Learn the 30 Corporate Bonds We Rate BUY

BondSavvy's Corporate Bond Returns

Our corporate bond returns have been beating the world’s largest bond funds and ETFs:

What our numbers tell you

  • Through October 31, 2022, we have made 100 corporate bond recommendations (we made five more November 16, 2022, which are not yet included in our returns figures)
  • We maximize total returns, in part, by selling bonds before maturity. We've exited 53 of our prior 100 bond recommendations
  • For our exited recommendations, we have beaten the leading iShares corporate bond ETFs 75.5% of the time
  • In 17 of our exited recommendations, we have beaten the iShares LQD/HYG ETFs by 10 points or more

BondSavvy’s Corporate Bond Returns Explained:

BondSavvy provides corporate bond recommendations subscribers use to make investment decisions for their own accounts. Our investment newsletter subscribers are either individual investors or financial advisors acting on behalf of individual investors.

This page compares the corporate bond returns achieved by BondSavvy’s recommendations to those of the iShares LQD and HYG bond ETFs:

For our exited recommendations

We show the name of the recommended bond; its CUSIP; pick and sell dates; and the return vs. the benchmark iShares bond ETF

For our current recommendations

Those still rated buy or hold – we show the pick date; pick date price; current price; and the return our recommendation has achieved vs. the benchmark iShares bond ETF

Below our returns tables

We show a case study on Verizon bonds and Albertsons bonds, which explains the key drivers of these recommendations’ performance

Our Corporate Bond Returns vs. iShares Bond ETFs

Corporate Bond Returns of Exited Recommendations

Recommended Corporate Bonds
BondSavvy Investment Returns
Bond ETF Returns (6)
Pick Date
Sell Date
Total
Return (3)
iShares
LQD
iShares
HYG
Beat Benchmark
iShares
Bond ETF

Investment-Grade Corporate Bonds

Alphabet 1.998% 8/15/26 CUSIP 02079KAC1
3/8/18
4/1/19
5.66%
5.58%
NA
Apple 3.45% 2/9/45 CUSIP 037833BA7
12/13/17
8/9/19
13.10%
10.53%
NA
Bed Bath & Beyond 3.749% 8/1/24 CUSIP 075896AA8
5/2/18
10/7/19
20.73%
17.34%
9.28%
BNSF 3.90% 8/1/46 CUSIP 12189LAZ4
3/15/19
10/7/19
17.18%
11.62%
NA
CSX 3.80% 11/1/46 CUSIP 126408HF3
3/26/20
11/24/20
24.96%
19.71%
NA
CSX Corp. 3.25% 6/1/27 CUSIP 126408HH9
3/26/20
8/12/20
12.60%
18.78%
NA
--
eBay 4.00% 7/15/42 CUSIP 278642AF0
12/13/17
12/4/21
42.16%
25.21%
NA
eBay 4.00% 7/15/42 CUSIP 278642AF0
11/19/18
12/4/21
66.80%
31.24%
NA
E*TRADE 3.80% 8/24/27 CUSIP 269246BQ6
3/26/20
9/10/20
22.35%
17.39%
NA
Expedia 3.800% 2/15/28 CUSIP 30212PAP0
3/25/20
6/19/20
31.55%
18.42%
NA
FedEx 3.400% 2/15/28 CUSIP 31428XBP0
3/30/20
9/10/20
13.50%
12.16%
NA
HP Inc. 6.000% 9/15/41 CUSIP 428236BR3
12/13/17
1/23/20
19.22%
15.43%
NA
Kirby Corp. 4.20% 3/1/28 CUSIP 497266AC0
6/5/20
3/25/21
16.12%
2.05%
NA
Lazard Group LLC 3.625% 3/1/27 CUSIP 52107QAH8
8/14/18
8/9/19
11.81%
13.39%
NA
--
Marriott International 3.125% 6/15/26 CUSIP 571903AS2
12/12/18
5/21/19
8.89%
7.60%
NA
PepsiCo 3.00% 10/15/27 CUSIP 713448DY1
3/26/20
6/19/20
8.02%
15.46%
NA
--
RPM Int'l 4.550% 3/1/29 CUSIP 749685AX1
6/5/20
3/25/21
5.41%
2.05%
NA
Southwest Airlines 3.00% 11/15/26 CUSIP 844741BC1
3/26/20
11/24/20
15.29%
19.71%
NA
--
Southwest Airlines 2.625% 2/10/30 CUSIP 844741BF4
3/26/20
11/24/20
19.05%
19.71%
NA
--
Teck Resources 6.25% 7/15/41 CUSIP 878742AW5
9/5/19
9/10/20
4.18%
8.28%
NA
--
Tiffany 4.900% 10/1/44 CUSIP 886546AD2
9/5/19
1/23/20
26.08%
2.03%
NA
Verizon 3.85% 11/1/42 CUSIP 92343VBG8
9/26/17
9/9/19
27.01%
12.53%
NA

