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Incandescent Bulbs Now Banned: Is There an Investment Play?

by Fred Fuld III

The incandescent light bulb ban is a federal regulation that went into effect on August 1, 2023. The ban prohibits the manufacture and sale of most incandescent light bulbs in the United States. The ban was put in place to promote energy efficiency and reduce carbon emissions.

What is banned?

The ban applies to most incandescent light bulbs, including:

A-shaped bulbs (the most common type of incandescent bulb)
B-shaped bulbs (used in recessed lighting)
C-shaped bulbs (used in table lamps)
MR-16 bulbs (used in track lighting)

What is not banned?

The ban does not apply to all incandescent light bulbs. The following types of incandescent bulbs are still allowed to be manufactured and sold:

Specialty bulbs, such as flame-shaped bulbs and decorative bulbs
Incandescent bulbs used in certain appliances, such as ovens and toasters

Why was the ban put in place?

The incandescent light bulb ban was put in place to promote energy efficiency and reduce carbon emissions. Incandescent light bulbs are very inefficient, meaning that they use a lot of energy to produce light. By banning the sale of incandescent light bulbs, the government hopes to encourage people to switch to more energy-efficient light bulbs, such as LED bulbs.

What are the benefits of the ban?

The ban on incandescent light bulbs is expected to have a number of benefits, including:

Reduced energy consumption: LED bulbs are much more energy-efficient than incandescent bulbs, so the ban is expected to lead to a significant reduction in energy consumption.
Reduced carbon emissions: The reduction in energy consumption will also lead to a reduction in carbon emissions.
Increased consumer savings: LED bulbs are also more affordable than incandescent bulbs, so consumers are expected to save money on their energy bills.

What are the drawbacks of the ban?

There are a few potential drawbacks to the ban on incandescent light bulbs, including:

Higher upfront costs: LED bulbs are more expensive than incandescent bulbs, so consumers may have to pay more upfront to switch to LED bulbs.
Not all LED bulbs are created equal: There are a wide variety of LED bulbs on the market, and not all of them are created equal. Some LED bulbs are not as bright as incandescent bulbs, and others may not last as long.
Consumer education: Consumers may need to be educated about the benefits of LED bulbs and how to choose the right LED bulb for their needs.

Overall, the ban on incandescent light bulbs is a step in the right direction towards promoting energy efficiency and reducing carbon emissions. However, there are a few potential drawbacks that consumers should be aware of.

The global market for LED bulbs is expected to grow at a CAGR of 15% from 2022 to 2027. So is there an investment play here?

Acuity Brands (AYI) is a prominent company in the lighting industry, particularly known for its expertise and innovation in LED lighting solutions. Here is a profile of Acuity Brands with respect to LED lighting:

Company Overview: Acuity Brands, Inc. is a leading provider of lighting solutions and building management systems. Headquartered in Atlanta, Georgia, USA, the company was founded in 2001 and has since grown to become a major player in the lighting industry. Acuity Brands operates through various subsidiaries and brands to offer a wide range of lighting products and solutions for commercial, industrial, institutional, and residential applications.

Expertise in LED Lighting: Acuity Brands is recognized for its strong focus on LED lighting technology. LED (Light Emitting Diode) lighting is known for its energy efficiency, long lifespan, and eco-friendliness. Acuity Brands has invested significantly in research, development, and manufacturing capabilities related to LED lighting. Their products include LED fixtures, lamps, and integrated lighting systems that cater to various indoor and outdoor lighting needs.

Innovation and Product Range: Acuity Brands is known for its innovative approach to lighting solutions, leveraging the latest advancements in LED technology, IoT (Internet of Things), and smart lighting systems. They offer a diverse portfolio of LED lighting products that cover architectural lighting, commercial lighting, industrial lighting, roadway lighting, and more. These products often feature advanced controls, allowing users to optimize lighting settings and reduce energy consumption.

Sustainability and Energy Efficiency: As a leader in the LED lighting industry, Acuity Brands places a strong emphasis on sustainability and energy efficiency. LED lighting is inherently more energy-efficient than traditional lighting technologies, and Acuity Brands promotes its adoption to help customers reduce their carbon footprint and energy costs.

Market Presence: Acuity Brands has a significant presence both in the United States and globally, serving a wide range of customers including businesses, governments, and individual consumers. They collaborate with lighting designers, architects, and electrical contractors to provide customized lighting solutions for various projects.

This $5.12 billion market cap stock trades at 14 times trailing earnings and 12.5 times forward earnings. The Price to Earnings Growth {PEG] ratio is a reasonable 1.12. Earnings per share growth this year were up an incredible 32.4%. The company pays a dividend, although a small one, giving a yield of 0.31%.

LSI Industries (LYTS) is a well-established company in the lighting industry, particularly recognized for its expertise and focus on LED lighting solutions. Founded in 1976 and headquartered in Cincinnati, Ohio, USA, LSI Industries has grown to become a leading provider of high-performance lighting products and integrated lighting solutions.

The company’s business with respect to LED lighting centers on its strong commitment to innovation and sustainability. LSI Industries has been at the forefront of adopting LED technology, capitalizing on its energy efficiency, long lifespan, and environmentally friendly characteristics. They have invested significantly in research and development to design cutting-edge LED lighting fixtures, lamps, and integrated systems that cater to a wide array of applications, including commercial, industrial, outdoor, and architectural lighting needs.

LSI Industries’ LED lighting offerings are known for their reliability, durability, and advanced features. They often incorporate smart lighting controls and IoT capabilities, allowing customers to optimize energy usage and achieve substantial cost savings. Moreover, the company places a strong emphasis on sustainability, striving to reduce its environmental impact and help customers meet their energy efficiency goals.

With a robust market presence in North America and beyond, LSI Industries collaborates closely with lighting designers, architects, contractors, and facility managers to provide tailored lighting solutions for various projects. Their customer-centric approach and dedication to quality have earned them a reputation as a trusted partner in the lighting industry.

The company has a $3,57 million market cap, a trailing price to earnings ratio of 16 and a forward P/E of 12.5. The PEG ratio is a very favorable 0.64, and the price to sale ratio is also an excellent 0.61. Earnings per share this year skyrocketed by 151.1%. The stock overs a yield of 1.6%.

Energy Focus (EFOI) is a notable company in the lighting industry, particularly known for its specialization in LED lighting products and solutions. Founded in 1985 and based in Solon, Ohio, USA, Energy Focus has positioned itself as a leading provider of energy-efficient LED lighting technologies for a diverse range of applications.

Energy Focus’ company business centers on its strong commitment to sustainability and environmental responsibility. The company is dedicated to designing and manufacturing high-quality LED lighting solutions that promote energy conservation and reduce carbon emissions. By focusing on LED technology, Energy Focus aims to offer lighting products that have longer lifespans and consume significantly less energy compared to traditional lighting options, helping businesses and consumers alike to reduce their energy costs and overall environmental impact.

