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.


Mid-Year Stock Market Update

Excerpted from the July 2015 Issue

So far in 2015 the large-cap portion of the U.S. stock market has traded in a relatively narrow--and rather symmetrical--band. The widely followed S&P 500 Index was up only about 0.2% for the first half of the year, with a high for the year of +3.7% and a low of –3.8%. These returns are without dividends, which would add about 1.0% to the S&P returns. Incidentally, all of these calculations also pre-date the most recent Greek debt-related fallout and NYSE trading disruptions on July 8th.

According to a market analysis group cited in Barron’s, that is the narrowest first half trading range in the history of the Index. Moreover, there have only been three years--1952, 1993 and 2004--during which the Index had not been up or down by at least five percent at some point in the first six months.

As is often the case, the market sectors that were laggards last year have outperformed this year. Small-cap U.S. stocks, as measured by the Russell 2000 Index, lagged the S&P 500 last year by more than eight percentage points, but this year the small-caps are beating the S&P by about four percent. Similarly, foreign stocks, as measured by the MSCI EAFE Index, which were down 6.3% last year, are up about 3.8% so far in 2015. Emerging market stocks have been about flat for the year so far. 

On the whole, the bond market has been soft over the first half of the year as investors wait for the Federal Reserve to raise interest rates. The Barclays U.S. Aggregate Index, which measures a mix of government and corporate bonds, is down 0.1% for the year to date. High yield bonds have fared better than we expected so far, gaining 2.5% as measured by the BofA Merrill Lynch High Yield Index. It is worth noting, however, that in 2014 high yield bonds had a good first half but gave back most of their gains in the second half.

So, where do we go from here? In the January issue, we predicted that the S&P 500 would gain four percent for the full year (read the full article free of charge here); and we don’t see any reason to change that forecast now. While the stock market is likely to remain uninspiring for the rest of the year, to us it still looks like the best game in town. High quality bonds could be volatile when the Fed finally does raise rates.

As discussed in the most recent issue of The Turnaround Letter, we expect to see more defaults in the high yield bond universe, which is likely to hurt returns in that asset class. The stock market’s narrow trading band may have sapped the enthusiasm from some investors, but given the lack of alternative places to invest right now, we think there will be enough demand to push stocks a little higher from here. In addition, we expect the economy and corporate earnings to remain relatively strong for the next several quarters. 

Read More Distressed Investing Blog Entries

Identify & Profit from Distressed Investing

Free Report: Distressed Investing

Turnaround Investing Blog

Turnaround Investing Blog

Return of Volatility? No, Return of "Normal"

Sizeable market moves can increase the temptation to sell on downdrafts and buy on upswings; however, we strongly advise against attempting to do that. The chances of getting out at the right time and then back in again before the market rebounds are extremely slim. 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."