BNN's portfolio manager interviews are a great repository of investment ideas from across the asset management spectrum.
Today we feature Portland Investment' s Randy LeClair. During the appearance, LeClair, an award winning specialist in fixed income and global fixed income, preferred shares, and corporate bond investing, discussed his three top corporate bond picks for the coming period.
Portland Investment Counsel manages some mutual funds for Manulife Investments, following the sale of AIC Funds to Manulife Investments in August, this year. Leclair is Portland's Chief Investment Officer and sub-advises the Manulife Preferred Income Fund.
LeClair likes the Sun Life Preferred (SLF.PR.D) 4.45% issue. Its current yield is about 5.64%. He told BNN the next call is next December at $26. He said he doesn't "think it will be called out but if they did you would have a 27% return from here.
LeClair advised that choosing between common shares, preferred shares or bonds depends on where you want to stand in line. Dividends, for example, get cut, as in the case of BP.
Also in the preferred universe, he likes Power Financial Corp. Preferred (PWF.PR.L) 5.1% issue. Leclair pointed out, "It currently yields about 5.69%, the "next call is Oct 31, 2011. He added,"If it got called out at $26, you are looking at an almost 20% return," but I don't think it will get called out."
In the corporate bond universe, LeClair's likes the RBC Capital TrustĀ (TRUCS) 4.87% maturing Dec 29/2049. Leclair pointed out, "These are callable at the end of 2015". Leclair said he "expects the call to be exercised and in that case RBC would have to pay you 19.5 basis points over Government of Canada bond."
What are TRUCS and CATS? These are hybrid Tier 1 Bank capital bonds. TRUCS are issued by RBC Capital Trust and CATS are issued by TD Capital. They have conversion privileges under certain conditions.
On the subject of asset allocation, LeClair advised, "You should have 25% of portfolio in bonds and increase during bad times."
He does not consider himself a big 'high yield' investor. He added, "You have to do it in small doses," and he prefers government and investment grade bonds. He further clarified though that if you are inclined to get some high yield bonds, that it may be best to do so using a fund, or an ETF.
LeClair explained that advantages of a bond fund or bond ETF: First, "you get access to inventories at all the dealers, competitive pricing, expertise, and credit management (which companies to buy)." Second, he added, "the prices you get as a retail investor are not as good as those a professional can get."
Report Card (How Did Last Year's Top Picks Do?)
BCE Inc. 4.35% Series 17 preferred bond - A top pick since Aug 28/09. Up 12.37%
Royal Bank 6.1% Series AX Bond yielding 5.5% - A top pick since Aug 28/09. Up 8.27%
Co-operators General Insurance Company (Pref-D) 7.25% Series D Bond - A top pick since Aug 28/09. Up 8.23%
Data Source: Stockchase.com
