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

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<v Speaker 1>I'm Charlie Hellott. FedEx numbers are out. FedEx delivering better

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<v Speaker 1>West Texas Intermediate. I'm Charlie Pellett. That's a Bloomberg business flash.

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<v Speaker 1>You're listening to Taking Stock with bim Box at Kathleen

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<v Speaker 1>Hayes on Bloomberg Radio. Looking for some hybrid vigor. Well,

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<v Speaker 1>you've got to ask our next guest all about it.

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<v Speaker 1>Bill fine Gold is the co founder and managing principle

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<v Speaker 1>for Hillside Advisors. They are based in Valhalla, New York,

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<v Speaker 1>where we find Bill here in the studio with us today. Bill,

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<v Speaker 1>thanks very much for coming in life pleasures always, you

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<v Speaker 1>have a specialty amongst many, but one of them I

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<v Speaker 1>want to focus on is convertibles. What are convertibles and

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<v Speaker 1>how do they work? Convertibles PIM or interest bearing UH

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<v Speaker 1>securities that give the owner the unique option of being

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<v Speaker 1>able to convert into stock if it proves to be

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<v Speaker 1>profitable beneficial. So basically, what it ends up giving you is,

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<v Speaker 1>to a reasonable degree, the best of both worlds. You

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<v Speaker 1>get the benefits of an income bearing security, the cash

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<v Speaker 1>the downside protection plus a very significant portion of the

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<v Speaker 1>stocks upside. It basically saves you the trouble of having

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<v Speaker 1>to decide. So that's why you have devoted your career

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<v Speaker 1>to this, Bill fine Gold, and you're celebrating a very

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<v Speaker 1>important milestone, the one hundredth edition of your newsletter that

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<v Speaker 1>focuses on convertibles. Just give us a thumbnail sketch of

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<v Speaker 1>the history of you and your your company, where where

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<v Speaker 1>you started and where you are now. Thanks so much,

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<v Speaker 1>Kathleen's my pleasure. Um, Well, basically, I got into convertibles

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<v Speaker 1>a little over twenty years ago. As you said, I

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<v Speaker 1>was an option trader at the time, and the place

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<v Speaker 1>I was working used me as a guinea pig to

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<v Speaker 1>see if option traders could also trade these big, ugly

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<v Speaker 1>things called convertible bonds. And it was a big struggle

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<v Speaker 1>the first year, but as they say, you learn a

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<v Speaker 1>lot more by losing them by winning, and I became

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<v Speaker 1>a convertible trader, a convertible animal, as a convertible portfolio manager.

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<v Speaker 1>I've written two books about convertibles. I just fell in

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<v Speaker 1>love with the product, and then a couple of years ago,

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<v Speaker 1>I decided, you know what, it's time to sort of

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<v Speaker 1>start my own thing. And I felt that on the

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<v Speaker 1>one hand, it's it's a product of tremendous value. It's

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<v Speaker 1>goes underappreciated and under the radar a lot of the time,

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<v Speaker 1>but it's people who know about it make great use

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<v Speaker 1>of it. A lot of companies that you wouldn't think

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<v Speaker 1>issue convertible bonds have done it, including Apple. Uh. And

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<v Speaker 1>I said, it's time to really give this product. It's

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<v Speaker 1>it's due, it's stay in court. There really had never

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<v Speaker 1>been an analytical true newsletter dedicated to it, and I

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<v Speaker 1>decided to start one and build my firm around it.

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<v Speaker 1>And we just put out, as you say, our hundred editions.

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<v Speaker 1>So we're very proud of that. But we wonder if

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<v Speaker 1>you could tell us a story about parking your car

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<v Speaker 1>and linked in parking my car and LinkedIn? Um, well, uh,

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<v Speaker 1>linked In, I can tell you about you said, you're

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<v Speaker 1>you're parking your car and you were looking at your

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<v Speaker 1>phone and you noticed that the Microsoft Oh yes, yes, right,

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<v Speaker 1>that's right. I completely forgot. A couple of weeks ago. Yeah,

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<v Speaker 1>I was just pulling into the parking lot of of

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<v Speaker 1>my office building and I saw that Microsoft had bought

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<v Speaker 1>Uh was announced that Microsoft had bought LinkedIn. LinkedIn, Uh

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<v Speaker 1>did a convertible bond about a year or so ago.

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<v Speaker 1>A little uh, maybe a little bit more. And it's

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<v Speaker 1>a really interesting story in how to make good use

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<v Speaker 1>of convertibles and how to sort of get in and out.

