Besides making specific “Buy” recommendations,The Turnaround Letter is constantly discussing companies we feel have real turnaround potential. George continually scans the horizon--identifying turnaround opportunities to uncover undervalued securities. With these tried and true techniques, The Turnaround Letter offers George's unique insight on why a group of companies or a specific investment vehicle would work so well for the committed turnaround investor. 

These articles identify companies with real turnaround potential:

"Value Compression: Springboard to Future Gains?": Last month’s recommendation of Johnson & Johnson got us thinking about other high quality companies that have suffered from “valuation compression” over the last decade or so.  Valuation compression refers to a change in investor perception that reduces the valuation multiples that peole are willing to pay for the stock.  In other words, a stock that used to trade at a relatively high price-to-earnings ratio, now trades at a relatively low P/E ratio, even though there has been little change in the company’s business prospects.  It turns out that there are a lot of good companies out there whose stocks have suffered from this phenomenon.

Value Compression Opportunities

"Busy Month for Bankruptcies: Interesting Investment Opportunities": The past month has been a busy one for bankruptcy lawyers.  Beginning with the filing by brokerage firm MF Global Holdings on October 31, we’ve seen six significant publicly traded companies go into Chapter 11. The clothing retailer Syms filed on November 2, energy company Dynegy Holdings on November 7, tanker operator General Maritime on November 17, mortgage insurance PMI Group, and airline AMR (parent of American Airlines) on November 29. With the bankruptcy filing by AMR, we’ve now seen more publicly traded assets going into Chapter 11 in the past month (from October 31) than we did in the previous 21 months combined.

Chapter 11 Activity

"Year-End Bounce Candidates: When the Calendar Makes Winners out of Losers": The past month has been a busy one for bankruptcy lawyers.  Beginning with the filing by brokerage firm MF Global Holdings on October 31, we’ve seen six significant publicly traded companies go into Chapter 11.  The clothing retailer Syms filed on November 2, energy company Dynegy Holdings on November 7, tanker operator General Maritime on November 17, mortgage insurance PMI Group, and airline AMR (parent of American Airlines) on November 29.  With the bankruptcy filing by AMR, we’ve now seen more publicly traded assets going into Chapter 11 in the past month (from October 31) than we did in the previous 21 months combined.

Year-End Bounce Candidates

"Is There Blood in the Streets of Europe Yet?": Baron Rothschild is reputed to have said, “The time to buy is when there is blood in the streets.” There may not be blood yet, but there have certainly been tear gas and riot police in the streets of Athens and other European cities recently. If the Baron was right (and we tend to agree with him), this might be a good time to look at European stocks.

European Options

"Swinging for the Fences: Low-Priced Stocks with Big Rebound Potential": In baseball, the most consistent contributors are usually those players who hit singles and doubles, but the homerun hitters provide an important measure of excitement to the game. Similarly in investing, we don’t advocate always swinging for the fences, but occasionally going for a big gainer can spice up your portfolio. You just have to remember that just as homerun hitters strike out a lot, stocks with high return potential also have higher levels of risk.

Read More on Low-Priced Stocks

"Aristocracy on the Cheap": Standard & Poor’s maintains an index it calls the “Dividend Aristocrats,” consisting of “blue chip” companies that are part of the S&P 500 and that have increased their dividends every year for at least 25 consecutive years. Since it is no mean feat to raise your dividend every year for 25 years, there is a strong presumption that these are very well-managed companies. However, even aristocrats get caught up in major upheavals (just ask the French aristocracy what it was like after the Bastille fell in 1789), and so many of these quality companies have seen their stocks fall sharply in recent weeks.

Dividend Aristocrats

"Reorganized but not Respected": At the other end of the perceived-risk spectrum from the dividend aristocrats are post-bankruptcy stocks. What most investors don’t understand is that many companies take advantage of Chapter 11 to reshape their businesses and balance sheets so that they emerge as very strong competitors. Nonetheless, because of perceptions, post-bankruptcy stocks often sell off very sharply when investors get nervous, and they have certainly followed that pattern this summer. The companies discussed in this article have all emerged from bankruptcy and most of them have strong positions in their markets; most of them have much improved balance sheets; and all of their stocks have been hammered recently.

Post-Bankruptcy Opportunities

"100 Years Old and New": The Turnaround Letter isn’t the only one celebrating a significant anniversary this year. We've been thinking about other prominent companies that have survived for a century or more that might be currently reinventing themselves or otherwise taking significant steps to turn around their stock performance. We came up with a dozen interesting candidates, and this month’s purchase recommendation also falls into the same category.

Centennial Organizations

"Beaten Up Bank Stocks Good Long Term Values?": Bank stocks have been one of the worst performing groups during the first half of 2011, but we believe that many of them now represent very good long-term values. While there is still the risk that more negative headlines will keep them under pressure for the short-term, the stocks have been beaten down to levels where they look very cheap. This article identifies the stocks of ten large banking companies that we believe have very attractive long-term appreciation potential.

Banking Potential