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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.

High Yield Bonds / Post-Bankruptcy Stocks

High Yield Bonds: Time for Even More Caution

Excerpted from February 2013 Issue

February 8, 2013

From time to time we comment on high yield bonds (sometimes called “junk bonds”) because they are akin to turnaround stocks in several ways. While they are called bonds, many high yield issues have return--and risk--characteristics closer to stocks than to other fixed income instruments. Also, many companies that issue high yield debt are in the process of turning around, or at least trying to. Some high yield  issuers don’t make it, file for Chapter 11 and eventually provide interesting post-bankruptcy stock potential turnaround opportunities.                   

Last year at this time we urged caution in approaching high yield bonds, but our concerns proved to be unfounded as high yield had a very strong year in 2012. As measured by the Bank of America Merrill Lynch High Yield Master Index, junk bonds gained an average of 15.4% last year. In our defense, we did say “Maybe the high yield market can squeeze out another decent year before things head south…”

This year we urge even more caution towards high yield bonds. The yields on junk bonds are at record low levels--below six percent--and we believe that at those levels you are not being adequately compensated for the risks you are taking. The risks in high yield bonds right now come from a couple of different sources (learn more about those risk sources).

While it’s not certain that  the risks will materialize this year, we feel that the longer the current boom in high yield continues, the greater the risk of negative surprises. As we said above, at current low yields, holders of junk bonds are not getting adequately compensated for that risk.

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Learn George Putnam's Turnaround Secrets

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Patience May Be A Virtue--But Know When It's Time to Move On

There is no easy way to determine how much patience is appropriate; but if your turnaround is well into its fourth year without meaningful progress, it could be time to move on. Read More.

Market-Beating Profit: The 200+ Club

Turnaround stocks present a unique opportunity for savvy investors to buy in at bargain prices. Take a look at this list of just a few of our purchase recommendations that have realized a return rate of 200% or better:

* Bristow remains an our active purchase recommendation, currently as a "Hold," and 1,928% stock profit is as of 8/11/16.

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.