Adding a sizable debt burden on top of the profit uncertainty will further expand the range of possible outcomes; and this very wide range creates inefficient pricing, as investors can have very different views on what these bonds are actually worth. For the buyer of distressed bonds, this uncertainty and inefficiency are powerful sources of potentially high returns.Read More
Distressed investing usually involves greater risk than turnaround investing, but can also offer higher returns. Given the risk, most investors in distressed securities focus on bonds, which can provide greater downside protection.Read More
It’s bargain hunting season again. Holiday shoppers flock to the malls and their favorite websites, and savvy investors search the stock market for year-end discounts.Read More
Excerpted from the December 2016 Issue
Investors have newfound enthusiasm for domestic economic growth, as a Trump presidency could bring new infrastructure spending, lighter regulatory burdens and lower corporate taxes. While the distance between campaign promises and corporate profits can be vast, we agree with the market’s general assessment of how government policies might change.Read More
Excerpted from the November 2016 Issue
A common temptation is to mix emotions with investing. Your candidate won, and so you are more optimistic--or your candidate lost, and now you’re more pessimistic. Stocks don’t know who you voted for. Avoiding emotionally-driven post-election buying and selling will be beneficial to your financial health.Read More
As tempting as it may seem, buying the stock of a company operating under bankruptcy court protection is almost never a good investment.Read More
Leadership matters. Whether in sports or in business, an organization is not just a collection of people, cash, physical property, intellectual property and other assets. Not every new management team is highly capable and new leadership cannot always overcome dire strategic situations or the quagmire of a decaying industry; but without good leadership, no business can prosper for long--much less survive.Read More
There is an old saying among turnaround investors: “earnings and assets come and go, but debt is forever.”Read More
While important to any investment program, diversification is critical to successful turnaround investing. Read More
Excerpted from the October 2016 Issue
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.Read More
Identify & Profit from Distressed Investing
Turnaround Investing Blog
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.
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.
Turnaround Letter Stock Pick Named Top Performer of 2017
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."
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