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How to buy a company with no money

Perhaps you remember the late-night television commercials selling tapes and courses on how to buy real estate with no money down. One memorable character from the early 1990s ran infomercials featuring him on a yacht surrounded by bikini-clad women to emphasize how he, a Vietnamese refugee, had made a fortune from nothing. You could do the same thing if you bought his course.
The Wall Street equivalent of buying a company with no money down is the leveraged buyout, or LBO. The LBO was made possible by the popularization of junk bond, or high yield bond, financings, which was a financial innovation from the 1980s.
 
Even though the LBO has gone mostly out of usage, it may be time to revisit LBO targets now that high yield spreads are narrowing. I screened non-financial stocks in the S&P 1500 for LBO candidates and came up with a number of interesting insights. 

It turns out that LBO candidates are relatively rare. They may be the modern deep value equivalent of Ben Graham’s formulation of stocks trading below net-net working capital or current assets minus all debt.
 
The full post can be found here.
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