How to Catch a Falling Knife (Yes it Can Be Done)

In the Wall Street Investment Bible, I discussed other securities I that had a good chance of bankruptcy down the road (e.g. Blockbuster and Sirius Satellite). Regardless what ultimately happens with these companies, my analysis has thus far been correct. Since analyzing these companies, shares have declined by about 90%.  

In the most recent newsletter, I discussed some stocks in the past that I was able to determine that the market was wrong about.

The reason why I mentioned this was to demonstrate my track record assessing distressed securities and securities facing challanges. 

Why might it be important to gain confidence from subscribers in my abilities to assess distressed securities? 

Because this is the best way to make a lot of money.

It's also one of the most risky. 

Hundreds of stocks have been battered by the financial apocalypse. Thus, the ability to determine whether or not to invest in these stocks and when to invest has never been more important.

Most recently, Goldman Sachs and British Petroleum have seen big losses in market cap. At some point, investors might begin to question whether they represent tremendous value or tremendous risk.

Here, I show a summary of the argument I made for a stock that was seen as very questionable in the past, hoping to provide you will the basic process you need to follow if you want to seperate yourself from the herd. Of course, the following presentation is very simplified and does not include all of my analysis. 

The company is Merck.  You might recall in the fall of 2004, the Vioxx scandel broke.

Shares of Merck collapsed from over $50 to around $30.

A few weeks later, Mrk fell to the mid 20s. Panic was everywhere.