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

estimates of twelve point eight billion. Stay with Bloomberg will have more on FedEx's report. Stocks higher, SMP five hundred index having back to back gains up three tenths of one percent today picking up five points to two thousand eighty eight. Down Industriels up twenty four a gain of one tenth of one percent, and a stack up six again,

also of one tenth of one percent. The tenure down four thirty seconds the old one point seven percent, Gold down twenty two eighty ounce twelve sixty nine, a drop of one Crude oil West Texas Intermediate down one percent, down fifty two cents eighty five for a barrel of West Texas Intermediate. I'm Charlie Pellett. That's a Bloomberg business flash. You're listening to Taking Stock with bim Box at Kathleen

Hayes on Bloomberg Radio. Looking for some hybrid vigor. Well, you've got to ask our next guest all about it. Bill fine Gold is the co founder and managing principle for Hillside Advisors. They are based in Valhalla, New York, where we find Bill here in the studio with us today. Bill, thanks very much for coming in life pleasures always, you have a specialty amongst many, but one of them I want to focus on is convertibles. What are convertibles and

how do they work? Convertibles PIM or interest bearing UH securities that give the owner the unique option of being able to convert into stock if it proves to be profitable beneficial. So basically, what it ends up giving you is, to a reasonable degree, the best of both worlds. You get the benefits of an income bearing security, the cash the downside protection plus a very significant portion of the stocks upside. It basically saves you the trouble of having

to decide. So that's why you have devoted your career to this, Bill fine Gold, and you're celebrating a very important milestone, the one hundredth edition of your newsletter that focuses on convertibles. Just give us a thumbnail sketch of the history of you and your your company, where where you started and where you are now. Thanks so much, Kathleen's my pleasure. Um, Well, basically, I got into convertibles

a little over twenty years ago. As you said, I was an option trader at the time, and the place I was working used me as a guinea pig to see if option traders could also trade these big, ugly things called convertible bonds. And it was a big struggle the first year, but as they say, you learn a lot more by losing them by winning, and I became a convertible trader, a convertible animal, as a convertible portfolio manager.

I've written two books about convertibles. I just fell in love with the product, and then a couple of years ago, I decided, you know what, it's time to sort of start my own thing. And I felt that on the one hand, it's it's a product of tremendous value. It's goes underappreciated and under the radar a lot of the time, but it's people who know about it make great use of it. A lot of companies that you wouldn't think issue convertible bonds have done it, including Apple. Uh. And

I said, it's time to really give this product. It's it's due, it's stay in court. There really had never been an analytical true newsletter dedicated to it, and I decided to start one and build my firm around it. And we just put out, as you say, our hundred editions. So we're very proud of that. But we wonder if you could tell us a story about parking your car

and linked in parking my car and LinkedIn? Um, well, uh, linked In, I can tell you about you said, you're you're parking your car and you were looking at your phone and you noticed that the Microsoft Oh yes, yes, right, that's right. I completely forgot. A couple of weeks ago. Yeah, I was just pulling into the parking lot of of my office building and I saw that Microsoft had bought Uh was announced that Microsoft had bought LinkedIn. LinkedIn, Uh did a convertible bond about a year or so ago.

A little uh, maybe a little bit more. And it's a really interesting story in how to make good use of convertibles and how to sort of get in and out. LinkedIn started out the stock was near and all time high and low two hundreds. They issued a convertible with a conversion price of about two ninety, which is a price the stock never actually ended up getting close to. So it was a great win for the company was able to raise money paying fifty basis point coupon um.

But uh, in terms of people who invested in linked In through the convertible instead of the stock, there was also a lot of benefits. For one thing, they probably slept a lot better at night. If you own LinkedIn when the stock was in the one nineties and then had to write it all the way down to a hundred,

that could not have been a lot of fun. During that same time period, the Lincoln convertible went roughly from par a hundred cents on the dollar down to about ninety, which is not great, but it's a lot better than getting cut in half. What's different if I want to, you know, invest or have some of this warm me in converts convertibles. Uh? Is it harder than watching stocks or poses a different what's the key thing that you say, Well, that's not exactly a bonder of stock, So what do

I do? Yeah, well, it look it's um Conceptually, convertibles are as simple or as complicated as you choose to make them. The market is not nearly as liquid as the stock market. You can't just point and click the way you can with an account, so it's generally best to work with a professional advisor. Uh. I actually am very fortunate that my company, UH. When we started out, we figured that by publishing our letter we would get some clients and hopefully partner up with some of them,

and that's exactly what's happening. We're now partnering up with a firm called Balanced Growth Advisors, which, like Hillside, is a young firm with some old grizzled veterans with a lot of experience like me, and we're going to help both existing and hopefully new clients see the benefit of investing in convertibles. It is tricky, a little bit to go out on your own if you haven't done it before, but conceptually they really are not that hard to understand.

I wonder if you could use sun Power as an example, because I was looking at some of the sun Power convertibles and you have to know which one right, I mean, you've got one that pays six point seven percent, but then you have another one to pay six point one percent. Well,

there's sun Power. There's a number of companies that that we like to call repeat offenders or serial issuers of convertibles, and they have convertibles get issued at different times, uh, you know, with the stock price at one point maybe at all time highs, another time maybe a lot lower. Basically, what happens is if a convertible gets issued, SunPower or any other company gets issued, and then the stock drop down significantly, it's likely to become a more more of

a yield instrument, more of a pure bond. Whereas if a convertible gets issued and then the stock appreciates significantly, the convertible becomes more of an equity substitute. That's happened with SunPower and a lot of other names. Well, Bill found Fine Goal. Thank you so much for joining us again. Congratulations on the edition of your Convertible Bond newsletter. Bill is co founder and managing principle at Hillside Advisor's l l C. I want to thank our technical director, Reggie Basil.

We want to take thanks Sam Linga, our producer. I'm Kathleen Hayes. My co host is Pim Fox. This is taking Stock on Bloomberg Radio. Coming up on Bloomberg Law, they'll be discussing the latest gun regulation news from the Senate, which turned down four gun regulation proposals just last night. That's next on Bloomberg Law.