Mark Notkin of Fidelity -- Another Jew Junk Bond "Pump" and "Dumper"

[CrackSmokeRepublican]

Note "Notkin" is a Jew-Khazar name of old from Odessa:
http://www.jewishgen.org/belarus/rje_n.htm

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Fidelity's Junk-Bond King Notkin Adds Stocks as Debt Rally Dies
By Charles Stein - Nov 18, 2010 12:01 AM ET

Fidelity Investments' Mark Notkin, whose high-yield mutual fund beat all rivals over the past five years, said the rally in junk bonds is over and stocks are a better buy.

The manager of the $12.8 billion Fidelity Capital & Income Fund is putting more money into equities and leveraged loans while cutting back on high-yield bonds, which have soared 80 percent since the start of 2009.

"I don't see the value in the high-yield market," Notkin said in an interview at his Boston office. "You are not being paid to take risk."

Corporate junk bonds climbed last year after the U.S. recession ended and the default rate fell. Investors added $55.1 billion to U.S. junk-bond funds in 2009 and this year through September, according to Cambridge, Massachusetts-based research firm EPFR Global. Withdrawals from U.S. equity funds were $129.9 billion in the same period.

It's time to shift gears because equities offer bigger gains, said Margaret Patel, who oversees about $1 billion for Wells Fargo & Co. in two mutual funds that invest in both asset classes. Notkin's fund, which can keep as much as 20 percent of assets in stocks, had 17 percent in equities at the end of September, according to Fidelity's website.

"The pendulum has swung from high yield to equities," Patel said in a telephone interview from Boston.

Patel said that as earnings rise for companies tied to the global economy over the next 12 months, stocks are likely to deliver more than the 6 percent to 7 percent gains she expects from junk bonds.

Low Yields

Junk-bond yields that are low by historical standards and the prospect of increasing interest rates will limit gains, Patel said. Firms that issued high-yield securities in the past three to five years may buy back outstanding bonds because the debt can be refinanced at lower rates, she said.

Speculative grade, or junk, bonds, are rated Ba1 or below by Moody's Investors Service and BB+ or below by Standard & Poor's.

High-yield bonds could outperform stocks if the U.S. economy slows, said Patel, because companies would still be able to pay their debts even as profits slump.

Notkin, 46, joined Fidelity in 1994 as a high-yield analyst covering broadcasting, gaming and lodging. He earned a bachelor's degree from the University of Massachusetts and a master's of business administration from Boston University.

Third in Size

He took over Fidelity Capital & Income in July 2003. It's the third-largest U.S. junk-bond fund after the $17.3 billion American High-Income Trust, run by Los Angeles-based Capital Group Cos., and the $13.1 billion Vanguard High-Yield Corporate Fund.

Notkin's fund fell 32 percent in 2008, compared with the 26 percent drop in Bank of America Merrill Lynch's U.S. High Yield Master II Index, as the financial crisis prompted investors to dump risky assets.

By the end of 2008, Notkin saw an "extraordinary opportunity," when the average yield on junk bonds rose above 20 percent.

"At that point I thought it made sense to be pressing down on the gas pretty hard," he said.

Notkin used the fund's cash stake, which he had built to about 20 percent of the portfolio, to buy the riskiest high- yield bonds.

Not for Fainthearted

By Sept. 30, 2009, according to Chicago-based Morningstar Inc., the fund had 35 percent of its assets in bonds rated CCC and below, among the lowest credit ratings assigned by New York- based Standard & Poor's. The typical high-yield fund had 21 percent in bonds rated that low, according to data compiled by Morningstar.

"This fund is not for the faint of heart," Miriam Sjoblom, an analyst with Morningstar, said in a telephone interview.

Fidelity Capital & Income surged 72 percent in 2009, compared with a return of 58 percent for the Merrill Lynch index, Bloomberg data show. In the five years ended Nov. 16, Capital & Income averaged gains of 9.9 percent, the best among 422 high-yield funds tracked by Morningstar. This year the fund has risen about 14 percent.

The default rate for junk-rated corporate debt is expected to drop to 2.4 percent in the year ending September 2011 from 11 percent at the end of 2009, Standard & Poor's said in October.

Reducing Risk

Notkin said he has been "de-risking" the fund this year by substituting higher-quality bonds for those of lesser stability. As of Sept. 30, 21 percent of the fund was in bonds rated CCC and below, compared with the 17 percent allocation among his average peer, according to Morningstar.

With prices on high-yield bonds near all-time peaks and yields near a record low, investors can expect gains over the next 12 months of about 7 percent, Notkin said.

"The market is fairly valued, if not overvalued," he said. "Compared to high yield, equity is very cheap."

