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.

Bankruptcy/Chapter 11 / Bonds

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 $271million) 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.

Each of these bankruptcies has its own unique causes, and there are few, if any, common threads among them. Nonetheless, these four high profile Chapter 11 cases could be significant just because they have gotten people thinking about bankruptcy again. We’ve been through a nearly two-year period when it’s almost been hard for large companies to fail because so much liquidity has been available from Wall Street. These four big cases serve to remind both debtors and creditors that bankruptcy is an option--and often the preferred option. As a result, we could see more significant Chapter 11 filings in the months ahead.

Moreover, each of these recent bankruptcies has its own potential investment opportunities and pitfalls. We plan to discuss the investment considerations in these four bankruptcies in the upcoming December issue.

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GameStop Faces Its Battle Royale

The market believes GameStop (GME) is headed toward a relatively quick demise; however, new CEO Mike Mauler's retrenching to bolster its core business is a good strategy. At 2x EBITDA, the lowest multiple in the market for any stock above an $800 million market cap, the shares can do well if the company can slow the decline or if the company is acquired. We don't see a liquidation or transformative acquisition as likely. For highly-risk-tolerant investors, the shares' extreme discount offers the potential for outsized returns. Read More.

Harnessing Activists to Help Find Turnaround Stocks

Activist investors often produce attractive returns for their clients; and you can still use their influence to help your position as a turnaround investor in two ways: Buy a position in a stock with the expectation that an activist will soon follow or buy after an activist takes a stake.

 

Value Investing

 

While one of the many dozens of activist funds might find their way to selecting your particular stock, this approach is likely to be frustrating and unrewarding. A better approach is to buy after the activist makes their move. Once an activist takes a stake in a company, how do you evaluate whether it is worthwhile to follow on? Admittedly, this is a bit of an art... Learn how you can harness the power of activist investors to find market-beating turnaround stocks.

Turnaround Letter Stock Pick Named Top Performer of 2017

 

stock market advicex

 

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."