Purchase "Less Followed Investments"

Another strategy that we use to add value is to search out investments which are overlooked, under-researched, and mispriced, yet offer "more yield (income) per credit quality" or per upside/downside characteristics than the financial markets in general. We call these situations "less followed investments." These investments exist for several reasons but the primary reason is that they are too small for the large investment houses to worry about. A favorite example is "hold out bonds." These are bonds that "hold out" when an exchange offer is made. Because the majority of the bonds exchange for new bonds or cash, few bonds of the original issue remain outstanding and they end up dropping through the cracks of the financial markets. Brokers will not research them or write analysis reports on them because they will not be able to get their hands on enough bonds to make any money. You give up some liquidity (the ease with which you can sell your position at a fair price) with "less followed investments" but if you are in for the long haul, these bonds will out perform if they are purchased correctly.

Another Less Followed Investment Example - Another very good example of these "less followed investments" is taxable municipal bonds. Most municipal bonds are tax-free. But sometimes, municipalities use up their capacity to issue tax-free bonds and must issue some taxable municipal bonds. Institutionally, brokers that sell tax-free bonds seldom sell taxable bonds and brokers that sell taxable bonds seldom sell tax-free bonds. What happens is that these taxable municipal bonds fall through the cracks and almost always offer "more yield per credit quality" than the market in general.