As the range of potential outcomes for a distressed security is wide, the path to the endgame is uncertain and the timing can be protracted, it is easy to let your emotions drive your strategy. Once you’ve made the decision to invest, the waiting--doing nothing--is the most difficult part.Read More
Once dismissed as irrelevant or even a detractor from good investment returns, there is a growing body of evidence that shows this ESG (aka "sustainable," "socially responsible" or "impact") approach actually contributes to better returns over the long run.Read More
While investing in distressed companies can produce enormous gains, not all distressed companies fully recover. Some slip into bankruptcy, yet this might still produce a positive return for some bondholders. However, in some cases the company has little value at all, and is best sold piecemeal, for scrap, in essence. What happens to your investment then? Read More
Excerpted from the April 2017 Issue
Investors here in the United States usually have plenty of turnaround opportunities to invest in; yet change is everywhere, and the trends that affect American-based companies can affect companies all over the globe. Just like many companies here, issues surrounding governance, scandals and complacency can create the need for new leadership and strategic re-positioning no matter where a firm is based. Since many of the foreign stock markets have not been as robust as the U.S. market in recent years, the stocks of some of these international turnarounds may be more compelling values right now compared to their U.S. counterparts.Read More
Investing in distressed companies can produce enormous gains: When the recovery is successful, it is not uncommon for the stock to produce multiples of the initial investment and for bonds to generate 50-100% gains along with often-generous interest income. However, not all distressed companies recover, and some decay into bankruptcy. What happens to your investment then?Read More
...So you recently bought a turnaround stock, and now it is down 10% from your cost. You’re frustrated and worried that you made a mistake. You have the urge to sell now before the price goes down further. What now? First, manage the emotions. Successful investing in turnaround stocks can be a highly emotional experience.Read More
At its most basic, evaluating potential pay-off is straightforward--determine what the company could be worth if it recovers, then parse out the value between the debt and equity to estimate the potential upside; but traditional metrics like price/earnings ratios, price/book value ratios and dividend yields generally aren’t useful. Instead, investors should look to Enterprise Value/Ebitda on a post-recovery basis as an effective valuation method.Read More
A lot has happened since our August 2016 “Time to Move Out of the Comfort Zone” article, which focused on companies that were out of favor due to their “high volatility” earnings and share prices. While the market had ignored the six companies we featured, these “uncomfortable” stocks went on to produce some impressive returns, gaining an average of 35.1% as of March 15, 2017.Read More
When a company is distressed, its assets are probably worth less than its debts. The best indicator of whether a distressed company will recover is its willingness and speed in dealing directly with that reality. The Turnaround Letter tells investors how to evaluate if a troubled company can execute a successful turnaround.Read More
Excerpted from the March 2017 Issue
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.Read More
Identify & Profit from Distressed Investing
Turnaround Investing Blog
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.
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.
Turnaround Letter Stock Pick Named Top Performer of 2017
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."
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