$MSFT $JNJ $AAPL: only 3 US AAA Rated Cos.


TO BE AWARDED a triple-A credit rating was once a priority for some of the biggest and best-known U.S. companies. Only the financially strongest companies, organizations and governments can earn a triple-A rating.

The triple-A rating typically bestows the lowest borrowing rates and suggests the highest ability to repay bondholders. But the triple-A club has been shrinking over the past four decades. Apple recently became only the third current corporate member of this exclusive club.

The list of companies holding triple-A credit ratings was once much longer. In 1980, nearly 60 companies carried a triple-A rating. These companies prioritized solid balance sheets and enjoyed the lower borrowing costs that flowed to financially robust borrowers.


Longevity is one of the factors keeping other quality companies out of the list. Traditionally its old line blue chip companies that qualify.

It’s interesting that 50 yo companies like Apple and Microsoft can qualify.

1 Like

The linked article touting slave-labor Apple is the usual misinformed nonsense that passes for “information”. Apple’s credit-rating isn’t a solid AAA/Aaa, but a notch lower on one leg by S&P. Only JNJ, the Smithsonian, and a couple of development banks might truly be ‘triple-AAA/Aaa’ debt, and I have my doubts about that.

Secondly, a distinction needs to be made between ‘agency-assigned’ ratings and ‘market-implied’ ratings. As everyone knows who read or saw The Big Short, ratings can be bought, and the rating agencies can be bribed. Hence, a would-be bond investor has to dig deeper. The lazy way to do this is to use comparative analysis and to estimate an issuer’s market-implied rating. If the market disagrees with the rating agencies, what the market says should be trusted, not that the rating agencies’ reports should be discarded, because the analysts writing them aren’t dummies and often offer shrewd insights worth considering. It’s when discrepancies arise that disbelief and mistrust have to kick in.

Case in point. Years ago, GE’s debt was rated AAA/Aaa, but the yield on its debt was comparable to that of Mexico’s sovereign debt. The market “knew” that GE wasn’t a top-tier bond issuer, and the market was pricing GE’s debt to reflect the suspicion --which was later confirmed beyond doubt-- that GE had been cooking its books. These days, GE’s debt is rated BBB+/Baa1, which is where the market --in its wisdom-- was pricing it years before GE’s accounting scams and scandals came to light.

The more aggressive way to rate an issuer’s debt is to do the old-fashioned, green-eye shade thing of doing one’s own credit-analysis. Most would-be bond “investors” lack the skills to do this. Hence, they end up losing the money they do and them blame everyone but their own ignorance, laziness, and stupidity.

There’s serious money to be made in bonds, because --on a risk-adjusted basis-- their returns have to equal those of other asset classes, such as equities, or else the arbs step in make it so. That’s how markets work --or are supposed to work-- unless/until the Fed steps in and destroys genuine price discovery, which is where all investors find themselves today.



Arindam, do you have links to websites which confirm what you said, “Apple’s credit-rating isn’t a solid AAA/Aaa, but a notch lower on one leg by S&P. Only JNJ, the Smithsonian, and a couple of development banks might truly be ‘triple-AAA/Aaa’ debt, and I have my doubts about that?”

Thanks in advance for anything else you can add.

On another point: have ratings agencies ever paid attention to “slave labor” issues by Western countries? Or car companies doing business in Western China where Muslim citizens are imprisoned because of their faith?

I’m curious as to what other things ratings agencies weigh.


Most brokers offer a bond-search engine that includes the current ratings by Moodys and S&P. FINRA offers info on ratings as well and includes those by Fitches. In short, it’s easy to find out how an issuer’s bonds are currently rated, as well as how the issuer was rated historically and whether it is currently on credit-watch and subject to an upgrade or downgrade. If you want to know how to interpret “split ratings”, which is Apple’s situation, you’re going to have to dig into the professional bond literature for guidence, but that stuff is all but unreadable and/or useless unless you’re running a professionally-sized portfolio (aka, multi-millions of dollars).

Sugestion: if you want to vet a corporate bond, see what the rating agencies are saying and what the market is saying about the issuer’s credit worthiness through their pricing of the bonds --which is a separate issue than the impact of interest-rate levels and forecasts) and what the stock analysts are saying about the company’s prospects and what the stock and options traders are saying through their pricing and then grind through the company’s financials the old-fashioned way, looking for warning flags. Collectively, a pretty trustworthy picture emerges, which is only step one of the vetting process. Next comes sizing a postion relative to your account size and your risk metrics and objectives. Then comes the problem of finding a lot that someone will sell you. Explanation: some order mins are 200 bonds. No retail investor can manage that. Plus, you gotta deal with call features, tax features, etc. But there are plenty of books that explain the bond investing process, the best of which for beginners is that by Sharon Wright (any edition). The next step up is Barnhill’s book and anything by Altman.

As for SEG factors, you’d be surprised by what rating agencies consider as they attempt to estimate ‘risk’. Read a couple dozen reports. The analsysts aren’t dummies. What happens at higher levels of mangement --where the bribes are offered and accepted-- is a whole 'nother matter. And even there the corruption isn’t as widespread as is alleged. Yeah, in obvious cases, for obvious reasons, ratings are sometimes issued that the facts don’t warrant. (Like, ask what rating is assigned to our dear country’s debt and then compare that to the ratings assigned to far more solvant, but politically disfavored, countries.) But by and large, the ratings and reports are a useful place for an investor to start.

As for Apple, it’s a corrupt, evil, POS company I want nothing to do it, and the world would be a better place without it. Ditto Altria, Raytheon, Boeing, Monsanto, Pfizer, etc.(IMHO, 'natch.)


1 Like

Arindam, do you have a list of socially responsible companies you buy stock in?

“… do you have a list of socially responsible companies you buy stock in?”


I don’t have a list. I have a sense of what companies I think merit supporting, either by purchasing their products or services or by owning shares of their stock or debt.

The problem with SEG lists is that everyone’s values and ethics are different, never mind that the whole “socially repsonsible” investing thing often turns into a green washed scam that doesn’t bear close scrutiny.

What impact does a small investor have on a company’s fortunes and profitability if he/she does/doesn’t buy shares? Nearly zero, right? What about selling short? Again, nearly zero impact. But it feels to sell short and to punish the idiots who tout the stocks of companies the world would be better off without. (E.g., I’ve made money shorting AAPL, DIS, etc.)