Bryan Krug – High Yield Credit Investing - [Invest Like the Best, EP.114]

My guest today is Bryan Krug, who manages the Artisan Partners Credit Team and overseas more than $3B in high yield credit investments for the firm. This was my first conversation on high yield, so I took it as an opportunity to get an overview on the investment universe and home in on the tools used for analysis and security selection. As an equity investor, I think one of the most fruitful areas of research is into ways that companies fail or go wrong, and credit investors focus almost entirely on this potential for impairment. My guess is that all equity investors will learn something useful from this conversation. Please enjoy.

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Sign up for the book club, where you’ll get a full investor curriculum and then 3-4 suggestions every month at InvestorFieldGuide.com/bookclub.

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Show Notes

2:11 – Overview of the high yield debt markets

5:05 – Why should investors consider this investment class

7:11 – How analyzing a company’s debt is different from what equity analysts look for

8:42 – Primary factors when exploring a company’s ability to de-lever

9:43 – What is their alpha vs others in the space

12:02 – Deep dive into the quantitative factors for them to look into a deal

14:25 – Benchmarks he uses

16:08 – Portfolio construction

17:15 – Their preference for broadband providers over cable tv networks

20:01 – What piques his interest about spreads

21:50 – The ratings of debt

25:40 – A recent example of an opportunity and how the mispricing was identified

29:17 – Most valuable data sets in this world

31:51 – Favorite part of this process

32:26 – Most surprising new learning

33:01 Maintaining your advantage

34:49 – The biggest pools of error in this industry

48:00 – What industries interest Bryan

40:50 – Dedication to this market

41:45 – Evolution of his healthy skepticism

42:38 – Can things in the debt market help to project what will happen in the equity markets

44:56 – Current view of the world based on what is happening in the credit markets

45:51 – Categories of convenience that he cares about

49:15 – Anything that has him worried in high yield markets

50:38 – Kindest thing anyone has done for Bryan

 

Learn More

For more episodes go to InvestorFieldGuide.com/podcast. 

Sign up for the book club, where you’ll get a full investor curriculum and then 3-4 suggestions every month at InvestorFieldGuide.com/bookclub

Follow Patrick on twitter at @patrick_oshag