I might come across as “Just the facts, Ma’am. Just the facts” trader. But all of us have soft spots in our hearts where values trump possible profits or when a sense of fun wins the day.
Friendly Ice Cream was/in an East coast/ Mid-western, family-style, restaurant chain I’d never heard of before stumbling onto its bonds one day. The yields were fat. The company’s financials seemed fine. But for me being a West coaster, I knew nothing about the restaurants themselves. Some poking around said they were known for their ice cream. Further poking around said the company was trying to reinvent itself by “empowering its employees”. “Yeah, right”, I thought. “The usual management buzz words.”
My daughter was attending the U of Akron. So I rang her up and asked if she had ever been to one of their restaurants. “No. But there was one nearby.”
“Would you go there”, I asked, “and buy something? I’ll cover for it. And check them out. I’m thinking of buying some of their bonds.”
A couple days later, she called back. She reported the restaurant was clean, not too busy, and she had walked up to the counter. When asked how the clerk could help her, she had asked for a peanut butter milkshake. The counterman said that they didn’t offer that flavor. But then he paused and said, “We have peanut butter for our sandwiches, and I know we have ice cream. Why I don’t just make you one?”
When she told me that, I knew I had a winner. ‘Employee empowerment’ wasn’t just management hype. It was happening at the store level. So I immediately went online and bought two of the only five bonds being offered of one maturity and all three of another maturity. (In other words, on that day, I was 60% of the total volume traded. Talk about “thinly traded”.) But I had done my due-diligence, plus some “field research”, and I was willing to make a five-bond bet, which --at that point in my career-- probably represented 4% of AUM, not a sizable position, but enough that a loss would sting.
I’m happy to report, though, that both came to maturity, and I made my 15% YTMs. And I could tell you a dozen other such tales, where I bought because I thought the project was worthwhile. E.g., World Wildlife’s bonds, the Smithsonian’s bonds, or where the company had been part of my childhood (Treehouse’s bonds), or where it just seemed like a fun thing to do, e.g., Jamaica’s bonds, Turkey’s bonds (both doing well).
Arindam