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Stink Bid Baker Hughes Bond, CUSIP 05723KAE0 For Safe Yield And Capital Gains

May 07, 2020 12:03 PM ETBaker Hughes Company (BKR)5 Comments
Keith J. Dauzat profile picture
Keith J. Dauzat


  • The bond is Money Good.
  • Recent turmoil in oil futures has resulted in mispricing.
  • Purchased at the right price, this bond yields alpha versus comparable investment grade bonds.

Buying bonds at distressed prices is a powerful strategy. The bargain price both boosts yield and allows for a terminal capital gain when the bond pays out at par. Today, I'm recommending the 15DEC2027 maturity 3.337 coupon Baker Hughes (NYSE: NASDAQ:BKR) bond trading as CUSIP 05723KAE0. As of this writing, it has a yield to maturity of 3.8%. I'll demonstrate how that can likely be boosted to 17.9% by waiting for the right entry price.


This bond recently (before COVID-19 rocked the markets) traded as high as 108.6. It has likewise recently traded as low as 71.3. Current price is around 96 but I expect multiple pullbacks to a price of 95 or below. That is going to be the target price to enter this trade. CUSIP 05723KAE0 and Baker Hughes have an "investment grade" rating from Standard and Poors (A-). That is the bond is very safe. I'll detail cash flows to demonstrate that in a moment. Even with a steep drop in revenues, the company is going to be cash flow positive and have interest coverage to ride out the economic shock.(source: FINRA)


Baker Hughes is a company transformed (DISCLOSURE: author was previously employed by Baker Hughes as a Financial Analyst supporting the SEC reporting effort). The company previously traded under the ticker BHI and was a takeover target by rival Halliburton. To persuade the government the deal would not be anti-competitive, BHI had to sell some assets, especially in the Gulf of Mexico. The assets that were sold were expensive to maintain and raised substantial cash, improving the company's balance sheet. The deal fell through and Halliburton had to pay BHI $3 billion cash for the break up fee.

Shortly thereafter, General Electric took an interest acquiring BHI. That deal went through and combined the company

This article was written by

Keith J. Dauzat profile picture
Retired from the corporate accounting grind on 5OCT2012 to trade on my own account full time. I invest in options, individual bonds, high yield securities, Closed End Funds, and "special situations".

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, but may initiate a long position in CUSIP 05723KAE0 over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Author has a good till canceled bid in the market for CUSIP 05723KAE0

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