Convertible Debentures: A Debt/Equity Hybrid

SYNOPSIS
On a one-week basis Canadian stocks rose last week while the US major indexes fell. The S&P/TSX SmallCap index jumped 2.7%, while the S&P/TSX Composite and S&P/TSX Venture indexes were up about 1%.

ProfiTrend Portfolio… Our PTP annualized growth rate is holding steady at 154%, well ahead of the comparable stats for the S&P 500 (18%) and the S&P/TSX Composite Index (23%).

Investor Confidence… The latest State Street Investor Confidence data are included for the month of May 2014. The “smart money” continues to ignore geopolitical issues… treating them as the media-created fantasies that they are. Institutional investors recognize that riskier equities are still a better place to be than bonds and other “risk-free” assets. This is actually most pronounced right now with European investments in equities rather than North American or Asian.
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Topic of the Week… Convertible Debentures: A Debt/Equity Hybrid

We rarely talk about bonds here, because we’re more interested in the capital gains accrued from rising equity prices, rather than income from the debt market. So, even though there are ways to leverage changes in bond prices, that’s currently outside of our scope.

There is one type of bond, however, that is a hybrid security… part debt instrument, part equity. That’s the convertible debenture, which is today’s topic. They are rarely ever mentioned in the media, and I don’t believe that I’ve written anything about them either in all of the years that this newsletter was been produced. So, I’m thinking that it’s probably time to have a look.

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