Smart-Stock.net

Since financial matters tend toward the labyrinthine, it might be helpful to get a very straightforward refresher on distressed asset investing.  This link does a good job of presenting an understandable description.

The analogy that author Murray Priestley makes is that of a garage sale.  What might cost a dollar retail is obtainable for pennies used.   By definition, a distressed asset is one purchased from a company in dire financial straits, which is selling its assets for extremely low prices (”everything must go!” etc.).  It’s important to distinguish between the flailing company and the assets themselves, which might be capable of fetching a great price at a later date.

It’s possible to invest both directly and indirectly in distressed assets.  Direct investment is the act of buying and selling the assets yourself, and can be very very profitable.  Indirect investment is the practice of investing money into a distressed asset fund, which buys and manages the funds for you.  While more cautious, this method is often more prudent and ensures a more diversified portfolio of different accounts.

Priestly sums it up well:  “The growth opportunities are massive for companies as assets are available that, in a bullish market, would have been too expensive.”