One of the key areas of expertise for Energy Focus is in providing LED lighting solutions for various commercial, industrial, and institutional applications. Their product portfolio includes a wide range of LED fixtures, lamps, bulbs, and lighting systems, designed to meet the unique needs of different sectors and industries.

Moreover, Energy Focus has developed a niche in providing military-grade LED lighting solutions. They have secured contracts with the U.S. Navy to supply their LED lighting products for naval vessels and submarines. This highlights their reputation for producing rugged and reliable lighting solutions capable of withstanding challenging environments.

As a company committed to technological advancement, Energy Focus continues to invest in research and development to stay at the forefront of LED lighting innovation. They strive to integrate the latest advancements in smart lighting controls and IoT capabilities into their products, enabling users to optimize lighting efficiency and performance further.

With a presence in both domestic and international markets, Energy Focus collaborates with a wide range of customers, including businesses, government agencies, and consumers, to deliver tailored LED lighting solutions that address their unique requirements. Their focus on energy-efficient, environmentally friendly lighting technologies has established Energy Focus as a trusted and forward-thinking player in the LED lighting industry.

This is an extremely low cap company at $5.27 million, and should be considered extremely speculative. The stock is currently generating negative earnings, but does have a reasonable price to sales ratio of 1.12. The company does not pay a dividend.

Maybe one of these stocks could light up your portfolio.

Disclosure: Author didn’t own any of the above at the time the article was written. Some of these stocks are extremely low cap and therefore extremely speculative.

Stocks Going Ex Dividend in August 2023

The following is a short list of some of the many stocks going ex-dividend during the next month, which can be helpful for traders and investors interested in the stock trading technique known as “Buying Dividends” or “Dividend Capture.” This strategy involves purchasing stocks before the ex dividend date and selling them shortly after the ex-date at a similar price, while still being eligible to receive the dividend payment.

Although this technique generally proves effective in bull markets and flat or choppy markets, it is advisable to exercise caution and consider avoiding this strategy during bear markets. To qualify for the dividend, it is necessary to buy the stock before the ex-dividend date and refrain from selling it until on or after the ex-date.

However, it is important to note that the actual dividend may not be paid for several weeks, as the payment date can be delayed by up to two months after the ex-date.

For investors seeking a comprehensive list of stocks going ex-dividend in the near future, WallStreetNewsNetwork.com has compiled a downloadable list containing numerous dividend-paying companies. Here are a few examples showcasing the stock symbol, ex-dividend date, periodic dividend amount, and annual yield.

Stock	Ex Div Date	Div Amount	Yield
Las Vegas Sands Corp. (LVS)	8/7/2023	0.20	0.34%
American Electric Power Company (AEP)	8/9/2023	0.83	3.95%
International Business Machines (IBM)	8/9/2023	1.66	4.63%
Starbucks Corporation (SBUX)	8/10/2023	0.53	2.09%
Walmart Inc. (WMT)	8/10/2023	0.57	1.43%
Eli Lilly and Company (LLY)	8/14/2023	1.13	1.00%
Consolidated Edison, Inc. (ED)	8/15/2023	0.81	3.47%
Target Corporation (TGT)	8/15/2023	1.10	3.26%
Microsoft Corporation (MSFT)	8/16/2023	0.68	0.81%
Duke Energy Corporation (DUK)	8/17/2023	1.025	4.38%
Southern Company (SO)	8/18/2023	0.70	3.87%
Discover Financial Services (DFS)	8/23/2023	0.70	2.48%
Hilton Worldwide Holdings Inc. (HLT)	8/24/2023	0.15	0.39%
Johnson & Johnson (JNJ)	8/25/2023	1.19	2.82%
Allstate Corporation (ALL)	8/30/2023	0.89	3.15%
Goldman Sachs Group, Inc. (GS)	8/30/2023	2.75	3.08%
Lockheed Martin Corporation (LMT)	8/31/2023	3.00	2.66%

To access the entire list of over 100 ex-dividend stocks, subscribers will receive an email in the next few days. If you are not already a subscriber, you can sign up using the provided signup box below. Don’t miss out on this valuable information, and the best part is that it’s free!

Dividend Definitions

To better understand the dividend-related terms, let’s define them:

Declaration date: This refers to the day when a company announces its intention to distribute a dividend in the future.
Ex-dividend date: On this day, if you purchase the stock, you would not be eligible to receive the upcoming dividend. It is also the first day on which a shareholder can sell their shares and still receive the dividend.
Record date: This marks the day when you must be recorded on the company’s books as a shareholder to qualify for the dividend. Typically, the ex-dividend date is set two business days prior to the record date.
Payment date: This is the day on which the dividend payment is actually made to the eligible shareholders. It’s important to note that the payment date can be as long as two months after the ex-date.

Before implementing the “Buying Dividends” technique, it is crucial to reconfirm the ex-dividend date with the respective company to ensure accuracy and avoid any unexpected changes.

In conclusion, being aware of the stocks going ex-dividend can be advantageous for traders and investors employing the “Buying Dividends” strategy. WallStreetNewsNetwork.com provides a convenient resource to access a comprehensive list of such stocks, allowing individuals to plan their investment decisions effectively. Remember to stay informed and consider market conditions before employing any investment strategy.

Disclosure: Author did not own any of the above at the time the article was written.

Water Utility Stocks Have Dividends that Flow

by Fred Fuld III

The water utility industry plays a vital role in providing safe, reliable, and accessible water supply and wastewater treatment services to communities around the world.

Their main objective is to ensure a continuous supply of clean drinking water, as well as the effective treatment and disposal of wastewater to protect public health and the environment. The industry employs advanced technologies and infrastructure, such as water treatment plants, distribution networks, and sewage treatment facilities, to manage water resources efficiently.

Additionally, water utilities are increasingly adopting sustainable practices, such as water conservation initiatives and eco-friendly treatment methods, to address growing concerns about water scarcity and environmental impact. Despite facing various challenges like aging infrastructure and funding constraints, the water utility industry remains dedicated to its mission of providing a fundamental and essential service to society.

Over the past few decades, the water utility industry has experienced significant growth and evolution worldwide. As populations have grown, urbanized, and industrialized, the demand for reliable water supply and effective wastewater management has intensified. This has led to substantial investments in infrastructure and technology to meet the increasing needs of communities.

Private entities have recognized the importance of providing clean, safe water to their citizens and have focused on expanding and modernizing water treatment plants, distribution networks, and sewage treatment facilities. Moreover, advancements in water treatment processes, including desalination, membrane filtration, and advanced oxidation, have enabled the industry to tackle water scarcity challenges in arid regions.

