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Hillside's Feingold on Finding Value in Convertibles (Audio) · Bloomberg Intelligence

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  Speaker 1: You're listening to Taking Stock with bim Box at Kathleen
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  Speaker 1: Hayes on Bloomberg Radio. Looking for some hybrid vigor. Well,
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  Speaker 1: you've got to ask our next guest all about it.
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  Speaker 1: Bill fine Gold is the co founder and managing principle
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  Speaker 1: for Hillside Advisors. They are based in Valhalla, New York,
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  Speaker 1: where we find Bill here in the studio with us today. Bill,
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  Speaker 1: thanks very much for coming in life pleasures always, you
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  Speaker 1: have a specialty amongst many, but one of them I
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  Speaker 1: want to focus on is convertibles. What are convertibles and
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  Speaker 1: how do they work? Convertibles PIM or interest bearing UH
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  Speaker 1: securities that give the owner the unique option of being
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  Speaker 1: able to convert into stock if it proves to be
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  Speaker 1: profitable beneficial. So basically, what it ends up giving you is,
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  Speaker 1: to a reasonable degree, the best of both worlds. You
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  Speaker 1: get the benefits of an income bearing security, the cash
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  Speaker 1: the downside protection plus a very significant portion of the
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  Speaker 1: stocks upside. It basically saves you the trouble of having
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  Speaker 1: to decide. So that's why you have devoted your career
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  Speaker 1: to this, Bill fine Gold, and you're celebrating a very
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  Speaker 1: important milestone, the one hundredth edition of your newsletter that
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  Speaker 1: focuses on convertibles. Just give us a thumbnail sketch of
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  Speaker 1: the history of you and your your company, where where
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  Speaker 1: you started and where you are now. Thanks so much,
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  Speaker 1: Kathleen's my pleasure. Um, Well, basically, I got into convertibles
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  Speaker 1: a little over twenty years ago. As you said, I
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  Speaker 1: was an option trader at the time, and the place
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  Speaker 1: I was working used me as a guinea pig to
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  Speaker 1: see if option traders could also trade these big, ugly
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  Speaker 1: things called convertible bonds. And it was a big struggle
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  Speaker 1: the first year, but as they say, you learn a
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  Speaker 1: lot more by losing them by winning, and I became
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  Speaker 1: a convertible trader, a convertible animal, as a convertible portfolio manager.
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  Speaker 1: I've written two books about convertibles. I just fell in
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  Speaker 1: love with the product, and then a couple of years ago,
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  Speaker 1: I decided, you know what, it's time to sort of
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  Speaker 1: start my own thing. And I felt that on the
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  Speaker 1: one hand, it's it's a product of tremendous value. It's
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  Speaker 1: goes underappreciated and under the radar a lot of the time,
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  Speaker 1: but it's people who know about it make great use
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  Speaker 1: of it. A lot of companies that you wouldn't think
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  Speaker 1: issue convertible bonds have done it, including Apple. Uh. And
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  Speaker 1: I said, it's time to really give this product. It's
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  Speaker 1: it's due, it's stay in court. There really had never
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  Speaker 1: been an analytical true newsletter dedicated to it, and I
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  Speaker 1: decided to start one and build my firm around it.
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  Speaker 1: And we just put out, as you say, our hundred editions.
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  Speaker 1: So we're very proud of that. But we wonder if
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  Speaker 1: you could tell us a story about parking your car
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  Speaker 1: and linked in parking my car and LinkedIn? Um, well, uh,
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  Speaker 1: linked In, I can tell you about you said, you're
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  Speaker 1: you're parking your car and you were looking at your
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  Speaker 1: phone and you noticed that the Microsoft Oh yes, yes, right,
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  Speaker 1: that's right. I completely forgot. A couple of weeks ago. Yeah,
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  Speaker 1: I was just pulling into the parking lot of of
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  Speaker 1: my office building and I saw that Microsoft had bought
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  Speaker 1: Uh was announced that Microsoft had bought LinkedIn. LinkedIn, Uh
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  Speaker 1: did a convertible bond about a year or so ago.
