Individual corporate bonds' fixed coupon payments enable investors to lock in today's high bond yields for the long term. Bond fund and ETF investors, unfortunately, cannot lock in today's high yields since bond fund distributions are variable and can change each month. Stock investors have it even worse, with the S&P 500 dividend yield recently reaching 1.2%, lows not seen since the dot com bubble in the early 2000s.
Bondsavvy presents new bond recommendations each quarter, and we are looking forward to presenting new bond picks in today's higher-yield environment. On November 14, 2024 at 5:00pm EST, Bondsavvy will present new corporate bond recommendations during The Bondcast, a financial webinar available exclusively to Bondsavvy subscribers.
Why Own Individual Bonds vs. Bond Funds and Stocks
One of the biggest weaknesses with bond fund and stock investments is that they do not allow investors to lock in high long-term income the way investors can with individual corporate bonds. With bond yields recently hitting four-month highs, individual bond investors can lock in high yields and benefit from potential capital appreciation.
The world's largest bond fund, the $343 billion Vanguard Total Bond Market Index Fund (VBTLX), has an annual portfolio turnover of about 40%. This means that, over one year, nearly half of the portfolio has changed from what it was at the beginning of the year. Therefore, investors in these mega bond funds have no idea what long-term income they can expect from such investments.
For stocks, the S&P 500 dividend yield on October 21, 2024 was a paltry 1.2%, and dividend payments can be slashed or discontinued overnight when companies hit a rough patch.
The income offered by individual corporate bonds is contractual and lasts until a bond's maturity date.
Overview of The Bondcast
We founded Bondsavvy to empower individual investors to benefit from the income, capital growth, and relative safety individual corporate bonds can provide. The Bondcast simplifies the 9,000-bond corporate bond universe to a select number of easy-to-understand investment recommendations. It puts individual investors in control of their fixed income portfolios.
This fixed income blog post provides answers to FAQs for The Bondcast and the Bondsavvy investment service.
1. Why own individual corporate bonds now?
We strongly advocate investors build bond portfolios over time; however, as of this October 22, 2024 update, there are several factors making now a compelling time to invest in individual corporate bonds:
- The S&P 500 now trades near a 30x price-to-earnings (P/E) ratio compared to approximately 19x ten years ago, according to Gurufocus.com.
- The S&P 500 dividend yield was 1.23% on October 21, 2024, a low level not seen since the dot.com bubble reached its peak in early 2000, according to Gurufocus.com
- Since bottoming out on September 16, 2024, 10- and 20-year US Treasury yields have increased over 50 basis points to 4.19% and 4.54%, respectively, on October 21. This has caused many investment-grade corporate bonds to fall several points, providing values not seen since the summer of 2024.
- For example, a 30-year, investment-grade bond issued by one of the world's largest technology companies had a 5.70% YTM on October 22 and was priced in the low 80s. Bonds like this provide investors an opportunity to lock in high, long-term income and benefit from potential capital appreciation.
- Money market yields have fallen about 50 basis points (one-half percentage point) over the last several weeks and could fall into the 3s should the US Federal Reserve cut rates further per the September 2024 Fed dot plot.
- Income distributions for bond funds and ETFs vary monthly and do not enable investors to lock in long-term income, as can be done with individual corporate bonds.
- Since bond funds and ETFs do not trade relative to par value and lack underlying financial metrics, investors cannot assess whether bond funds or ETFs are trading at compelling values.
2. Do I have to wait until November 14 to subscribe to Bondsavvy?
No. While there is always excitement around new bond recommendations, as of October 15, 2024, Bondsavvy had 26 corporate bonds rated 'buy' in addition to to 35 rated 'hold.' We have as much conviction in previous recommendations rated 'buy' as we do in brand-new picks.
We update all buy/sell/hold ratings from previous recommendations each quarter based on the latest issuer financials and bond pricing and yield metrics. We provide additional email updates in the case of mergers, tender and exchange offers, and other material events impacting our bond issuers.
In addition, before attending their first edition of The Bondcast, subscribers would be well served to review our prior recommendations. They may decide to purchase some of these recommendations in advance of our November 14 edition of The Bondcast.
3. How have Bondsavvy's corporate bond recommendations been performing?
On October 15, 2024, Bondsavvy updated the investment performance of its 129 prior corporate bond recommendations. Please view our corporate bond returns page to see the total returns of our 66 exited recommendations, as well the 60+ bonds that remain either a buy or hold. For the 66 bonds we have previously sold, we have outperformed the iShares corporate bond ETFs 76% of the time, including 22 times by at least 10 percentage points.
Performance of Recently Exited Recommendations
Through October 15, 2024, we have recommended 'sells' of 12 previously recommended corporate bonds in 2024. Of these 12 prior recommendations, Bondsavvy outperformed iShares in 10 (83% of the time), including 6 picks where we outperformed by at least 10 percentage points.
Figure 1a shows the performance of each of these recommendations compared to the leading iShares corporate bond ETFs.
