Credit is simpler than equities because returns don't require market agreement
Dave Brizano · David Breazzano - High Yields and Low Risk at Polen Capital (EP.405) · Sep 12, 2024 · at 23:01
Dave Breazzano of Polen Capital compares the fundamental mechanics of public equity investing versus high-yield credit investing.
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“I think it's harder for the equity investors because they identify a stock and they make that purchase and then they hope the next day or shortly thereafter, the rest of the market agrees with their investment thesis and buys that stock. So that trades up. If nobody agrees with their investment thesis, that stock could just go sideways forever and they underperform. So you're dependent on two things. You got to get the fundamentals right, but you also got to hope that others identify the same positives that you did after you and then buy it in credit, we got to get our fundamentals right. And our sole job, or at least what I tell our analysts is just be certain in your opinion that that company can mature its debt. Then don't worry about where the bond trades between the day we invest in it and maturity, because if sentiment goes against us and people don't agree with our investment thesis and the bond trades down, if we did our work right, it goes back to par or to maturity or sooner. So nobody has to agree with us. We just have to get our thesis right, and then we're rewarded.”
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