I never recommend getting out of the stock market entirely--or even making major changes to your allocation to stocks. The stock market is so unpredictable that if you bail out, the risk is very high that you will miss a significant upturn. Moreover, even if you make the right call to get out of the market, you then have to muster the courage to get back in. 

There are certainly good opportunities in foreign turnarounds, but also very significant risks as well. The market inefficiencies that provide unusually high return potential for turnarounds here in the U.S. are probably even greater in foreign markets. However, there may be special, local features that affect foreign companies that we may not understand when we view them from afar. 

The structural factors relating to bankruptcy securities can be both legal and psychological. As an example of a legal factor, many institutional investors (such as insurance companies or mutual funds) are not allowed, either by law or by their charter, to hold bonds that have defaulted and no longer pay interest. 

The question continues..."Investment is always a risk, but there must occasionally be situations when you would "bet the farm" on a stock at a given time. Trouble is, I don't have a farm, but would someday like to get one."

I don’t usually respond to stock specific questions in this section of the website, but Bank of America is such a bellwether for the banking sector, and probably for turnaround stocks in general, that it is worth talking about here. My view is that Bank of America’s biggest problems are of a public relations nature and not of a fundamental, financial nature. Since late 2008, the bank seems to have had one public relations disaster after another. Every time there is a negative headline, the stock gets pushed down further.

You should almost never buy the stock of a company in Chapter 11. The only possible exception is if you are a very daring short-term trader.

While there is no hard and fast definition of a “penny stock,” the term refers to a stock selling at a very low dollar price. Some people would say that a stock must be trading below $1.00 per share to be a true penny stock...

The short answer is “no.” However, I am always very cautious about turnarounds in heavily regulated industries....

I don’t like the term “play” money because I always consider money and investing to be serious subjects....

I often find selling harder than buying. You should periodically review each position in your portfolio and ask yourself the following questions....

The recent unfortunate accident involving the Costa Concordia cruise ship, which is owned by a subsidiary of Carnival Corp., raises an important investing question: Should you bail out of a stock if the company is affected by a serious negative event? Unless the event could be part of a series or trend, the answer is usually “no,” for two reasons.

The argument in favor of buying Kodak stock goes something like this: Now that Kodak has filed for bankruptcy, its stock trades for about 30 cents; but since it traded for more than $30 just a few years ago, doesn’t that mean it has to be cheap? Unfortunately, there are two major fallacies with this argument.

One of the things we like to see in a potential turnaround stock is a strong brand name. That will often provide the foundation on which the company can build its turnaround. However, the recent Chapter 11 filing by Hostess Brands and Eastman Kodak are reminders that well known brand names alone may not be enough to save a company. In both of these cases the brand names are widely recognized, but the products with which they are associated no longer represent strong business franchises.

I never recommend getting out of the stock market entirely--or even making major changes to your allocation to stocks. The stock market is so unpredictable that if you bail out, the risk is very high that you will miss a significant upturn. Moreover, even if you make the right call to get out of the market, you then have to muster the courage to get back in. 

There are certainly good opportunities in foreign turnarounds, but also very significant risks as well. The market inefficiencies that provide unusually high return potential for turnarounds here in the U.S. are probably even greater in foreign markets. However, there may be special, local features that affect foreign companies that we may not understand when we view them from afar. 

The structural factors relating to bankruptcy securities can be both legal and psychological. As an example of a legal factor, many institutional investors (such as insurance companies or mutual funds) are not allowed, either by law or by their charter, to hold bonds that have defaulted and no longer pay interest.