John calamos launched his career and built the foundation of a $1.7 billion fortune trading convertible securities. Now 68, and with 38 years in the business, he says converts have never been such a deal. "This is the most undervalued I've ever seen the market," he says. "It's unbelievable."rnConvertibles are bonds or preferred shares that entitle owners to convert them into common shares if they feel so inclined. Most converts are issued by small or midsize firms seeking to borrow at low interest rates. If the issuer's stock does well the bond will be converted, diluting common shareholders. But that's not too harsh a penalty for success, figuresrnthe issuer, which in the meantime enjoys a coupon a few points below what might have been paid on straight debt.rnAnd if the issuer gets into trouble? In bankruptcy, convertible bondholders get paid back after straight bondholders but before equity investors. The fixed interest payment gives the convertible a minimum value, even if the common share price sinks after the convert is issued.
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