Today I’m looking into an ad from The Oxford Club’s Marc Lichtenfeld, which is teasing the idea of investing in so-called “refundable stocks.”
Lichtenfeld refers to this as the “perfect investment” and likens it to what you’d get if you combined “the protection of bonds” and the “upside potential” of stocks.
“In fact, this ‘perfect investment’ is practically hidden in plain sight… found only in a small corner of one of the largest financial markets in the world.”
“… what if you could combine the two? You’d get the all the protection of bonds… but you’d ALSO get the upside potential of the stock.
“That’s the investment I’m talking about today.
“It’s a stock-bond hybrid investment that has done better than you can possibly imagine.”
“In fact, I like to think of these hybrid bonds as ‘refundable stock trades.'”Source: https://pro.oxfordclub.com/p/REFUND2100NMTLTMLBOSAPost/ENMTYA21/Full
What’s it all about?
In short, Lichtenfeld is pitching a biotech company with a convertible bond.
“… these assets are known as ‘convertible bonds’… or ‘convertibles.'”
He didn’t reveal the company or convertible bond he’s teasing, as he wants you to join his Oxford Bond Advantage service for $2,100 to find out.
But I looked into his pitch to see what I could find.
And I think I know what he’s teasing.
So with that said, let’s unpack what he said in the presentation, and then I’ll show you what my research uncovered.
Unpacking Marc Lichtenfeld’s “No. 1 Convertible Bond Pick” Presentation
The gist of Marc Lichtenfeld’s pitch is that convertible bonds are the so-called “perfect investment” since they give investors the “protection of bonds” and the “upside potential” of stocks at the same time.
And he teased his “No. 1 convertible bond pick for 2022,” which the presentation suggests could be a “10X opportunity.”
What are convertible bonds?
Convertible bonds pay fixed-income interest payments to the holder and can also be converted into a predetermined number of shares of the underlying stock before reaching maturity (i.e., expiring).
So by investing in a convertible bond, you can collect the agreed-upon interest payments and, when the bond matures, get your money back.
Or you can convert them into shares and potentially profit IF the underlying share price goes above the conversion price before it matures.
Here’s how Lichtenfeld explains it:
“So a convertible bond generally comes with the same terms you get from a normal bond.
“It pays you interest over time… and when the bond expires, you get your principal back.
“But a convertible bond also offers a very special privilege to its holders.
“Thanks to a unique clause in the contract of these bonds, you have the right to eventually convert your investment into a predetermined number of shares at a preset price.”
What’s the catch?
As Lichtenfeld points out, if the stock price goes down, you can still get back the money you invested in the convertible bond while also having collected interest payments for your troubles.
So in that respect, the underlying stock price going down isn’t the end of the world.
However, if the company goes bankrupt while you’re holding its convertible bonds, you could end up losing your entire investment.
And this is something Lichtenfeld himself stated in the presentation:
“Of course, these convertible bonds aren’t completely without risk.
“As with any bond, the risk is that the company itself will go bankrupt. That’s the only way you wouldn’t get paid.”
As such, anyone investing in convertible bonds is taking on WAY more risk than investing in a U.S. Treasury bond, for example.
Which, by the way, are currently seeing record-high yields.
The U.S. 12-month treasury bond, for example, is currently yielding 4.69%.
My point? U.S. Treasury bonds are as close to a “risk-free” investment as it gets since they are backed by the U.S. government. So unless a convertible bond is paying a much higher interest rate than what those are, one would have to carefully consider if the convertible bonds were worth the risk.
To be clear, I am not an expert on convertible bonds. Nor do I claim to be. And I am not giving you advice on what you should or shouldn’t invest in.
This site does not provide financial advice.
I did, however, think it was worth stressing the fact that, while the presentation suggests convertibles are “perfect investments,” there are risks.
“… most convertible bonds are considered to be riskier/more volatile than typical fixed-income instruments.”Source: https://www.investopedia.com/terms/c/convertiblebond.asp
Anyway, with that said, let’s look into what biotech company and convertible bond Marc Lichtenfeld might be teasing.
What “Biotech Gem” Is Lichtenfeld Teasing?
