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

W.R. Grace Emerges from Bankruptcy: A Couple of Lessons for Investors

W.R. Grace (stock symbol GRA), a specialty chemical producer, emerged from Chapter 11 earlier this month after nearly 13 years in bankruptcy and provided a couple of lessons to investors. The first lesson is that bankruptcy proceedings can last a long time.  This is especially true when the bankruptcy filing was precipitated by asbestos liabilities, as was the case with Grace. Other prominent--and lengthy--asbestos bankruptcies include Manville (six years in Chapter 11), Owens Corning (six years) and Raytech (17 years).

The other lesson, which is actually a confirmation of a lesson that we’ve seen in two other cases recently (American Airlines and Overseas Shipholding Group), is that there are exceptions to even some of the most reliable investing rules. In this case the rule is that the stocks of companies in Chapter 11 almost never do well. It is very rare that a company in Chapter 11 will have enough value to satisfy all of its creditors and have anything left over for stockholders. As a result, the stocks of most companies in Chapter 11 end up being worthless or almost worthless.

Grace was definitely an exception to that rule. While the stock dropped below 2 when the company filed for Chapter 11 in April 2001, it recovered several years later and has been on a fairly steady climb ever since, recently trading above 100. Unfortunately, we didn’t recommend buying the Grace stock at its lows, but we did highlight it as an interesting speculation in December 2002 when it was trading a little above 2. We highlighted it again in late 2006 when the stock was about 16.

Now Grace is considered a fairly mainstream stock, and therefore is probably not dramatically undervalued. Nonetheless, since it recently emerged from Chapter 11, we have added the Grace stock to the Post-Bankruptcy Stock IndexTM.

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Boston Beer--Time for Investors to Step Up to the Bar?

Boston Beer is the nation's largest craft beer company, with 2017 revenues of over $900 million. Since its days as a start-up in 1984, it has led the nation's growing taste for craft beers; and shareholders have enjoyed tasty returns along the way. So why is The Turnaround Letter--which focuses on out-of-favor companies undergoing major positive changes--even thinking about this ostensible "growth" company?  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."