The growth of the water utility industry has also been driven by the rising awareness of environmental sustainability. This has led to the adoption of eco-friendly practices, such as water conservation programs, wastewater recycling, and energy-efficient treatment methods. Additionally, with the advent of digital technologies, water utilities have embraced smart metering, data analytics, and real-time monitoring to optimize their operations and enhance overall efficiency.

The industry has not been without its challenges, though. Aging infrastructure, water pollution, climate change, and financial constraints remain significant hurdles that require innovative solutions. Nevertheless, the water utility industry continues to adapt and thrive, supported by a growing understanding of the vital role water plays in ensuring public health, economic prosperity, and environmental preservation.

American Water Works Company, Inc. (AWK) is the largest publicly traded water utility company in the United States. Headquartered in Camden, New Jersey, the company was founded in 1886 and has a rich history of providing water and wastewater services to communities across the nation.

With a strong commitment to delivering safe, clean, and reliable water, American Water serves millions of customers in various states, including residential, commercial, and industrial clients. The company’s extensive network of water treatment plants, distribution systems, and wastewater treatment facilities ensures a continuous supply of high-quality drinking water and efficient wastewater management.

American Water places a strong emphasis on technological advancements and environmental stewardship, adopting smart metering and digital solutions to optimize operations and reduce water losses. Furthermore, the company actively engages in community partnerships, educational programs, and environmental initiatives to promote water conservation and sustainability.

As a vital component of the nation’s critical infrastructure, American Water Works Company continues to play a significant role in safeguarding public health and supporting economic development through its dedication to excellence and innovation in the water utility sector.

This $28.6 billion market capitalization company trades at 33 times trailing earnings and 29 time forward earnings. Quarterly earnings growth year-over-year was 5.3% on an 11.4% rise in sales over the same period. The stock pays a dividend of 1.9%.

Essential Utilities, Inc. (WTRG) is a prominent publicly traded water and natural gas utility company in the United States. Formerly known as Aqua America, Inc., the company rebranded as Essential Utilities, Inc. to reflect its broader scope of utility services. Headquartered in Bryn Mawr, Pennsylvania, Essential Utilities has a long history dating back to 1886 and has grown to become one of the largest publicly traded water utility companies in the country.

The company operates in multiple states, serving millions of customers with water and wastewater services. In addition to its water operations, Essential Utilities also provides natural gas distribution services to customers in several states.

The company is committed to ensuring a reliable and safe supply of clean drinking water, as well as effective wastewater treatment, to support public health and environmental protection. With a focus on sustainability, Essential Utilities actively engages in water conservation initiatives and environmental stewardship programs to reduce its environmental footprint.

Essential Utilities places a strong emphasis on operational efficiency and technological advancements, utilizing smart metering and data analytics to enhance service delivery and optimize resource management.

The company has an $11.2 billion market cap, a trailing price to earnings ratio of 25 and a forward P/E of 21. Earnings per share growth for next year is anticipated to be 8.7%. The dividend yield on this stock is 2.66%.

California Water Service Group (CWT) is a leading publicly traded water utility company based in San Jose, California. Established in 1926, Cal Water has a long-standing history of providing high-quality water utility services to customers in California, Washington, New Mexico, and Hawaii. As one of the largest investor-owned water utility companies in the United States, Cal Water serves millions of residential, commercial, and industrial customers, ensuring a reliable and safe supply of clean drinking water while maintaining a strong commitment to environmental sustainability.

The company operates a vast network of water treatment plants, distribution systems, and storage facilities to efficiently deliver water to its diverse customer base. Cal Water places a strong emphasis on water conservation, implementing water-saving programs, and promoting responsible water usage to address the challenges of water scarcity in California and other regions.

In addition to its core water utility services, California Water Service Group has also diversified its operations to include complementary businesses, such as providing wastewater and recycled water services. The company prioritizes technological advancements, leveraging innovative solutions to enhance operational efficiency, data management, and customer service.

This $2.96 billion market cap stock trades at 40 times trailing earnings and 25 times forward earnings. Earnings per share growth for next year is anticipated to be 9.35%. The yield is 1.94%.

There are several other publicly traded companies that sell water. Here are four more examples.

American States Water Company (AWR) – American States Water is a utility holding company, with subsidiaries providing water and electricity services primarily in California.
Middlesex Water Company (MSEX) – Middlesex Water Company serves customers in New Jersey, Delaware, and Pennsylvania, offering water and wastewater services.
Connecticut Water Service, Inc. (CTWS) – Connecticut Water Service operates in Connecticut, Maine, and New Hampshire, providing water utility services.
SJW Group (SJW) – SJW Group serves customers in California, Texas, and other western states, offering water utility services.

As societies become more conscious of water’s preciousness, the water utility industry is likely to continue its growth trajectory, prioritizing sustainability and resilience in the face of future uncertainties.

Disclosure: Author owns CWT.

Taylor Swift Stock Index Outperforms the S&P 500

by Fred Fuld III

Taylor Swift is not only beautiful and a great singer, songwriter, and actress, she is also very intelligent, especially in the area of finance.

Did you know that she almost became a celebrity spokesperson for FTX, the cryptocurrency company that was involved in a scandal that involved the arrest of the founder for fraud charges.

Taylor Swift was reportedly offered a $100 million sponsorship deal with the FTX cryptocurrency exchange. However, she ultimately declined the deal after asking FTX representatives a simple question: “Can you tell me that these are not unregistered securities?”

This question was significant because it raised the issue of whether FTX was selling unregistered securities. Unregistered securities are a type of investment that is not registered with the Securities and Exchange Commission. This means that investors in unregistered securities do not have the same level of protection as investors in registered securities.

Swift’s question about unregistered securities appears to have been a dealbreaker for FTX.

In addition to asking about unregistered securities, Swift reportedly also did her own research on FTX before deciding to decline the sponsorship deal. She reportedly read the company’s white paper and spoke to other celebrities who had been involved with FTX.

Unfortunately for those other celebrities, which included Tom Brady, Gisele Bündchen, Steph Curry, Naomi Osaka, David Ortiz, Shaquille O’Neal, Kevin O’Leary, and Larry David, they got caught up in the scandal.

These celebrities appeared in paid advertising campaigns for FTX and promoted the exchange on social media.

In December 2022, a class-action lawsuit was filed against FTX and its celebrity endorsers. The lawsuit alleges that the celebrities engaged in deceptive practices to sell FTX yield-bearing digital currency accounts.

Taylor Swift, as a prominent figure in the entertainment industry, has been sought after by various brands for celebrity endorsements. Three notable endorsements in her career include Coca-Cola’s (KO) Diet Coke, Apple (AAPL), and Coty (COTY).

Swift signed a multi-year partnership with Diet Coke in 2013. She became the face of their brand and appeared in commercials and print advertisements. The collaboration aimed to promote the brand’s message of positivity and refreshment. Swift’s bubbly personality and wide fan base made her an ideal ambassador for Diet Coke, and her endorsement helped raise brand awareness and reach a younger demographic.