High-Yield Corporate Bonds

AECOM 5.125% 3/15/27 CUSIP 00774CAB3
3/8/18
6/3/21
30.44%
NA
19.84%
Albertsons 7.45% 8/1/2029 CUSIP 013104AF1
9/26/17
3/24/22
79.52%
NA
15.18%
AMC Networks 4.750% 8/1/25 CUSIP 00164VAE3
8/14/18
2/19/21
18.88%
NA
16.21%
AMC Networks 4.750% 8/1/25 CUSIP 00164VAE3
3/25/20
2/19/21
18.68%
NA
28.06%
--
American Axle 6.500% 4/1/27 CUSIP 02406PAU4
11/19/18
9/10/20
23.96%
NA
11.74%
American Axle 6.500% 4/1/27 CUSIP 02406PAU4
8/14/18
9/10/20
14.45%
NA
9.79%
CF Industries 4.95% 6/1/43 CUSIP 12527GAD5
5/31/19
11/24/20
49.55%
NA
8.79%
Citrix Systems 4.50% 12/1/27 CUSIP 177376AE0
11/19/18
1/23/20
20.45%
NA
12.62%
Citrix Systems 4.50% 12/1/27 CUSIP 177376AE0
5/31/18
1/23/20
18.63%
NA
12.71%
Consolidated Comms 6.5% 10/1/22 CUSIP 20903XAE3
8/14/18
10/2/20
22.11%
NA
8.60%
DISH DBS 7.750% 7/1/26 CUSIP 25470XAY1
5/31/18
5/28/19
12.82%
NA
6.04%
EQT Corp. 3.900% 10/1/27 CUSIP 26884LAF6
9/23/20
6/3/21
19.52%
NA
7.68%
Expedia 3.800% 2/15/28 CUSIP 30212PAP0
3/8/18
6/19/20
13.85%
NA
8.82%
Exterran Energy 8.125% 5/1/25 CUSIP 30227KAE9
1/12/22
10/21/22
15.30%
NA
-13.51%
H&E Equipment 5.625% 9/1/25 CUSIP 404030AH1
3/15/19
11/24/20
13.06%
NA
9.76%
JCPenney 5.65% 6/1/20 CUSIP 708130AD1
4/4/20
12/17/20
-100.00%
NA
21.13%
--
JCPenney 6.375% 10/15/36 CUSIP 708130AC3
12/13/17
12/17/20
-80.77%
NA
16.96%
--
JCPenney 5.65% 6/1/20 CUSIP 708130AD1
11/19/18
5/28/19
7.25%
NA
6.07%
JCPenney 5.65% 6/1/20 CUSIP 708130AD1
9/10/18
5/28/19
-3.96%
NA
3.80%
--
Laredo Petroleum 9.500% 1/15/25 CUSIP 516806AF3
12/18/20
3/24/22
31.71%
NA
-0.93%
Lennar 4.750% 5/30/25 CUSIP 526057BV5
3/8/18
11/24/20
27.18%
NA
15.67%
Mercer International 5.50% 1/15/26 CUSIP 588056AW1
9/5/19
5/18/20
-9.42%
NA
-5.18%
--
M/I Homes 5.625% 8/1/25 CUSIP 55305BAQ4
3/15/19
1/11/21
18.20%
NA
11.66%
Monitronics 9.125% 4/1/20 CUSIP 609453AG0
9/26/17
9/14/18
-7.13%
NA
2.59%
--
Park-Ohio Industries 6.625% 4/15/27 CUSIP 700677AR8
5/31/19
3/25/21
14.25%
NA
12.31%
Pitney Bowes 4.625% 3/15/24 CUSIP 724479AJ9
5/31/18
5/15/19
10.66%
NA
5.90%
Quad / Graphics 7.000% 5/1/22 CUSIP 747301AC3
12/12/19
4/29/22
26.03%
NA
0.59%
Tennant Company 5.625% 5/1/25 CUSIP 880345AB9
12/12/18
11/24/20
17.99%
NA
14.72%
TransAlta 4.500% 11/15/22 CUSIP 89346DAF4
6/5/20
3/25/21
5.42%
NA
9.25%
Tupperware Brands 4.75% 6/1/21 CUSIP 899896AC8
12/12/19
12/3/20
7.30%
NA
4.40%
US Concrete 6.375% 6/1/24 CUSIP 90333LAP7
12/12/18
3/25/21
21.45%
NA
18.43%

