2014, 12:22 PM
- “There is a heightened level of uncertainty in the post El-Erian era surrounding the questions of whether Pimco’s latest senior staffing transitions will prove beneficial to investors [and] whether recent and future senior-level departures indicate a persistent side effect of the firm’s pressure-cooker culture," says analyst Eric Jacobsen cutting Pimco's "stewardship" rating to C from B and the "parent pillar score" - which examines manager turnover, investment culture, and fee levels - to Neutral from Positive.
- It's not automatic, but look for the big-picture rating changes to quickly filter through to the ratings of individual Pimco funds, says Morningstar.
- Among Pimco's closed-end offerings are PTY, PDI, PMF, PGP, PKO, PFL, PFN, PCN, PCM, PHK, RCS, PMF, PML. There's also the ETF version of Bill Gross' Total Return Fund: BOND.
- Pimco parent Allianz SE (AZSEY -2%)
Mar. 4, 2014, 1:28 PM
- Efficient markets? Morningstar's Samuel Lee notes the strategy of the Pimco High Income Fund (PHK +0.4%) is nearly identical to that of the Pimco Corporate Income & Opportunity Fund (PTY +0.6%), yet PHK trades at a 51% premium to NAV vs. PTY at a 23% premium (PTY is slightly less leveraged).
- Why? As far as Lee can tell, investors would rather pay $1.51 for $1.00 of assets in PHK than $1.23 for a dollar of assets in PTY simply because PHK offers a higher payout percentage. This payout, however, isn't from greater income, but instead coming from a return of capital.
- Of course, this discussion doesn't get into why investors would pay even a 23% premium to NAV in the first place.
Oct. 17, 2013, 12:17 PM
- I see no reason for long-term rates to head higher, says Jeff Gundlach, appearing on CNBC. He doesn't see the taper coming soon - incomes are falling, the labor force participation rate is stuck, and inflation is non-existent. Further, why would Janet Yellen take the Fed helm and immediately begin to reverse a policy she's so supportive of?
- Without the taper, he notes, QE is actually expanding on a relative basis thanks to a smaller budget deficit and less Treasury issuance needing to be mopped up by the central bank.
- The best opportunity in fixed income continues to be closed-end funds trading at discounts to net asset value (his DBL being one of them). You can put together a basket of these, he says, yielding 8-9% and with a discount to NAV of 10%. Others possibilities (though we haven't checked their prices vs. NAV): PDI, PTY, PCI, PHK, PKO, PCN, PCI, PFN, PFL.
- Treasurys continue their big rally, the yield on the 10-year now all the way down to 2.60%. TLT +0.8%, TBT -1.6%.
- Turning to stocks: I don't like $300B market cap companies trading at 20x forward earnings, he says, suggesting GOOG be "harvested" for gains.
- On TSLA: There's something wrong with this picture, he says, noting the company's $23B valuation while GM and Ford are hitting new highs. These massive Tesla sales being priced into the stock have to come from somewhere.
Sep. 13, 2013, 3:45 AM
- Pimco and BlackRock (BLK) reportedly scooped up over 25% of Verizon's (VZ) mammoth $49B bond sale on Wednesday, helping the telecom carrier to raise all the money it wanted to at once rather than in chunks, as it had originally intended.
- Bill Gross' firm bought $8B in bonds and BlackRock $5B, with the two companies also influential in persuading Verizon to price the debt at an above-market rate.
- Pimco funds: PCI, PTY, PDI, PHK, BOND, PKO, PCN, PCI, PFN
Sep. 12, 2013, 11:21 AM
- That bond funds - specifically Pimco bond funds - have tumbled in value as rates flew higher this summer isn't news. Instead, it's the vanishing "Pimco premium" in the firm's closed-end offerings.
- The Dynamic Credit Income Fund (PCI +0.9%) is off nearly 18% since its launch earlier this year as an initial premium of 9% is now a 9% discount. Others include PDI now at a 8.2% discount vs. a previous average of -2.4%.
- Others still trade at premiums, but of vastly smaller size. PTY is at 6.6% premium vs. a 3-year average of 17.8%. PHK remains at a whopping 50.7% premium, but down from 75% last year.
- "Was (it) the epoch that made the man as opposed to the man that made the epoch," wrote Bill Gross (BOND), wondering if his success was the result of being in the right place at the right time (the 30-year bond bull market).
- Others of note: PKO, PCN, PCI, PFN.
