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.

Avoid This Common Turnaround Investing Mistake

Turnaround investors recognize the opportunity in a battered stock well before the rest of the market and want to pounce immediately. But even if the fundamentals look attractive and there is a margin of safety in the valuation, the stock can still decline--sometimes substantially.
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Don't Make Too Much of Price History

It can be tempting to look at a depressed stock and think, “it used to trade at 40 and now it’s at 8 – therefore it must be a bargain.” Unfortunately, the fact that a stock once traded at a higher price does not guarantee that it will ever get back there. One big reason that a stock trades so much lower than before: its earnings potential or assets have deteriorated. Without some fundamental improvement, the share price will continue to lag, or worse.
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Focus on Worth not Price, to Create Stock Profit

One common stock market pitfall can be mistaking a low-priced stock for being cheap. Many stocks trade at low prices, say under $5 per share; but this is no indication of real value--or whether it’s a bargain. What really matters is what shares are worth.
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Number of Public Companies Shrinking?

Excerpted from the August 2016 Issue
There doesn’t seem to be much incentive to go public these days. This trend seems likely to continue. What is less clear is the impact: Do valuations increase for the remaining public companies as the supply diminishes? Will individual investors have less access to the best new companies? What will happen when interest rates rise and close off the spigot of cheap money driving private deals?
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Post-Bankruptcy Value Investing Opportunities

Most investors think of bankruptcy as bad. As a result, they tend to avoid the stocks of companies that have been through a U.S. Bankruptcy Court restructuring, but Chapter 11 can be very beneficial to a company and its post-bankruptcy stock.
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Watch Headlines for Turnaround Stock Opportunities

Negative media headlines can be a great source of turnaround ideas. Stories about struggling companies, management turmoil, failed strategies, large financial losses, industrial accidents, lawsuits and the like can drive a stock to well-below reasonable levels and may provide a buying opportunity. Like all Wall Street axioms, however, “buy on bad news” must be accompanied by careful analysis to evaluate the potential for turnaround success.
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Greater Cash Flow = Greater Recovery Prospects

The stronger a company’s cash flows are relative to its obligations, the greater its chances for recovery. If cash flows exceed its obligations, the company has resources and time. If, however, cash flows barely match or fall short of its obligations, the company fights not only its operational challenges, but also fights the clock.
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Mid-Year Stock Market Update: "Near Record Highs" But It Doesn't Feel That Way

Excerpted from the July 2016 Issue
So, where do we go from here? With the S&P 500 Index having already exceeded the 3% return we anticipated in our January issue, we have modest expectations for the rest of the year. Valuations for large-cap stocks remain high, and earnings growth looks tepid. Stocks with “low volatility” and stable earnings appear particularly expensive to us. Smaller-cap stocks, value stocks and those with unique situations continue to look much more appealing. In general, we expect the U.S. economy to...
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Look for Well-Known Products to Boost a Potential Turnaround

It is essential for a turnaround company to maintain a steady level of sales to provide the cash flow and time span needed to carry out its recovery plan: If revenues remain stable, there is a high probability that the turnaround will eventually succeed.
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Market Conditions Deeply Impact Turnaround Stocks

The best environment for turnaround stocks is when the economy is just beginning to improve after a slowdown. As broad economic conditions improve, the weakness of turnaround companies can become their strength as they benefit much more than healthier companies. Their sharper recovery can lead to outsized share price gains relative to other stocks.
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Identify & Profit from Distressed Investing

Free Report: Turnaround Investing Mistakes

Turnaround Investing Blog

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Amazon = US GDP 1970

Amazon joined Apple in reaching a $1 trillion market capitalization. $1 trillion is about the same as the total value of New York City property and the total value of loans at JP Morgan, the nation’s largest bank in terms of assets. Jeff Bezos’ $160 billion stake would place him (personally) as the #33 largest company in the S&P 500 in terms of market cap, next to Coca-Cola, Disney and Netflix. We aren’t bold enough to predict whether the shares will continue upwards or if they are in a bubble reaching maximum inflation. Setting aside for a moment their investment prospects, let’s admire the truly remarkable milestone that these two companies have reached. Read More.

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.

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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."