I was asked this question not too long ago by a fellow investor during a coffee session, and when I first heard it, I was like “Okay…is it going to be something complicated?”
After hearing out his explanation, I had gotten what he is trying to say. Basically and in gist;
a. Corporate bonds are considered long term liability, i.e. debt, and;
b. One of the rules of value investing is to find low debt or no debt companies.
So his question was if I follow (b), then investing in (a) would contradict my rule in (b).
This is a very interesting question.
A Little Bit On Corporate Bonds
A corporate bond is issued by a company, and like its government bond counterpart, it has a maturity date and a coupon rate. Unlike government bonds, however, corporate bonds tend to be shorter in nature (within …