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.

Don't Make Too Much of Price History

At The Turnaround Letter, we believe that the essence of turnaround investing is profiting from a substantial upturn in an underperforming company’s fundamentals. Simply put, it’s buying when things look bad but are actually about to get a lot better.

What is the most powerful factor in successful turnaround investing? Making sure there is a solid and clear reason that the fundamentals – revenues, costs, balance sheet – will improve. What is the most important way to reduce risk when selecting a turnaround stock? Buying at a significant discount in underlying value. In other words, buying with a margin of safety.

Most of the mistakes in turnaround investing violate one or both of these principles. If fundamentals don’t improve (or worse, deteriorate further), the investment will almost certainly not be successful. If the valuation is not attractive, the over-paying investor not only has reduced their upside potential, but also risks greater downside should the fundamentals stall out.

It can be tempting to look at a depressed stock and think, “it used to trade at 40 and now it’s at 8 – therefore it must be a bargain.” Unfortunately, the fact that a stock once traded at a higher price does not guarantee that it will ever get back there. One big reason that a stock trades so much lower than before: its earnings potential or assets have deteriorated. Without some fundamental improvement, the share price will continue to lag, or worse.

You want to understand why the stock price has declined. Then identify what fundamental change will reverse the company’s fortunes. Is the management taking new actions to address the issues? Is the industry cycle turning up? Is something else improving?  Only then can the stock have a chance to recover. And remember, the former $40 stock doesn’t need to fully recover. If you buy it at 8 and it goes to 16, even though it’s down 60% from its prior price, you still have a 100% gain.

Read More Turnaround 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."