Cardboard Posted December 3, 2015 Share Posted December 3, 2015 Quite often, the stock of a company trading at a depressed level will also have its bonds trade well below par. Taken to the extreme, it would indicate that there is no value left in the common shares when the bonds are trading at 50 cents or below on the dollar due to their higher ranking in the capital structure. Sometimes, it is truly the case and the selection is obvious: buy the bonds and forget about the stock. Sometimes, it looks like that the bonds have as much upside as the surviving stock and once again the selection is easy. However, it is not always that clear cut and there are instances where the bonds trade well below par with the stock looking like a promising investment with a higher return potential. How do you select between the two in these instances? What is your thought process? The question also applies to convertibles and preferreds. Cardboard Link to comment Share on other sites More sharing options...
Create an account or sign in to comment
You need to be a member in order to leave a comment
Create an account
Sign up for a new account in our community. It's easy!Register a new account
Already have an account? Sign in here.Sign In Now