In 2015, Swift teamed up with Apple for an exclusive endorsement deal. It started with a public disagreement when Swift criticized Apple Music’s initial policy of not compensating artists during the service’s three-month free trial period. After Apple changed its policy, Swift became an advocate for the platform and released her album “1989” exclusively on Apple Music. She also appeared in commercials and promotional materials for the streaming service, showcasing her influence in the music industry and helping Apple Music gain popularity among her dedicated fanbase.

Coty, a major beauty and fragrance company for the CoverGirl cosmetics brand, partnered with Taylor Swift in 2010 to launch to launch NatureLuxe makeup. The partnership with Coty allowed Swift to expand her brand beyond music into the lucrative world of celebrity fragrances.

These endorsements showcase Taylor Swift’s ability to align herself with influential brands and effectively promote their products. Her partnerships have not only enhanced her public image but have also allowed her to diversify her portfolio and extend her brand beyond the music industry.

I have developed stock indices for many celebrities, such as Gisele Bündchen, which I originally created back in 2007.

Because of Swift’s astute review of endorsements, I thought it would be interesting to see how the stocks of the major companies that she endorsed have done over time, compared to the S&P 500, as measured by the SPY ETF.

She was in the Got Milk? campaign, but obviously, the California Milk Processor Board is not a publicly traded stock. She also promoted L.E.I. Jeans, a brand owned by Nine West Holdings, a privately held company.

So I stuck with the three major companies that she was connected with, Coca-Cola, Apple, and Coty.

What are the results?

I ran the analysis over a ten year period, from July 1, 2013 to July of this year. Over that period of time, the Taylor Swift Stock Index outperformed the S&P 500 by a very substantial amount.

Taylor Swift was up 362.95% versus the SPY, which was up only 221.04%. Just look at the chart to see the difference.

Data Source: Yahoo! Finance: Historical Prices

Maybe one of these stocks is singing your song.

Prices are beginning of month first trading day close, adjusted for splits, dividends, and capital gains distributions. The Taylor Swift Index is a price-weighted index, similar to the Dow Jones Industrial Average.

Disclosure: Author owns AAPL.

Wine: Good for Your Health, Good for Your Stock Portfolio?

by Fred Fuld III

Drinking wine in moderation has been associated with several potential health benefits. However, it’s important to note that these benefits apply to moderate consumption, which typically means up to one drink per day for women and up to two drinks per day for men. Excessive alcohol consumption can have detrimental effects on health. Here are some potential health benefits of moderate wine consumption:

Heart health: Moderate wine consumption, particularly red wine, has been linked to a reduced risk of heart disease. Red wine contains antioxidants called polyphenols, including resveratrol, which may help protect the heart by increasing levels of “good” HDL cholesterol and preventing damage to blood vessels.
Antioxidant properties: Wine, especially red wine, contains antioxidants that can help reduce oxidative stress and inflammation in the body. These antioxidants, such as resveratrol and quercetin, have been shown to have potential anti-aging effects and may help protect against certain chronic diseases.
Blood pressure management: Some studies suggest that moderate wine consumption may help lower blood pressure. The polyphenols in wine could improve blood vessel function and promote better blood flow, which in turn can help reduce hypertension risk.
Reduced risk of certain cancers: Some research has found that moderate wine consumption, particularly red wine, may be associated with a lower risk of certain cancers, such as colon, prostate, and breast cancer. However, it’s important to note that excessive alcohol consumption can increase the risk of developing certain types of cancers, so moderation is key.
Improved cognitive function: Some studies have suggested that moderate wine consumption, especially red wine, may have a protective effect on cognitive function and reduce the risk of neurodegenerative diseases like Alzheimer’s and Parkinson’s disease. The antioxidants in wine may help reduce inflammation and oxidative stress, which are believed to contribute to these conditions.

If you are looking to invest in the wine and vineyard industry, there are a few stocks to choose from.

The Duckhorn Portfolio (NAPA) is a collection of luxury wineries based in the United States. Founded in 1976 by Dan and Margaret Duckhorn, the company started with Duckhorn Vineyards in Napa Valley, California, where they initially focused on producing high-quality Merlot wines. Over the years, The Duckhorn Portfolio expanded through acquisitions and vineyard development, encompassing several distinct wineries known for their exceptional wines.

Duckhorn Vineyards, the flagship winery, is renowned for its elegant Merlot and other Bordeaux varietals. Paraduxx specializes in Napa Valley red blends, combining traditional Bordeaux varieties with Zinfandel to create robust wines. Goldeneye, located in California’s Anderson Valley, focuses on crafting outstanding Pinot Noir from cool-climate vineyards. Migration sources grapes from California’s finest cool-climate regions to produce Chardonnay and Pinot Noir wines that reflect their terroir. Canvasback, situated in Washington State’s Red Mountain AVA, is dedicated to premium Cabernet Sauvignon production. Additionally, the acquisition of Calera Vineyards in 2017 added exceptional Pinot Noir and Chardonnay wines from California’s Central Coast to their portfolio.

The Duckhorn Portfolio follows a wine philosophy centered on showcasing the unique character and terroir of each vineyard site. They prioritize meticulous vineyard management, sustainable farming practices, and artisan winemaking techniques to produce wines of exceptional quality and expression. Sustainability is an important focus for the company, and they strive to minimize their environmental impact through initiatives such as water conservation, energy efficiency, and biodiversity preservation.

The wines produced by The Duckhorn Portfolio have garnered numerous accolades and high ratings from critics and wine enthusiasts, solidifying their reputation as a producer of premium wines.

This, $1.46 billion market cap company trades at 25 times trailing earnings and 18 times forward earnings. Quarterly earnings growth year-over-year was 7.8%, with an estimated long term annual growth of 8.1% over the next five years.

Vintage Wine Estates (VWE) is a wine company that operates multiple wineries and vineyards throughout the United States. With a diverse portfolio of wine brands, Vintage Wine Estates is committed to producing high-quality wines from various wine regions. The company focuses on crafting wines that showcase the unique characteristics of each vineyard site and emphasizes sustainable farming practices and artisanal winemaking techniques.

Vintage Wine Estates owns and operates several well-known wineries, including B.R. Cohn Winery in Sonoma Valley, California, which produces premium wines from estate vineyards. The company also owns Girard Winery in Napa Valley, known for its Bordeaux varietals, and Cosentino Winery in Napa Valley and Lodi, specializing in small-lot, handcrafted wines.

In addition to its California wineries, Vintage Wine Estates has expanded its reach to Oregon’s Willamette Valley with its brand Firesteed Cellars, which focuses on cool-climate varietals like Pinot Noir. The company also owns properties in Washington State, such as the Owen Roe Winery in the Yakima Valley, which produces wines reflecting the unique terroir of the region.