Corporate Bond Returns of Current Recommendations

Recommendations by Pick Date Subscribe to learn bond names and CUSIPs
BondSavvy Investment Returns
Bond ETF Returns (6)
Pick Date
Price (1)
Nov 30, 2022
Price (2)
Total
Return (3)
iShares
LQD
iShares
HYG
Beat Benchmark
iShares
Bond ETF
Short Term Investment Grade Bond 1
98.72
96.42
-0.47%
-0.56%
NA
Short Term Investment Grade Bond 2
97.22
96.29
0.81%
Short Term Investment Grade Bond 3
101.37
99.64
0.32%
Short Term Investment Grade Bond 4
100.19
99.37
0.96%
High Yield Bond 1
94.11
86.21
-5.53%
NA
-4.98%
--
High Yield Bond 2
91.60
83.56
-6.02%
--
High Yield Bond 3
94.57
87.53
-4.03%
High Yield Bond 4
89.04
77.46
-10.11%
--
High Yield Bond 5
88.78
78.49
-9.39%
--
High Yield Bond 6
92.35
75.50
-14.26%
--
High Yield Bond 2
98.10
84.15
-10.84%
-15.52%
-9.73%
--
High Yield Bond 3
92.60
64.38
-25.59%
--
Investment Grade Bond 1
85.66
64.17
-22.52%
--
Investment Grade Bond 1
89.85
63.25
-26.88%
-18.41%
-10.11%
--
Investment Grade Bond 2
104.48
79.12
-21.11%
--
High Yield Bond 1
100.22
87.06
-7.02%
High Yield Bond 2
109.85
91.22
-9.55%
Investment Grade Bond 3
93.46
63.29
-29.01%
--
High Yield Bond 1
98.60
74.31
-18.03%
-14.94%
-10.11%
--
Investment Grade Bond 1
92.52
69.55
-19.94%
--
Investment Grade Bond 2
87.12
63.28
-23.20%
--
High Yield Bond 2
97.17
83.86
-8.38%
High Yield Bond 1
101.35
99.00
8.52%
-14.09%
-6.97%
High Yield Bond 2
103.35
98.71
7.27%
High Yield Bond 3
113.60
80.08
-19.08%
--
High Yield Bond 4
118.10
42.50
-52.35%
--
Investment Grade Bond 1
90.07
66.16
-21.76%
--
Investment Grade Bond 2
85.32
66.13
-17.95%
--
Investment Grade Bond 1
96.30
61.71
-31.35%
-17.98%
-6.08%
--
Investment Grade Bond 2
98.55
64.18
-29.93%
--
High Yield Bond 1
83.10
101.19
45.56%
High Yield Bond 3
101.98
49.84
-39.73%
--
Investment Grade Bond 1
110.86
86.68
-11.46%
-16.47%
-1.40%
High-Yield Bond 1 (split-rated)
94.34
88.02
4.31%
Investment Grade Bond 2
96.04
64.28
-26.69%
--
Investment Grade Bond 2
95.56
76.33
-9.06%
-13.03%
0.40%
High Yield Bond 2
97.33
89.04
8.09%
All 3/26/20 Recommendations Have Been Sold
High-Yield Bond 2 (split-rated)
88.85
74.41
-0.37%
NA
-1.60%
High Yield Bond 4
83.20
85.17
19.32%
High-Yield Bond 1
99.48
90.00
12.28%
NA
0.10%
Investment-Grade Bond 1
91.43
77.63
0.43%
-1.91%
NA
Investment-Grade Bond 2
86.54
78.40
6.29%
Investment Grade Bond 1
87.95
65.73
-4.15%
2.04%
NA
--
Investment Grade Bond 2
79.96
72.50
13.01%
6.68%
NA
High-Yield Bond 1
91.66
90.50
32.52%
NA
9.28%
Investment Grade Bond 1
76.60
15.50
-50.35%
6.93%
NA
--
All 3/8/18 Recommendations Have Been Sold
All 12/13/17 Recommendations Have Been Sold
Investment-Grade Bond 1
86.86(5)
15.41
-51.46%
3.16%
NA
--

HISTORICAL CORPORATE BOND RETURNS UPDATES

The above tables show our corporate bond returns from the initial recommendation date (or "Pick Date") until either the sell date or the date indicated for our current bond recommendations. In July 2022, we began providing periodic updates on key drivers of our investment returns. We plan to provide this additional color each time we update BondSavvy's corporate bond returns.

November 2022 Corporate Bond Returns Update
4 min read

Through October 31, 2022, BondSavvy has made 100 corporate bond investment recommendations.  Of these 100 picks, we have sold (or "exited") 53 of them.  We recommended five new bonds November 16, 2022; however, these picks are not yet included in our performance data since they were made only two weeks before the end of the November 30, 2022 corporate bond returns update period.  As shown above in the Corporate Bond Returns for Exited Recommendations table, for our...

Through October 31, 2022, BondSavvy has made 100 corporate bond investment recommendations.  Of these 100 picks, we have sold (or "exited") 53 of them.  We recommended five new bonds November 16, 2022; however, these picks are not yet included in our performance data since they were made only two weeks before the end of the November 30, 2022 corporate bond returns update period.  

As shown above in the Corporate Bond Returns for Exited Recommendations table, for our 53 exited recommendations, we have beaten the iShares LQD and HYG corporate bond ETFs 40 times, or 75.5% of our exited bond picks.  For 17 of our exited recommendations, we have beaten the iShares ETFs by at least 10 percentage points.  For our 53 exited recommendations, there have only been two cases where the iShares corporate bond ETFs outperformed BondSavvy by 10 percentage points or more.

Corporate Bond Return for Exterran 8.125% '25 Exited Recommendation

Bond price appreciation has been rare in 2022; however, our recently exited Exterran '25 recommendation (CUSIP 30227KAE9) is one of the few corporate bonds that increased in price during 2022.

Exterran Energy was a global provider of natural gas processing and treatment solutions.  We recommended the Exterran bond on January 12, 2022 at a price of 94.61.  Shortly after we made the recommendation, Canada-based Enerflex announced it agreed to acquire Exterran.  As Enerflex was deemed to have a higher credit quality than Exterran, the Exterran bonds increased in price to above par value

When one company acquires another company, the acquiring company typically assumes the debt of the company being acquired.  This is why the Exterran bond increased in price, as the bond would now be the obligation of a company with a higher corporate bond rating.  

