This ETF Is Full Of Junk (JNK)

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September 23, 2009 1:32pm ETF BASIC NEWS NYSE:JNK

junk-bonds“We think that junk bonds — bonds rated BB+ or lower by S&P or Ba1 or below by Moody’s — are worth considering as part of a diversified income portfolio


.” says Carla Pasternak. In her High Yield Investing, she asks, “If you agree with us that one’s person’s junk may turn out to be your treasure, how do you invest?” She answers by offers a pair of junk bond fund ideas.

“SPDR Barclays Capital High Yield Bond ETF (JNK) has a $2.2 billion portfolio of 140 junk bonds. Its holds junk bonds in only three sectors: industrials (75.8%), utilities (12.16%) and financials (8.72%). It pays a monthly distribution comprised entirely of earnings. JNK is best held in a tax-advantaged account as distributions are taxed at your marginal income tax rate. Over the past 12 months, JNK has distributed $4.66 per share. On a trailing 12 month basis, the yield is approximately 12.8%,”  Steven Halpern Reports From Blogging Stocks.

“In other words, fund investors are still getting a substantial premium to the average 8.9% coupon rate of the fund’s holdings. A slight expense ratio of 0.40% trims total returns. Investors have thus far shrugged off rising default rates and an iffy economic recovery as JNK’s rally from its March bottom shows no sign of ending. The fund has continued to dole out rich earnings-driven distributions through the worst of the credit crisis,”  Halpern Reports.

See Full Story: HERE

The investment (JNK) seeks results that correspond generally to the price and yield performance, before fees and expenses, of the Lehman Brothers High Yield Very Liquid index. The fund normally invests at least 80% of total assets in securities that comprise its benchmark index. It may also invest its other assets in securities not included in its benchmark index. The fund is nondiversified.

TOP 10 HOLDINGS (JNK) ( 20.91% OF TOTAL ASSETS)  
 
Company Symbol % Assets
Chs / Cmnty Health Sys 8.875% N/A 2.55
Ford Motor Credit 9.75% N/A 1.64
Gmac 144A 6.875% N/A 2.35
Harrahs Oper 10% N/A 1.82
HCA INC N/A 3.01
Hertz 8.875% N/A 1.64
Intelsat 11.25% N/A 2.47
TECK RESOURCES LTD N/A 1.71
Texas Competitive Elec Hldgs 10.25% N/A 2.23
Windstream 8.625% N/A 1.49

Chart for SPDR Barclays Capital High Yield Bond (JNK)

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