Convertible securities are preferred shares, bonds or debentures that can be exchanged for common shares of an underlying company. The terms of the conversion are detailed with each security. In some cases, companies can initiate the conversion themselves if it is financially advantageous to do so.
When evaluating exchangeable or convertible securities, it’s particularly important to assess the premium-the extra cost of buying the convertible instead of the underlying stocks into which you can convert.
The premium, stated as a percentage, is the current market value of the convertible bond in excess of the current market value of the shares into which it can be converted. The premium reflects the market’s evaluation of the advantages of hanging on to the convertible or exchangeable security, rather than exercising the conversion/exchange privilege.
The size of the premium gives you some idea of how far the underlying shares have to rise before they begin to push up the price of the convertible. When a premium is high, the underlying shares need a big rise to make it likely that they will push up the value of the convertible. (To put it another way, when a premium is high, the underlying shares can move up much more quickly than the exchangeable.) When the premium shrinks down close to zero, the stock and the exchangeable can move more or less in tandem.
We feel investors should be aware of how convertible securities work. But for your common stock portfolio, we recommend using our TSI Network three-part Successful Investor philosophy for investing:
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VIATRIS INC. $12 is a hold. The company (New York symbol VTRS; Income Portfolio, Manufacturing sector; Shares outstanding: 1.2 billion; Market cap: $14.4 billion; Price-to-sales ratio: 1.0; Dividend yield: 4.0%; TSINetwork Rating: Average; www.viatris.com) was formed in November 2020 by the merger of Pfizer’s Upjohn division (generic drugs)… Read More
WABTEC CORPORATION, $200.62, symbol WAB on New York, provides equipment, systems, digital solutions and value-added services for the freight and transit rail industries, as well as mining, marine and industrial markets.
Wabtec is short for Westinghouse Air Brake Technologies. The company has operated in the rail… Read More
These two REITs continue to add quality properties to their portfolios. They also continue to renew expiring leases at higher rental rates. That extra cash flow should help them keep raising your distributions.
CHOICE PROPERTIES REIT $14 is a top pick for 2024. Canada’s biggest REIT (Toronto symbol… Read More
CISCO SYSTEMS INC., $57.46, Nasdaq symbol CSCO, is still a buy.
Through their shares, investors tap a global producer of hardware and software that links and manages computer networks.
In March 2024, Cisco completed its acquisition of Splunk Inc. (Nasdaq symbol SPLK) for $28 billion. The firm… Read More
VIATRIS INC. $11 is a hold. The company (New York symbol VTRS; Income Portfolio, Manufacturing sector; Shares outstanding: 1.2 billion; Market cap: $13.2 billion; Price-to-sales ratio: 0.9; Dividend yield: 4.4%; TSINetwork Rating: Average; www.viatris.com) merged its biosimilars drug business with India’s Biocon Biologics in 2022. Biosimilars are cheaper… Read More
NEWSMAX INC. has filed paperwork with U.S. regulators for an initial public offering (IPO) of common shares. The shares will trade on New York under the symbol NMAX.
Based in Florida, the company operates a conservative-focused cable TV news channel, as well as online portals. Broadcasting supplies… Read More
On November 1, 2015, the old Hewlett-Packard Co. split into two firms—HP Inc. and Hewlett-Packard Enterprise. For every share they held in the old HP, shareholders received one share in each of the new companies.
HP is now up over 150% since the split, while HP… Read More
These three medical products makers (including Kenvue, see box) have struggled as independent firms. While all three have solid prospects, embecta is the only one we see as a buy right now.
EMBECTA CORP. $16 is a spinoff buy. The company (Nasdaq symbol EMBC; Manufacturing & Industry sector;… Read More
The firm owns a diverse portfolio of four iconic quick-service restaurant brands. This helps to mitigate risk and provides multiple growth avenues as the experienced management team drives operational improvements.
Even with over 31,100 locations globally, there’s still significant room for international growth, particularly in high-potential… Read More
Even though China’s economic growth as slowed lately, these two fast-food giants continue to expand in that country. We feel these investments will ultimately pay off, which will let them keep raising their dividends.
STARBUCKS CORP. $75 is a buy for aggressive investors. The company (Nasdaq symbol SBUX;… Read More
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How to Invest In Stocks Guide: Find 10 factors that make your investments safer and stronger.
The Successful Investor Inc. and its affiliate Successful Investor Wealth Management (referred to hereafter as TSI Network) know that you care how information about you is used and shared, and we appreciate your trust that we will do so carefully and sensibly. This notice describes our privacy policy. By visiting websites owned by or associated with TSI Network, you are accepting the practices described in this Privacy Policy.
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What personal information do we collect?
The information we receive from customers helps us personalize and continually improve your online experience at TSI Network. TSI Network may collect personal information online for all legal purposes, which include, but are not limited to:
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Does TSI Network Use the Information It Receives?
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Except as provided herein, TSI Network will not sell or rent personal information about you to unaffiliated third parties.
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Changes to this Policy
This Policy is the sole authorized statement of TSI Network's practices with respect to the collection of personal information through TSI Network's websites and the subsequent use and disclosure of such information. Any summaries of this Policy generated by third party software or otherwise (for example, in connection with the "Platform for Privacy Preferences" or "P3P") shall have no legal effect, are in no way binding upon TSI Network, shall not be relied upon in substitute for this Policy, and neither supersede nor modify this Policy.
TSI Network may revise this Policy from time to time.
Legal Notices and Disclaimers
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