In our conversation this week with Ted D. Baszler, vice president and portfolio manager with Heartland Advisors, Inc., he gave some interesting insight into areas that investors should be wary of.
TWST: As you look ahead, what potential problem areas or challenges do you see that investors should be wary of?
Mr. Baszler: One of the areas of concern is the economy rolling over. We have seen some nice moves early this year in some of the cyclical and material names.We are probably getting close to peak earnings in some of these names and could see a meaningful earnings decline with an economic slowdown. Companies with high levels of debt are also very concerning at this time in the credit cycle. I believe credit spreads for low quality companies are going to be significantly higher a year from now. So any company with a marginal credit rating and with funding needs will be facing higher financing costs down the road.
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