It appears that much-needed stability is returning to this large-cap value stock, and continued strengthening of the economy could add the tailwinds of higher advertising prices and slower cord-cutting. The stock pick's valuation looks reasonable--even before factoring in the likely benefits of the new, more stable turnaround management.
While we believe that overall bankruptcy activity will remain at a high level for the foreseeable future, we think that filings in the energy sector may have peaked. We are optimistic that the increasing bankruptcy activity will provide some very attractive opportunities for turnaround investors.
We firmly believe in the merits of holding a larger and more diversified group of turnaround stocks: This helps reduce the risk from an individual bad selection and the temptation to sell a temporarily weak stock at the bottom. Also, we like all the stocks on our Recommended list, otherwise they wouldn’t be there. There’s another reason (although perhaps not a very scientific one): Just as a team featured on the cover of Sports Illustrated is said to become jinxed, we sometimes worry that the same fate might befall some of our Top Five picks too.
The market’s previous assumptions about the U.S. economy--sluggish growth, rising government regulation, near-zero interest rates--seem to have reversed overnight with the election of Donald Trump. We think the changes run deeper. Households and companies are starting to move past the financial crisis, which peaked eight years ago. Demand is picking up. With it, there is a good chance that the deflationary environment is shifting back toward inflation. Trump’s election could further boost growth through more government spending and fewer regulations. Risks to the markets may increase in 2017, and investors prepared for volatility can better hold firm when it arrives.
With U.S. stocks well into their eighth year of a bull market and the economy showing increasing signs of strength, finding ideal turnaround stocks--those with all three ingredients--can be a needle-in-the-haystack project at best. What is an investor to do in a seemingly barren value stock landscape?
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 in our active portfolio (currently as a Hold), and 2,849% gain is as of 1/17/17.
Darren Fonda notes, "…besieged stocks often start to recuperate as the headlines fade and investors anticipate a return to precrisis sales and profits. The trick, of course, is to find companies that are more likely to rebound from a setback than collapse entirely."