Turnaround Investing Blog

George Putnam, one of the country's leading turnaround and distressed investing professionals, shares his timely insight on the economy and turnaround investing opportunities.

A Reader Asks, "In our normally quite efficient securities markets, why are there certain structural factors that make bankruptcy securities inefficient and therefore potentially unusually profitable?"

The structural factors relating to bankruptcy securities can be both legal and psychological. As an example of a legal factor, many institutional investors (such as insurance companies or mutual funds) are not allowed, either by law or by their charter, to hold bonds that have defaulted and no longer pay interest.
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A Reader Asks, "What is your opinion on investing in foreign turnaround companies?"

There are certainly good opportunities in foreign turnarounds, but also very significant risks as well. The market inefficiencies that provide unusually high return potential for turnarounds here in the U.S. are probably even greater in foreign markets. However, there may be special, local features that affect foreign companies that we may not understand when we view them from afar.
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A Reader Asks, "With so much turmoil and uncertainty in the U.S. economy, and even more fear of collapse overseas, do you ever recommend just getting out of the stock market all together and hunkering down with something safer like bonds?"

I never recommend getting out of the stock market entirely--or even making major changes to your allocation to stocks. The stock market is so unpredictable that if you bail out, the risk is very high that you will miss a significant upturn.
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Should You Buy Kodak Stock Now?

The argument in favor of buying Kodak stock goes something like this: Now that Kodak has filed for bankruptcy, its stock trades for about 30 cents; but since it traded for more than $30 just a few years ago, doesn’t that mean it has to be cheap? Unfortunately, there are two major fallacies with this argument.


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Good Brands are Not Enough

One of the things we like to see in a potential turnaround stock is a strong brand name. That will often provide the foundation on which the company can build its turnaround. However, the recent Chapter 11 filing by Hostess Brands and Eastman Kodak are reminders that well known brand names alone may not be enough to save a company. In both of these cases the brand names are widely recognized, but the products with which they are associated no longer represent strong business franchises.


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When the Headlines Overwhelm the Fundamentals

Since last August, the stock market has been dominated by headlines about financial matters in Europe. It has been almost as though the fundamentals of U.S. stocks don’t matter anymore. Things might look great (well, maybe they haven’t ever looked great in recent months, but at least okay) in the U.S. but if Europe didn’t seem to be making any progress on solving its latest crisis (Greece, Ireland, Portugal or wherever) the Dow would fall sharply. Then if good news came from across the Atlantic, the Dow would soar.


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Four Big Recent Bankruptcies: Harbingers of More to Come?

After a long dry spell with few significant bankruptcies, we’ve seen four large public companies file for Chapter 11 protection in the last three weeks: MF Global Holdings (total assets of $40.5 billion) on October 31, Syms (assets of $271 million) on November 2, Dynegy Holdings (assets of $9.9 billion) on November 7 and General Maritime (assets of $1.8 billion) on November 17. Taken together, these four filings represent more assets going into Chapter 11 than all of the other bankruptcies over the preceding 19+ months combined.


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Worry About What You Can Control

There’s a lot to worry about right now out there in the financial world. The European debt problems, the volatility in the stock market and the gridlock in Washington are probably at the top of many worry lists.


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Identify & Profit from Distressed Investing

Free Report: Turnaround Investing Mistakes

Turnaround Investing Blog

Turnaround Investing Blog

Tupperware: Not a Good Fit as a Turnaround Stock

At first glance, the shares have decent appeal as a turnaround investment. Looking deeper, however, the fundamentals are not as strong and stable as they appear. Surplus cash flow is tight, a key driver is weakening, it is increasingly reliant on China and has other nagging issues. We don’t see the new CEO as a catalyst for change. Despite the “first glance appeal”, Tupperware isn’t a good fit as a turnaround stock. Read More.

Comparing Stocks Vs. Bonds

While the common stock of a turnaround candidate usually has the greatest upside potential, other classes of securities, such as bonds or preferred stock, may offer attractive profit possibilities with less risk. Many turnaround companies have only one class of securities available to investors but where there are different classes to choose from, it can pay to do a little extra analysis of the various options.

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Turnaround Letter Stock Pick Named Top Performer of 2017

 

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What Last Year's Top Stock Pickers Are Buying in 2018

 

This Forbes write-up follows up on the recent Top Stock Tips report--naming The Turnaround Letter's Crocs recommendation the top performer of 2017: With 90% gains, CROX beat out 100 other investment ideas included in the report; and the stock continues to have value investing appeal, according to Putnam.

 

George notes, "We see additional upside for the stock in 2018 as management's efforts continue to bear fruit, though the gains will likely be more muted than we saw in 2017."