lol, figures after i recommend a buy "under $16.50", PFH gets as low as $16.51 a few days later, before starting a long march into the $19s. :P while you've missed out on a lot if you waited for my target, i think it's still worth buying a little at the current price of $19.02, as it yields 10+% when it's <= $19.06.
the more confident people become about JC Penney's survival, the higher PFH will go, because in a low-interest-rate environment, its yield doesn't have to be high at all to compete with other bonds. keep in mind this was issued with a face value of $25.00, and a yield of 7.625%. this bond was probably issued in a higher interest rate environment, so it's fully possible for its price to exceed that face value when interest rates drop from the prevailing rate at the time. heck, it's done so a few times, getting as high as $26.75 in early 2007 (admittedly much "happier" days for the economy).
let's look at another corporate note for comparison: ATT, senior notes for AT&T. it was issued with a yield of 6.375%, and a face value of $25.00. it's currently trading at $26.60, which is a yield of 5.99%. now, there are some differences. ATT is senior debt, which is higher than the PFH junior debt in the capital structure, so it's better for recovery should the companies tank. also, AT&T is a far more solid earner and on better footing than JC Penney, which is expected to lose a little money this quarter. it'll resume next quarter to earning a small amount of money, but it'll still be far inferior to recent years; contrast with AT&T, which has only seen a slight earnings dip, and no losses.
so i won't get as aggressive with PFH. if it got to $25 here, once again yielding 7.625%, that'd be a 31% gain. but i'll be more tempered and say it only returns to yields as low as 8.5%. that'd make PFH reach $22.42, for a 17.9% gain. or if it yields a hefty 9.0%, it'll still hit $21.18, an 11.3% gain.
now, if treasury yields start to rise significantly, PFH could fall (to be more competitive with risk-adjusted yields). but i do think it's worth buying a few shares here. you can always buy more on the way down. now watch ... right after me posting this, it'll plummet back down to $16.50. :P
btw, does anybody here even buy stocks or bonds? am i wasting my time typing all this?
