Penn Capital Management recently unloaded its stake in healthcare distributor Amerisource Bergen Corporation's 7.25% notes of '12 (Ba3/BB-). Eric Green, portfolio manager and director of research at the Cherry Hill, N. J., shop, says that while he sees nothing fundamentally wrong with the credit, he was able to find better value in the new-issue market. "We'll let somebody else take the last couple of points," Green says.
Coming off of another strong earnings quarter, the 7.25% issue from the distributor of drugs and medical supplies recently rose from 101.625 to 103--bringing the yield down to 6.82%. The company's other issues have also fallen below the 7% yield range, he says.
Susannah Gray, analyst at CIBC World Markets, agrees there is little room for additional appreciation in the name. Nonetheless, she maintains an overweight on Amerisource, arguing that the company will continue to see modest earnings expansion. She argues that cost savings and synergies from the company's recent merger "have already been realized and are baked into trading levels. It makes sense to ride another wave into the shore," she says. For investors looking to maintain exposure to healthcare, Gray recommends the bonds of PerkinElmer, a company that makes testing equipment for pharmaceutical labs, and has the same (Ba3/BB-) rating as Amerisource. PerkinElmer's 8.875% notes of '13 were bid at 98 last Tuesday.