The only way to find out for sure what company Lichtenfeld is teasing in the presentation is to see his research report.
Specifically, the one called “Principal-Protected Profits: Conservatively Target an Explosive 10X Return on This Biotech Gem.”
And the only way to do that would be to join his $2,100 service, Oxford Bond Advantage, as this is where he shares all the details of his pick.
I didn’t join that service or read his report, but I did look into the clues he shared in the presentation to see what I could find.
And I think it’s possible that he’s teasing Paratek Pharmaceuticals, Inc. (PRTK), a Boston-based pharmaceutical company founded in 1996.
To explain why I say that, let’s look at a summary of Lichtenfeld’s clues, and then I’ll show you how I think this company is a possible match.
“There is one specific convertible bond that I’ve been monitoring closely.
“It’s easily one of the most exciting investment opportunities I’ve seen in many years.”
“…for starters, this is a tiny pharmaceutical company that isn’t on most people’s radars…
“It currently sports a market cap of just over $200 million. So, again, this is a tiny company with room to run…
“It operates in an incredibly important space. And that’s the $40 billion global antibiotics market.
“It recently earned FDA-approval for a pivotal oral drug used to treat bacterial pneumonia.”
“And current forecasts have its revenue surging from about $50 million in 2020… to close to $400 million by 2025.”
“Right now, this company is trading at a very cheap $4 a share.
“And according to my own analysis of this company…
“I believe strongly that this stock could hit as high as $47 a share in the next 12 to 24 months.”
“The coupon on this convertible bond is set at 4.75%… a meaningful amount to wait this trade out. And it matures on May 1, 2024.”
With those clues on hand, I researched different small-cap biotech stocks until I found Paratek Pharmaceuticals, which seems like the closest overall match.
For starters, Paratek Pharmaceuticals is a pharmaceutical company with a market cap of just over $183 million as of writing. And its stock is sitting at $3.35.
Granted, those figures are slightly lower than what Lichtenfeld said, but his presentation is dated February 2022, and the stock has gone down since.
So with that in mind, that clue is still a possible match.
Second, regarding Lichtenfeld’s clue about the company earning FDA approval for an oral drug… Paratek Pharmaceuticals’ flagship drug is called NUZYRA®, which the company says is a “once-daily oral and intravenous antibiotic” used to treat Community-Acquired Bacterial Pneumonia (CABP) and Acute Bacterial Skin and Skin Structure Infection (ABSSSI).
And according to the company website, it has been “approved by the FDA.”
I’m not even going to attempt to explain anything further about what this drug is or how it works because, quite frankly, it’s beyond me.
But it does seem to be a possible match with the oral drug Lichtenfeld hinted at (i.e., an FDA-approved oral drug used to treat pneumonia).
Third, the clues Lichtenfeld shared about the company’s revenue seem to line up with what’s shown in Yahoo Finance. Although I’m not sure where he got the part about its revenue being forecasted to reach “close to $400 million by 2025.”
Nevertheless, Paratek Pharmaceuticals looks like the “tiny pharmaceutical company” Lichtenfeld is teasing.
What about the “convertible bond” part of his pitch?
This page on cbonds.com shows that Paratek Pharmaceuticals has a 4.75% bond that is convertible and that matures on May 1, 2024.
So, while I can’t be 100% certain, that is my best guess as to what his “No. 1 convertible bond pick for 2022” is.
As for whether or not this company or its bonds are worth investing in, that’s something I’ll leave for you to decide, as I’m not a stock picker.
I also can’t advise you on what the best way to invest in convertible bonds is, as this is not something I’m familiar with. And even if it was, this is probably something that’s best to discuss with your financial advisor.
Recommended: Go here to see my #1 rated stock advisory of 2023
Marc Lichtenfeld’s “refundable stocks” presentation is all about investing in convertible bonds, which he describes as the “perfect investment.”
I’ve shared my guess about what I think he’s pitching here. But regardless of what specific company or convertible bond he’s referring to, I would suggest taking the presentation with a pinch of salt, as no investment is perfect.
In any case, I hope what I’ve shared in this post has helped demystify the presentation a bit. And if you’d like to share your thoughts on any of this, feel free to chime in below. Thanks for reading.