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. Convertible securities are fixed-income instruments (either bonds or preferred shares) 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: BSG) and First Data Corp. (NYSE: FDC) 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 to the New York Stock Exchange (its former ticker symbol 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 that Maitland recommended for Western Gas Resources (NYSE: WGR) 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) 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