We understand why momentum investors are shorting bonds, but we don’t necessarily agree with their take. The Federal Reserve must be overly cautious, telegraphing that interest rates may have further to rise. But we believe the rate hike cycle is close to finished, if not already done.
Bank loans are becoming harder to obtain. Meanwhile, credit ratings on corporate bond issuers are improving. The freight train represented by credit tightening is hurtling down the track, but it hasn’t arrived at the station yet.
In this exclusive excerpt from his seminal work on special situations investing, author and trader Maurece Schiller shows how to profit from companies undergoing a reorganization, merger, acquisition, spinoff or corporate misstep. First chapter reproduced by publishers' permission.
Renowned credit analyst Martin Fridson has arranged with his publisher to give Porter & Co. readers a special look at the first chapter of his latest book. This book focuses on stocks that came in #1 for the year in total return within the S&P 500 and what caused them to achieve that distinction.
Last Wednesday, Fed Chairman Jerome Powell signaled that the rate hike cycle is close to done. He said the central bank has been able to slow inflation growth without cratering the economy. Money managers see Powell’s speech as an unofficial “no more rate hikes” announcement.
Most investors believe the Fed is done or nearly done with its inflation-fighting interest rate hikes – and so far, no recession is in sight. That means perceived risk will remain subdued in the high yield bond sector... for now.
Today, we introduce a leading digital payments company, with a dominant competitive position and world-class capital efficiency. Recent operational stumbles have created a near record discount in its share price, but we make the case for a rebound and 20% compounded returns from here.
Corporate bankruptcies are running at their highest rate since 2010, the year after the Great Recession. As defaults rise, investors will likely become more cautious about taking credit risk and it should become easier to find attractive values in lower-quality bonds.
Could you make a fortune buying into the AI boom today? Perhaps. We would rather own a world-beating business in a sector that is uniquely underappreciated by investors. In this issue, we recommend one of the highest-quality businesses ever created.