My guest today is Bryan Krug, who manages the Artisan Partners Credit Team and overseas more than $3B in high yield credit investments for the firm. This was my first conversation on high yield, so I took it as an opportunity to get an overview on the investment universe and home in on the tools used for analysis and security selection.
As an equity investor, I think one of the most fruitful areas of research is into ways that companies fail or go wrong, and credit investors focus almost entirely on this potential for impairment. My guess is that all equity investors will learn something useful from this conversation. Please enjoy.
For more episodes go to InvestorFieldGuide.com/podcast.
Sign up for the book club, where you’ll get a full investor curriculum and then 3-4 suggestions every month at InvestorFieldGuide.com/bookclub.
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Show Notes
2:11 – Overview of the high yield debt markets
5:05 – Why should investors consider this investment class
7:11 – How analyzing a company’s debt is different from what equity analysts look for
8:42 – Primary factors when exploring a company’s ability to de-lever
9:43 – What is their alpha vs others in the space
12:02 – Deep dive into the quantitative factors for them to look into a deal
14:25 – Benchmarks he uses
16:08 – Portfolio construction
17:15 – Their preference for broadband providers over cable tv networks
20:01 – What piques his interest about spreads
21:50 – The ratings of debt
25:40 – A recent example of an opportunity and how the mispricing was identified
29:17 – Most valuable data sets in this world
31:51 – Favorite part of this process
32:26 – Most surprising new learning
33:01 Maintaining your advantage
34:49 – The biggest pools of error in this industry
48:00 – What industries interest Bryan
40:50 – Dedication to this market
41:45 – Evolution of his healthy skepticism
42:38 – Can things in the debt market help to project what will happen in the equity markets
44:56 – Current view of the world based on what is happening in the credit markets
45:51 – Categories of convenience that he cares about
49:15 – Anything that has him worried in high yield markets
50:38 – Kindest thing anyone has done for Bryan
Learn More
For more episodes go to InvestorFieldGuide.com/podcast.
Sign up for the book club, where you’ll get a full investor curriculum and then 3-4 suggestions every month at InvestorFieldGuide.com/bookclub
Follow Patrick on twitter at @patrick_oshag