The Fidelity Short Duration High Income Fund (MUTF:FSAHX) has really gotten beaten up in the last year. The fund picks junk bonds with short yields. It has been losing value in NAV with no bottom in site.
What is a little disconcerting is that the SEC yield is 7.28% and the average maturity is 3.7 years. That means there is quite a bit of "junk" in this fund. On May 31, 2015, a $10,448 value in the fund became $9,522 on January 31, 2016. It is down even more since then. The fees are pretty high at 80 basis points. On top of that, your money is tied up for 90 days unless you want to pay a penalty of 1%.
A series of William Lyon Homes (NYSE:WLH)(Cusip 96926DAF7) that matures 4/15/19 has sold off in the last few weeks. It matures almost 7.5% and is B- rated by S&P. In mid-January, it was selling for 96.5 and a recent trade has it at 94. It is the fund's third largest holding.
A series of debt from Intelsat Jackson (NYSE:I)(Cusip 45824TAE5) that matures 4/1/19 yields 11.282%. That's too aggressive for my taste, unless you know something about this company. With a yield like that, the market questions Intelsat's solvency. This is the fund's fifth largest holding.
A major holding is of a company that I've never heard of: BlueLine Rental Finance Corp. (Cusip U0942LAA9) These bonds have not traded since November of last year. Very thin issue. In the middle of last year, they traded at 104 and dropped to 92 at the end of November. They are probably lower than that, but have not traded since then.
Looking through the holdings, I don't see anything that stands out to me. What I mean by that is do I see any bonds in bankruptcy. There are high yield names like: Sprint (NYSE:S), T-Mobile (NASDAQ:TMUS), Cemex (NYSE:CX), and J.C. Penney (NYSE:JCP). These issues are on the junk side of high yield and are trading at low prices evidenced by the fund's 7.28% yield.
I'd stay away from this fund and even sell it if I owned it. These high yield bonds are not where you want to be right now. Junk bond funds like this do well in raging bull markets, not bear and sideways markets. The fund has been dropping every day in NAV and has not hit bottom. Look at safer investments.
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
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