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Bonds Are a 'Safe' Investment: A Big Lie Gets Even BiggerThis post is part of a special annual report -- Top Stock Picks '09 -- in which TheStockAdvisors.com asked 75 leading newsletter advisors to select their favorite investment for the new year.
"For the best risk-adjusted results we're looking at corporate bonds," says BizRadio host Daniel Frishberg, whose favorite pick for 2009 is the Energy Conversion Devices 3% convertible bond due 6/15/2013.
In The MoneyMan Report, he suggests. "These securities -- which are convertible into shares of the solar power stock Energy Conversion Devices (NASDAQ: ENER) -- could generate a major score, since the company is right in the Obama sweet spot."
"We are following the government as it moves its market manipulation up the risk curve.
"We have seen the government first buying commercial paper and short term bonds to move the Fed Funds Rate, then moving investors up the ladder to long-term Treasuries, then on to agency and high-grade corporate bonds.
"Each time, these moves have produced stock-like capital gains for investors with the knowledge to participate in these markets.
"Now that prices have moved up on high-grade corporate bonds, our next move is to quality high-yield bonds. To evaluate them we don't rely on Moody's or S&P, instead underwriting for ability to repay debt, as we would if we were a bank lending the company money.
"The Energy Conversion Devices convertible bond, which matures in five years, is yielding almost 20% a year, if held to maturity. This bond is now selling for around 55 cents on the dollar, which means a double if and when the price moves back to par as we expect within a year or two.
"This will depend on the psychology of investors more than it depends on the fortunes of the company itself, which appear less problematic.
"As a bonus, the bond is convertible into common stock of Energy Conversion Devices, which manufactures and sells thin film solar laminates that convert sunlight to energy. This is a $1 billion Michigan-based company with very fast sales growth and a good balance sheet.
"However, their bonds are being treated like a junk bond. This is a convertible bond convertible into the company's stock. The bond is approximately $490 per bond. It'll mature at $1,000 per bond in 2013."
Steven Halpern's TheStockAdvisors.com offers a daily look at the latest market commentary and favorite stock picks and investment ideas from the nation's leading financial newsletter advisors.
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