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Exclusive Interview with One of the “Most Sought-After Fund Managers”

Stock-Markets / Investing 2009 Apr 21, 2009 - 10:43 PM GMT

By: Q1_Publishing

Stock-Markets Best Financial Markets Analysis ArticleTo say it’s not often we get an opportunity like this is an understatement. Today we’re sitting down for an exclusive one-on-one with the man the New York Times calls “one of the most sought-after fund managers in the country…”  

In his ongoing quest to uncover hidden opportunities, get past the mainstream headlines to find safe investments, Andrew Mickey, Q1 Publishing’s Chief Investment Strategist, had the opportunity to speak to John P. Calamos, Sr.


Calamos is the chairman, CEO, and founder of Calamos Investments (NASDAQ:CLMS). The firm dates back to 1977 and has become one of the leading investment management companies in the world. As of March 2009, the firm managed $23.5 billion in assets.

A big part of Calamos’ success can be attributed to his firm’s unique focus on risk and reward. He has developed an expertise in convertible securities (bonds, notes, preferred stock, etc.). He says that with convertible securities “...investors can still be in the equity markets with less risk.”

He literally wrote the book on investing in convertibles. He has written Investing in Convertible Securities: Your Complete Guide to the Risks and Rewards and Convertible Securities: The Latest Instruments, Portfolio Strategies, and Valuation Analysis.

Long time Prosperity Dispatch readers are familiar with Calamos and the unique benefits and favorable risk/reward profile of convertible securities. At Q1 Publishing, we believe convertible bonds can provide the safety and downside protection of a regular bond, with unlimited upside potential, just like stocks.

So, who better to help us learn more about convertibles than John Calamos. In this exclusive interview, you’ll learn:

  • How you can use convertibles to your advantage
  • The basics of convertible securities and how they can be used as a part of a defensive strategy for equity investors
  • The most misunderstood aspect of convertibles (90% of experts don’t even get this one)
  • John’s approach to analyzing investments
  • The investment he says hasn’t been this cheap in decades
  • What he’s buying now

That’s all just to get started. There’s a lot more. And it’s all included in the transcript below.

Enjoy,

Carly Walton
Publisher, Q1 Publishing

Interview with John P. Calamos, Sr. of Calamos Investments

Andrew Mickey: We’ve been covering convertibles for a long time. During times like these, it’s tough to find a better investment with the right mix of safety and upside potential.

As you’ve been actively tracking, the recent downturn has decimated convertible bonds. So with everything that’s going on with convertible bonds lately who better to talk to than yourself…

John Calamos: Thanks. Also, Andrew, I have Jeff Scudieri with me here. Jeff is one of our senior strategy analysts.

Andrew Mickey: First, I’d like to know how you became attracted to convertible bonds and how it all kind of came about?

John Calamos: Well, that goes back a long way. I had my MBA in finance and then went into the Air Force for five years flying airplanes. But I always had an interest in the financial markets. So my last two-year assignment was up in Minot, North Dakota. You can imagine what that’s like.

Andrew Mickey: I was in the Air Force too and have heard about how “off the beaten path” Minot is, but I successfully avoided it. What did you do up there?

John Calamos: I was a pilot flying B-52s for Airborne Alert. That meant for four or five days at a time, you sat in a hole while waiting for War World III.

I started thinking, “Well, in case the Cold War never turns into something bigger, I better study my finance.” So, it was while I was in the service that I studied and I really got enamored with convertibles.

And in 1971, my time was up. I got out and became a stockbroker. I started using convertible strategies or convertible securities back then. So that’s how it all began for me.

The ‘70s were very volatile. I found convertibles to be a very good, attractive way to control risk in very volatile markets. So, I cut my teeth early on and continued along the path to convertible expertise.

Back in those days, option price theory was just coming out. The option market came into being in 1973 and Black–Scholes options models just came out in the ‘70s, too. As you know, option price theory then started being applied to other asset classes, including convertibles.

So early on, one of the first things we did was to really try and understand how option price theory is applicable to convertible valuation. In 1977, I started my own company investing in convertibles; and for the first 15 years in the business, we ended up being a boutique convertible institutional money manager.

Andrew Mickey: Interesting, you’ve come a long way since then. So to jump ahead a bit with what’s going on now, I want to get into the impact of hedge funds.

The Wall Street Journal says up to 95% of convertible securities are purchased by hedge funds.

Whether they use them for direct investment or convertible arbitrage, they buy a lot of them. But, with the recent redemption spree, a lot of them have had to sell out. Do you consider that a benefit to you as a buyer of convertibles or do you also engage in a lot of the arbitrage strategies?

John Calamos: We walk across a spectrum of convertibles, depending on the investment objective. We use convertibles in many different strategies: hedge strategies, long-only strategies and opportunistic strategies. We use busted converts, high-yield convertibles and convertibles as a defensive equity strategy.

We also have been doing convertible arbitrage for a long time. We have one of the few mutual funds that does convertible arbitrage. It’s called the Calamos Market Neutral Income Fund (CVSIX). It was opened back in 1990.

What it really comes down to is the investment objective and how you would use the convertible to help you fulfill that investment objective…

To find out how Mr. Calamos is positioning his funds in this market and learn what about what he calls “a defensive strategy for investors” simply follow this link.

Good investing,

Andrew Mickey
Chief Investment Strategist, Q1 Publishing

Q1 Publishing is committed to providing investors with well-researched, level-headed, no-nonsense, analysis and investment advice that will allow you to secure enduring wealth and independence.

© 2009 Copyright Q1 Publishing - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

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