That said, as part of the Exterran acquisition, Enerflex obtained new financing at a lower rate than the 8.125% Exterran was paying on its bonds.  As a result, Exterran called the bonds October 21, 2022 at a price of 102.03.  Assuming a 94.61 purchase price and a 0.1-point markup on the purchase, the investment generated a total corporate bond return of 15.30% compared to a -13.51% return of the iShares HYG ETF during the same period.

Exited Returns Have Outperformed Most Recent Recommendations  
Above, we displayed our corporate bond returns in two separate areas: Exited Recommendations and Current Recommendations.  While we have been pleased with the performance of our exited recommendations, a number of our current recommendations have performed poorly.

The greatest number of bonds with weak performance have been long-dated investment grade corporate bonds, which have been hurt by higher US Treasury yields.  As shown in Figure 1, long-term US Treasury yields were on an upward path until October 24, 2022 when the 10 year US Treasury YTM was 4.25% and the 30 year US Treasury YTM was 4.40%.  These US Treasury YTMs fell significantly from October 24 until November 30, 2022, with the 10 year US Treasury YTM falling 0.57 percentage points (or 57 "basis points") and the 30 year US Treasury YTM falling 0.60 percentage points (or 60 basis points).   

Figure 1: US Treasury Yields vs. Effective Fed Funds Rate: November 30, 2021-November 30, 2022 

november-30-2022-treasury-yields.png

Many investors automatically believe that investing in short-term bonds is always the best play in a rising interest rate environment.  Unfortunately, that strategy hasn't been a good one in 2022, as short-term bond yields have risen substantially more than long-term bond yields.  As shown in Figure 1, the two-year US Treasury YTM has increased 3.86 percentage points (386 basis points) from November 30, 2021-November 30, 2022, while the 30-year US Treasury YTM has increased 2.02 percentage points (202 basis points) over the same time period.

While the prices of short term investment grade corporate bonds have generally fallen less than long term investment grade corporate bonds in 2022, purchasing short term investment grade bonds in 2021 was not compelling, as most YTMs of such bonds were very low. For example, the YTM on the Apple 3.45% 5/6/24 bond (CUSIP 037833AS9) was 0.47% on August 2, 2021 when the bond traded at 108.15.  On November 30, 2022, the Apple '24 bond was trading at a price of 98.52 and a 4.53% YTM.  

As short term bond yields began rising in 2022, we made four new short term corporate bond recommendations on June 16, 2022.  Such short term corporate bond investments will not be home runs, but they do enable investors to lock in 4-5+% YTMs over the next several years.

Other Factors Driving Corporate Bond Prices Lower in 2022

Apart from the negative impact of rising US Treasury yields, three of our high yield corporate bond recommendations have been hurt by weak issuing company financial performance.  Another high yield bond (High Yield Bond 4 from March 11, 2021) fell significantly in price, as the bond was assumed as part of an acquisition, and the acquiring company heaped billions of new senior debt on the issuing company.  This caused the bond's rating to fall, and its price fell with it.

The Exterran '25 bond is the only recommendation we have sold in the second half of 2022.  Falling bond prices will generally extend the holding time of our bond recommendations.  In addition, should issuing company fundamentals remain strong, we will often recommend subscribers purchase more of a bond that has fallen in price.

Many Bonds Still Available at Low Prices
As shown in our Current Recommendations tables, there are many corporate bonds priced in the 60s and 70s.  Many of these bonds are issued by the world's most profitable companies and can provide compelling upside opportunities with very low default risk.

July 2022 Corporate Bond Returns Update
6 min read

The first half of 2022 was a rough one for bond investments, including many BondSavvy recommendations. We were pleased to see the market recover during July 2022, as 46 of our 48 bond recommendations achieved total investment returns of at least 1.86%, 34 returned at least 5%, and 20 picks returned at least 7%. Figure 1 provides a summary of the investment returns our 48 corporate bond recommendations achieved during July 2022: Figure 1: BondSavvy Investment...

The first half of 2022 was a rough one for bond investments, including many BondSavvy recommendations. We were pleased to see the market recover during July 2022, as 46 of our 48 bond recommendations achieved total investment returns of at least 1.86%, 34 returned at least 5%, and 20 picks returned at least 7%.

Figure 1 provides a summary of the investment returns our 48 corporate bond recommendations achieved during July 2022:

Figure 1: BondSavvy Investment Performance for July 2022 (1)

social-posts-july-2022-corporate-bond-returns-linkedin.jpg

(1) Please see Figure 2 for additional information on our investment return calculations.

As of July 29, 2022, BondSavvy's 48 corporate bond recommendations included 28 high yield corporate bonds, 16 long term investment grade corporate bonds, and 4 short term investment grade corporate bonds.  Figure 2 shows the July 2022 performance of all corporate bond picks made prior to June 16, 2022 and, for our June 16, 2022 picks, their performance since the pick date. We also compare each group of bonds to the benchmark iShares corporate bond ETF.

Subscribe to BondSavvy to learn the names, CUSIPs, and investment rationale for each corporate bond recommendation.

Figure 2: Summary of July 2022 Corporate Bond Returns for Each Bond Recommendation

july-2022-corporate-bond-returns.png

July 2022 Corporate Bond Returns vs. iShares Corporate Bond ETFs

We outperformed the iShares HYG high yield corporate bond ETF for 14 of our 28 (50%) high yield bond recommendations. We outperformed the iShares LQD investment grade corporate bond ETF for 14 of our 16 (87.5%) long-term investment grade bond recommendations. Thus far, all of our June 16, 2022 short-term bond recommendations have outperformed the iShares SLQD 0-5 year investment grade corporate bond ETF.

