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 Cap / Media

45% Gains on January Sale Recommendation: Time

In case you missed the last issue, our most recent sale recommendation--Time, Inc.--resulted in 45% stock profit for Turnaround Letter readers. We added this mid-cap print and digital media icon to our active portfolio in November 2016, when its stock price was approaching all-time lows. Despite its roster of highly-valuable brands, the company had struggled to adapt to a Web-based business model and its aggressive belt-tightening effort was offset by Time's spending on digital-based operations.

With the sting of Wall Street disdain battering its stock, we saw promising value investing opportunity here and felt its depreciated price failed to reflect Time's implementation of several important changes that indicated that a successful turnaround was in the works--including senior management changes.

We also liked that Time felt further pressure to improve its strategy, execution and capital allocation as a result of activist investor JANA Partners' 5% stake. Putnam told investors, "The new executive leadership combined with the presence of an activist shareholder provides a lot of encouragement that the company will soon begin to generate more value from its iconic brands."

In addition to these positive indicators, Time's financials at the time of the purchase recommendation remained solid, with strong cash flow, low debt levels and generous 5.8% dividend yield.

We provided several key purchase recommendation updates, beginning in April 2017 when Time’s board and management terminated discussions with a number of potential buyers, opting instead to pursue its strategic plan CEO Rich Battista. The following month, Time reported disappointing 1Q17 financials, and its stock fell 14% on the day. Despite the grim outlook, we continued to view other changes as positive and told Turnaround Letter readers, "The shares are essentially at the same price as our initial recommendation. Time’s outlook is more uncertain now, but clear positives remain…"

In November 2017, Time announced that it had agreed to sell to Meredith in an all-cash deal for $18.50/share, or $2.8 billion including the assumption of debt; and we moved the stock to hold status. The January 2018 Turnaround Letter advised readers to sell Time and lock in 45% gains: "As the proposed acquisition by Meredith draws closer, we see diminishing likelihood of a higher competing bid."

Time, Inc. is just one of countless examples reflecting how The Turnaround Letter continues to monitor and update all its recommended stocks--from purchase through sale recommendation--to further educate our readers and help maximize potential stock profit.

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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."