This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Shifting Away From Junk Bonds

Stocks in this article: TGLMX GOBSX PDVAX

Rivelle said that the securities remain undervalued and should continue rallying.

"With the non-agency mortgages, you have the potential to get high single-digit returns and possibly double-digit returns," Rivelle said.

Another manager who has shied away from high-yield issues is Steve Smith, portfolio manager of Legg Mason BW Global Opportunities Bond (GOBSX). After markets began recovering from the financial crisis, Smith held a big stake in corporate bonds, including high-yield issues. But lately he has shifted almost entirely away from corporate issues. A global manager who is free to invest anywhere in the world, Smith has been shopping in troubled countries of Southern Europe.

"We have been selling expensive corporate issues and buying Portuguese bonds that were yielding 9.5%," he said.

The shift to Portugal might seem like an unlikely move, but Smith has made a career of going against the crowd. His fund currently has 4% of assets in Malaysia and 3% in Hungary. The portfolio has only small holdings in developed countries such as Japan and Germany.

The contrarian moves have often paid dividends. During the past five years, the fund returned 7.9% annually, topping its average peers in the world bond category by almost 3 percentage points. Smith argues that the Portuguese issues represent good values. The securities are rated BB, one step below investment grade.

Curtis Mewbourne, portfolio manager of PIMCO Diversified Income (PDVAX), ranges around the globe, holding a mix of U.S. and foreign bonds. Lately he has been shedding high-yield bonds and shifting to securities from the emerging markets. Holdings include bonds from Russia and South Africa. The wide-ranging approach has enabled the fund to return 8.5% annually during the past five years, outdoing 76% of multi-sector bond competitors.

Mewbourne particularly likes Brazilian bonds. While the country has an inflation rate of 6.5%, the bonds yield 11%.

"Brazilian yields have increased substantially in the last six weeks, and the country has sound credit fundamentals," he said.

This article was written by an independent contributor, separate from TheStreet's regular news coverage.

Stan Luxenberg is a freelance writer specializing in mutual funds and investing. He was executive editor of Individual Investor magazine.
2 of 2

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!


DOW 17,804.80 +26.65 0.15%
S&P 500 2,070.65 +9.42 0.46%
NASDAQ 4,765.38 +16.9840 0.36%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs