Stockchase Opinions

Lorne Steinberg iShares Hi Yield Corp Bond ETF HYG-N DON'T BUY Jul 26, 2022

A great time to buy high-yield bonds, paying over 7%. But Canadians shouldn't buy HYG, because the USD is strong and if it falls, it will hurt you. Instead, buy a bond ETF that's currency-hedged.
$76.505

Stock price when the opinion was issued

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PAST TOP PICK
(Top Pick Oct 20/09, Up 1% because of yield) They converted to a Canadian dollar hedged fund in January. He thinks you will get double-digit returns out of this fund.
WEAK BUY
Hi Yield Corp Bond ETF. Diversification reduces risk of holding low-investment-grade bonds. Gives full exposure to high yields as an asset class. Higher asset class has performed very well over the last decade. Prefers Canadian hedged versions such as the High Yield Bond ETF (CHB-T) because of currency changes, especially in RRSPs.
PAST TOP PICK
(A Top Pick Oct 30/09. Up 2.9%.) US High-yield corporate bonds ETF. Cdn$ took 1% of the return so switched to the US High Yield Bond Index Fund (XHY-T). (See Top Picks.)
PAST TOP PICK
(A Top Pick Oct 30/09. Up 16.1%.) US High-yield corporate bonds ETF. (Top Pick is the Canadian version XHY-T.)
PAST TOP PICK
(A Top Pick June 7/10. Up 16.75%.) US High Yield Corp. Bond ETF. Switched to the US High Yield Bond Index Fund (XHY-T) because it is hedged back to the Cdn $. Returns are almost identical.
HOLD

The high-yield bond market in the US is interesting. In January everybody thought the troubles in the high-yield bond market would echo itself into something that would look more like a sub prime crisis in 2008. He had disagreed with this, so has been very Long on this all year. The bond and credit markets have done really well over the last few months, so he would recommend you shorten your duration in bond markets and increase your credit risks.

COMMENT

High-yield bonds with a shorter duration? This is a relatively short duration of around 5 years, and would be his preferred choice.

COMMENT
One of the biggest risks is the credit markets in the sheer amount of debt that is sitting at investment-grade that will get downgraded. This is a high yield bond ETF. $75 to $80 is probably the range that you want to nibble away at. There will be some value developing in the high yield space.
BUY

Unhedged, with 1,157 issues, duration is 3.4 years and yields at maturity under 6%. It has done well and will continue to.