Convertibles make the difference: Tracy Maitland's convertible securities strategy lessened market risk. (Stock Update).Last year, BLACK ENTERPRISE took a look at convertible securities with Tracy V. Maitland, president of New York-based Advent Capital Management L.L.C., ranked No. 17 on the BE ASSET MANAGERS list with $1 billion in assets under management Assets Under Management (AUM) is a term used by financial services companies in the mutual fund and money management or investment management business to gauge how much money they are managing. . Convertible securities are fixed-income instruments (either bonds or preferred shares Preferred shares Preferred shares give investors a fixed dividend from the company's earnings and entitle them to be paid before common shareholders. See: Preferred stock. ) that can be converted into common stock. Maitland, who is one of the best in the this area, says the benefit of convertibles is that they can be "a great way for an individual to invest in the market and generate equity-like returns with more of a fixed-income risk profile." Barry Nelson, a senior vice president at Advent, says what helped Maitland's performance was that "two of the five stocks appreciated despite the adverse stock market." The BISYS Group (NYSE NYSE See: New York Stock Exchange : BSG BSG Battlestar Galactica BSG Broadband Stakeholder Group (UK) BSG British Society of Gastroenterology (London, UK) BSG Business Systems Group BSG Business Solutions Group BSG Basigin ) and First Data Corp. (NYSE: FDC FDC - Floppy Disk Controller ) enjoyed 2-for-1 stock splits since last year. While the BISYS Group, which provides outsourcing services to financial institutions, adjusted to its move from the Nasdaq Composite index Nasdaq Composite Index An index that indicates price movements of securities in the over-the-counter market. It includes all domestic common stocks in the Nasdaq System (approximately 5,000 stocks) and is weighted according to the market value of each listed to the New York Stock Exchange New York Stock Exchange (NYSE) World's largest marketplace for securities. The exchange began as an informal meeting of 24 men in 1792 on what is now Wall Street in New York City. (its former ticker symbol Ticker Symbol An arrangement of characters (usually letters) representing a particular security listed on an exchange or otherwise traded publicly. When a company issues securities to the public marketplace, it selects an available ticker symbol for its securities which investors was BSYS), the 4% convertible bond helped cushion the overall decline of its stock. The convertible returned a loss of advertising fell 20.8%, the convertible lost just 5.4%. The $2.625 convertible preferred stock Convertible Preferred Stock Preferred stock that includes an option for the holder to convert the preferred shares into a fixed number of common shares, usually anytime after a predetermined date. Also known as "convertible preferred shares". that Maitland recommended for Western Gas Resources Western Gas Resources is a Fortune 1000 company based in Denver, Colorado and founded in 1971. Western is an independent natural gas explorer, producer, gatherer, processor, transporter and energy marketer. (NYSE: WGR WGR Wireless Gaming Review (gaming resource website) WGR Western Gas Resources, Inc. WGR Waveguide Grating Router (IEEE) WGR Women in Government Relations, Inc. ) demonstrates how convertibles can increase the value of an investment even when it does well. While the stock of this provider of natural gas gained a healthy 8%, the convertible almost doubled that return with a gain of 15.6%. Finally, the 5% convertible for COR Therapeutics (Nasdaq: CORR CORR Used on the consolidated tape to indicate a correction in a reported transaction : CORR.LAST.GY 50 WAS 51. ) became a fantastic hedge against the losses produced by the stock after the company was acquired by Millennium Pharmaceuticals (Nasdaq: MLNM), a leading pharmaceutical company. "An unusual feature of the COR 5% bond is that it can be sold back to the company at $108.50 on April 29, 2003, which has caused the bond to appreciate despite the decline of the underling stock," says Maitland. The convertible, (now less than a dollar away from its buyback price), showed a 25.1% gain compared to the stock, which lost 39.2% primarily due to the takeover.
Maitland's Convertible Strategy Performance
Company Convert Date of
Exchange: Symbol Yield Maturity
The BISYS Group (BSG) 4.00% 3/15/2006 *
First Data Corp. (FDC) 2.00 3/01/2008 ([dagger])
Lamar Advertising (LAMR) 5.25 9/15/2006
Western Gas Resources (WGR) 5.25 N/A
COR Therapeutics (CORR) 5.00 3/01/2007 ([double dagger])
8/10/01 8/10/01
Company Stock Convert
Exchange: Symbol Price Price
The BISYS Group (BSG) $26.53 $103.44
First Data Corp. (FDC) 33.70 106.83
Lamar Advertising (LAMR) 37.79 103.15
Western Gas Resources (WGR) 29.55 43.07
COR Therapeutics (CORR) 23.45 90.00
8/12/02
Company Stock Stock
Exchange: Symbol Price Peformance **
The BISYS Group (BSG) $22.05 16.9%
First Data Corp. (FDC) 34.05 1.2
Lamar Advertising (LAMR) 29.94 -20.8
Western Gas Resources (WGR) 31.70 8.0
COR Therapeutics (CORR) 14.25 -39.2
8/12/02
Company Convert Convert
Exchange: Symbol Pice Performance **
The BISYS Group (BSG) $95.69 3.6%
First Data Corp. (FDC) 109.90 4.7
Lamar Advertising (LAMR) 92.29 -5.4
Western Gas Resources (WGR) 47.16 15.6
COR Therapeutics (CORR) 107.58 25.1
Value of stock performance on an investment of $5,000: $4,314.23
(-13.72%)
Value of convertibles performance on an investment of $5,000:
$5,157.71 (+7.3%).
* TICKER CHANGED FROM BSYS. AUGUST 10, 2001 STOCK PRICE ADJUSTED FOR
SUBSEQUENT 2-FOR-1 STOCK SPLIT. ([dagger]) AUGUST 10, 2001 STOCK PRICE
ADJUSTED FOR SUBSEQUENT 2-FOR-1 STOCK SPLIT. ([double dagger])
ACQUIRED BY MILLENNIUM PHARMACEUTICALS FOR 0.9873 MLNM SHARE PER CORR
SHARE. 8/12/02 STOCK PRICE ADJUSTED TO REFLECT THE VALUE OF 0.9873
MLNM SHARE. ** PERFORMANCE IS PRICE APPRECIATION/DEPRECIATION PLUS
YIELD. (NOT COMPOUNDED.)
SOURCE: KYNEX
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