(With this article, Signal from Noise inaugurates an Other Voices format, to be published occasionally as we run across portfolio managers with investment themes and stock ideas relevant to subscribers. It’s our intention to familiarize you with the views of successful money managers, some you might have read about, but, more importantly perhaps, some you might not. Today’s piece was written by Craig Van Hulzen, John Pearce and Stefan ten Brink, portfolio managers at Van Hulzen Asset Management, El Dorado Hills, CA. It deals with the covered calls strategy. All investors should find it interesting, but particularly those interested in income and yield combined with relatively low risk.)

We have never understood the value proposition of high yield bonds. As fundamental, bottom-up value equity managers, you might call us a little biased, but we believe the category is called “junk” for a reason. 

Despite residing in the fixed income asset class, which has a traditional reputation for safety and stability, high yield bonds carry significant credit risk instead and offer little downside protection during equity market declines. The volatility of this bond subset is two to three times its investment grade counterpart. The drawdown in junk bonds was -32% during the ...

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