So-called bond proxies have become extremely popular with investors since the financial crisis. These proxies usually take the form of low volatility, defensive or high yielding equities, which provide a bond like returns but offer a higher yield. Plunging bond yields have only increased the demand for these proxies during the past two years and as a result, many high yielding/defensive/low volatility stocks are now trading at nosebleed valuations. Falling bond yields have also propelled equity markets higher as the lower risk-free rates are plugged into DCF calculations and the equity risk premium spread remains constant. The question equity investors…
What Should Investors Do With Bond Proxies As Rates Rise?
Sign up now and get our in-depth FREE e-books on famous investors like Klarman, Dalio, Schloss, Munger Rupert is a committed value investor and regularly writes and invests following the principles set out by Benjamin Graham. He is the editor and co-owner of Hidden Value Stocks, a quarterly investment newsletter aimed at institutional investors. Rupert owns shares in Berkshire Hathaway. Rupert holds qualifications from the Chartered Institute For Securities & Investment and the CFA Society of the UK. Rupert covers everything value investing for ValueWalk