Key Drivers of July 2022 Corporate Bond Returns

A key driver of strong July 2022 corporate bond returns was the fall in US Treasury yields since they reached a peak on June 14, 2022. As shown in Figure 3, YTMs of the 2-, 10-, and 30-year Treasury all fell, with the 10-year US Treasury YTM falling the most: 82 basis points (or 0.82 percentage points) from 3.49% to 2.67%.

Figure 3: Year-to-Date 2022 US Treasury Yields

us-treasury-yields-july-2022.png

Credit spreads for many of our recommended corporate bonds fell as well. For example, the credit spread for High Yield Bond 5 fell 90 basis points (bps), from 5.38% on June 30, 2022 to 4.48% on July 29, 2022. This was a big driver of its strong July 2022 corporate bond return. The credit spread of High Yield Bond 1, July 2022’s best performer, fell 93 bps. This bond price increased more than that of High Yield Bond 5 due to Bond 1's longer-dated maturity.

CASE STUDIES OF CORPORATE BOND RETURNS FOR EXITED BONDSAVVY RECOMMENDATIONS

Many investors believe that 'interest rates' are the only thing that impact bond prices. We have two real-world examples that will hopefully dispel this notion once and for all.

On September 26, 2017, during the premier edition of The Bondcast, we recommended Verizon 3.85% 11/1/42 (CUSIP 92343VBG8) and Albertsons 7.45% 8/1/29 (CUSIP 013104AF1). Understanding the changes in these bond prices helps investors better understand what to look for when investing in bonds and what causes bond prices to rise and fall.

Verizon 3.85% '42 Case Study

Verizon is an investment-grade issuer, as its bonds are rated Baa1/BBB+ by Moody's and S&P, respectively. Bonds rated at least Baa3/BBB- are deemed 'investment-grade,' meaning that the credit rating agencies believe they have a lower risk of default than 'high-yield bonds,' which have lower ratings.

In the below chart, we compare changes in the price of the Verizon 3.85% 11/1/42 to its benchmark US Treasury 2.75% 11/15/42 (CUSIP 912810QY7). The reason it is called the 'benchmark' is that the maturity date of this Treasury bond is almost identical to that of the Verizon bond. The price of this US Treasury bond moves up and down based on the demand for this government bond. As the price for this Treasury bond increases or decreases, its yield to maturity ("YTM") moves in the opposite direction. The yield to maturity of this Treasury bond is telling investors what the 'risk-free' investment return is for a Treasury bond that matures 11/15/42, as the US Treasury is deemed to have no default risk. (We don't believe the US government has zero risk of defaulting, but that discussion is for another post.)

When the Verizon bond -- and nearly all other investment-grade corporate bonds -- are quoted on a trading desk, they will be quoted as a spread to the benchmark Treasury. This spread is referred to as the credit spread. For example, suppose:

Verizon 3.85% '42 YTM: 4.22%

US Treasury 2.75% '42 YTM: 2.89%

Credit spread:1.33%

The Verizon bond's YTM is the result of changes in the benchmark Treasury AND the credit spread. As Verizon's credit quality improves, its credit spread will typically shrink, as investors will require less return above the benchmark Treasury to compensate them for the extra credit risk they are taking. When the credit spread shrinks, the bond's yield to maturity decreases and the price of the bond increases. Similarly, if the benchmark Treasury yield moves up or down, that component of the Verizon bond's YTM will also move up or down.

A real-life example is shown in the below charts, which show bond price changes for the Verizon '42 bond we recommended September 26, 2017 and its benchmark Treasury. Since we recommended the Verizon bonds, they have increased in price 12.5 points, from September 26, 2017 through June 30, 2019, generating a total return of 21.4%, while the benchmark Treasury increased 4.3 points during the same time period. The Verizon bond price increase happened because the credit spread for these bonds shrunk, as Verizon has been reporting strong financial results. While moves in the '42 Treasury bond do impact the price of the Verizon '42 bond, the two bonds do not move in lockstep. In this case, Verizon's strong operating performance enabled the bonds to increase in price well beyond the price increase of the benchmark US Treasury bond.

Corporate bond returns

Sources: Historical prices are from FINRA market data. The prices used to calculate the Verizon bond's total return are from Fidelity.com. Total returns include interest income accrued and/or received and capital appreciation. Returns do not contemplate re-investment of interest income. Total returns are not annualized returns.

Albertsons 7.45% '29 Case Study

Bonds rated below investment grade (aka 'high-yield bonds') do not trade in relation to their benchmark Treasury as shown in the below chart, which compares changes in the Albertsons 7.45% '29 bond (CUSIP 013104AF1) we recommended to its benchmark 6.125% 8/15/29 Treasury (CUSIP 912810FJ2). High-yield bonds are known as a 'credit investment,' and their price is driven by changes in the underlying credit quality of the bond issuer. For example, for the first half of 2017, the Albertsons bonds were trading at or above 96. Then, in June 2017, Amazon announced it was purchasing Whole Foods, and many investors thought Albertsons wouldn't be able to compete, which caused the bonds to fall into the 70s, at which point we recommended the bonds at 78.50 on September 26, 2017.