Vintage Wine Estates takes pride in its commitment to sustainability and environmental stewardship. They implement sustainable practices in their vineyards, including water conservation, soil health management, and biodiversity preservation. The company’s goal is to create a positive impact on the environment while producing exceptional wines.

The company has an extremely low market cap at $53 million, and should therefore be considered extremely speculative. The company has been generating negative earnings, although it does have a very favorable price to sales ratio of 0.18 and is selling at 26% of book value.

Willamette Valley Vineyards (WVVI) is a prominent winery located in the heart of Oregon’s Willamette Valley. Founded in 1983 by Jim Bernau, the company has become known for its exceptional wines and commitment to sustainable and environmentally-friendly practices. Willamette Valley Vineyards focuses primarily on producing cool-climate varietals, with a particular emphasis on Pinot Noir.

The winery owns and operates several estate vineyards, strategically located in various sub-appellations within the Willamette Valley. These vineyards benefit from the region’s unique climate, which is characterized by cool temperatures, maritime influences, and diverse soils. Willamette Valley Vineyards’ winemaking philosophy revolves around showcasing the distinct terroir of each vineyard site, allowing the grapes to fully express their character and complexity.

Sustainability is at the core of Willamette Valley Vineyards’ operations. The company has achieved certification as both LIVE (Low Input Viticulture and Enology) and Salmon-Safe, demonstrating their commitment to environmentally conscious practices. They utilize renewable energy sources, employ natural pest control methods, implement water conservation measures, and actively support biodiversity in their vineyards.

In addition to their sustainable practices, Willamette Valley Vineyards takes pride in its customer-focused approach. The winery offers a range of tasting experiences and events, including vineyard tours, wine education programs, and a wine club for enthusiasts. They strive to provide visitors with a welcoming and educational environment that enhances their appreciation for Oregon wines.

Over the years, Willamette Valley Vineyards has received numerous accolades and critical acclaim for its wines. Their commitment to quality winemaking, sustainable practices, and their contribution to the Oregon wine industry has earned them a reputation as a leading producer in the region.

This is another extremely speculative low market cap stock at $29 million. The company has been generating negative earnings. The price sales ratio is 0.80 and the price to book is 0.95.

A safer way to invest would be to look at some of the larger companies, such as Brown Forman (BF-B) and Constellation Brands (STZ), which produce wine as a small part of their business.

Disclosure: Author didn’t own any of the above at the time it was written.

Top Yielding Dividend Aristocrats

by Fred Fuld III

Dividend Aristocrats are a group of 65 S&P 500 stocks that have increased their dividends annually for at least 25 consecutive years. They are considered to be some of the most reliable dividend-paying stocks on the market.

The Dividend Aristocrats index is maintained by S&P Dow Jones Indices. To qualify for the index, a stock must meet the following criteria:

It must be a member of the S&P 500 index.
It must have increased its dividend for at least 25 consecutive years.
It must have a market capitalization of at least $3 billion.

The Dividend Aristocrats index is a popular investment among investors who are looking for income and growth. The stocks in the index have a long track record of dividend growth, and they are typically well-established companies with strong financials.

Here are some of the top Dividend Aristocrats in 2023, ranked by their forward dividend yield:

Realty Income (O): 5.0%
IBM (IBM): 5.0%
AbbVie (ABBV): 4.4%
Coca-Cola (KO): 3.0%
Johnson & Johnson (JNJ): 3.0%
Procter & Gamble (PG): 2.5%
Pepsico (PEP): 2.7%

These stocks are all paying a high dividend yield, and they have a long track record of dividend growth. They are a good option for investors who are looking for income and growth.

Here are some of the benefits of investing in Dividend Aristocrats:

Income: Dividend Aristocrats are a good source of income for investors. They typically pay a high dividend yield, and they have a long track record of dividend growth.
Growth: Dividend Aristocrats can also provide growth potential for investors. Many of the companies in the index are well-established and have strong financials. This means that they are likely to continue to grow their businesses and their dividends over time.
Safety: Dividend Aristocrats are considered to be relatively safe investments. They are typically large, well-established companies with a long track record of profitability. This means that they are less likely to go bankrupt or cut their dividends than smaller, more volatile companies.

If you are looking for an investment that can provide you with income and growth, then Dividend Aristocrats may be a good option for you. They are a relatively safe investment that has the potential to provide you with a steady stream of income over the long term.

Disclosure: Author owns PEP.

Are There Really Stocks Selling Below Cash per Share? Yes!

by Fred Fuld III

The cash per share is a financial metric that measures the amount of cash a company has per outstanding share of common stock. It is calculated by dividing the total cash and cash equivalents of a company by the number of outstanding shares.

The significance of the cash per share lies in its ability to provide insights into a company’s liquidity and its ability to cover short-term obligations. A higher cash per share indicates that a company has a larger cash reserve available to meet its financial commitments and is generally seen as a positive sign. It suggests that the company is well-positioned to handle unexpected expenses, fund its operations, pay dividends, or invest in growth opportunities.

Investors and analysts often use the cash per share as one of the indicators of a company’s financial health and stability. It can be compared across different companies within the same industry or used to assess a company’s performance over time. However, it’s important to consider the context of the industry and the company’s business model since different industries may have different capital requirements.

While a high cash per share can be seen as a positive signal, an excessively high amount of cash may also indicate that the company is not effectively deploying its cash. It might suggest that the company is not investing in growth opportunities, paying off debt, or returning value to shareholders through dividends or stock buybacks. Therefore, it’s crucial to consider other financial metrics and factors when evaluating a company’s overall financial health and investment potential.

The price-to-cash ratio (P/C ratio) is a financial metric that compares a company’s market price per share to its cash per share. It is calculated by dividing the market price per share by the cash per share.

The P/C ratio is used to evaluate the valuation of a company’s stock relative to its cash reserves. It provides insights into how the market values a company’s cash position. A lower P/C ratio suggests that the company’s stock is relatively undervalued compared to its cash holdings, while a higher P/C ratio indicates that the stock may be overvalued.

Investors and analysts use the P/C ratio as one of the valuation metrics to assess investment opportunities. However, it’s important to note that the P/C ratio should not be analyzed in isolation but should be considered alongside other fundamental and financial factors.

In simple terms, imagine that a stock is selling for $5 per share, and the company has cash per share of $10. If the company was debt free and went out of business today, and all the other assets of the company (such as real estate, machinery, inventory, etc.) were totally worthless, the investors would still double their money due to all the cash.

Obviously this is an extreme example, but having more cash per share than what the stock is trading at can provide a huge cushion.

