This article was originally published on the Ningyuan Investment WeChat public account
Introduction
There are still two trading days. The intensive issuance of convertible bonds this month is about to end, which also means that the convertible bond market transactions in 2019 are about to end. As of last Friday, the CSI Convertible Bond Index was up 23.82%, higher than the Shanghai Composite Index, which was 20.50% higher.
In terms of annual increase, Dongyin convertible bonds increased by 127%, Special Issue convertible bonds increased by 94%, and Kailong convertible bonds increased by 79%, ranking among the top three increasers. Based on the closing price on the first day of listing, the top three gainers after listing are: Kailong Convertible Bonds 69% , Zhongzhuang Convertible Bonds 47% , and Changxin Convertible Bonds 45% . This year's listing has also achieved compulsory redemption this year, including Juewei Convertible Bonds, Haier Convertible Bonds, Ice Lun Convertible Bonds, and Pingyin Convertible Bonds. If you buy it from the closing price on the first day of listing, you can achieve an average of 23.69. % annualized income.
It can be seen that there is a large investment space in the secondary market of convertible bonds. Therefore, I used five dimensions to dig out 10 convertible bonds that are likely to increase significantly in 2020.
Mining Dimensions
From market observation, the growth of underlying stocks is still the mainstream factor driving the rise in convertible bond stock prices. Therefore, the growth valuation of underlying stocks is included in the first stock selection dimension. We use PEG to measure the growth valuation of underlying stocks. The earnings growth rate required in the PEG calculation uses the consensus expected performance growth data of institutions.
However, for positive stocks whose expected performance growth rate is low or even negative, using PEG valuation is obviously not suitable. To this end, I introduce the price-to-earnings ratio (PE) as another valuation, and here I choose PE (TTM) as the second stock selection dimension.
The more institutions that research stocks, the more complete the information collection and processing, and the higher the accuracy of profit forecasts. Therefore, I use the number of research reports released by different institutions in the past three months as an indicator of institutional attention, and use this as the third stock selection dimension.
The conversion premium rate is the percentage of the convertible bond price relative to the conversion value. The lower the conversion premium rate, the easier it is for the underlying stock to drive the price of the convertible bonds up. Therefore, the stock conversion premium rate serves as the fourth stock selection dimension.
The bond yield represents the annualized yield of buying a convertible bond at the current convertible bond price and holding it to maturity. The higher the bond yield, the higher the rate of return that investors can obtain if they encounter stock or market risks after buying and hold until maturity. Therefore, bond yield serves as the fifth stock selection dimension.
Mining method
Primary selection
Among all traded convertible bonds, we screen out convertible bonds with a conversion premium rate within 25% and a bond yield of -1% or more. Then sort the convertible bonds from small to large according to PEG, and select the top 20 convertible bonds as the preliminary pool. The preliminary results are shown in the table below:
score
These 20 convertible bonds are ranked in five dimensions: PEG, price-earnings ratio, institutional attention, conversion premium rate, and bond yield. The first place in an individual event will be scored with 20 points, the second place will be scored with 19 points, and so on. Among them, if the consensus expectation of institutions is for a stock whose performance growth rate is less than 5%, its PEG ranking value will be recorded as 0. Finally, the scores from the five dimensions are summed up to obtain a total score. Theoretically, the maximum score is 100 points.
results
Sort the mid-scores from high to low, and select the top 10 convertible bonds, which are the 10 Daikin convertible bonds in 2020. See table below.
Summary
The summary results of the top 10 major gold convertible bonds in 2020 are shown in the table below. Ratings and breakeven prices are added as buying references.
Note that the capital-guaranteed price here is calculated using annualized yield fitting, which is slightly different from the actual accumulated interest price and redemption price.
In addition, it should be noted that the 10 Dajin convertible bonds cannot be bought and earned. It can only be said that based on the currently known information, the convertible bonds may rise significantly. It is best to buy at a price lower than the breakeven price, of course, the lower the better.
explains
1. PE (TTM): rolling price-to-earnings ratio, which is the stock price / the sum of earnings per share in the last four quarters.
2. PEG: The price-to-earnings ratio is relative to the earnings growth ratio, which is equal to the price-to-earnings ratio/(earnings per share growth rate * 100).Used to measure the company's valuation level relative to its performance growth. PEG greater than 0 and less than 0.5 indicates a low valuation, 0.5 to 1.5 indicates a reasonable valuation, and greater than 1.5 indicates a high valuation.