Since then, Albertsons has delivered strong financial performance, and the bonds increased in price 18 points from the date we recommended the bonds through June 30, 2019. You'll see the benchmark Treasury fell 2.4 points during this same time period, and movements in the prices in both bonds were not correlated.

High Yield Return

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How We Maximize Investment Returns

Many investors believe corporate bond returns are limited to a bond's yield. They build ill-conceived bond ladders, hold bonds to maturity, and then do it all over again. Investors who build bond ladders and hold bonds to maturity will never achieve a return higher than a bond's yield to maturity.

Luckily, there is a better way, which can drive higher returns for bond investors.

Through our investment analysis, we identify corporate bonds that are undervalued relative to other bonds in the marketplace. These bonds pay coupons higher than other corporate bonds with similar risk and have an opportunity to increase in price and drive investment returns that have beaten the world's most popular bond funds and ETFs.

What Corporate Bond Returns Do We Seek To Achieve?

While annual total returns can vary year to year, our goal is to recommend bonds that can achieve annualized total returns in excess of 10%. We recommend both investment grade corporate bonds and high yield corporate bonds, and we have shown that high returns are not only the domain of the riskiest bonds.

As we show on our corporate bond returns page, many of our highest-returning bonds were rated investment grade. Since bond ratings are biased toward large companies and generally ignore a bond's price, yield, liquidity, maturity date vs. bonds issued by the same company, and interest-rate sensitivity, we find them to have limited use for the serious corporate bond investor.

How Do We Maximize Corporate Bond Returns?

There are three key components to how we maximize corporate bond returns:

1) Be Selective: On any given day, there are 9,000 individual corporate bonds available to individual investors. BondSavvy's Job #1 for our fixed income newsletter subscribers is to narrow the corporate bond universe to a select number of corporate bonds that can beat the market.  Our comprehensive investment analysis is at the center of identifying corporate bonds with strong upside with a reasonable level of risk.  Selectivity is one of the biggest advantages of owning individual corporate bonds vs. bond funds, as we can focus on investments with the best risk/reward opportunities. Our investment analysis is a big step up from the old way of bond selection, where investors would simply look at a bond's rating and its YTM and buy bonds.

2) Carefully Monitor Financial Performance of Issuing Companies: BondSavvy makes 20+ initial buy recommendations each year. We make an initial recommendation based on where we find value on each new bond recommendation date. Over time, the recommended bond's price will move, and the financial performance of the issuing company could either improve or worsen. As a result of these changes, BondSavvy updates its corporate bond recommendations following company quarterly earnings releases during The Super Bondcast. During this subscriber webcast, we update subscribers on the financial performance of each company and whether our previously recommended bonds are buys, sells, or holds.

In addition to The Super Bondcast, we provide our bond newsletter subscribers email updates on whether our corporate bond recommendations change in between editions of The Super Bondcast.

3) Sell Bonds To Maximize Returns When Upside Wanes: Since our goal is to maximize total returns and achieve returns higher than a corporate bond's YTM, we typically sell bonds before maturity. Corporate bonds do have ceilings and cannot increase without limit like stocks. Given the favorable tax treatment of capital gains, after tax, one dollar of capital gain is worth more than one dollar of interest income. We are, therefore, vigilant when monitoring our corporate bond recommendations so we can protect our capital gains and maximize returns.

A Word About Corporate Bond Returns Shown in Your Brokerage Account

When evaluating investment performance, investors should be wary of the prices they see on their brokerage statements, which do not show the bond's total return and often undervalue the bond held. The price shown on an investor's statement is called "an evaluated price," which is an estimated price at which a large institutional money manager could sell the bond. Investors owning smaller quantities can often achieve better price execution than investors needing to sell $1 million plus of bonds, so always check a bond's depth of book when investing in bonds online to see what the current market price of your corporate bond is.

In addition, brokerages typically only show the bond's capital gain/loss when showing its return. Most do not show a bond's total return, which includes interest income received and accrued plus capital appreciation / loss. When we calculate our investment returns, we show total returns and compare these to leading corporate bond ETFs.

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Case Studies Of Corporate Bond Returns For Exited BondSavvy Recommendations

Many investors believe that 'interest rates' are the only thing that impact bond prices. We have two real-world examples that will hopefully dispel this notion once and for all.

On September 26, 2017, during the premier edition of The Bondcast, we recommended Verizon 3.85% 11/1/42 (CUSIP 92343VBG8) and Albertsons 7.45% 8/1/29 (CUSIP 013104AF1). Understanding the changes in these bond prices helps investors better understand what to look for when investing in bonds and what causes bond prices to rise and fall.

Verizon 3.85% '42 Case Study

Verizon is an investment-grade issuer, as its bonds are rated Baa1/BBB+ by Moody's and S&P, respectively. Bonds rated at least Baa3/BBB- are deemed 'investment-grade,' meaning that the credit rating agencies believe they have a lower risk of default than 'high-yield bonds,' which have lower ratings.