Buying stock in companies with a low price-to-cash ratio can have several potential advantages. Here are a few reasons why investors might find it advantageous:

Value Investing: A low price-to-cash ratio is often associated with value investing, which involves seeking stocks that are undervalued by the market. Investors who follow this approach believe that the market may have overlooked or undervalued the company’s cash reserves, leading to a potential buying opportunity. By purchasing stocks at a lower price relative to the company’s cash position, investors aim to benefit from a potential increase in stock price as the market recognizes the company’s underlying value.
Margin of Safety: Investing in companies with a low price-to-cash ratio can provide a margin of safety. The cash holdings of a company act as a financial cushion, providing stability and reducing the downside risk. If the market price of the stock declines, the cash reserves can provide a buffer and support the stock’s value. This can be particularly appealing to risk-averse investors who prioritize capital preservation.
Potential for Special Situations: Companies with low price-to-cash ratios may present special situations that could unlock value for investors. For example, a company with a substantial cash position may be in a position to initiate a dividend payout, engage in share buybacks, or make strategic acquisitions. These actions can signal confidence in the company’s prospects and have a positive impact on stock price.
Flexibility for Growth and Opportunities: Companies with ample cash reserves have the flexibility to pursue growth opportunities, invest in research and development, or weather economic downturns. A low price-to-cash ratio may indicate that the market has not fully recognized the potential for future growth or the strategic advantage of the company’s cash position. By investing in such companies, investors can potentially benefit from future growth and value creation.

So do these companies exist? Yes, but unfortunately, most are extremely low capitalization stocks.

Acacia Research Corporation (ACTG) is headquartered in Newport Beach, California. It specializes in acquiring and licensing patented technologies. Established in 1993, the company’s primary focus is on monetizing intellectual property by partnering with inventors, patent owners, and research institutions. Acacia Research Corporation operates through various subsidiaries, including Acacia Research Group LLC, Acacia Patent Acquisition LLC, and Acacia Patent Acquisition Corporation, each specializing in different technology sectors.

The business strategy involves identifying patent portfolios with licensing potential, negotiating agreements with companies that may be infringing on those patents, and generating revenue through licensing fees, settlements, and royalties. Additionally, the company may pursue legal enforcement actions, such as filing lawsuits, to protect patent rights and seek damages. Acacia Research Corporation also manages its own investment portfolio of intellectual property assets, actively seeking opportunities to acquire patents from inventors and other intellectual property owners.

Acacia Research has a market cap of $248 million and a sky high forward price to earnings ratio of 204. However, this company, which has no long term debt, has $7.83 in cash per share but last traded for $4.08 per share, giving it an outstanding price to cash ratio of 0.52.

Allied Gaming & Entertainment Inc. (AGAE) is a provider of entertainment and gaming products worldwide.

It is an extremely low cap company at $37 million. This debt free company has $2.04 in cash per share but last traded at 95 cents per share, giving it an excellent price to cash ratio of o.47. It is currently generating negative earnings.

LGL Group, Inc. (LGL) based in Orlando, Florida, operates as a diversified holding company in the electronics manufacturing industry. With a history dating back to 1917, LGL Group primarily focuses on providing electronic components and solutions to various industries.

The company operates through its subsidiaries, including MtronPTI and Precise Time and Frequency, Inc. MtronPTI specializes in the design and manufacturing of frequency control devices, oscillators, and filters, catering to sectors such as aerospace, defense, telecommunications, medical, and instrumentation. PTF, on the other hand, specializes in precision time and frequency references and network synchronization solutions.

LGL Group’s products find applications in telecommunications infrastructure, ensuring reliable timing in networks, while the aerospace, defense, medical, and instrumentation industries rely on their solutions for mission-critical applications. The company emphasizes research and development to drive innovation and maintain quality in its offerings.

This debt free company is also extremely low cap at $25 million, however it has a favorable forward price to earnings ratio of 12.35. It has a decent price to cash ratio of 0.66.

It’s important to note that while a low price-to-cash ratio may indicate potential value, it should not be the sole factor considered in investment decisions. Conducting thorough research, evaluating the company’s fundamentals, assessing its competitive position, and considering other financial metrics are essential to make well-informed investment choices.

Disclosure: Author didn’t own any of the above at the time the article was written.

Top Defense Stocks

by Fred Fuld III

Some investors are opposed to purchasing stocks that benefit from the manufacture of weapons, and that’s completely understandable. If you fall into that category, then this post is probably not for you.

The defense industry is currently in a state of flux. On the one hand, there is a growing demand for defense products and services, as the world becomes increasingly unstable. On the other hand, there are also growing concerns about the cost of defense spending, and the need to reduce military budgets.

As a result, defense companies are facing a number of challenges. They need to find ways to reduce their costs, while also developing new products and services that meet the changing needs of the military. They also need to be prepared for the possibility of a decline in defense spending, and the need to diversify their businesses.

Despite these challenges, the defense industry is still a major economic force. In the United States, the defense industry employs over 2 million people, and generates over $400 billion in annual revenue. The industry is also a major source of innovation, and has been responsible for the development of many of the world’s most advanced technologies.

The future of the defense industry is uncertain, but it is likely to remain a major player in the global economy. The industry will need to adapt to the changing needs of the military, and the growing concerns about the cost of defense spending. However, the industry also has a number of strengths, including its strong research and development capabilities, and its ability to adapt to new market conditions. As a result, the defense industry is likely to remain a major economic force for many years to come.

Here are some of the key trends that are shaping the defense industry today:

The rise of new technologies. The defense industry is constantly evolving, as new technologies are developed. These technologies are changing the way that wars are fought, and they are also creating new opportunities for defense companies. For example, the development of drones and other unmanned systems is changing the way that the military conducts surveillance and strikes.
The growing importance of cybersecurity. Cybersecurity is becoming increasingly important in the defense industry. As militaries become more reliant on digital systems, they are also becoming more vulnerable to cyberattacks. Defense companies are developing new technologies to protect military systems from cyberattacks.
The need for greater international cooperation. The defense industry is becoming increasingly globalized. As militaries around the world face similar threats, they are increasingly working together to develop new technologies and share resources. This is creating new opportunities for defense companies that are able to operate in multiple markets.

The defense industry is a complex and ever-changing industry. However, it is also a major economic force that is likely to remain important for many years to come.

Lockheed Martin (LMT) is an American aerospace, arms, defense, information security, and technology corporation with worldwide interests. It is the world’s largest defense contractor by revenue for the past 43 years. Lockheed Martin is headquartered in Bethesda, Maryland, and employs approximately 114,000 people worldwide.

This $119 billion market cap company trades at 21 times trailing earnings and 17 times forward earnings. Long term annual earnings per share growth estimate over the next five years is anticipated to be 10.9%. The company pays a dividend yield of 2.57%.

Raytheon Technologies (RTX) is an American multinational aerospace and defense corporation with worldwide interests. It was formed in 2020 by the merger of Raytheon and United Technologies. Raytheon Technologies is headquartered in Waltham, Massachusetts, and employs approximately 190,000 people worldwide.

