Be the Next Junk Bond King

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Stock jockeys aren't the only ones salivating at securities prices these days. High-yielding corporate debt has traded down to tempting levels as well. I've never dabbled in debt, but I'm beginning to sniff around the space.

Various products allow you to invest in debt -- either an individual issue or a cross-section of them -- just as you would a share of common stock. For below-investment grade -- aka "junk" -- bonds, there's the iShares iBoxx $High Yield Corporate Bond (NYSE: HYG) ETF and the SPDR Lehman High Yield Bond (NYSE: JNK) ETF. Here's more on the former fund.

There are also closed-end funds, which can produce extra juice if you buy them at a discount to net asset value. Many of these discounts have snapped shut since fellow Fool Dan Caplinger took a look last month, but the Dreyfus High Yield Strategies Fund (NYSE: DHF) value gap is still fairly wide.

Whether you opt for an exchange-traded fund or a closed-end fund, both provide a convenient way to pick up a diversified basket o' distress. Corporate defaults are definitely headed higher, but the firms that survive ought to generate returns that are fabulous enough to outweigh the zeroes. That's all the more true if you buy during another dramatic sell-off akin to what we saw in early October and late November.

If you're bearish on the broader economy, or your inner stock picker urges you to hone in on individual securities, there is another easy way to dip a toe into this part of the market. There's a fair amount of debt out there that's listed on a stock exchange and traded just like stock. The usual denomination for these notes is $25, so you'll see them trading around that price in normal times -- remember those?

General Motors (NYSE: GM) has exchange-traded debt priced at around $3, or a dozen pennies on the dollar. But that discount isn't altogether unreasonable, and it’s not really the kind of opportunity I'm thinking about.

More interesting to me are cash cows like Comcast (NYSE: CMCSA) and CBS (NYSE: CBS). Comcast, the largest cable company in the country, has a note (ticker: CCS) trading below 80% of par. Viacom (NYSE: VIA) spinoff CBS has two issues (tickers: CPV and RBV) trading around $0.50 on the dollar. That is pretty astonishing for an investment-grade credit.

I know both companies are likely in for a rough 2009, but visions of default do not dance before my eyes.

Related Foolishness:

• My colleague David Lee Smith sees the picture darkening for Comcast.
• What's with CBS' $14 billion elephant?
• GM is still an utter disaster.

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