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

Bonds / Post-Bankruptcy Stocks

Mid-Year Bankruptcy Investing Update

Excerpted from the July 2012 Issue

July 27, 2012

Bankruptcy filings by publicly traded companies in 2012 are running at roughly the same pace as last year – 31 filings so far this year versus 37 at the same time last year. This year’s corporate bankruptcies are somewhat larger (both including and excluding financial companies) than the filings during last year’s first half, but in 2011 we saw a number of big companies go into Chapter 11 late in the year.

We are seeing a few more financial companies file for bankruptcy this year than last, but nowhere near the number that we saw from 2007 through 2010. There are also three aviation related companies (Hawker, Pinnacle and Global) on the list of largest bankruptcies of 2012. Otherwise, there are no obvious trends in the types of public companies going bankrupt.

Until we get a few more big Chapter 11 filings, we don’t see much in the way of great bankruptcy investing opportunities. The bonds of AMR (the parent company of American Airlines, which filed for Chapter 11 last November) could have further gain potential, but they have already run up quite a long way.  Kodak is probably the next most prominent Chapter 11 case, but the value of Kodak bonds will depend almost entirely on the value of the company’s patents, which is very hard to determine. We recommend that investors be patient because we expect better opportunities down the road.

For our thoughts on why we may see more bankruptcy filings in the not-too-distant future, as well as our 2012 bankruptcy statistics, see the full article in the July 2012 Turnaround Letter.

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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. Read More.

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Retail Turnaround Trio

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MoneyShow.com interviewed George to learn more about his favorite value stock picks for today's market. In "Retail Turnaround Trio," Steve Halpern highlights three of The Turnaround Letter's recently-profiled retailers: JWN, TIF and SPLS.

 

Putnam notes, "Well the retailing sector is undergoing very fundamental change as people move away from the bricks and mortar mall doors to buying more and more online but that's not going to wipe out all of the old-fashioned retailers. Starting the middle of 2015, investors just moved away from retailers en masse and a number of them are trading at about half the level they were a year ago. We thought some of the higher quality names that definitely will be survivors looked interesting."

 

Learn more about these three retail stocks poised for a turnaround.