Stocks dropped 10% over a four-week period in February and March. As is usually the case, the performance of bonds didn’t capture quite as many headlines. But their behavior as equities sank is worth examining – especially by investors who don’t know about the benefits of distressed bonds.
Since we recommended this company’s bond a year ago, the company has improved its performance, and the bond, still a year out from maturity, is trading near face value, having increased in price by 24%. This month, we are adding the shares to the portfolio.
Tight credit isn’t the only factor driving the Distress Ratio’s rise and fall. But it’s a powerful one that’s likely to keep making it harder for struggling companies to refinance their maturing debt in coming months. It all adds up to a likelihood that distressed-debt investors will have a significantly wider array of bonds to choose from before very long.
This nutrition company was the focus of an epic battle of two investment titans. Since that dispute ended, shares have been up and down – now creating an opportunity to buy the company’s bond at a very large discount.
If you’ve never traded bonds before, start here. Our Distressed Investing team will walk you through how bonds work, how and where to purchase them, and what to say to your broker (even if they don’t understand bonds). We also include a handy glossary, a clear breakdown of “bond math,” and more.
The total return of the average distressed bond exceeded 30% in 2024, beating the S&P 500 Index’s total return, which was well above its own historical average, at 25%. Still, with many big losers in that average, picking the right bonds is essential with distressed investing.
High-yield bonds often predict the direction of their companies’ associated stocks a few months in advance. We’ve taken advantage of this phenomenon with three bond recommendations followed by the same companies’ shares. And in this issue, we’re doing the same thing…
First a supply-chain bottleneck, then a warehouse fire, sent this hugely popular, non-brick-and-mortar company’s revenue plunging. It has fought its way back and now finds itself on solid ground once again.
