An Atlanta-area county government had guaranteed a set of local hospital bonds and structured them so that interest paid to bondholders would be income tax-free. On paper, they were a conservative, guaranteed investment — exactly the kind of stable income vehicle Lee actively seeks for his clients.
Then the rumors started. Word spread that the hospital was experiencing cash flow issues serious enough that the county might be required to step in and provide the backup funding it had promised. The county itself had a less-than-ideal reputation for bureaucratic reliability, and that reputation was enough to shake investor confidence.
Investors began selling. The price of the bonds fell. And Lee began buying.
"We knew the fears were overdone. The county's guarantee was real. The income was tax-free. The price was wrong — and that mispricing was an opportunity."
— Lee HollingsworthAfter only a few months, an important vote confirmed timely payment of funds. The market reversed immediately. The bonds surged in value. Having captured nearly all available profit, Lee sold — delivering an 8.5% capital gain on top of the 5.25% tax-free interest that had been accruing throughout the holding period. Total return: 13.75% in a single year on a guaranteed investment, in a hyper-low interest rate environment.
This is the kind of opportunity available only to those with deep, specialized knowledge of the municipal bond market — and the conviction to act when others are retreating.