If market value was an illusion when stocks were soaring, who’s to say it’s no illusion when stocks are flooring?! So say investment specialists Marty Whitman and Curtis Jenson of the Third Avenue Value fund. Arguing for optimism in this article from The Wall Street Journal, Mr. Jenson offers “…unprecedented opportunities in the distressed debt market.”
Calling many current valuations “ridiculous,” the managers at Third Value have pressed ahead with high-yield bonds.
Third Avenue Value has been buying select bonds from GMAC, as well as bonds from a trucking company — Swift Transportation — and expects either a yield at maturity of 19% or a valuable slice of equity if Swift is forced to restructure.
Indeed, in a recent letter to his shareholders, Mr. Whitman predicts some yields as high as 54%.
How do you take advantage of opportunities in high-yield bonds during these difficult times? If Jensen and Whitman are correct, the key is optimism, and a group of investment specialists who know how to value distressed assets.
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