Where the Smart Money Will Go in the Next Panic

Where the $100 bills are... The opportunity in corporate bonds... When the market panics, this is where the smart money goes... They pay you first...

Editor's note: Most investors don't even consider the corporate bond market...

And Wall Street does everything it can to keep it that way – warning folks that these bonds are too risky and making them jump through hoops to buy them. But according to Stansberry's Credit Opportunities editor Mike DiBiase, the truth is, buying them is much safer than owning stocks...

Today, as our team enjoys some time off for the holiday season, we're bringing you a special guest essay from Mike...

In it, he explains exactly how the right type of corporate bonds can allow you to earn equity-like returns, with less risk than being in the stock market... and why these are the investments you want to buy when most everyone else panics in the next credit crisis.

Have you ever heard someone talk about 'picking up nickels in front of a steamroller'?...

This old Wall Street adage simply refers to trying to earn small returns while taking on the risk of large catastrophic losses. The strategy works – as long as you don't slip.

But you'll never get rich doing this... And eventually, you'll get crushed.

Today, I'll share a strategy that is the complete opposite. You could potentially earn significant returns while taking on far less risk... It's like picking up $100 bills in front of a tricycle.

The problem is that most investors don't see the $100 bills because they don't believe they could exist.

I'm talking about investing in dying companies.

Most investors want to stay as far away as possible from these companies...

The idea of investing in companies spiraling toward bankruptcy scares them. Investing your hard-earned money in businesses headed to zero seems like a surefire way to get wiped out.

That's understandable. But the thing is, fears of impending doom can sometimes create opportunities for savvy investors to make huge returns before these companies go bankrupt.

To be clear, this isn't a strategy where you profit as a company's share price falls – like shorting the stock or buying put options. With those strategies, it's critical to get the timing right. And they expose you to large losses if the stock suddenly rises.

With the strategy I'll share today, you're making an actual investment in a company...

You aren't taking on any additional risk if the stock's price rises. In fact, a rising stock price only reduces your risk.

You might have realized by now that this strategy doesn't involve investing in stocks at all. I'm talking about investing in a company's debt.

More specifically, I'm talking about buying corporate bonds issued by troubled companies...

Now, you don't want to touch these companies' stocks. Their best days are long behind them. While you could make some money if investors react favorably to any glimmer of good news – sending the stock higher for a brief period of time – it's generally a losing move.

It's not a matter of if, but when, these companies will go belly-up.

But here's the important thing to remember...

Just because a company is headed for bankruptcy doesn't necessarily mean its bonds aren't safe. You can earn massive, safe returns when you invest in the debt of dying companies.

This is because bond investing is a lot different than stock investing...

Most investors have never thought about investing in corporate bonds. They believe stocks are the only way to invest in companies.

That's just what Wall Street professionals want you to think...

They save their best investments for their wealthiest clients. Have you ever had a stockbroker try to sell you a corporate bond? I doubt it. They make massive profits on the commissions from investors buying and selling stocks. Most likely, they'll try to talk you out of buying bonds. They may even try to tell you bonds are riskier.

The truth is that bonds are actually much safer than stocks. And they're much easier to understand and value. When investing in bonds, you don't have to love a company or think it has a rosy future. You don't need to come up with estimates of what you think the company is worth. All you need to be aware of is what you're contractually owed and whether you'll get paid.

You see, unlike stocks, bonds are legal obligations that the company has to pay you when they mature at a known point in the future. For every bond you buy, you'll get paid $1,000 in principal (called the bond's "par value"). On top of that, you'll also receive interest payments (called "coupons") every six months. These interest payments are also legal obligations.

If the company doesn't pay all of the interest and principal as it comes due, it can be forced into bankruptcy. As I like to say, bonds are binary... You either get paid in full or you don't. There are no other possibilities. And unlike stockholders, even in bankruptcies, bondholders usually end up recovering at least part of their investment.

That's why investing in bonds is far safer than investing in stocks...

And it's why I urge you to consider investing in bonds today if you haven't done it before.

In our monthly Stansberry's Credit Opportunities newsletter, my colleague Bill McGilton and I devote our time to finding the best opportunities in corporate bonds.

We only recommend bonds we think are safe – those that we research thoroughly and determine will pay us in full and on time – that will deliver equity-like returns.

But you might wonder, "Why would I ever suggest you invest in the debt of a company headed for bankruptcy?"

The answer is simple...

Companies headed for bankruptcy are great places to find the best bond opportunities.

You see, most investors do a poor job evaluating heavily indebted companies. Their sentiment about the companies tends to go from one extreme to another.

They either assume a company is completely safe and pile into its stock and bonds... or that it's completely toxic and they sell anything associated with the company.

And this overall sentiment can flip from one extreme to another. When investors turn on a company, they turn fast and hard. This "love 'em or hate 'em" mentality creates wild swings in both its stock and bond prices. And that leads to mispriced opportunities...

Some of the bonds issued by these troubled companies can trade for far less than the $1,000 par value. They might trade for $500, for example. But remember, bondholders are still entitled to collect $1,000 at maturity – plus all of the interest payments along the way.

