Yield Advantage

See Convertible Bonds.

Yield advantage here just means that you, the public stock investor, gain an advantage in buying the busted convert bonds of a publicly traded company...at least as far as yield is concerned. That is, you have these busted converts that yield some 6.5%; they convert into the stock that yields 4%, so you have a yield advantage in buying the bonds and just waiting around until eventually, presumably, the common stock price catches up to the convert price...and you can trade in those old bonds for n shares of dividend-yielding stock.

Here, you pick up a 250-basis-point advantage in doing so, while taking bond risk (less) instead of common stock risk.

Wells Fargo was left swimming in these kinds of busted converts after the 2008 loan crisis, and we're guessing Warren scooped up a lot of them. The guy knows how to take advantage.