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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: Paul Senior who wrote (74956)	1/27/2024 4:07:29 PM
From: Harshu Vyas	Read Replies (2) \| Respond to of 78505

You're right in that not all leveraged companies are problematic but if leverage is involved, I think you should err on the side of caution. If operating margins are already low and the industry demands high reinvestment rates, I just don't think it's worth running the risk. Also, it depends on the cyclicality of the industry and the approach management has laid out. It could be that I'm totally off about the risk and it's not as large as we think, but we're going to hit a wave of maturities in '26. And small caps are especially under pressure. Market valuations outside of tech already prove that. Can't remember which book it was where I read that many investors were focusing too much on current/expected earnings during an expanding economy that they forgot to consider about all of the bondholders that stand further up the line. Can't even remember what timeframe the book was written in (Jeez, my memory is going to be terrible when I hit forty lol) but I think the lesson rings true. Interest coverage is a useful measure but I'm confident that most investors would admit they preferred companies to outright pay the principal (as opposed to refinancing) in this market environment. I could be wrong and I'd love to hear some comments. In essence, I think investors should be thinking "worst case" especially when it comes to leverage- or as Munger correctly puts it "always invert!" And I'm having to reflect and re-evaluate on my CUTR position. It's not as "risk-free" as I initially thought. For now, I have no reason to close my position just yet but I am desperately trying to get a crumb from IR as to an update on the delayed filings. At this point, I must be a regular in their inbox (I'm peppering them with many, many questions), but still no cigar!