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.

Post-Bankruptcy Stocks / Telecommunication Services

Top Five Turnaround Stocks for 2018 e-Report Includes Post-Bankruptcy Stock Opportunity

George Putnam's Turnaround Letter recently published its latest free report: "Top Five Turnaround Stocks for 2018," which details five hot value stock recommendations--all hand-picked by George Putnam, III and based on potential stock profit in 2018 and beyond.

One of 2018's recommended stocks, Consolidated Communications (CNSL), acquired FairPoint Communications. The Turnaround Letter had recommended FairPoint many years ago after the telecom emerged from a Chapter 11 bankruptcy filing with a cleaner balance sheet and new leadership. Putnam emphasizes that, contrary to common perception, bankruptcy does not necessarily signal a company's demise. In fact, when managed effectively, corporate restructurings can result in a streamlined, more fiscally sound enterprise with a lot of investing appeal. Post-bankruptcy stocks are often overlooked and undervalued and display several of the characteristics The Turnaround Letter looks for in turnaround situations.

FairPoint was a local telephone company that acquired Verizon's landline and internet operations in Maine, New Hampshire and Vermont for $2.4 billion, and the deal's heavy debt burden led to its 2009 bankruptcy. Despite a promising start when it emerged from bankruptycy, FairPoint struggled against industry headwinds and was ultimately acquired by Consolidated.

"Top Five Turnaround Stocks for 2018" notes, "Investors seem uninterested in slow-moving cash flow stories and have all but given up on the company, pushing its share price down 55% in 2017." Despite its cold shoulder Wall Street reception, Illinois-based CNSL is a well-managed company and adding FairPoint's customer base and cash flows makes the combined company financially and strategically stronger.

The Turnaround Letter adds, "At an attractive 5.9x EBITDA, Consolidated is sending a good signal to investors."

In previous years, The Turnaround Letter's stock recommendations have generally delivered strong returns. From the "Top Five Turnaround Stocks of 2017" report, three of the five (ACAT, CROX and FCX) handily returned more than the S&P 500. Arctic Cat was a quick winner with a 23% gain when it was acquired in mid-January by Textron. Crocs posted an impressive 84% stock profit as its turnaround gained traction. Metal commodities miner Freeport-McMoran gained 44%; and the fourth pick, OAK, produced a total return of about 21% with the help of its high dividends. NIHD turned out to be a real clunker, losing much of its value--and demonstrating the necessity of a well-diversified portfolio!

Get more analysis and rational behind the CNSL recommendation and other hot stocks in Putnam's "Top Five Turnaround Stocks for 2018."

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Is there value in bankrupt PG&E’s stock?

In nearly every case, the shares of a company in bankruptcy become worthless. In very rare cases, however, they can become great investments. W.R. Grace (NYSE:GRA) shares produced a 75-fold return, as an example. With California utility PG&E (NYSE:PCG) now in bankruptcy, the range of possible outcomes for its equity is wide.

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EV/EBITDA: What Is It & Why Are We Using It More?

In reading recent editions of The Turnaround Letter, you have probably noticed that we are increasingly using EV/EBITDA as a valuation measure, rather than the better-known price/earnings multiple.  We thought it might be useful to describe this measure and why we like it.

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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."