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  Speaker 1: A little uh, maybe a little bit more. And it's
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  Speaker 1: a really interesting story in how to make good use
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  Speaker 1: of convertibles and how to sort of get in and out.
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  Speaker 1: LinkedIn started out the stock was near and all time
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  Speaker 1: high and low two hundreds. They issued a convertible with
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  Speaker 1: a conversion price of about two ninety, which is a
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  Speaker 1: price the stock never actually ended up getting close to.
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  Speaker 1: So it was a great win for the company was
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  Speaker 1: able to raise money paying fifty basis point coupon um.
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  Speaker 1: But uh, in terms of people who invested in linked
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  Speaker 1: In through the convertible instead of the stock, there was
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  Speaker 1: also a lot of benefits. For one thing, they probably
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  Speaker 1: slept a lot better at night. If you own LinkedIn
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  Speaker 1: when the stock was in the one nineties and then
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  Speaker 1: had to write it all the way down to a hundred,
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  Speaker 1: that could not have been a lot of fun. During
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  Speaker 1: that same time period, the Lincoln convertible went roughly from
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  Speaker 1: par a hundred cents on the dollar down to about ninety,
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  Speaker 1: which is not great, but it's a lot better than
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  Speaker 1: getting cut in half. What's different if I want to,
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  Speaker 1: you know, invest or have some of this warm me
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  Speaker 1: in converts convertibles. Uh? Is it harder than watching stocks
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  Speaker 1: or poses a different what's the key thing that you say, Well,
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  Speaker 1: that's not exactly a bonder of stock, So what do
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  Speaker 1: I do? Yeah, well, it look it's um Conceptually, convertibles
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  Speaker 1: are as simple or as complicated as you choose to
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  Speaker 1: make them. The market is not nearly as liquid as
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  Speaker 1: the stock market. You can't just point and click the
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  Speaker 1: way you can with an account, so it's generally best
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  Speaker 1: to work with a professional advisor. Uh. I actually am
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  Speaker 1: very fortunate that my company, UH. When we started out,
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  Speaker 1: we figured that by publishing our letter we would get
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  Speaker 1: some clients and hopefully partner up with some of them,
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  Speaker 1: and that's exactly what's happening. We're now partnering up with
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  Speaker 1: a firm called Balanced Growth Advisors, which, like Hillside, is
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  Speaker 1: a young firm with some old grizzled veterans with a
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  Speaker 1: lot of experience like me, and we're going to help
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  Speaker 1: both existing and hopefully new clients see the benefit of
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  Speaker 1: investing in convertibles. It is tricky, a little bit to
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  Speaker 1: go out on your own if you haven't done it before,
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  Speaker 1: but conceptually they really are not that hard to understand.
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  Speaker 1: I wonder if you could use sun Power as an example,
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  Speaker 1: because I was looking at some of the sun Power
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  Speaker 1: convertibles and you have to know which one right, I mean,
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  Speaker 1: you've got one that pays six point seven percent, but
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  Speaker 1: then you have another one to pay six point one percent. Well,
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  Speaker 1: there's sun Power. There's a number of companies that that
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  Speaker 1: we like to call repeat offenders or serial issuers of convertibles,
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  Speaker 1: and they have convertibles get issued at different times, uh,
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  Speaker 1: you know, with the stock price at one point maybe
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  Speaker 1: at all time highs, another time maybe a lot lower. Basically,
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  Speaker 1: what happens is if a convertible gets issued, SunPower or
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  Speaker 1: any other company gets issued, and then the stock drop
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  Speaker 1: down significantly, it's likely to become a more more of
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  Speaker 1: a yield instrument, more of a pure bond. Whereas if
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  Speaker 1: a convertible gets issued and then the stock appreciates significantly,
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  Speaker 1: the convertible becomes more of an equity substitute. That's happened
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  Speaker 1: with SunPower and a lot of other names. Well, Bill
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  Speaker 1: found Fine Goal. Thank you so much for joining us again.
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  Speaker 1: Congratulations on the edition of your Convertible Bond newsletter. Bill
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  Speaker 1: is co founder and managing principle at Hillside Advisor's l
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  Speaker 1: l C. I want to thank our technical director, Reggie Basil.
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