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 / Post-Bankruptcy Stocks

Beware Chapter 22's

From time to time we’ve written about the gain potential in post-reorganization stocks (the stocks of companies that have emerged from bankruptcy proceedings). As we’ve said, they are often undervalued because many investors shy away from a post-reorganization stock as a result of bad memories of the company’s prior problems. Often the company will have used Chapter 11 protection to solve those prior problems and it will have emerged as a lean and powerful business. However, recent news about two companies with well-known names serves as a cautionary reminder about post-reorganization securities.

AMF Bowling and Hostess Brands have both been in the news because they are back in bankruptcy for the second time. People sometimes give these cases the informal name of “Chapter 22”--in other words Chapter 11 twice. Both companies have iconic brands, which is usually a good sign. At least for those of us of a certain age, AMF is known for dominating the bowling alley business in the industry’s heyday  in the 1960’s and 70’s. Hostess makes the well-known Twinkies, as well as other tasty (but not-very-healthy) snack foods.

For a post-reorganization stock to be a good buy, the company must have used the Chapter 11 process properly to reshape its business. If the company was not aggressive enough in making changes during bankruptcy, it can end up back in Chapter 11 (or in Chapter 22, if you will), as was the case with both AMF Bowling and Hostess Brands.

Read More Distressed Investing Blog Entries

Identify & Profit from Distressed Investing

Free Report: Turnaround Investing Mistakes

Turnaround Investing Blog

Turnaround Investing Blog

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.

Read More.

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."