Hybrid Vigor Vol 2 Issue 14: Take Me Out to the Bond Game

Dear Friends,

It’s opening day! (Unless you’re a Cubs fan, for whom last night apparently was a reminder that even upgrading your roster and your manager still doesn’t beat great pitching). Few things remind us more of the cycle of renewal and hope, be it for a pennant-winning season or an attractive new convertible deal.

In that spirit, we’re giving our On-Deck Circle feature the day off to enjoy the games. Instead, we thought we’d just throw out a few ideas for new issuers right up front. Let’s start with Buffalo Wild Wings (BWLD). Remarkable what a success story that is, especially considering all of First Lady Michelle Obama’s efforts to get people eating healthier. It must be the other two parts of the slogan—beer and sports—and it’s hard to go wrong with those two. The stock’s up nearly 50% over the past six months. It has a 30-ish P/E and no debt. Yeah, we know baseball diamonds are going more high-end with their food, but that’s all the more reason for schlubs who can’t afford the crazy ticket prices to watch more games at new BWLD locations.

Speaking of beer, why not Molson Coors (TAP)? Most convertible players will remember how ugly the old 2.5% convertibles of 2013 got and how loudly the arbitrageurs short them would squeal, begging for offers. That good old European investment-grade demand seems to be alive and well, judging by the action in names like Illumina, Red Hat and of course RPM. One can only shudder to imagine what terms Molson Coors might get. But, hey, the demand’s out there, so why not?

And, speaking of chicken and investment-grade convertible names from the past, why not Tyson Foods? Yeah, the stock’s about 10% off the highs—perfect time for a heavy-hedge happy meal right? After all, someone’s gotta supply all those wings. Other ideas—Kraft Foods, the maker of Planters’ Peanuts, could issue a convertible to finance that big dividend it’s paying to shareholders in conjunction with the Heinz deal. Maybe that’s what Warren Buffett’s getting for his new investment. Wanna let the little guys in on the action, Warren? Or perhaps Pepsi, which makes Cracker Jacks through Frito-Lay? Again, with all that investment-grade demand out there, Pepsi could probably reverseengineer itself some free money.

Finally, I was thinking of equipment. My first baseball glove was a Tom Seaver, made by Wilson, back in 1969. Yes, I’m that old. But Wilson’s owned by a Finnish company, so that’s for another day. Then I got to Rawlings. Guess who owns them? Jarden, a company that knows its way around convertibles. Time for another, Mr. Franklin?

(This is the cover letter for the subscription-based weekly Hillside's Hybrid Vigor newsletter. For a complete copy, please contact John Anderson at + 1 (646) 712-9289 x 107).


Bill