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Specialized Bonds

By George on Wed, 2008-06-04 09:23

At this year's annual shareholders meeting, Warren Buffett was asked, "With small sums of money, what strategies would you pursue?" In his reply, Warren Buffett said, "I'd look in small stocks or specialized bonds."

What are these specialized bonds?

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Circle of Compe... on Sat, 2008-06-21 23:15
Title: George: I'd guess he meant

George: I'd guess he meant junk bonds, bonds with convertible options, things like that.  Any bond that is "unusual" in any way is probably what he was referring to; they are more likely to be mispriced.

George on Sun, 2008-06-22 20:28
Title: Thanks for the response. At

Thanks for the response. At first I thought that it might actually be convertible bonds, but are they often mispriced? My impression is that there are several hedge funds actively involved in convertible bonds and that they likely keep these bonds from being mispriced. Am I wrong? I don't have much experience with the bond markets, so any insights would be appreciated.

I do agree that junk bonds however probably do provide mispriced opportunities due to liquidity and institutional issues.