Figure 1a: Performance of Bondsavvy Recommendations Exited January 1-October 15, 2024
| Bond | Pick Date | Sell Date | Bondsavvy Total Return | iShares Bond ETF Return* | Bondsavvy 10-Bond $ Total Return** | Bondsavvy Win? |
|---|---|---|---|---|---|---|
| High Yield Bonds | ||||||
| Beazer Homes 7.25% 10/15/29 | 3/8/23 | 9/5/24 | 23.23% | 17.05% (HYG) | $2,128 | Yes |
| CoreCivic 4.75% 10/15/27 | 12/12/19 | 9/5/24 | 40.52% | 16.29% (HYG) | $3,371 | Yes |
| DISH DBS 5.125% 6/1/29 | 1/12/22 | 10/7/24 | -12.21% | 7.43% (HYG) | -$1,131 | No |
| Steelcase 5.125% 1/18/29 | 11/16/22 | 9/5/24 | 23.50% | 19.07% (HYG) | $2,039 | Yes |
| TransAlta 6.50% 3/15/40 | 6/5/20 | 3/7/24 | 27.15% | 12.37% (HYG) | $2,629 | Yes |
| US Cellular 6.700% 12/15/33 | 3/8/23 | 5/30/24 | 26.17% | 11.19% (HYG) | $2,331 | Yes |
| Vital Energy 10.125% 1/15/28 | 12/17/20 | 3/29/24 | 66.49% | 5.68% (HYG) | $5,525 | Yes |
| Investment Grade Bonds | ||||||
| Brunswick Corp. 4.40% 9/15/32 | 6/22/23 | 9/5/24 | 14.68% | 10.58% (LQD) | $1,267 | Yes |
| Kyndryl Holdings 3.15% 10/15/31 | 6/22/23 | 9/5/24 | 20.81% | 10.58% (LQD) | $1,569 | Yes |
| Macy's 4.50% 12/15/34 | 12/12/18 | 5/30/24 | 37.28% | 12.86% (LQD) | $2,981 | Yes |
| Marriott Int'l 4.00% 4/15/28 | 11/16/22 | 9/5/24 | 13.61% | 11.23% (LQD) | $1,268 | Yes |
| Nutrien Ltd. 4.00% 12/15/26 | 6/16/22 | 5/30/24 | 5.66% | 7.60% (SLQD) | $559 | No |
Sources: Bond market prices are from Fidelity.com and FINRA TRACE market data. iShares performance figures are from the iShares website. * iShares bond ETF comparison is based on the recommended bond's rating on the pick date. **Represents the total return, in US dollars, from a 10-bond investment in each recommendation.
Please view our corporate bond returns page to see the performance of all of Bondsavvy's prior 129 corporate bond recommendations, as well as additional footnotes pertaining to our performance figures. Fixed income expert Steve Shaw founded Bondsavvy in 2017 to empower individual investors to benefit from the income, potential capital growth, and relative safety corporate bonds can provide. We believe showing this level of performance transparency enables investors to evaluate the Bondsavvy service and the upside and downside that can come with bond investing.
4. Why should I attend The Bondcast financial webinar?
Once investors understand the benefits of owning individual bonds vs. bond funds, they need to decide which among the 9,000 available corporate bonds to add to their portfolios. Without Bondsavvy, this is a daunting task.
Without Bondsavvy, investors must sift through thousands of bonds and rely on corporate bond ratings for financial analysis. The problem with this approach is that bond rating methodologies are flawed, often underrating high yield bonds and overrating investment grade bonds. In addition, bond ratings do not speak to whether a bond is a compelling investment, as they ignore a bond's price, YTM, credit spread, and interest rate risk.
Bondsavvy's corporate bond research evaluates over 15 investment considerations when we make new bond recommendations. Not only do we evaluate the creditworthiness of a bond issuer, but we seek to understand whether a prospective bond investment represents a good value. Our goal is to identify bonds that pay high yields relative to their risk and offer compelling total return opportunities. Read our fixed income investing strategy post to learn more.
Bondsavvy Subscriber Benefit
Bondsavvy's objective, easy-to-understand bond recommendations put individual investors in control of their bond investments.Get StartedBondsavvy simplifies bond investing by taking a large universe of bonds and narrowing it down to a select list of recommendations we believe can outperform the leading bond funds and ETFs. Bondsavvy subscribers use our bond recommendations to buy bonds online and build bond portfolios.
5. Is The Bondcast a live event? How will I gain access?
Yes, The Bondcast is a live subscriber event we host on Zoom. Shortly before the live event, we will email Zoom details for The Bondcast. Should you not be available at 5:00pm EST on November 14, you can access a recording of the live event several hours after it is finished. Upon subscribing, you will see details for all current 60+ buy/hold recommendations as well as the presentations supporting each recommendation.
The Bondcast is interactive, as our subscribers post questions that our founder Steve Shaw answers throughout the webcast.
We kick off each edition of The Bondcast with a brief discussion of overarching investment themes. These themes help us narrow down the bond universe to certain sectors, credit quality, and maturity dates. Figure 1b shows a slide where we discussed key investment themes during a previous edition of The Bondcast.
