Convertible Securities: a complete guide to investment and corporate finance

Like many, I kind of fell into the stock market. I left the Army after the Vietnam war and returned to school to study philosophy. Six year later, I looked in vain for a teaching job. A fellow student, who had made a mid-career change from graphic design to aesthetics, suggested I look to finance. It’s not boring, like many other jobs, and you’re so old (30) that no industrial firm will hire you, she said. The second was certainly true, and I couldn’t get a starting-out finance job, either. Among my rejections was an “are you joking” letter typed on a manual typewriter that desperately needed cleaning, from Value Line.

A couple of months later, in the midst of a newspaper strike that prevented VL from advertising for new help, the company lost a large part of its staff to a brokerage just recovering from a brutal mid-1970s slump. I was in …because there was no one else.

One of my more respectable and much better qualified colleagues at Value Line was F. Barry Nelson, who has gone on to a long and successful career in convertibles. Tracy Maitland, Daniel Partlow and he, all of Advent Capital Management, have just written the definitive book on convertibles. Here’s my review of it:

Convertible Securities: a Complete Guide to Investment and Corporate Financing Strategies (McGraw Hill, 2022) is a fabulous, and very important, book. 

–it’s a gold mine of practical information about the convertible world, much of which would be hard/impossible to get otherwise.  I think it’s the first book anyone interested in convertibles should read

CS is an exceptionally thorough analysis of the interesting, but not top-of-mind for the investing public, world of convertibles (hybrid securities issued as fixed income but having the extra feature of allowing/compelling the holder to exchange them for something else—usually equities)

–it argues persuasively that a well-constructed portfolio of convertibles can deliver equity-like returns with considerably greater downside protection

–McGraw Hill is the go-to imprint for serious finance

–most important, CS is written by three seasoned investment professionals from Advent Capital Management, a firm that specializes in convertibles.  (My friend Barry Nelson was a senior analyst at Value Line when I joined VL in 1978.)

On another level:

CS is 500+ pages long.  Some of it is tough going.  Think of it as a way of apprenticing yourself to a group of master craftsman to learn a trade

–the book itself is a great illustration of the deceptive simplicity of Wall Street, where complexity arises from the skill of combining a welter of relatively easy-to-understand elements into a multi-aspect conclusion that’s not intuitively obvious

–maybe my strongest impression of CS is about the generosity of the authors in revealing craft knowledge it would have taken them years of hard work to amass.  Very un-Wall Street, but lucky for the rest of us.

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