My Investing Muse

With the current interest rates, companies which are not making profits and have higher debt exposure would run more risks. Thus, I have set up a screener in the S&P500 to identify some companies with such risks. I have set up a screener using the following: S&P500 High Debt/Equity (more than 0.5) High Long-term Debt/Equity (more than 0.5) Operating margin (negative) - that is running at operational losses. From the above screener, there were a total of 4 companies namely Carmax Inc, MGM Resorts International, 3M Co and Verizon Inc. These companies are losing money (making losses) and have significant debts on hand. If these are sustained, the companies would be at risk. This is just an initial screening and more needs to be done to qualify their fundamentals before we make the decision to buy, sell, hold or avoid. Revenue, profit, good free cash flow, net debts and retained earnings will be the data that I screen first before I deep dive into other quantitative and qualitative...

News about Junk Bond Recent news about rising default of junk bonds (a USD$1.4T market) Extract from News  Article : Defaults in the $1.4tn US junk loan market have climbed sharply this year as the Federal Reserve’s aggressive campaign of interest rate rises increases the pressure on risky companies with “floating” borrowing costs. There were 18 debt defaults in the US loan market between January 1 and the end of May totalling $21bn — greater in number and total value than for the whole of 2021 and 2022 combined, according to a Goldman Sachs analysis of data from PitchBook LCD. My investing Muse US high-yield bonds (typically junk bonds) ( Source  of chart) High-yield bonds, also known as junk bonds, are bonds with lower credit ratings and usually present high default risks. Junk bonds are typically those with BBB ratings and lower, including BB, B, and CCC grades. Rising yields on junk bonds indicate that investors are dubious about these companies' solvency. The increasing n...

  With the “high interest-rate” environment, I plan to screen for companies which may be at risk. However, these can be at risks of going under or can be turnaround plays. Thus, I look into both NASDAQ & NYSE with the following criteria: High Debt/Equity (more than 0.5) Operating Margin (negative) Net Profit Margin (negative) High LT Debt/Equity (more than 0.5) The results were sorted according to their Debt/Equity in descending order. The higher this number, the worse debt situation the company is in. List of companies from NASDAQ The same criteria were applied to companies in NYSE List of companies from NYSE When the results were out, it is not surprising that most of these companies have negative ROA, ROE & ROI. These are the definition of ROA, ROE & ROI from Investopedia. Conclusion With such high-interest rates, companies with higher debts will run at a greater risk of going under. Let us review our current portfolio to identify stocks with excessive debts. The cur...