Martin Whitman of Third Avenue along with several other value investors have been verociously buying distressed debt yielding 20% plus.

Whitman said he’s finding “huge, huge opportunities,” in distressed debt and may launch a new fund for those investments. “We’re very heavily in,” he said.

Whitman said he increased the limit on distressed debt that the Value Fund can hold to 35 percent of its assets and that his firm hopes to launch a new fund focused on those investments.

“In the last six months it’s practically all the investing Third Avenue Value Fund has done,” he said. “I got so spooked by the stock market and the terrible performance in 2008. If I buy a performing loan with 30 percent yield to maturity, I don’t have to worry about the stock market.”

I would wait for a pullback in shares of Forest City Enterprise Senior Notes and then accumulate heavily when yields reach north of 20%. This company has the cash flow to support its current debt obligations making the senior notes very attractive and in a worst case scenario the company has strong assets to pay off all creditors in the event of a bankruptcy which is highly un-likely.

Forest City Enterprise Symbol: fcy

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