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.

Mutual Funds

Turnaround Mutual Funds: The Few, the Brave & the Potentially Profitable

Excerpted from March 2014 Issue

While we normally focus on individual stocks, from time to time The Turnaround Letter likes to look at mutual funds that focus on turnarounds. Mutual funds can be attractive because a single fund can provide fairly broad diversification. Unfortunately, there are very few mutual funds that really focus on turnaround investing. In fact, out of the thousands of mutual funds out there, we could only find a dozen, all of which are detailed in our contrarian investing newsletter. Even in those funds, turnaround investing is usually not their principal objective: In most cases, it is just one of several strategies that the fund manager pursues.

In some ways the scarcity of turnaround-oriented funds just validates our investment philosophy that turnarounds represent an inefficient--and therefore potentially very profitable--niche in the securities markets. Even professional investors tend to shy away from turnarounds because they require a somewhat different analytical approach from more mainstream stocks.

Another reason why there are very few turnaround mutual funds today is that there is no index of turnarounds. Today, most mutual funds (and the people who sell the funds) want to compare their returns to a certain benchmark, usually a well-known index like the S&P 500. As a result, most fund managers tend to hug their benchmarks fairly closely. These fund managers are risk averse. They want to keep their jobs, after all; and they give up the opportunity to outperform their benchmark in exchange for reducing the risk of underperforming. Since turnaround stocks are underrepresented in the major benchmarks, fund managers are hesitant to buy them. The managers of these mutual funds discussed are brave enough to put at least a portion of their portfolios in turnaround situations, and many of them have posted strong returns over the years because of that.

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

Boston Beer Company 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."