Fallen Angel

Fallen Angel

1. A junk bond that was once investment-grade.

2. A stock that has fallen steeply in price from its previous high.

In both cases, fallen angels may be undervalued, value investments or bad investments nearing bankruptcy. This makes investing in a fallen angel very risky but it has the possibility of a high return.

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fallen angel

A once-popular security that has lost investor favor and has declined in value. For example, a high-growth company may hit a period of heavy competition or saturated markets such that its stock declines in price and becomes a fallen angel.

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Fallen angel. Corporate or municipal bonds that were investment-grade when they were issued but have been downgraded are called fallen angels. Bonds are downgraded by a rating service, such as Moody's Investors Service or Standard & Poor's (S&P).

Down-grading may occur if the issuer's financial situation weakens, or if the rating service anticipates financial problems that could lead to default.

The term fallen angel is sometimes used more generically, to refer to stocks or other securities that are out of favor with investors.