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.

Energy / Retailing

What Makes An Ideal Turnaround Investment? | Putnam's Top Stock Picks

MoneyLife Radio's Chuck Jaffe recently interviewed George to learn more about what he looks for in an ideal turnaround investing opportunity: a solid core business, strong brand recognition and a healthy balance sheet. He also favors those companies that bring in skilled turnaround leadership, noting, "We like to see a change in management because very often the management that gets the company into trouble won't be able to get it out of trouble."

Putnam also talks specific business sector trends—namely in the troubled retail and energy arenas. Pointing out the many encouraging characteristics of Macy's (M), George notes that although the retail icon has been struggling recently, it continues to enjoy a great brand and has valuable real estate holdings. Not only that, but its stock is trading at a decent yield, and Putnam believes Macy's will "survive and eventually thrive." On the other end of the spectrum is Sears (SHLD), which George notes has not reinvested and is "just dying quickly."

The interview also covers the battered energy sector, which The Turnaround Letter currently favors. Putnam recommends Weatherford International (WFT). This mid-cap oil services provider is reducing debt and lowering costs—and its debt maturities are minimal through 2018. George names three additional energy sector-related value investing opportunities.

George also talks about Credit Suisse (CS), his most recent Turnaround Letter purchase recommendation. This large-cap investment management company found itself poorly-managed and overextended, but shows many of the characteristics Putnam seeks in an ideal turnaround investment. Although based in Switzerland, the company benefits from a worldwide platform and great brand. CS has a solid franchise and is, according to Putnam, "doing all the right things"—including a revamped management team and C.E.O.

Even with a tried-and-true investing strategy, not all turnaround stock picks can be winners; and George tells Jaffe how he knows when it's time to sell and move on. Jaffe wraps up this MoneyLife Radio interview with a spirited round of "Hold 'Em or Fold 'Em" stock pick recommendations. George Putnam's full interview can be heard here.

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Tupperware: Not a Good Fit as a Turnaround Stock

At first glance, the shares have decent appeal as a turnaround investment. Looking deeper, however, the fundamentals are not as strong and stable as they appear. Surplus cash flow is tight, a key driver is weakening, it is increasingly reliant on China and has other nagging issues. We don’t see the new CEO as a catalyst for change. Despite the “first glance appeal”, Tupperware isn’t a good fit as a turnaround stock. 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

 

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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."