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.

Bonds

Volatility Up, Rates to Follow?

Excerpted from the October 2016 Issue

Our warning in last month’s issue that volatility was likely to increase proved to be very timely.  There were five days in September on which the S&P 500 moved by more than one percent (including one day when it dropped by nearly 2 ½%), after there was just one one-percent day in July and August combined.

Part of this volatility appears to have been caused by changing views on when the Fed will raise interest rates.  As we’ve said before, trying to bet on the Fed’s action is a loser’s game.  Your chances of getting it right are slim, and even if you guess right about when the Fed will raise rates, the market may react differently than you expect.  While everyone expects the stock market to drop in response to a rate hike, in the past the opposite has often happened.  Interest rate rises are usually in response to strength in the economy, which is generally good for stocks. 

The effect on bonds is much more clear-cut: when rates go up bond prices go down.  And the longer the term of a bond, the further it will fall.  Therefore our advice right now is to sit tight with your stocks and be very wary of bonds.

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Identify & Profit from Distressed Investing

Free Report: Turnaround Investing Mistakes

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IBM: Not Yet Time to Swing at this Pitch

IBM’s stock underperformance since IBM’s current CEO took the helm in 2012 has been stark, with the shares declining 23% while the S&P500 Index has more than doubled. One big problem: revenue growth rate is zero, at best. Without revenue growth, what’s left to entice investors? The real driver of value at IBM – free cash flow that is used to repurchase shares. Can IBM borrow its way to shareholder prosperity as its cash flows shrink? What to do with IBM shares? Wait for a better pitch in the form of a catalyst or much lower valuation. Read More.

Comparing Stocks Vs. Bonds

While the common stock of a turnaround candidate usually has the greatest upside potential, other classes of securities, such as bonds or preferred stock, may offer attractive profit possibilities with less risk. Many turnaround companies have only one class of securities available to investors but where there are different classes to choose from, it can pay to do a little extra analysis of the various options.

Read More.

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."