Recommendations of the Week - August 12, 2011
With most equity markets in a state of flux, investors are seeking safer havens, buying up corporate bonds and government securities. Some investors have found buying opportunities among downtrodden securities, convertibles included.
Convertibles, which are hybrids of a stock and a bond, could offer the best scenario for investors at this time. On the upside, convertibles offer a play on the underlying common if the stock price rises to and surpasses the conversion “trigger” price. On the downside, the bond-like portion of convertibles acts as an investment “floor” value, below which the value of the security should not trade. This is the reason convertibles tend to do better than common stocks in this kind of market environment.
Our proprietary model has identified a number of convertibles suitable for purchase at this time. However, on more detailed scrutiny, we like only…