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
The ultimate goal in evaluating a distressed security is answering this question: is there anything here worth investing in? If not (perhaps the company has so little value that even the most senior traded bond would not have much recovery), then it’s time to move on. But if there is meaningful value, then it’s time to look deeper.Read More
George Putnam continues his series on investing in distressed securities--this time focusing on how to find publicly traded distressed securities that might be promising investment candidates.Read More
Although George hates to choose favorites among his stock picks, this free e-report details The Turnaround Letter's Top Five Turnaround Stocks for 2017--including a diverse selection with several post-bankruptcy value stocks poised for a rebound. This is the perfect tool to grow your turnaround investing portfolio and lock in stock profit in a potentially turbulent stock market.Read More
BankruptcyData's Energy Sector Bankruptcies report anticipates that overall Chapter 11 activity will remain at a high level for the foreseeable future. Energy company filings have probably peaked and will gradually decline over the next 12 to 18 months, so the flow of bankruptcies will likely shift toward a more diverse group of industries. In time, this could contribute to an opportunity-rich market for distressed debt and post-reorganization stocks.Read More
Identify & Profit from Distressed Investing
Turnaround Investing Blog
Recently I was asked how my investing perspective changed over the 32 years of publishing The Turnaround Letter. It's a fascinating question because change is constant, and often beneficial (although that's not a given) in the business world. If change is the norm, can investing principles stay constant? I firmly believe that they can.
EV/EBITDA: What Is It & Why Are We Using It More?
In reading recent editions of The Turnaround Letter, you have probably noticed that we are increasingly using EV/EBITDA as a valuation measure, rather than the better-known price/earnings multiple. We thought it might be useful to describe this measure and why we like it.
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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