Turnaround Investing Blog

George Putnam, one of the country's leading turnaround and distressed investing professionals, shares his timely insight on the economy and turnaround investing opportunities.

Don't Make Too Much of Price History

It can be tempting to look at a depressed stock and think, “it used to trade at 40 and now it’s at 8 – therefore it must be a bargain.” Unfortunately, the fact that a stock once traded at a higher price does not guarantee that it will ever get back there. One big reason that a stock trades so much lower than before: its earnings potential or assets have deteriorated. Without some fundamental improvement, the share price will continue to lag, or worse.
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Focus on Worth not Price, to Create Stock Profit

One common stock market pitfall can be mistaking a low-priced stock for being cheap. Many stocks trade at low prices, say under $5 per share; but this is no indication of real value--or whether it’s a bargain. What really matters is what shares are worth.
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Number of Public Companies Shrinking?

Excerpted from the August 2016 Issue
There doesn’t seem to be much incentive to go public these days. This trend seems likely to continue. What is less clear is the impact: Do valuations increase for the remaining public companies as the supply diminishes? Will individual investors have less access to the best new companies? What will happen when interest rates rise and close off the spigot of cheap money driving private deals?
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Post-Bankruptcy Value Investing Opportunities

Most investors think of bankruptcy as bad. As a result, they tend to avoid the stocks of companies that have been through a U.S. Bankruptcy Court restructuring, but Chapter 11 can be very beneficial to a company and its post-bankruptcy stock.
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Watch Headlines for Turnaround Stock Opportunities

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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Greater Cash Flow = Greater Recovery Prospects

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.
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Mid-Year Stock Market Update: "Near Record Highs" But It Doesn't Feel That Way

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...
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Look for Well-Known Products to Boost a Potential Turnaround

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.
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Market Conditions Deeply Impact Turnaround Stocks

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.
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Learn & Avoid These 10 Common Mistakes

Free Report: Turnaround Investing Mistakes

Turnaround Investing Blog

Turnaround Investing Blog

A Closer Look At Two Activist Campaigns

Watch to see if ADP’s CEO Carlos Rodriguez inadvertently helps Pershing, and his aggressive and sometimes personal stance against Ackman could backfire. Overall, because of the stock’s strong returns and Ackman’s weak credibility, we would give this activist campaign a low chance of making ADP a successful turnaround investment. For turnaround investors, the Trian campaign appears to have a win-win opportunity for investors--either Peltz joins the board and learns enough to re-invigorate P&G, or loses and management must either execute (boosting earnings and the shares) or they will face a more drastic proxy campaign with higher odds of success down the road. We think the P&G campaign could turn out well for shareholders.  Read More.

Warrants: A Solid Investment Opportunity

Warrants provide a valuable tool for the savvy investor. When selected and implemented well, they can be a smart addition to a diversified investor’s portfolio. Like options, warrants are not equity. They only convey the right to buy equity. As such, neither holder is entitled to dividend rights, pre-emptive rights, proxy voting or any share of any liquidation.

 

Value Investing

 

Warrants' return potential can be very high, but they also carry significant risks. Learn what they are, how they work, strategies to minimize risk and find profit with warrants.

Here's Why You Should Invest in Asset Managers

 

stock market advicex

 

This Forbes article cites a recent MoneyShow write-up that recommends investors take advantage of the strong stock market and potential interest rate hike by "putting some of your investment assets into the shares of asset management stocks."

 

The article praises The Turnaround Letter's OAK purchase recommendation and quotes George Putnam: "As the corporate debt binge that we’ve experienced since 2009 comes to an end, Oaktree will benefit from a growing number of restructurings and bankruptcies."  

 

Learn more about Putnam's investing success with turnaround stocks.