Notkin expects interest rates to rise to historically normal levels over the next year or two, which could push up yields on U.S. Treasuries in the 5- to 10-year range more than 200 basis points, or 2 percentage points, he said. The yield on the 10-year Treasury note is about 2.88 percent. Bond prices fall when rates climb.

"We aren't Japan," said Notkin, referring to a nation where rates have stayed near zero for more than a decade.

Patel of Wells Fargo said gains in junk bonds will be further restricted as corporations buy back more of their high- yield debt.

Ceiling on Prices

"That creates a ceiling on how far prices can advance," she said.

In April 2009, Notkin's fund had 5 percent of assets in stocks, filings with the U.S. Securities and Exchange Commission show.

"If I find opportunities, don't be surprised if it gets to 20 percent," he said.

Notkin said stocks have underperformed high yield "dramatically" since he began running the fund. The high-yield index has gained more than twice as much as the S&P 500 over that stretch, Bloomberg data show.

Stocks also look attractive using other measures, he said. The earnings yield on the S&P 500, the index's total earnings divided by its price, was 6.86 percent in the second quarter, the highest it has been since at least 1993, data from Standard & Poor's show.

Money managers often compare the yield on stocks and fixed income as a way to gauge the appeal of the two asset classes.

Stocks 'Attractive'

"Stocks are attractive relative to any kind of bonds," said Michael Mullaney, a portfolio manager at Fiduciary Trust Co. in Boston, where he helps oversee $9.5 billion.

More U.S. executives than ever are increasing earnings forecasts compared with those lowering them, based on data Bloomberg began tracking in 1999.

Shares of Teck Resources Ltd., which Notkin acquired in the third quarter of 2009, have climbed 72 percent since Sept. 30 of that year, Bloomberg data show. Vancouver-based Teck, Canada's largest diversified mining company, was the fund's 10th-biggest holding as of July 31.

TRW Automotive Holdings Corp., another top 10 position for Notkin, has almost tripled in value over the same period. The Livonia, Michigan-based company is the world's biggest supplier of vehicle-safety equipment.

"We love the auto sector," said Notkin. The business will continue to grow globally, he said, and companies that sell safety and emissions gear will do especially well as governments around the world force carmakers to raise standards.

Tech, Materials

Notkin favors industries such as technology and materials that will benefit from expanding economies in emerging countries. Businesses that depend more on the U.S., including retailing and homebuilding, are less appealing to him.

"We don't see the domestic economy going gangbusters anytime soon," Notkin said.

Leveraged loans are rated below investment grade and are repaid first in a bankruptcy or liquidation, which makes them a more defensive investment than high-yield bonds. Because the interest rates on the loans float, returns may rise if rates climb.

Economists surveyed by Bloomberg expect the yield on the 10-year U.S. Treasury note to reach 3.3 percent by the fourth quarter of 2011. The S&P/LSTA U.S. Leveraged Loan 100 Index has returned 8.1 percent this year.

Notkin said he is looking to add to his loan holdings, which represented 13 percent of the portfolio as of April 30, according to a filing with the U.S. Securities and Exchange Commission.

"When rates rise, which will happen eventually, bank debt will look attractive and will outperform high yield at some point," he said.

To contact the reporter on this story: Charles Stein in Boston at cbaumgaertel@bloomberg.net

http://www.bloomberg.com/news/2010-11-1 ... -dies.html

[CrackSmokeRepublican]

This guy is like the Jew Gary Black of Janus Partners-- another "rape and Jew Pillager"... free them from the Shetls 100 years ago... and their corrupt J-Tribe Children just Straight out "Scam"... IMHO -- CSR:

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Icahn, Seeking Hedge Fund Investors, Shows How He Made $2.8 Bln
By Miles Weiss - February 2, 2005 00:13 EST

Feb. 2 (Bloomberg) -- In his efforts to raise $3 billion for a hedge fund, corporate raider Carl Icahn revealed a secret to prospective investors: his winning and losing bets in the stock and bond markets.

The billionaire financier's 10 largest gains and losses over the past decade, including the $893 million he pocketed trying to break up RJR Nabisco Holdings Corp., are detailed in marketing materials that New York-based Icahn Partners LP distributed in July. The documents show his net investment gains were at least $2.77 billion during the period.

Icahn, who gained notoriety by taking over Trans World Airlines Inc. in 1985, occasionally discloses his positions because of regulatory requirements. To bring in outside investors for the first time in almost two decades, Icahn, 68, pulled back the curtain.

``Carl is very good at exploiting the human emotions of fear and greed,'' said Janus Capital Group Inc. Chief Investment Officer Gary Black, who was a tobacco-stock analyst when Icahn recruited him to help in a proxy fight with RJR Nabisco. ``It's a very interesting way of investing.''

Icahn, reached by phone, declined to comment.

