As developed world central banks keep pushing investors to accept lower and lower rates of return, we have put together a list of corporate bonds with a blended yield of just above 6% which we believe offer value to investors willing to take modest credit risk in order to avoid significant duration (and convexity) risk associated with owning very long term bonds with very low coupons.
The attached list of investment grade and near-investment grade bonds (blended bond rating of Baa3/BBB-) we believe offers a very attractive yield in today’s rate environment, with a blended yield to worst (YTW) of 6.1% and a z-spread of 472 bps. The highlighted bonds on the list reflect ones that could be owned interchangeably. In the case of the Perry Ellis and Hanesbrands bonds, we offer two ways to gain exposure to the apparel sector, one lower risk and one higher risk. All of the issuers are in our coverage universe and individual company reports can be found at www.sixtyguilders.com.
In making our selections, we chose companies that rate well in our Sixty Guilders Research credit rankings within their industry sector, and have yield/spread characteristics that we believe offer an attractive entry point for the risk category. Furthermore, the list of bonds offers broad industry differentiation and maturity profile. The average maturity of this list is roughly five and a half years. To summarize, we believe this bond list offers attractive yield without compromising credit quality, both as measured by rating agency credit ratings as well our own credit analysis and ranking categories.
As is always the case with corporate bonds, the prices we are using are recent trading levels which may vary materially from future trading levels.
We thank you for your interest and support, and welcome all questions and suggestions.
Dimitri Triantafyllides, CFA
Sixty Guilders Research, LLC
This report is for your information only and is not an offer to sell or a recommendation to buy the securities or instruments named or described in this report. Additional information is available upon request. The information in this report has been obtained or derived from sources believed by Sixty Guilders Research, LLC (Sixty Guilders) to be reliable, but Sixty Guilders does not represent that this information is accurate or complete. Any opinions or estimates contained in this report are current as of the date of the report and are subject to change without notice. Copyright © 2016 Sixty Guilders Research, LLC.
Conflicts of Interest. Sixty Guilders, its employees and its affiliates may from time to time hold securities mentioned in this report, either long or short, whether relying or not on information provided in this report.
Sources of Information. The information in this report has been obtained or derived from sources believed by Sixty Guilders to be reliable, but Sixty Guilders does not represent that this information is accurate or complete. Estimates for revenue and cash flow (EBITDA) are derived from street expectations as of the date of publication, therefore changes following the publication of the report are not reflected in the report. Other estimates in the report are provided by Sixty Guilders and may similarly be changed following the publication of the report.
Ratings. Sixty Guilders does not provide buy, hold or sell recommendations on the debt and equity securities profiled in its reports. Instead, Sixty Guilders force-ranks securities under coverage on a percentile scale, ranging from 100% (highest possible percentile) to 0% (lowest possible percentile). As a result, Sixty Guilders’s rankings are evenly distributed across the percentile spectrum of 100% to 0%. In its reports, Sixty Guilders discloses rankings for a company’s equity appeal and credit quality in 10 percentile increments rounded to the lowest 10 percentile increment. This format is also followed for a company’s peer group (“industry sector”). Industry sector rankings similarly rank sector fundamentals against the broader Sixty Guilders coverage index. In order to preserve the ranking relevance on our index data, company credit and equity percentile rankings are not rounded when displayed on the index. Furthermore, rankings on company reports are only current as of the publication date of a report, and may change as a company’s credit or equity relative appeal may improve or deteriorate following the publication of a report. Since our index data are updated daily, credit and equity rankings on the index are more current than those published in reports whose publication date may have been several days or weeks prior to the most recent current ratings.