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How Much Upside Is Left For Junk Bonds?


If you've been wondering how much upside is left for junk bonds, Barron's has an interesting interview with Mark Vaselkiv, the man in charge of the taxable high-yield bond team at investment manager T. Rowe Price Group, Inc. (NASDAQ: TROW).

Vaselkiv has been in charge of the $8 billion T. Rowe Price High Yield Fund (ticker: PRHYX) since 1996. Lately, Barron's reports that Vaselkiv has been leaning toward less risky investments, mainly credits rated B and BB.

“One of our themes is finding good companies that are emerging from bankruptcy and doing really well,” Vaselkiv said during the interview. “That includes CIT Group, Inc. (NYSE: CIT), the middle-market lender that declared bankruptcy last fall.”

Vaselkiv said that they have also invested in some fallen angels, including Sprint Nextel Corporation (NYSE: S). “It was downgraded in 2008; it had major competitive issues,” he said. “It was losing subscribers at an alarming rate, churn was very high and the customer experience was terrible. The network was poor and the company had too much debt – $24 billion outstanding when all the vital signs were going the wrong way.”

Vaselkiv gives Sprint's chief executive, Dan Hesse, a tremendous amount of credit for turning the company around.

Vaselkiv is also very impressed with Univision, a company that recently received a $1.2 billion equity investment from Grupo Televisa (NYSE: TV). “That has a major impact on fixing the balance sheet,” Vaselkiv said. “Keep in mind that we just finished a huge census. You are going to see some major increases in the Hispanic population, which is really positive for driving volumes and rates for advertising. Actually, Univision was one of the few companies that held up very well in the ad slump, because of the strength of the Hispanic population.”

CIT Group currently trades at $40.89; Sprint Nextel trades at $4.78; Televisa trades at $22.20; and T. Rowe Price Group trades at $54.93.


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Posted-In: CIT Group Grupo Televisa Sprint Nextel Corporation T. Rowe Price Group Univision Barron'sLong Ideas Trading Ideas