# Would you buy junk bonds from these companies?



## swoop_ds (Mar 2, 2010)

I started a thread a few weeks ago about buying individual bonds and learned a lot from that thread and the reading that I did afterwards. I got the impression from that thread that most people don't buy individual bonds, at least not in the current interest rate environment. 

Anyways, I am interested in junk bonds from a few companies, namely:
Sherrit Oil
Centric Health
Bell (to a lesser extent as I own shares with them)

I'm looking to mix this in with bond funds and possibly better grade bonds.


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## gibor365 (Apr 1, 2011)

Don't really understand induvidual bonds... so for junk bonds I just hold small position in HYG... also PCY (emerging market bonds)


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## andrewf (Mar 1, 2010)

Seems to me that with junk bonds especially you would want diversification. Junk bonds are somewhat difficult to value and tend to become illiquid.


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## GoldStone (Mar 6, 2011)

I own a few individual BBB bonds. That's the lowest credit quality I'm willing to own, as far as individual bonds are concerned. BB or lower? Fugget about it. Only in a fund.


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## HaroldCrump (Jun 10, 2009)

swoop_ds said:


> Anyways, I am interested in junk bonds from a few companies, namely:
> Sherrit Oil
> Centric Health
> Bell (to a lesser extent as I own shares with them)


Bell (if you mean Bell Canada - BCE) is not rated a junk bond.
They are rated A.
Even Bell Aliant is rated BBB.

You can even consider other large cap Canadian company bonds, such as Canadian Tire, the 5 banks, etc.

Why are you specifically interested in individual junk bonds - is it for higher yield?


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## swoop_ds (Mar 2, 2010)

Yes the yield is what interests me, I would be holding them until maturity.


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## andrewf (Mar 1, 2010)

Will you? Junk bonds generally can be called away by the issuer. Thus, you need to look at yield to worst (YTW). This examines all the different call scenarios along with maturing and picks the lowest yield for you because the issuer is looking for the lowest cost of borrowing.


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## HaroldCrump (Jun 10, 2009)

Junk bonds also get re-structured frequently prior to maturity.
Your current holding may get swapped for a different type of unsecured bond, senior or subordinate, some weird kind of convertible debenture, etc.
As a result, your debt can get rolled up and further out.

You have to be aware of all the risks inherent in sub-prime corporate bonds before you buy in.
There is no "market" for this stuff - you will be buying and selling from your broker, who acts as the dealer in this case.


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## Rusty O'Toole (Feb 1, 2012)

If you are looking for bonds for yield that will be held to maturity have you looked a convertible bonds? Safety of a bond with a good chance of capital gains if the company's stock goes up, in the next 10 to 20 years.


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## Cal (Jun 17, 2009)

Who holds individual bonds to maturity?

The bond market is where most individual investors get fleeced, I have never bought an individual bond, nor would I recommend it.

I would recommend to buy an ETF if you want bond exposure or preferreds if you want income stream.


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## swoop_ds (Mar 2, 2010)

I haven't looked into convertible bonds, I will have to mark it down for some bed time reading tonight.


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## AltaRed (Jun 8, 2009)

Cal said:


> Who holds individual bonds to maturity?
> 
> The bond market is where most individual investors get fleeced, I have never bought an individual bond, nor would I recommend it.
> 
> I would recommend to buy an ETF if you want bond exposure or preferreds if you want income stream.


I buy individual corporate investment grade bonds and preferred shares, for part of my FI allocation. It is a case of staggering maturities and placing them in the appropriate account (TFSA/RRSP for Corporate Bonds and taxable account for Prefs). I hold the bonds to maturity and carefully stick handle through the preferred share market using PrefLetter as my primary information source. The key with bonds is to buy at least at the $10k level, if not at the $20k level for better pricing (or via Scotia iTrade).


ETFs are ideal if one has smaller amounts to invest to ensure some diversification and risk management, but come at an MER cost.


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## scomac (Aug 22, 2009)

Cal said:


> Who holds individual bonds to maturity?


I do. I've done it for years. It's not the deep dark labyrinth you imply. It's the way that you ensure you earn the return you agreed to accept upon purchase.


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## GoldStone (Mar 6, 2011)

Cal said:


> Who holds individual bonds to maturity?


I'm at a loss. What exactly do you imply by asking this?

Holding individual bonds to maturity is pretty much the standard for most retail investors.


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## Cal (Jun 17, 2009)

Sorry for the brief reply today, apparently yesterdays was lost in the server mix up.

A couple of reasons to not hold bonds to maturity....investor may need the principal, they may want to realize a capital loss or gain for tax purposes, or the total return objective may have been met. The issuer could call in the coupon, the buyer could make a play on interest rates.....

An individual investor can get into an etf bond fund with smaller amounts, as stated above it takes a little more capital to get a better rate on an individual bond purchase, so they may not be able to or may not want to tie up the equity.

The bond funds or etfs are far simpler IMO. But there are lots of articles online about that: http://www.forbes.com/sites/marcpro...you-invest-in-individual-bonds-or-bond-funds/

As posted in the article above, there are drawbacks to bond funds and etfs as well.

Just my opinion not to hold a BB (or lower rated) bond to maturity. If I wanted the income stream I would choose a preferred, and in all honesty, I don't like those either. I would buy a dividend equity and try to achieve both capital appreciation and income stream.


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