Josh Friedman is an established distressed debt investor - notes on one of his interviews below:
13:45 Mispriced credits
Good credits selling at low prices.
During the savings and loan crisis in the late 80s/early 90s, bad lending in real estate eventually resulted in fire-sales of loans at distressed prices by the Resolution Trust Corporation (government agency). It was like "shooting fish in a barrel".
We look for similar situations in stocks using credit analysis plus qualitative sense checks.
16:00 Core investment philosophy
The anchor was value - distressed, convertible and risk arbitrage, stressed total return debt, complicated disliked/complicated new issues - which didn't fit normal boxes where conventional players were more likely sellers than buyers - and with defined exits.
23:45 Rule of Law
Predictability of rule of law is crucial and can't be relied on in many countries.
28:45 Dry years
There are times when you have to wait - and resist investing in sub-par opportunities. As Buffett said, opportunities tend to come in chunks.
54:15 Skewed upside
Distressed/stressed debt offers upside optionality and limited downside - similar to the stocks we look for.
58:30 Counter-cyclical investing
Think and act like a contrarian though it may be difficult - step up when capital is fleeing (and the facts warrant it). Practically all stocks we invest in requires this quality.