This is how you're able to earn stock-like returns.

The only thing that matters in bond investing is whether the bond you're buying is safe to own...

You can be extremely pessimistic about the company that issued the bond... while being comfortable owning one of its bonds. If the company that issued the bond goes out of business a few years after you've been paid, who cares? Your money will be elsewhere by that point.

Now, I need to be clear...

You don't want to buy just any bond of a company headed for bankruptcy. Not every bond is safe. But the opposite is also true... Not every bond is toxic.

You need to understand a company's debt schedule and borrowing capacity to figure out which ones are safe. And some bonds become far too cheap for the level of risk.

That's because most companies don't go bankrupt overnight. They die slow, painful deaths...

These bankruptcies often take much longer than investors expect.

New management is often brought in to run the troubled company. This new leadership implements its "turnaround" plan to try and resuscitate the dying business. It cuts costs, sells off old assets and product lines, and invests in new technologies and businesses.

These folks have a lot invested in the stock, so they do everything they can to bring the company back to life. No one wants to see a company go bankrupt under their watch.

The new management "sells" its strategy to new investors. The company's stock price often temporarily recovers. And as long as the business is still remotely profitable, banks and other creditors freely lend their capital to fund management's new strategies.

It can take years for investors to realize the turnaround isn't working. Meanwhile, the dying company continues to make its interest payments and meet its debt obligations as they come due.

And that's how savvy investors can earn huge returns. Let me give you an example...

You could have nearly doubled your money investing in a bond issued by now-bankrupt retailer Bon-Ton Stores...

The department-store chain filed for bankruptcy on February 4, 2018. The bankruptcy surprised no one. What surprised nearly everyone, however, was how long it took to happen...

In 2011 – seven years earlier – everyone knew Bon-Ton would go bankrupt. The "retail apocalypse" had just started sweeping the country. Tens of thousands of brick-and-mortar stores started closing. Bon-Ton's sales had already fallen 15% from a few years earlier. The company was no longer profitable.

Investors priced Bon-Ton's stock for bankruptcy. The company's market cap dropped to less than $50 million, and it was sitting on a pile of debt that totaled more than $1 billion.

Bond investors gave up, too... In January 2012, you could have bought Bon-Ton's only outstanding bond for around $540 – a substantial discount to par value ($1,000).

But if you did your homework, you would have known this bond was safe to own...

Smart investors knew it was too early for Bon-Ton to go bankrupt. Although the company was posting accounting losses, it was still generating around $100 million in annual "cash profits" – the cash it generated from its business.

The company could easily afford its interest payments. And it owed only a small amount of debt before the bond came due a few years later. On top of that, Bon-Ton's banks were willing to lend it another $450 million on its revolving credit facility.

Investors who bought the bond in January 2012 stood to earn nearly 50% on their investment if Bon-Ton survived another two years and paid off the bond. As it turns out, they didn't even have to wait that long...

Just a few months later, Bon-Ton issued a new $330 million bond maturing in five years. The cash infusion temporarily restored investors' confidence in the company. By the end of 2012, the bond that investors bought for around $540 traded for more than its $1,000 par value.

Investors who sold the bond when it returned above par earned a 92% return in less than a year.

The following year, Bon-Ton paid off the bond early – and in full.

The stigma of impending bankruptcies can often create opportunities like this...

Today, not many people are worried yet, even though the number of "zombies" – companies that don't earn enough to pay the interest on their debt – just hit the highest level since early 2022, right before the last bear market.

Of the largest 3,000 companies in the U.S., 639 are now considered zombies by Bloomberg. That's nearly a quarter of the largest U.S. companies.

And we've been warning subscribers about cracks forming across our economy, including in commercial real estate and private credit. Consumers and corporations are now cracking, too.

The next credit crisis is not far away, and when it arrives, many investors will panic. You don't have to be one of them. We expect a major sell-off in the bond market to unleash a wave of opportunities... leading to some of our highest returns yet.

Editor's note: Since launching Stansberry's Credit Opportunities in 2015, Mike and Bill have closed 70 positions with 57 winners – marking a phenomenal 81% win rate, to go with a 10% average return. Since the pandemic, their win rate is 91%, an average annualized return of 23%.

Right now, they believe a new wave of bankruptcies could soon unleash some of the best distressed-debt opportunities they've seen to date... but the time to get familiar with these opportunities is before the next crisis hits.

With that in mind, you can get started with their distressed corporate-bond strategy today.

In short, it's an investing approach that can help you book safe gains without worrying about day-to-day volatility in stocks... all while knowing your money is legally protected. But don't take our word for it...

Learn how following Credit Opportunities recommendations helped a real Stansberry Research subscriber retire worry-free at age 52 right here. He hasn't worried about market volatility for years, thanks to a strategy that can deliver equity-like returns with much less risk.

Our team is taking some deserved time off around the holidays, so we won't be sharing the 52-week highs, top open positions, and mailbag again until after New Year's Day. As always, though, if you want to get in touch with us, send a note to feedback@stansberryresearch.com... And happy holidays.

Good investing,

Mike DiBiase
Atlanta, Georgia
December 22, 2025