Find an interesting stock; before you buy look for warrants etc.
I don't know a site that lists warrants. I usually follow this strategy: find a stock that interests me, research background material, then look for alternative ways to get equity participation. Warrants, convertible bonds, LEAPS(long term options), significant stock ownership by other companies or funds, and stock in a company being acquired, can be better ways to get equity participation.
Since warrants are leveraged investments, you need to feel strongly about the growth in the underlying shares. So it is prudent to look for good investments, before looking for ways to leverage it. When you read the quarterly and annual reports, the warrants are usually identified. As soon as they are in the money, companies have to restate earnings based on the increased dilution caused by the additional shares. Intel had to do this in 1995, and actually caught some analysts off-guard with their "lower" fully diluted earnings.
Many warrants or converts are not offered to the general public; only institutions or other companies can obtain these warrants through private placements.
One way to get a quick list of warrants, is simply scan Barron's Market Week section of stock quotes. If the stock name is followed by the "wt" symbol, then that security is a warrant. There are hundreds of warrants out there, but most are for smaller speculative companies.
For many companies, LEAPs can be better alternatives. There are more selection of exercise prices and durations. Again these are highly leveraged, so learn about option pricing theory, before you get into them. At this point, the premium of INTCW, is essentially all due to deferred borrowing costs and lost dividends, not volatility, contrary to Chow's posting on this thread. Its extremely unlikely, that Intel will drop below the exercise price of $41.75, and no mathematical pricing model is ever going to give an accurate calculation of that probability. But options or warrants that are close to the exercise price can be priced exhorbitantly, and so understanding the basis for option pricing is important.
BTW I first became aware of INTCW when Jimmy Rodgers recommended shorting them in Barron's Round Table in January 1995. I bought a few in 95, but then really loaded up last winter. At the same time I bought Nexgen stock that was being bought out by AMD at a 10% discount to the conversion value. In this way I was able to own this sector for a fraction of the S&P multiple. This strategy has worked like a charm, both players have gone up significantly. I still own all my warrants and actually added AMD shares to keep my investments proportional to each companies possible prospects in this sector.
Paul |
