An investor who consistently beats the market needs others to be consistently on the wrong side of the trade. Don’t persist with a strategy that makes you the one who’s making money for someone else, Distressed Investing editor Marty Fridson writes.
Today’s Daily Journal features an exclusive book excerpt highlighting the dean of high-yield investing Marty Fridson, Porter & Co. Distressed Investing’s senior analyst. Marty has written eight books on investing – including The Little Books Of Picking Top Stocks and Financial Statement Analysis – and now is the focus of a chapter of a book on corporate finance being released soon.
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.
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.
The collapse of Drexel Burnham Lambert in 1990 triggered a collapse of the high-yield bond market: not a single new high-yield issue came to market for the whole remainder of the year. Marty Fridson recounts how the Great Debacle came to be.
When interest rates go up, bond prices go down. Most segments obey that rule, by falling in price, as the benchmark 10-year Treasury yield rose. But not distressed bonds.
In today’s Journal, Porter recommends taking steps now to hedge your portfolio and to raise cash. The first step, he says, is to identify which companies that you hold haven’t been performing well over the last five years.
Similar to Steve Jobs, Porter believes, Donald Trump has a “reality distortion field.” Trump’s reality distortion field, however, is blinding his supporters into thinking that he can return broad prosperity to the middle class without major dislocations in the markets.