Negative media headlines can be a great source of turnaround ideas. Stories about struggling companies, management turmoil, failed strategies, large financial losses, industrial accidents, lawsuits and the like can drive a stock to well-below reasonable levels and may provide a buying opportunity. Like all Wall Street axioms, however, “buy on bad news” must be accompanied by careful analysis to evaluate the potential for turnaround success.Read More
The stronger a company’s cash flows are relative to its obligations, the greater its chances for recovery. If cash flows exceed its obligations, the company has resources and time. If, however, cash flows barely match or fall short of its obligations, the company fights not only its operational challenges, but also fights the clock.Read More
Excerpted from the July 2016 Issue
So, where do we go from here? With the S&P 500 Index having already exceeded the 3% return we anticipated in our January issue, we have modest expectations for the rest of the year. Valuations for large-cap stocks remain high, and earnings growth looks tepid. Stocks with “low volatility” and stable earnings appear particularly expensive to us. Smaller-cap stocks, value stocks and those with unique situations continue to look much more appealing. In general, we expect the U.S. economy to...Read More
It is essential for a turnaround company to maintain a steady level of sales to provide the cash flow and time span needed to carry out its recovery plan: If revenues remain stable, there is a high probability that the turnaround will eventually succeed. Read More
The best environment for turnaround stocks is when the economy is just beginning to improve after a slowdown. As broad economic conditions improve, the weakness of turnaround companies can become their strength as they benefit much more than healthier companies. Their sharper recovery can lead to outsized share price gains relative to other stocks.Read More
Selecting a turnaround stock with solid profit potential can almost be considered an art form in itself. As noted in our other distressed investing blog entries there are many factors to evaluate to determine the real possibilities in any turnaround situation, and here is one more: Look for solid core businesses.Read More
Turnaround investing can be very profitable, but how do contrarians go about selecting the most potentially lucrative opportunities? One proven technique is to watch for management changes. Just as real estate experts say there are three keys to success in real estate, we believe there are three keys to success in turnarounds: management, management, management. Read More
Excerpted from the June 2016 Issue
For what seems like the umpteenth time over the last several years, investors – in both stocks and bonds – are once again focused on the questions of “Will the Fed raise interest rates? When? And by how much?” The stock and bond markets often react quite sharply to whatever the “expert” view is on any given day.Read More
While the common stock of a turnaround candidate usually has the greatest upside potential, other classes of securities, such as bonds or preferred stock, may offer attractive profit possibilities with less risk. Read More
Sometimes a company will struggle because of an isolated problem that is not related to its core business prospects. Litigation is a common example. When an otherwise healthy company becomes encumbered with a potentially major liability, management gets distracted and investors flee. A mighty battleship can’t escape its anchor. However, if the company can resolve this problem its stock and bonds may advance sharply and present a potentially lucrative turnaround investing opportunity.
George Putnam's Favorite Stocks for 2016
Turnaround Investing Blog
Negative media headlines can be a great source of turnaround ideas. Stories about struggling companies, management turmoil, failed strategies, large financial losses, industrial accidents, lawsuits and the like can drive a stock to well-below reasonable levels and may provide a buying opportunity. Like all Wall Street axioms, however, “buy on bad news” must be accompanied by careful analysis to evaluate the potential for turnaround success.
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Banking on a Financial Sector Turnaround
MoneyShow.com recently tapped George's favorable opinion for a banking industry rebound. In "Turnaround Expert's Banking Bets," Steve Halpern highlights a trio of Putnam's top stock picks from the battered financial sector.
George reminds value investors: "Fortunately, many of the factors...just aren't present in the market, and the other reason that investors seem to be down on the banks is they sort of expected the Fed to raise interest rates a little faster than they have. And the banks do better when interest rates are rising because they have wider margins on their loans, but I think the Fed will gradually raise rates to we will see profits improve, and so I think this downturn is really temporary."
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