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Gold/Mining/Energy : Swift Energy (SFY)
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To: wolfdog2 who wrote (686)2/28/1999 12:14:00 PM
From: Robert T. Quasius  Read Replies (1) of 1602
 
When the underlying stock for a convertible bond is trading well below the the conversion price, a convertible trades based upon the yield, with little premium for the convertibility. These bonds could be a good long term investment, if one is confident that the stock will eventually reach the conversion point. Especially, when one considers that one is collecting interest all the while.

One thing common stock holders should watch out for when convertible debt exists is that bond holders will sometimes short the common when the stock price reaches a high valuation. This locks in their profit, while they continue to collect interest. If they have to short cover, they merely convert the bonds into common shares.

There are some now some web sites dedicated to convertible bonds and preferred shares. You might want to check them out as they might give you a fair valuation of the bonds.
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