Stock Analysis & Valuation Calamos Convertible and High Income Fund (CHY)

• Previous Close: $11.73
• Sector Valuation Confidence Level: High

Valuation method	Value, $	Upside, %
Artificial intelligence (AI)	191.00	1528
Intrinsic value (DCF)	4.26	-64
Graham-Dodd Method	5.88	-50
Graham Formula	2350.69	19940

Strategic Investment Analysis

Company Overview

Calamos Convertible and High Income Fund (NASDAQ: CHY) is a closed-end fixed income mutual fund managed by Calamos Advisors LLC, focusing on convertible securities and high-yield corporate bonds in the U.S. market. Launched in 2003, CHY targets income-seeking investors by investing in below-investment-grade bonds (rated Ba/BB or lower) and convertible securities, blending fundamental and quantitative analysis for portfolio construction. Operating in the Financial Services sector under Asset Management - Income, the fund offers diversification through its hybrid approach, combining the upside potential of convertibles with the yield of high-yield debt. With a market cap of ~$818M and a dividend yield of ~5.1% (based on a $1.20 annual dividend), CHY appeals to investors balancing income generation and capital appreciation in volatile markets. Its zero-debt structure and consistent earnings (EPS of $2.33 in FY2024) underscore its disciplined risk management.

Investment Summary

CHY presents a compelling option for income-focused investors, leveraging its dual focus on convertible securities and high-yield bonds to deliver a competitive yield (5.1%) with potential equity upside. The fund’s strong net income ($178.7M in FY2024) and zero leverage mitigate credit risk, while its 1.196 beta indicates moderate sensitivity to market swings. However, its reliance on below-investment-grade debt exposes it to default risks during economic downturns. The absence of capital expenditures and consistent operating cash flow ($3.7M) support dividend sustainability, but the closed-end structure may lead to trading at premiums/discounts to NAV. Investors should weigh its high-income appeal against sector-specific risks and interest rate sensitivity.

Competitive Analysis

CHY’s competitive edge lies in its hybrid strategy, blending convertible securities (offering equity participation) with high-yield bonds (delivering income), a niche less saturated than pure-play high-yield funds. This diversification helps mitigate interest rate and credit risks compared to peers focused solely on fixed-rate debt. The fund’s zero-debt balance sheet and active management by Calamos Advisors enhance flexibility in volatile markets. However, its performance is tightly linked to corporate credit health, making it vulnerable to economic cycles. Competitors with larger AUM may benefit from economies of scale, but CHY’s specialized approach caters to investors seeking both yield and conversion optionality. Its 1.196 beta suggests slightly higher volatility than broader fixed-income ETFs, positioning it for investors comfortable with moderate risk for enhanced returns.

Major Competitors

• SPDR Bloomberg High Yield Bond ETF (JNK): JNK is a passive ETF tracking high-yield corporate bonds, offering liquidity and lower fees (0.40% expense ratio) than CHY’s active management. However, it lacks convertible securities exposure, missing equity upside. Its $7.8B AUM provides scale but less flexibility in credit selection.
• iShares iBoxx $ High Yield Corporate Bond ETF (HYG): HYG dominates the high-yield space with $14.5B AUM and 0.49% fees. Like JNK, it excludes convertibles, offering pure yield exposure. Its broader diversification reduces single-issuer risk but underperforms CHY in rising equity markets.
• SPDR Bloomberg Convertible Securities ETF (CWB): CWB focuses exclusively on convertibles, appealing to equity-sensitive investors. Its 0.40% fee undercuts CHY, but it misses high-yield income. CHY’s hybrid model offers a balanced alternative for those seeking both yield and conversion benefits.
• PIMCO Dynamic Credit Income Fund (PCI): PCI employs active management in multi-sector credit, including high-yield and bank loans. Its 10.6% yield surpasses CHY’s, but higher leverage (38% debt-to-equity) increases risk. CHY’s zero-leverage approach is more conservative.