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<v Speaker 1>LinkedIn started out the stock was near and all time

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<v Speaker 1>high and low two hundreds. They issued a convertible with

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<v Speaker 1>a conversion price of about two ninety, which is a

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<v Speaker 1>price the stock never actually ended up getting close to.

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<v Speaker 1>So it was a great win for the company was

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<v Speaker 1>able to raise money paying fifty basis point coupon um.

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<v Speaker 1>But uh, in terms of people who invested in linked

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<v Speaker 1>In through the convertible instead of the stock, there was

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<v Speaker 1>also a lot of benefits. For one thing, they probably

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<v Speaker 1>slept a lot better at night. If you own LinkedIn

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<v Speaker 1>when the stock was in the one nineties and then

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<v Speaker 1>had to write it all the way down to a hundred,

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<v Speaker 1>that could not have been a lot of fun. During

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<v Speaker 1>that same time period, the Lincoln convertible went roughly from

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<v Speaker 1>par a hundred cents on the dollar down to about ninety,

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<v Speaker 1>which is not great, but it's a lot better than

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<v Speaker 1>getting cut in half. What's different if I want to,

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<v Speaker 1>you know, invest or have some of this warm me

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<v Speaker 1>in converts convertibles. Uh? Is it harder than watching stocks

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<v Speaker 1>or poses a different what's the key thing that you say, Well,

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<v Speaker 1>that's not exactly a bonder of stock, So what do

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<v Speaker 1>I do? Yeah, well, it look it's um Conceptually, convertibles

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<v Speaker 1>are as simple or as complicated as you choose to

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<v Speaker 1>make them. The market is not nearly as liquid as

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<v Speaker 1>the stock market. You can't just point and click the

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<v Speaker 1>way you can with an account, so it's generally best

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<v Speaker 1>to work with a professional advisor. Uh. I actually am

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<v Speaker 1>very fortunate that my company, UH. When we started out,

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<v Speaker 1>we figured that by publishing our letter we would get

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<v Speaker 1>some clients and hopefully partner up with some of them,

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<v Speaker 1>and that's exactly what's happening. We're now partnering up with

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<v Speaker 1>a firm called Balanced Growth Advisors, which, like Hillside, is

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<v Speaker 1>a young firm with some old grizzled veterans with a

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<v Speaker 1>lot of experience like me, and we're going to help

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<v Speaker 1>both existing and hopefully new clients see the benefit of

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<v Speaker 1>investing in convertibles. It is tricky, a little bit to

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<v Speaker 1>go out on your own if you haven't done it before,

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<v Speaker 1>but conceptually they really are not that hard to understand.

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<v Speaker 1>I wonder if you could use sun Power as an example,

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<v Speaker 1>because I was looking at some of the sun Power

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<v Speaker 1>convertibles and you have to know which one right, I mean,

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<v Speaker 1>you've got one that pays six point seven percent, but

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<v Speaker 1>then you have another one to pay six point one percent. Well,

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<v Speaker 1>there's sun Power. There's a number of companies that that

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<v Speaker 1>we like to call repeat offenders or serial issuers of convertibles,

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<v Speaker 1>and they have convertibles get issued at different times, uh,

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<v Speaker 1>you know, with the stock price at one point maybe

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<v Speaker 1>at all time highs, another time maybe a lot lower. Basically,

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<v Speaker 1>what happens is if a convertible gets issued, SunPower or

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<v Speaker 1>any other company gets issued, and then the stock drop

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<v Speaker 1>down significantly, it's likely to become a more more of

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<v Speaker 1>a yield instrument, more of a pure bond. Whereas if

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<v Speaker 1>a convertible gets issued and then the stock appreciates significantly,

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<v Speaker 1>the convertible becomes more of an equity substitute. That's happened

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<v Speaker 1>with SunPower and a lot of other names. Well, Bill

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<v Speaker 1>found Fine Goal. Thank you so much for joining us again.

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<v Speaker 1>Congratulations on the edition of your Convertible Bond newsletter. Bill

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<v Speaker 1>is co founder and managing principle at Hillside Advisor's l

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<v Speaker 1>l C. I want to thank our technical director, Reggie Basil.

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<v Speaker 1>We want to take thanks Sam Linga, our producer. I'm

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<v Speaker 1>Kathleen Hayes. My co host is Pim Fox. This is

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<v Speaker 1>taking Stock on Bloomberg Radio. Coming up on Bloomberg Law,

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<v Speaker 1>they'll be discussing the latest gun regulation news from the Senate,

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<v Speaker 1>which turned down four gun regulation proposals just last night.

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<v Speaker 1>That's next on Bloomberg Law.