Friday, December 14, 2012

Short Thesis Summary for Troubled Company

During a period of prosperity and economic expansion, the companies that cannot earn a respectable living are left no recourse but to sell out or restructure if the level of the stock price aggravates shareholders or if a raider notes the underlying assets. 3 Categories of opportunities appear in Bull Market:

1. The restructured and heavily indebted company.
2. The "For Sale" but not sold company.
3. The company with deteriorating earnings that attempts to create the appearance of health with sale of assets.

These troubled companies could give you a lot of headache though because very often, Wall Street and other bulls will come out with rumors that someone will buy the troubled companies for more than the stock worth. Some companies may indeed buy the stocks in those companies so the ride can be very volatile. Like Charlie Munger once said, it's not worth that much irritation in life. This is a category that I think even though can be rewarding in the end, may not be a good exercise considering all the possible pains.

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