The latest issue of Barron’s is suggesting that investors may want to look at beaten down, debt-laden companies(subscription required):

Blackstone Group, Apollo Management and the rest of the private-equity crowd may be sidelined by the mess in the credit markets, but investors still can play at their game by purchasing shares of debt-laden companies in the public markets.

Barron’s goes on to propose that, whether credit markets stabilize, some companies with heavy debt loads will rebound well. I don’t dispute that analysis but I plus don’t think most investors should go chasing companies with big debt loads. It’s always struck me as being somewhat akin to tiptoeing in front of steamrollers to pick up a penny. I’ve never bought

shares of a company with a lot of debt. Sophisticated investors with an ability to really understand the debt, how it’s structured, and the risks that go with it may do well with these companies. But whether that isn’t you, I think your best bet is to stay absent.

As Barron’s warns, the final danger with investing in heavily leveraged companies is bankruptcy. whether you’re a disciple of Warren Buffett’s first and moment rules of investing — don’t lose money and don’t forget rule number 1 — that probably isn’t a game you want to be playing.

Original post by Zac Bissonnette

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