Right now, the industry that produces the key ingredient for everything from Oreo cookies to living-room paint is near the bottom in operating profit and share price. This distress creates the opportunity to recommend shares of one the leaders (a century-old business) in the production of this chemical.
The bankruptcy court’s decision in an ongoing case that Marty Fridson reports on this month may provide some guidance on what to expect if a similar situation arises in distressed bonds in the future. Keeping on top of these developments is an important part of the task of identifying the best opportunities in distressed securities.
In our report Dig Baby Dig, published on September 12, 2024, we recommended purchasing Albemarle’s 7.25% Series A Mandatory Convertible Preferred Stock, then trading at $42.89 per share. Our rationale was that the sharp decline in lithium prices had caused the stock prices of the companies, like Albemarle, that produce it, to fall too far.
The price of the bond featured this month has fallen sharply during the year – but our team believes the bond represents solid risk-adjusted value at current prices. We think the bond will ultimately be valued materially higher than it is today.
In July, we recommended QVC’s 4.375% bond maturing September 1, 2028, when it was trading for around $430. Today, we are recommending selling the bond. We have noticed a recent turn in the distressed-debt market. Until recently, investors tended to look beyond any hiccups in a company’s performance to focus on the longer-term outlook. In
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In looking at the distressed-bond market today, Marty Fridson suggests: Fasten your seatbelts. It’s going to get very bumpy. But investors who remain rational will profit extravagantly from the foreseeable disconnect between value and price in the lower-quality end of the corporate bond market.
In the Distressed Investing April 10 report, “Car Talk,” we recommended buying Cerence AI’s 1.5% convertible bond maturing July 1, 2028. Today, we recommend selling the bond. At the time of the recommendation, the bond was priced at $692, which equated to annual yield of 13.6%. We indicated that we thought it extremely unlikely that
In the May 8 Distressed Investing report, “Cracking the Code,” we recommended the combined $1,000 purchase of one Green Plains 2.25% convertible bond, then trading at $774, and shares of Green Plain stock (Nasdaq: GPRE), then trading at $3.66. At the time this equated to one bond and 61.7 shares. Recently we recommended selling the
Investors are concerned that the products of the company featured this month are on the wrong side of history and condemned to permanent decline. This report will explain how the company is reinventing itself – and will remain a survivor – and propelling the price of its bond higher.