This Insight Made Billionaires
Friday, January 25, 2013 at 11:12AM
Michael Bigger
I found this interesting Pier Import ($PIR) article in Forbes magazine. The article highlights an interesting situation by which a distressed company start seeing his business getting much better while the stock prices is trading under the assumption of the worst case scenario. 
 
In November 2003, Pier 1's stock was trading above $25.  However, the housing crisis took a huge toll on sales and profitability.  By early 2009, $PIR dropped to just $0.10 and was in danger of delisting from the NYSE. Alex Smith, CEO of $PIR said this about this situation:
 
“The outside world couldn’t see it, but our business was getting stronger”
 
He was right.  Yesterday the stock closed at $21.85.
   
Trading large-caps can make you a few bucks, but finding deep value is where the big money is.  Anyone that can uncover situations like $PIR in 2009 can become a billionaire. People will pay you a lot for the ability to choose great deep value investments. I know I would. Wouldn't you?
 
Here are two more data points showing American Apparel's management confidence in the current state of the business. This is why I think American Apparel could be the next successful distressed situation:
 
American Apparel New Shiny Wharehouse
 

Investing in distressed situations is very risky.  Please do your own due dilligence prior to investing. We are long American Apparel and realize the odds of the company going bankrupt are still quite high.

Written by Michael Bigger. Follow me on Twitter and StockTwits.
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