In the below chart, we compare changes in the price of the Verizon 3.85% 11/1/42 to its benchmark US Treasury 2.75% 11/15/42 (CUSIP 912810QY7). The reason it is called the 'benchmark' is that the maturity date of this Treasury bond is almost identical to that of the Verizon bond. The price of this US Treasury bond moves up and down based on the demand for this government bond. As the price for this Treasury bond increases or decreases, its yield to maturity ("YTM") moves in the opposite direction. The yield to maturity of this Treasury bond is telling investors what the 'risk-free' investment return is for a Treasury bond that matures 11/15/42, as the US Treasury is deemed to have no default risk. (We don't believe the US government has zero risk of defaulting, but that discussion is for another post.)

When the Verizon bond -- and nearly all other investment-grade corporate bonds -- are quoted on a trading desk, they will be quoted as a spread to the benchmark Treasury. This spread is referred to as the credit spread. For example, suppose:

  • Verizon 3.85% '42 YTM: 4.22%
  • US Treasury 2.75% '42 YTM: 2.89%
  • Credit spread: 1.33%

The Verizon bond's YTM is the result of changes in the benchmark Treasury AND the credit spread. As Verizon's credit quality improves, its credit spread will typically shrink, as investors will require less return above the benchmark Treasury to compensate them for the extra credit risk they are taking. When the credit spread shrinks, the bond's yield to maturity decreases and the price of the bond increases. Similarly, if the benchmark Treasury yield moves up or down, that component of the Verizon bond's YTM will also move up or down.

A real-life example is shown in the below charts, which show bond price changes for the Verizon '42 bond we recommended September 26, 2017 and its benchmark Treasury. Since we recommended the Verizon bonds, they have increased in price 12.5 points, from September 26, 2017 through June 30, 2019, generating a total return of 21.4%, while the benchmark Treasury increased 4.3 points during the same time period. The Verizon bond price increase happened because the credit spread for these bonds shrunk, as Verizon has been reporting strong financial results. While moves in the '42 Treasury bond do impact the price of the Verizon '42 bond, the two bonds do not move in lockstep. In this case, Verizon's strong operating performance enabled the bonds to increase in price well beyond the price increase of the benchmark US Treasury bond.

Corporate bond returns

Sources: Historical prices are from FINRA market data. The prices used to calculate the Verizon bond's total return are from Fidelity.com. Total returns include interest income accrued and/or received and capital appreciation. Returns do not contemplate re-investment of interest income. Total returns are not annualized returns.

Albertsons 7.45% '29 Case Study

Bonds rated below investment grade (aka 'high-yield bonds') do not trade in relation to their benchmark Treasury as shown in the below chart, which compares changes in the Albertsons 7.45% '29 bond (CUSIP 013104AF1) we recommended to its benchmark 6.125% 8/15/29 Treasury (CUSIP 912810FJ2). High-yield bonds are known as a 'credit investment,' and their price is driven by changes in the underlying credit quality of the bond issuer. For example, for the first half of 2017, the Albertsons bonds were trading at or above 96. Then, in June 2017, Amazon announced it was purchasing Whole Foods, and many investors thought Albertsons wouldn't be able to compete, which caused the bonds to fall into the 70s, at which point we recommended the bonds at 78.50 on September 26, 2017.

Since then, Albertsons has delivered strong financial performance, and the bonds increased in price 18 points from the date we recommended the bonds through June 30, 2019. You'll see the benchmark Treasury fell 2.4 points during this same time period, and movements in the prices in both bonds were not correlated.

High Yield Return

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Investment Returns Table Footnotes

We compare our high-yield corporate bond returns with the iShares high-yield corporate bond ETF ("HYG") and our investment-grade corporate bond returns with the iShares investment-grade ("LQD") corporate bond ETF. The benchmark ETF is based on the Moody's and S&P rating of our recommended bond on the recommendation date. Split-rated bonds are compared to the HYG ETF. "NA" means "not applicable," as the bond shown is being compared to the other benchmark ETF. Please read additional disclosures provided in the footnotes below.

PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. ACTUAL RESULTS MAY VARY BASED ON WHEN SUBSCRIBERS BOUGHT AND SOLD BONDS WE RECOMMENDED BUYING AND SELLING, THE BROKERAGE FIRMS THROUGH WHICH SUBSCRIBERS TRANSACT, BROKERAGE COMMISSIONS PAID, AND MARKET VOLATILITY.

* Source of bond price charts: FINRA market data. Total returns calculated by BondSavvy. Returns are not annualized.

(1) Prior to our March 11, 2021 recommendations, the pick date price is the top-of-book offer price shown on Fidelity.com the trading day prior to the pick date. Price assumes a $1/bond (0.1 points) mark-up on the quoted offer price. On March 11, 2021, we began hosting The Bondcast at 5:00pm EDT, so the pick date price for all recommendations beginning this date is the top of book price with at least 100 bonds in quantity shown on Fidelity.com the afternoon of the pick date.

(2) Bond prices reflect the higher of a) the average of up to four afternoon customer sell trades reported on the period-end date and b) the best bid price on Fidelity.com on the period-end date that could fill a sell order of at least 100 bonds.

