This post-bankruptcy telecom’s stock has a number of things going against it right now, but it also has a lot going for it. Most notably, the small-cap owns some very valuable assets that are worth a lot more than the stock is currently trading for. Despite its obvious risks, we believe the return potential considerably outweighs those risks.
Over the years we have looked at a number of companies facing massively negative headlines, which were often accompanied by major product recalls and the potential for extensive litigation. While we have found no fully reliable pattern, our sense is that in most cases the stock remains weak for several months after the headlines begin to subside, but then recovers nicely over the ensuing few years.
We have always liked small-cap value stocks. Not only do they fit well with our contrarian bent, but there is considerable research showing that they tend to outperform the rest of the stock market over the long-term. Over the short-term, however, small-cap value stocks have performed relatively poorly, but we feel they may be getting ready for a rebound.
George Putnam has suceessfully invested in distressed companies for nearly 30 years and The Turnaround Letter's market-beating returns demonstrate the profit potential. He knows all the pitfalls, too--which he shares in this free report!
If you look longer-term--both backwards and forwards--emerging markets look like much more promising investments...and many of the stocks have decent dividend yields to compensate you in case you have to wait a while for a rebound.
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With all the stock market volatility this year, many investors probably find themselves holding some stocks in which they have sizable losses. By selling those losers and realizing losses, you can use those losses to offset taxable gains that you may have realized during the year.
Most individual investors consider this investing strategy in December, which means that this tax-loss selling could push the price of some of these stocks even lower--meaning you probably do not want to be selling your losers then. In fact, savvy contrarians should consider buying some of these beaten down stocks to take advantage of that tax-generated downward pressure that goes away on January first.