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.

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.

This has been true of sectors and individual stocks as well.  For example, many of the U.S. banks have been making steady progress in recovering from the real estate/financial crisis of 2008 and early 2009. But that didn’t matter this year. When investors became worried that European banks might fail, they crushed bank stocks here in the U.S.--even those banks that had little or no exposure to Europe.  Some of the American bank stocks got pushed down to levels this fall that were near or even below their lows of early 2009. And the same has been true of many other turnaround stocks. When investors get spooked by the headlines, they dump anything they consider risky, and turnaround stocks frequently (although often wrongly) fall into that category.

During periods like this when the headlines dominate everything else, there is really only one thing you can do: be patient. When the news gets better--and eventually it will--stock prices will once again be driven by fundamental, economic factors. And if they have been depressed by negative headlines, stocks are likely to soar when the headlines subside. If you get scared by the headlines and dump all your stocks, you will miss the rebound and be left wondering when to get back into the market again.

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Is there value in bankrupt PG&E’s stock?

In nearly every case, the shares of a company in bankruptcy become worthless. In very rare cases, however, they can become great investments. W.R. Grace (NYSE:GRA) shares produced a 75-fold return, as an example. With California utility PG&E (NYSE:PCG) now in bankruptcy, the range of possible outcomes for its equity is wide.

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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."