Most bond investors invest with the herd: if bond ratings get upgraded, investors buy bonds, and if bond ratings are downgraded, investors sell bonds.
This is often the exact opposite of how investors should approach bond investing.
Our goal as bond investors is to find value. This typically means that a bond's rating does not accurately reflect its risk and/or the bond's price and yield is compelling relative to other comparable bonds. Our success as bond investors is determined by our ability to find value in the US corporate bond market.
BondSavvy makes CUSIP-level corporate bond investment recommendations that identify undervalued bonds that can drive strong total returns. We do not recommend bonds that are trading at a material premium to par value, as these bonds have limited upside as show in this blog post.
We review thousands of corporate bonds to create a short list of investment opportunities. We then conduct detailed analysis on these bonds to determine which bonds have the most upside relative to the company's financial performance and other bond investment opportunities available to investors. We conduct credit analysis on both investment-grade and high-yield corporate bonds to determine which bonds provide the most compelling risk-return opportunities.
This is a very different approach than the typical laddered bond portfolio. When investors create bond ladders, their focus is on the maturity date of the bond and not whether that bond is a good value or not. In our opinion, this limits an investor's options and reduces returns. Further, selling bonds before maturity is a key component of our bond investing strategy as it enables investors to lock in capital appreciation and increase bond investment returns.