If you were about to invest in a company and someone offered you a complete view of its entire capital structure — not just the stock, but also its debt — would you take it?
Obviously, yes. Who would turn down more information? And yet the standard operating procedure across the investment industry is often not to look at the whole company. At many asset managers, credit and equity research are organized as separate functions, even though what company owes can shape what it’s worth just as much as what it earns. Penn Capital was intentionally structured so the same analyst evaluates the entire capital structure of every company we follow. As a portfolio manager myself, I’ve worked on the equity and debt sides, which is to say I’ve experienced firsthand how one informs the other, and what can get missed when the two sides remain siloed.
The siloed credit manager’s blind spot
Credit investors typically care about one thing: getting paid back. That often means they don’t particularly care about what’s going on with a company’s stock price. When it comes to the high-yield market, investors are dealing with weaker cash flow companies, which is precisely why yields are higher. The danger for a credit investor is to blindly focus on yield today and to ignore that a business is declining rapidly like a melting ice cube. High bond yields and a falling stock price often reflect the same weak fundamentals, and both can be warning signs of default. In fact, the highest yield on a bond is often right before it defaults.
What a purely credit-focused investor tends to overlook is the equity market. A company doesn’t just raise capital by issuing debt; it can raise capital by issuing equity, too. A business with a strong stock valuation has equity investors that are optimistic about its future and more ways to access capital than one with a weak one, all else equal. That’s essential information for a credit investor, because it tells you something about a company’s flexibility and staying power. It can also help credit analysts avoid being invested in a company when the ice cube finally melts for good.
A timing question: to look forward or backward?
Equity and credit investors run on different clocks. Equity investors tend to look forward a few years into the future. That is perfectly logical for an equity analyst, but it also means they can buy stories about a future that hasn’t happened yet, even when the underlying fundamentals don’t support it. Credit investors, by contrast, are often paying attention to the recent past, as described by a company’s bond rating. Of course, that is its own kind of blind spot: Ratings tell you what already happened, not what’s happening now. Thoughtful credit investors borrow a bit of equity thinking, analyzing not just how the company’s debt looks today, but considering whether there are future cyclical trends that might change the calculus.
What a siloed equities manager can miss
The bond market is fundamentally more risk-averse — investors just want their money back — and that instinct can provide a healthy check on equity enthusiasm. Take Oracle’s recent announcement of massive AI infrastructure spending. The initial reaction was one of excitement: Oracle continuing to be a leader in the AI buildout. What a lot of equity investors weren’t considering was the debt: all of the bonds Oracle would need to issue to fund this infrastructure, without a guaranteed return on the investment. Ultimately, the stock dropped as concerns over the company’s debt levels grew.[1] It’s a perfect distillation of the different mindsets of equity and bond investors. The equity investors were buying the story; the bond investors were worried about how Oracle would pay for it from the start. In this case, the bond narrative seems to have won out.
Why it matters now
In today’s market environment, we believe having an integrated approach to analysis that combines equity and credit is more important than ever. Especially in a period where corporations are taking on more debt and interest rates are rising, an investment structure that allows analysts to see the full picture across equities and credit isn’t just a “nice-to-have.” It’s essential for making fully informed and strategic decisions, in our experience.
For more information, email: info@penncapital.com
[1] https://www.nytimes.com/2026/07/17/business/ai-spending-oracle-stocks-bonds.html
Disclosure
Securities mentioned are for illustrative purposes only and are not a recommendation to buy or sell. The views and opinions expressed are for informational and educational purposes only as of the date of production/writing and may change without notice at any time. This material may contain “forward-looking” information that is not purely historical in nature.