Philosophy Grad (like Jew Soros)

Icahn, a philosophy graduate from Princeton University, forged his reputation for aggressive investing in the 1980s, acquiring TWA, then seeking to profit from Texaco Inc.'s bankruptcy. During the 1990s, he made four attempts to take control of RJR Nabisco.

More recently, Icahn made millions betting on the direction of Revlon Inc. bonds and Conseco Inc. shares. The approach, which he dubs ``activist investing'' in marketing documents, has brought Icahn a fortune that Forbes magazine estimated at $7.6 billion in September.

So far, it hasn't appealed to enough investors. As of Jan. 19, Icahn Partners had raised $1.6 billion of the $3 billion it's seeking.

The marketing package lays out Icahn's strategy for the latter stages of his 44-year career. According to one document, a 37-page presentation, it involves taking big stakes in companies to gain influence or control over management; buying undervalued high-yield or distressed debt and participating in bankruptcies; selling stocks short to profit on price declines; and making bets on special situations such as mergers.

``Mr. Icahn has a reputation as a formidable adversary,'' the marketing materials say in a section entitled ``value- oriented'' activist investing. ``Companies take him seriously and often take actions to enhance shareholder value when they know Mr. Icahn has a position in their securities.''

53 Percent Return

Icahn made a 53 percent annual return on invested capital from January 1996 to May 2004, the documents show. During the period, he made personal investments of at least $20 million each in 56 companies, including two for more than $500 million.

His largest gain on those investments was on RJR Nabisco, where he bought stock while seeking to split up the company's food and tobacco operations. Icahn attempted to gain control of RJR Nabisco, the second-biggest U.S. tobacco company at the time, through stock purchases and proxy fights.

Under pressure from Icahn, RJR Nabisco spun off its cigarette arm, R.J. Reynolds Tobacco, in June 1999, and renamed itself Nabisco Group Holdings. The move freed the company's food business from the taint of tobacco litigation, paving the way for its acquisition by Philip Morris Cos. for $18.9 billion in June 2000.

RJR Windfall

Icahn invested a total of $1.3 billion in RJR Nabisco and its offshoots from late 1995 to mid-2000, making a 68 percent gain of $893 million, according to the hedge-fund materials.

His second largest gain was on ImClone Systems Inc. stock. Icahn turned a $196 million investment in the biopharmaceutical company into a profit of $418 million as of May 30. Shares of ImClone, the company at the center of the Martha Stewart's conviction last year on obstruction-of-justice charges, surged as high as $86.79 on June 1, 2004, from $3.81 on Dec. 31, 1995.

Icahn more than doubled a $197 million investment in Revlon, the cosmetics manufacturer controlled by Ronald Perelman. He began buying the company's bonds in late 1999 and held the position until the second quarter of last year, when a debt restructuring sent them soaring, the documents show.

``There was a huge windfall,'' said Terrence Dwyer, a high- yield bond analyst at KDP Investment Advisors in Montpelier, Vermont. ``The bonds had been trading at a very steep discount.''

Risk Factors

Icahn is charging an annual management fee of 2.5 percent of the fund's assets and 25 percent of net new profits, according to the second, 41-page document. He's requiring investors to wait a minimum of three years to withdraw any money.

In a section entitled ``risk factors,'' the first presentation advises that ``an investor could lose all or a substantial amount of his or her investment'' in Icahn Partners and ``management fees, incentive allocations and other expenses may offset or exceed trading profits.''

One of Icahn's favorite strategies has been shorting stocks, or borrowing shares and selling them immediately on the expectation they will decline. Investors make money on short positions by buying securities back once they have dropped in price, repaying the lender and pocketing the difference.

The marketing materials say Icahn sold 24 stocks short, losing money on 11. His largest loss in any investment since 1996 was a short sale of Beazer Homes USA Inc.

Icahn sold $70 million of Beazer shares short, losing $38 million as the homebuilder prospered. He also lost a total of $69.9 million shorting Mandalay Resort Group, MBIA Inc., Michaels Stores Inc. and a company identified as Trinity. Other missteps included purchases of stock in Visx Inc. and Xerox Corp.

`King Icahn'

The decision to short Conseco, the insurer, was a losing bet in 2001. Icahn maintained the position, eventually making $127 million when the company filed for bankruptcy in 2002 rendering its stock worthless.

The marketing materials pitch Icahn's hedge fund as the ``first opportunity'' for outsiders to invest with him since 1986. The financier will be chief executive officer and general partner of the fund, investing $300 million of his own money.

``It's a great opportunity for people to piggyback on one of the best business minds in the country,'' said Mark Stevens, who wrote the biography ``King Icahn'' and now runs a business advisory and marketing firm in Purchase, New York, called MSCO.

To contact the reporter for this story: Miles Weiss in Washington eschatzker@bloomberg.net

http://www.bloomberg.com/apps/news?pid= ... M&refer=us