HYBRID VIGOR VOL 2 ISSUE 18: Looking for Action

Well, we had lots of excitement in the markets last week. It made up, you might say, for one of the dullest Kentucky Derby runnings I can recall. The same one-two-three all the way around? That’s no fun. Unless you bet those three horses, of course.

We had plenty of motion in the HOCS 20, as you’ll see inside. Along with some damage to existing members and the return of an old friend, we got two brand new issues joining in. I might even go so far as to call them upstarts, except that would bring back raw memories of my Derby pick. The poor horse was basically eased. Hopefully he comes back rested and stronger this summer.

Focusing on the markets, the big question is probably whether the former social-media high flyers are grounded for good or just getting some maintenance. Once again we see the beauty of convertibles on names like this—you have a lot more margin for error. It’s a good thing, too, because you need it with some of these valuations.

With earnings season winding down, summer still a couple of months away, and some volatility coming back into the markets, we’d think this would be a time to expect a new surge of issuance. Let’s hope we get it. Accordingly, it’s probably not the right time to push too hard on valuations. But, with demand still pretty hot, we know there’s only so much a portfolio manager can do.

This week includes, other than an occasional single-name comment, our first foray into overseas markets. Roman Terekhin took our HARP methodology and applied it to the European convertible market. Look inside and see what he came up with.

(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).