The stock has a trailing price to earnings ratio of 26 and a forward P/E of 17. Earnings per share this year grew by 35.9%, and long term annual earnings per share growth estimate over the next five years is predicted to be 10.8%. The yield is 2.43%.

The Boeing Company (BA) is an American multinational corporation that designs, manufactures, and sells airplanes, rotorcraft, rockets, satellites, telecommunications equipment, and missiles worldwide. It is the world’s largest aerospace company by revenue for the past 26 years. Boeing is headquartered in Chicago, Illinois, and employs approximately 160,000 people worldwide.

The company has been generating negative earnings, but has a forward P/E of 41. The stock does not pay a dividend.

General Dynamics (GD) is an American multinational defense, information technology, and aerospace company that is headquartered in Falls Church, Virginia. General Dynamics is the world’s fifth-largest defense contractor by revenue. The company employs approximately 100,000 people worldwide.

The stock trades at 18 times trailing earnings and 15 times forward earnings. The long term annual earnings per share growth estimate over the next five years is predicted to be 10.8%. The yield is 2.43%.

Northrop Grumman (NOC) is an American global aerospace and defense technology company with worldwide interests. It is the world’s sixth-largest defense contractor by revenue. Northrop Grumman is headquartered in Falls Church, Virginia, and employs approximately 90,000 people worldwide.

The stock trades at 15 times trailing earnings but 19 times forward earnings. The long term annual earnings per share growth estimate over the next five years is expected to be only 1.9%. The stock pays a yield of 1.64%.

These companies are responsible for developing and manufacturing a wide range of defense products, including aircraft, ships, missiles, and weapons systems. They also provide a variety of services, such as maintenance, repair, and overhaul.

The defense industry is a major economic force, and it is expected to continue to grow in the coming years. This is due to a number of factors, including the increasing threats posed by terrorism and cyberwarfare, and the growing demand for new technologies.

Disclosure: Author didn’t own any of the above at the time the article was written.

The Artificial Intelligence Semi-Pure Play Stocks

by Fred Fuld III

I originally wrote about the pure play artificial intelligence stocks back in April of this year in an article called Top Five Pure Play AI Stocks.

Unfortunately, those stocks have very low market capitalizations and are very speculative. I figured it may be worthwhile to cover a couple of the semi pure plays in AI.

AI: What It Is

Artificial Intelligence, commonly referred to as AI, has become a revolutionary force in our modern world. It encompasses various technologies that enable machines to perform tasks that typically require human intelligence. From learning and reasoning to problem-solving and decision-making, AI has the potential to transform multiple aspects of our lives. In this blog post, we will delve into two intriguing applications of AI: Chat AI and image creation with DALL-E.

Chat AI: Transforming Customer Service and Beyond

One of the most widely used AI services today is Chat AI, which leverages natural language processing (NLP) and machine learning to enable machines to communicate with humans through chat interfaces. This technology has found a place in numerous settings, including customer service, healthcare, education, and business operations.

The key advantage of Chat AI lies in its ability to provide 24/7 support to customers without human intervention. Chatbots can efficiently handle frequently asked questions, offer information, troubleshoot issues, and even provide personalized support. By automating routine tasks, organizations can save costs and improve customer engagement.

Developers working on Chat AI face the challenge of creating algorithms that understand and interpret natural language while delivering appropriate responses. Achieving this requires a combination of NLP and machine learning techniques, as well as continuous training and improvement of the chat AI system.

Creating Images with AI: The DALL-E System

AI has ventured into the realm of visual arts with the creation of images using systems like DALL-E. Developed by OpenAI, DALL-E harnesses machine learning techniques, including NLP and computer vision, to generate images based on textual descriptions.

DALL-E’s name is a fusion of the renowned artist Salvador Dali and the beloved Pixar character Wall-E. The system has been trained on vast amounts of data, consisting of text-image pairs gathered from various sources, allowing it to understand the relationship between textual descriptions and their visual representations.

The potential applications of DALL-E are far-reaching. It offers avenues for artists, designers, and advertisers to streamline the creative process and bring ideas to life more quickly. By simply inputting a description, one can obtain an automatically generated image, even depicting non-existent objects or scenes.

However, as with any powerful technology, there are concerns associated with the misuse of AI image creation. Issues such as the production of fake images and the perpetuation of harmful stereotypes require careful consideration and ethical practices.

The Future of AI

Artificial Intelligence continues to shape our world, and its potential is boundless. Chat AI has already made significant strides, revolutionizing customer service and various industries by providing automated support and streamlining operations. As developers enhance algorithms and machine learning techniques, the capabilities of Chat AI will continue to expand.

In the realm of image creation, DALL-E showcases the remarkable progress AI has made. Allowing machines to generate images based on textual descriptions has implications for art, design, and advertising. While this technology opens new doors for creativity, it is crucial to approach it responsibly to mitigate potential risks.

As AI advances further, it is important for society to stay informed and engage in discussions surrounding its development and applications. By fostering a collaborative approach, we can ensure that AI technologies like Chat AI and image creation systems are used ethically and for the betterment of humanity.

Palantir Technologies (PLTR) is a software company that specializes in data analysis and artificial intelligence. Founded in 2003 by Peter Thiel, Alex Karp, and others, Palantir focuses on developing software platforms that enable organizations to integrate, analyze, and interpret large amounts of data.

Artificial Intelligence plays a significant role in Palantir’s offerings. The company’s flagship product is called Palantir Gotham, which is an AI-powered platform designed for data integration and analytics. Palantir Gotham utilizes advanced AI algorithms to extract insights from complex and diverse data sources, helping organizations make informed decisions and gain a deeper understanding of their data.

The AI capabilities of Palantir Gotham enable it to handle vast amounts of structured and unstructured data, including text, images, and sensor data. The platform incorporates machine learning and natural language processing techniques to uncover patterns, detect anomalies, and generate predictive models. By leveraging AI, Palantir Gotham provides users with powerful tools for data exploration, visualization, and collaboration.

Palantir also offers another product called Palantir Foundry, which is an AI-driven data integration and management platform. Foundry enables organizations to ingest, transform, and analyze data from various sources, making it accessible and actionable. Through AI technologies, Foundry automates data processing tasks, enhances data quality, and provides intelligent recommendations for data governance and security.

In addition to their software products, Palantir has developed AI applications for various industries and sectors. They have worked with government agencies, law enforcement, and intelligence communities, providing AI-powered solutions for data-driven decision-making, risk analysis, and security operations. Palantir’s AI capabilities have also found applications in healthcare, finance, and manufacturing, among other sectors, where they help organizations optimize processes, detect fraud, and improve operational efficiency.

However, it’s worth noting that Palantir’s use of AI has also raised concerns regarding data privacy, ethics, and potential biases in decision-making. As with any AI technology, responsible development, transparency, and accountability are essential considerations to mitigate these concerns.

