This turnaround investing opportunity's game plan looks promising, debt maturities are minimal through 2018 and cash flow is already showing significant improvement. Margins are likely to expand quickly with new revenues because the company’s cost structure will be lean. In addition, $1.7 billion in net operating loss carryforwards (NOLs) will largely eliminate any income taxes for several years--and if management can’t get results back on track, this value stock pick could be an acquisition target for healthier competitors.
Although the stock market has shown great enthusiasm for many companies that could benefit from regulatory reform and increased government spending (so-called “Trump” stocks), as well as other companies that will be aided by higher and more stable oil prices, it has overlooked several that could be particularly direct beneficiaries. These five companies are closely involved with building infrastructure, including refining and other energy-related facilities, yet their stocks have been laggards.
We firmly agree that ESG analysis is an important tool for successful long-term investing and have found that many companies with weak but improving ESG practices can be outstanding investments. Turnarounds in ESG practices often go hand-in-hand with turnarounds in financial results.
Because of special tax law provisions that exempt the territory’s debt from not only federal taxes but also state taxes in every state, the bonds are widely held by investors across the country. Since the legal action is under a new law that has never been tested, there is tremendous uncertainty about how much creditors will recover and how long the process will take, but there may be opportunities for stock investors to profit from the island’s restructuring as well--perhaps with less downside risk than in many of the bonds. We found four public companies based in Puerto Rico that could benefit from stabilization in the island’s finances as well as three major insurance companies with exposure to Puerto Rican debt.
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 2,320% gain is as of 4/11/17.
Five Struggling Stocks That Will Turn Around
Kiplinger points out that despite the post-election stock market surge, not all stocks have benefited from the uptick: "More than 100 issues in the S&P 500 have fallen in price this year, including dozens that have slumped by more than 10%....Yet these stocks won’t all stay in the dumps forever. Some will mount a comeback in 2017, making it an opportune time to try to identify the best candidates."
Quoting George Putnam, Kiplinger details five value opportunities for the new year.