Aug. 22, 2013, 7:33 AM
- "These outflows mark an enormous shift for the bond world," says TrimTabs, which gathered the data. "A vicious circle of losses and redemptions as the bond binge unwinds could get nasty ... Lulled into complacency by a 30-year bull market, many investors probably did not understand the risks ... Now they seem to be reacting very quickly to losses."
- The withdrawals this month are the 3rd highest on record - June 2013 and October 2008 are #1 and #2 - and the month isn't even over yet. Bond funds YTD have seen $4B in redemptions, putting them on pace for their worst year since 2004's $7B loss. This comes against $1.2T of inflows from 2009-2012.
- It's estimated Pimco saw $7.4B in redemptions in August as Bill Gross' giant Total Return Fund (ETF version: BOND) has lost 3.6% YTD. Some Pimco closed-end funds having a rough run (with a couple now trading at rare discounts to NAV): PHK, PTY, PDI.
- DoubleLine is estimated to have lost $631M, but Jeff Gundlach's Total Return Fund has fallen just 1.1% YTD - better than 86% of its rivals. The DBL now trades at a discount to NAV.
- Broad bond ETFs: AGG, BND, LAG, SCHZ, BOND, SAGG, MINC.
Aug. 13, 2013, 12:44 PM
- Tumbling Treasury prices - with TLT carving out a new 52-week low today - are again hitting income favorites.
- Leading mREITs (REM -1.4%) lower are Invesco (IVR -3.3%), Annaly (NLY -2.3%), American Capital (AGNC -2%), and Western Asset (WMC -1.6%).
- A number of income CEFs not long ago were so much in favor they commanded large premiums to NAV. They're now at seemingly growing-by-the-day discounts. Among the movers today is the Pimco Dynamic Income Fund (PDI -1.4%) selling for $27.45 against yesterday's closing NAV of $30.23. Others include: PCI, PFN, and PFL.
- Still trading at premiums to NAV are the Pimco High Income Fund (PHK -0.9%) and the Pimco Corporate & Income Fund (PTY -1.1%).
- Municipals (MUB -0.6%) slip as well, hitting Muni CEFs: NXZ -0.9%, IIM -1.2%, VKQ -0.7%.
- Related ETFs: MORT, MORL, SUB, MUNI, PVI, PZA, SHM, TFI, VRD, HYD, ITM, MLN, PRB, SMB, GMMB, SMMU, RVNU, NY .
Jun. 24, 2013, 10:10 AMSo much for those "1994 won't happen again" stories. On a percentage basis, the rise in the 10-year Treasury yield (to over 2.6% from 1.6% less than 2 months ago) is the worst since 1962, according to BTIG. "The Fed had no idea how leveraged or bubbled-up the world's positions were," says Andrew Brenner of National Alliance Securities. "Nothing is sacred today." Income funds: Alpine Total Dynamic (AOD -3.6%), Pimco High Income (PHK -1.6%), Eaton Vance Tax-Managed (EXG -3.6%). Equity REITs: Omega (OHI -2.3%), HCP Inc. (HCP -2.3%), Medical Properties (MPW -4.2%), Realty Income (O -0.4%). | 3 Comments
Jun. 13, 2013, 11:34 AMA check of some Pimco closed-end income funds finds them higher as rates come down today. The Dynamic Income Fund (PDI +1.9%) fell to an 11.4% discount to NAV at the close last night. After more than a 10% one-month decline, the High Income Fund (PHK +0.7%) is still at a 33.9% premium to NAV. After nearly a 20% one-month decline, the Corporate & Income Opportunity Fund (PTY +2.6%) narrowed its premium to NAV to 4%. | 2 Comments
May. 28, 2013, 1:01 PMHeavy selling hits a number of Pimco income funds, notably the High Income Fund (PHK -4.3%) with heavy exposure to high-yield paper and the financial sector. The decline narrows the fund's premium to NAV to a still-whopping 34%. The Income Opportunity Common Fund (PKO -2.2%) trades at just a slight premium, while the Dynamic Income Fund (PDI -2.8%) sells for about a 5% discount. Others: (PTY -3.6%), (PCN -2%), (PGP -5.3%), (PFN -1.5%). | 3 Comments
PHK vs. ETF Alternatives
The primary objective is to seek high current income. Capital appreciation is a secondary objective. The primary investments are U.S. dollar-denominated corporate debt obligations of varying maturities and other corporate income-producing securities. The p
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