This week I added to my investment in Colabor Income Fund convertible debentures (CLB.DB). Colabor distributes food and non-food products, to independent wholesalers that redistribute these products to their customers, primarily in Quebec. Even during economic downturns, people still require food.
Normally, I am interested in the potential for conversion, but an examination indicated there were very few opportunities. Ignoring conversion, I focused on yield and time to maturity. The yield of the debentures were within a reasonable range of 5% to 7%, and they mature in about 2.5 years. Higher yields are associated with higher risk and lower yields are available elsewhere with less risk. I am not prepared to risk beyond 3 years given the recent global ‘quantitative easing’ that has taken place. Finally, the trading volume suggested that I should be able to sell the debentures prior to maturity without paying too much for liquidity risk.
Tags: convertible debentures, trading