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

A Reader Asks, "In our normally quite efficient securities markets, why are there certain structural factors that make bankruptcy securities inefficient and therefore potentially unusually profitable?"

The structural factors relating to bankruptcy securities can be both legal and psychological. As an example of a legal factor, many institutional investors (such as insurance companies or mutual funds) are not allowed, either by law or by their charter, to hold bonds that have defaulted and no longer pay interest. Therefore, they will immediately sell the bond as soon as it defaults, regardless of the ultimate value of that bond. Or perhaps the institutional investor can own a defaulted bond, but it is not permitted to hold stock. That institution will have to immediately dump any stock it receives in exchange for a bond in a reorganization.

On the psychological side, the word “bankruptcy” has such a negative connotation for most people that they will not go near a security of a company that is in Chapter 11 or that has recently emerged.

(Question submitted by Yusen L.)

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Turnaround Investing Philosophy: 32 Years Later, Some Things Never Change

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. 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

 

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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."