Figure 1b: Sample Slide from Previous Edition of The Bondcast
You'll notice a table of contents to the right of the slide. Once we post a recording of The Bondcast in our subscriber area, we append a table of contents so subscribers can click on the slides of greatest interest.
6. How often does Bondsavvy make new corporate bond recommendations?
Bondsavvy hosts The Bondcast each quarter so our analysis can reflect a bond issuer's most recent financial filings. Our November 14, 2024 edition of The Bondcast will reflect all of the financial reports filed by bond issuers by that date. With the exception of companies that don't have a December 31 yearend, we expect the issuing companies of our recommended bonds to have reported Q3 2024 earnings.
7. If I subscribe to Bondsavvy, do I gain access to prior Bondsavvy bond recommendations?
Yup. From our first set of bond recommendations made September 26, 2017, Bondsavvy has made 129 corporate bond recommendations. We currently have 24 bonds on our 'buy' list and another 35+ corporate bonds rated hold. As a Bondsavvy subscriber, you gain access to our existing bond recommendations, as well as all new bond picks for as long as you are a Bondsavvy subscriber. View our corporate bond returns page to see the performance of previously recommended bonds, including the bond names and CUSIPs for bond recommendations we have exited.
8. How long is The Bondcast and what's the agenda?
The Bondcast is a 60-minute presentation, which consists of i) Overarching investment themes and market conditions; ii) Pricing and financial ratios of our recommended bonds and bond issuers; iii) Historical bond prices and call provisions; and iv) Analysis of each bond issuer's business, growth, risks, capital allocation, capital structure, and recent financial performance.
Based on the investment analysis presented during The Bondcast, subscribers will be able to decide which bonds they want to add to their investment portfolios.
9. How many corporate bond recommendations will you make at each edition of The Bondcast?
Typically, between four and five. Our corporate bonds recommendations will all be at the individual bond, or CUSIP or ISIN, level.
10. How are Bondsavvy recommendations split between investment-grade and high-yield corporate bonds?
Historically, we have had a fairly even split; however, based on market conditions, at certain editions of The Bondcast, it may skew slightly toward either investment-grade or high-yield corporate bonds. Of our last 37 corporate bond recommendations through July 11, 2024, we have recommended 21 high yield bonds and 16 investment grade bonds.
View our corporate bond returns page to see a breakdown of our investment grade and high yield bond recommendations.
11. Am I going to have to do a bunch of work to make corporate bond investments?
No. Bondsavvy does the heavy lifting for you. During The Bondcast, we will provide you key pieces of information on each company and corporate bond we are recommending, boiling down each recommendation to two to three PowerPoint slides.
Along with additional color provided during The Bondcast, you will have the information you need to make an investment. All you'll need to do is copy and paste your selected bond CUSIPs (or ISINs for non-US investors) to execute trades through online bond trading platforms such as Fidelity.com, E*TRADE, Schwab, Vanguard, and Interactive Brokers, or whichever brokerage you use.
Bondsavvy Subscriber Benefit
Bondsavvy takes the guesswork out of corporate bond investing. Our founder, Steve Shaw, is the leading expert on evaluating investments in individual corporate bonds for individual investors.Get StartedThat said, investors must understand that investing in individual corporate bonds is not a "set it and forget it" investment strategy in the way bond index funds are. It is incumbent upon Bondsavvy subscribers to view our new recommendations and recommendation updates so they can make investment decisions.
International subscribers should look into which online brokerages support corporate bond trading in their areas.
12. What happens if a bond recommendation changes?
Bondsavvy updates its bond recommendations each quarter during The Super Bondcast financial webinar. During The Super Bondcast, we review each issuing company's updated financials, as well as each bond's update price, yield to maturity, and credit spread. We then discuss the rationale for each updated buy/sell/hold recommendation.
We complement The Super Bondcast with written recommendation updates we email subscribers and post in the Bondsavvy subscriber area.
13. Can I view prior editions of The Bondcast?
Yes, for as long as you subscribe to Bondsavvy,
you have access to recordings of all Bondsavvy financial
webinars, including The Bondcast and Super Bondcast.
14. Is Bondsavvy an SEC-registered trading platform, broker-dealer, investment adviser, or asset manager?
None of the above. Bondsavvy is not registered as an investment adviser under the Investment Advisers Act of 1940, or the securities laws of any state or other jurisdiction, nor is such registration contemplated. Bondsavvy makes recommendations on individual corporate bond investments and charges a fee to customers. We do not hold customer assets, and we do not execute trades on behalf of customers.
15. Are Bondsavvy's corporate bond investment recommendations specific to my portfolio?
As Bondsavvy operates under the publishers' exemption of the Investment Advisers Act of 1940, the investments discussed during The Bondcast do not take into account an investor's particular investment objectives, financial situation or needs. In making an investment decision, each investor must rely on his or her own examination of the investment, including the merits and risks involved. Please read the Bondsavvy general disclaimer.
While Bondsavvy does not provide personalized advice, we have published the How To Build a Bond Portfolio blog post, which provides some key considerations for investors constructing bond portfolios.
We hope to welcome you as a new Bondsavvy subscriber and that we'll see you on The Bondcast.
