No. of Recommendations: 1
In the spirit of what Charlie asked ... tips ...

Well, first off there's my purpose for buying bonds. It's my overall investment plan, namely to build a core of stable interest/dividend paying things to allow the total investment pool to be organically growing. I'm just at the beginning of my overall plan with about $15,000 or REIT and bond investments.

Second - last year with my first bond purchases, both were a wash. The first was issued by Exodus, a formerly leading web hosting provider (my DD was "hmm, I work in the tech industry and know that Exodus is leading in web hosting, so they must be safe") and they went bankrupt a month later. The second was issued by Enron, with equally skimpy DD, about a month before their bankruptcy. Fortunately each was bought at a big discount, and the total investment was about $1,500 (?less?) so the lesson didn't cost a lot.

Currently I do some crunching of the company's SEC filings, their current and recent news releases, who they are, their safety as a company, etc. I'd love to know how to get the prospectus for the bond, but don't know where it might be, and I think the prospectus would be vital to know any special features etc of the bond.

My experience since those two winners were:-

1- Corning, bought at a slight discount. The company is being hurt by loss of fiber optics sales, and is running a high debt. The message board traffic implied the company has been cyclical in this way a number of times, implying the management know how to navigate this kind of territory. The bonds currently quote at a big loss to my purchase price, but they're paying their dividends, and if I hang on they may well recover eventually.

2- Citizens Communication - this is a second tier telecom company specialising in servicing small towns in America. This seems to give them an interesting advantage. I bought at a very slight discount, and the current price is at 109, for a nice percentage gain. Since I have only one bond, I'd rather get the interest than the $90 gain on the bond.

3- Muni (New Mexico Hostpitals) - It was at around par when I bought, and has been hovering slightly above par.

4- REIT Preferreds - These aren't techincally bonds, but stocks, but the REIT's generally use them as if they're bonds. They're generally callable after a specific date for a specific price, pay a fixed dividend, and trade at a discount or premium to the call price depending on the company's health. They trade a lot more freely than bonds, as they're stocks and are on the stock market. I'm reading and educating on the REIT market in general, and when I go hunting for a new investment I'll follow regular DD for the companies I look at. Most are trading at pretty much the same as my purchase prices.

- David
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