(3) Returns are calculated from the trading date immediately prior to the pick date through the end of the period shown, with the exception of recommendations beginning March 11, 2021, which are calculated beginning on the pick date. For returns calculations under "Corporate Bond Returns of Current Recommendations," the Pick Date Price and end-of-period price are calculated pursuant to footnotes 1 and 2 above. For "Corporate Bond Returns of Exited Recommendations," the Pick Date Price is calculated pursuant to footnote 1. With respect to the selling price: (i) for bonds owned by our founder Steve Shaw, the selling price comes from his trade confirmation statements; (ii) for corporate bonds not owned by Mr. Shaw, the selling price reflects the top-of-book bid price available on Fidelity.com when the sell recommendation was issued or, for sells beginning September 10, 2020, the average of the three customer sell trades, as reported to FINRA TRACE, executed immediately after such sell recommendations were made. Beginning June 3, 2021, for sells of bonds not owned by Mr. Shaw, the sell price was based on the top-of-book bid price available on Fidelity.com on the sell date that could satisfy an order of at least 250 bonds. BondSavvy believes these returns may be understated compared to the methodology of iShares returns, as (a) BondSavvy's total returns do not factor in re-investment of interest income and capital gains, which the iShares returns do include and (b) the individual bond returns reflect a purchase at the offer price and a valuation at the bid price, which can negatively impact returns from 0.25 to 0.75 percentage points on average. The iShares returns are calculated based on changes in the fund's net asset value and, therefore, aren't penalized as significantly by a bid-ask spread. Returns calculations are not annualized. BondSavvy total returns include capital gain/loss and interest accrued.

(4) During the 11/19/18 Super Bondcast, we recommended subscribers buy additional amounts of these previous BondSavvy picks. We also updated all other prior BondSavvy corporate bond investment recommendations, other than three companies which had yet to report earnings. This was BondSavvy's first edition of The Super Bondcast, a subscriber-only webcast where we evaluate the financial performance of our issuing companies and the performance of each recommended corporate bond. In certain editions of The Super Bondcast, we may recommend buying bonds of recommendations we had previously made a 'Hold.' When we show 'Exited Recommendations,' these returns will show returns from both the initial pick date as well as from other times we recommended subscribers purchase these bonds over the course of our ownership of the bond. For simplicity, other than the 11/19/18 Super Bondcast, we only show the performance from the initial pick date for bonds listed under the heading 'Corporate Bond Returns of Current Recommendations.'

(5) BondSavvy recommended these bonds at 89.92 on September 26, 2017. The price shows the blended price Steve Shaw has acquired these bonds across four different transactions. Note that we no longer are recommending purchases of these bonds but now recommend shorter-dated bonds of the same issuer.

(6) Returns calculated from the day immediately prior to the Pick Date through (i) the final trading day for the period for current recommendations or (ii) the sell date for recommendations we have sold. Source of iShares returns is the iShares website. We went to the home page for each iShares ETF, clicked "Performance" and then clicked the "View Full Chart" hyperlink under the "Growth of Hypothetical $10,000" heading. We then entered the various date ranges and recorded the investment returns shown for the specific iShares ETF. 

BondSavvy has made 100 corporate bond recommendations between its first set of recommendations on September 26, 2017 and October 31, 2022.  We made five additional bond picks November 16, 2022; however, given how close these picks are to our November 30, 2022 period-end date, they are not included in our performance data.    

This chart compares the total returns achieved from our 53 exited bond recommendations to those achieved by the leading iShares corporate bond ETFs -- iShares LQD and iShares HYG. A "Beat" is any time our total return exceeded that of the iShares bond ETF. We show details of each BondSavvy recommendation in the tables below this chart.

After we make an initial corporate bond recommendation, we update our recommendations during a quarterly BondSavvy subscriber webcast called The Super Bondcast.  During each Super Bondcast, we update our buy/sell/hold recommendation for each of our previously recommended corporate bonds.

In certain cases, we may make a bond a 'buy' after we previously made it a 'hold.' For simplicity, in the table under the heading "Corporate Bond Returns of Current Recommendations," we only show performance from the initial pick date.  

The corporate bond returns shown under the heading "Corporate Bond Returns of Exited Recommendations" reflect the performance of each time we have recommended a bond, including if we recommended buying a bond after previously recommending a 'hold.' An example of this is the Expedia 3.800% 2/15/28 bonds (CUSIP 30212PAP0), which we initially recommended March 8, 2018. During the onset of the COVID-19 crisis, we made these Expedia bonds a 'hold.' Then, as markets began to recover, we made the Expedia bonds a 'buy' again on March 25, 2020.

Each of the iShares bond ETFs have different holdings, which results in different levels of comparability to our bond recommendations. As shown in the below tables, we compare each of our bond recommendations to either iShares LQD or HYG based on the bond's rating as of the recommendation date. We compare all split-rated bonds (bonds rated investment grade by one rating agency and below investment grade by another) to the HYG ETF.

Please see additional disclosures regarding the calculations of our returns in the footnotes of the tables following this chart.

Following is a brief description of the iShares LQD and HYG ETFs (all figures as of April 29, 2022 for LQD and May 3, 2022 for HYG):

BlackRock iShares LQD: $33 billion investment grade corporate bond index fund that holds corporate bonds that have an average rating of at least Baa3 / BBB- (the lowest investment-grade bond rating) from Moody's, S&P, and Fitch. The fund held 2,504 bonds. 

BlackRock iShares HYG: $13.1 billion high yield corporate bond index fund that holds corporate bonds with an average rating of Ba1 / BB+ and lower. The fund held 1,287 bonds. 

We Make New Corporate Bond Picks in: