PDI: A Decent Income Investment (Archive)

This 5-Minute Pitch was originally published on Seeking Alpha before the launch of the Hunting Alphas website. It is shared here to showcase my previous work and track record. New 5-Minute Pitches published on this site will not be disseminated anywhere else.

Elevator Pitch

• PIMCO Dynamic Income Fund has outperformed the S&P 500 in a risk-off environment, but my outlook is now more constructive for equities, making me less bullish on PDI's outperformance prospects.
• But PDI has favorable tailwinds in non-agency residential MBS, as low housing inventories offset low affordability, leading to higher prices and demand for mortgage credit.
• PDI also has meaningful exposure to high-yield credit. And this market is seeing higher yields without higher credit risk, at near all-time-low default rates.
• The fund's 12% premium to NAV is acceptable, particularly for income-focused investors desiring the juicy 14.15% fwd divvy yield.
• PDI vs SPX500 technicals show a balance of bullish and bearish forces, which is why on balance I am deciding on a 'Neutral/Hold' rating overall.

Read the full article here.