Overall, Palantir utilizes AI as a core component of its software platforms and applications, enabling organizations to harness the power of data for improved decision-making and operational efficiency.

The stock trades at a fairly high forward price to earnings ratio of 65, however, the company has no long term debt. Quarterly revenue growth year-over -year increased by 17.7%, and the long term annual growth estimate of earnings per share over the next five years is 73%.

Verint Systems (VRNT) is a well-established software company that provides solutions for customer engagement, workforce optimization, and security intelligence. While Verint is not primarily known as an artificial intelligence company, they have integrated AI technologies into some of their offerings to enhance their capabilities.

Verint’s AI-powered solutions are designed to help organizations extract valuable insights from large volumes of data, automate processes, and improve decision-making. They utilize machine learning, natural language processing, and other AI techniques to analyze and interpret data from various sources.

In the customer engagement domain, Verint offers AI-driven solutions for voice and text analytics. These solutions can analyze customer interactions, such as calls, emails, chat conversations, and social media posts, to identify sentiment, extract key insights, and detect patterns. By leveraging AI, Verint enables organizations to understand customer behavior, optimize customer service operations, and personalize customer interactions.

Verint also provides AI-powered workforce optimization solutions, which help organizations manage and optimize their workforce performance. These solutions leverage AI algorithms to analyze employee data, identify training needs, and provide recommendations for improving workforce efficiency and productivity.

In the realm of security intelligence, Verint incorporates AI technologies to enhance their offerings. Their security solutions utilize AI-based video analytics to detect and alert on suspicious activities, automate the monitoring of security cameras, and enable real-time incident response.

While Verint Systems is not exclusively an AI-focused company, they have recognized the value of incorporating AI technologies into their solutions to enhance their capabilities and provide value to their customers. By leveraging AI, Verint aims to help organizations improve customer engagement, optimize workforce performance, and enhance security intelligence.

The stock trades at a very reasonable 11.7 times forward earnings, and the quarterly earnings growth year-over-year was 61.2%. The long term annual growth estimate of earnings per share over the next five years is 9.75%.

If you want to learn more about artificial intelligence, you should get the book Artificial Intelligence: What AI Is and How You Can Use It to Make Your Life Easier: A Guide to AI for Beginners, available in both paperback and Kindle.

Disclosure: Author owns PLTR and VRNT. This article contains Amazon affiliate links whereby I would receive a small commission on any sale through those links at no additional cost to you.

Should You Invest in Convertible Bonds?

by Fred Fuld III

A convertible bond (often referred to as a convertible note or a convertible debenture) is a type of corporate bond that gives the bondholder the option to convert the bond into a predetermined number of the issuing company’s common stock or other securities, typically at a predetermined conversion price. In simpler terms, it is a bond that can be converted into shares of stock.

Do not confuse convertible bonds with convertible preferred stocks, which are a completely different type of security, and the subject of another article.

Here’s how a convertible bond works:

Issuance: The company issues the convertible bond to investors, typically at a fixed interest rate and with a maturity date.
Bondholder receives interest payments: Similar to regular bonds, the bondholder receives periodic interest payments (coupon payments) based on the bond’s face value and the fixed interest rate.
Conversion option: The bondholder has the right, but not the obligation, to convert the bond into a specified number of shares of the issuing company’s stock. The conversion price is the predetermined price at which the bond can be converted into stock.
Stock price appreciation: If the company’s stock price rises above the conversion price, the bondholder can convert the bond into stock and potentially benefit from the stock’s price appreciation.

Advantages of convertible bonds:

Potential for capital appreciation: Convertible bonds offer the potential for investors to benefit from an increase in the issuing company’s stock price. If the stock price rises significantly, the bondholder can convert the bond and profit from the capital appreciation.
Income generation: Before conversion, the bondholder receives regular interest payments, providing a steady income stream.
Reduced downside risk: Unlike pure equity investments, convertible bondholders have a bond floor or a minimum value. If the company’s stock price declines, the bond retains some value as a fixed-income instrument.
Priority: If the company goes out of business, the bondholders get paid off before the stockholders.

Disadvantages of convertible bonds:

Lower coupon rates: Convertible bonds typically have lower coupon rates compared to regular bonds due to the additional value derived from the conversion feature. This means the bondholder may receive lower interest income compared to non-convertible bonds with similar risk profiles.
Dilution risk: When bondholders convert their bonds into equity, new shares are issued, which can dilute the ownership stakes of existing shareholders.
Limited potential upside: While convertible bondholders can benefit from stock price appreciation, the conversion feature may limit their potential gains compared to holding the company’s stock outright.
Interest rate sensitivity: Convertible bond prices can be sensitive to changes in interest rates. If interest rates rise, the value of the bond may decline, affecting its attractiveness to investors.
Liquidity: They can be illiquid, with most not traded on any exchange. Not all brokers offer them.

It’s important to note that the specific terms and features of convertible bonds can vary, so investors should carefully review the bond’s prospectus.

Tesla (TSLA) issued 2.00% Convertible Senior Notes due May 15, 2024. The bonds, which were issued in 2019, had an Initial Conversion Price of approximately $309.83 per share of Common Stock and an Initial Conversion Rate of 3.2276 shares of Common Stock per $1,000 principal amount of Notes.

Since that time, Tesla had a three for one stock split in 2022, so based on the prospectus, it appears that the conversion rate would be adjusted.

It is very difficult to find these bonds or even get a price.

The utility Southern Company (SO) issued its Series 2023A 3.875% Convertible Senior Notes due December 15, 2025.

Interest on the Convertible Notes will be paid semiannually at a rate of 3.875% per annum. The Convertible Notes will have an initial conversion rate of 11.8818 shares of Southern Company’s common stock per $1,000 principal amount of the Convertible Notes

PPL Capital Funding, Inc., a wholly-owned subsidiary of PPL Corporation (PPL), issued 2.875% Exchangeable Senior Notes due 2028.

The notes will be senior, unsecured obligations of PPL Capital Funding and will be fully and unconditionally guaranteed on a senior, unsecured basis by PPL Corporation. The notes will bear interest at a rate of 2.875% per year, payable semi-annually in arrears on March 15 and September 15 of each year, beginning on September 15, 2023. The notes will mature on March 15, 2028, unless earlier exchanged, redeemed or repurchased.

The notes will be exchangeable at an initial exchange rate of 29.3432 shares of PPL Corporation’s common stock per $1,000 principal amount of notes.

General Motors (GM) issued a mini-convertible bond at $25 par value. The General Motors, 5.25% Series B Convertible Senior Debentures due 3/5/2032 have a conversion rate of 0.3852. It appears that the bonds were formally exchange listed but have since been delisted, and from what I can tell, it appears that the bond interest payments have been suspended.

If you are considering converting a portion of your portfolio to convertibles, beware of the risks, and lack of liquidity.