Bear! Message Board - Msg: 34654078

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Strategies & Market Trends : Bear!

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To: Harshu Vyas who wrote (248)	5/1/2024 1:51:39 PM
From: Sean Collett	of 265

So did you miss the comment I made about debt being termed out and at fixed rates? Refinancing is a risk if my maturities are due tomorrow not in 10 years. You're only going to need to refinance current debt if it's due otherwise that risk isn't present. This is where knowing what you're buying comes into play. If my debt is termed out and at fixed rates that's different than a company that has a lot of short-term maturities with low fixed rates and/or floating rates. What's the cash situation like? What's the MOAT of the company and will revenues hold in a "lipstick effect" in a downturn? Either way you wrote a lot but there's a lot of nuance in this that can't be written off as "all leverage is bad". Will companies go bust? Yes sir. Will all leveraged companies go bust? Nope. You can also consider companies that have debt issued when rates were low and can take advantage of the fact that their bonds have likely tanked. If they have strong balance sheets they can use some of their cash/assets to buy that debt back at a significant discount. Apple has $108B in debt so do we bucket them the same? Likely not. They have enough cash to nuke their debt in the event they need to. Not to mention they have $43B in property and equipment to sell too. Just using them as a quick example of where you need to look deeper and all leveraged companies are not equal. Boil it down without this getting into some big thing is writing all leveraged companies off isn't going to make you money. Look everywhere because there's usually opportunity in places the market has decided to look away from. << Further, in 2022, companies had the ability to pass on costs because consumers were strong. Two years later, is the situation the same?>> Right. Same thing I wrote to you on this thread. Either way there's a lot that goes into this and the money is made by those that look everywhere and sometimes even in leverage there's opportunity if you're willing to look. Not all debt is equal :) << I just don't see how small caps/micro caps can get hit more when they're already so cheap.>> Makes me think of what Peter Lynch said in 1994 when thinking of how much lower can something go. The answer is much lower! -Sean

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