Investing in Distressed Securities

Investing in distressed securities means purchasing the equity and fixed income securities of companies that are either in bankruptcy or have a meaningful likelihood of filing for bankruptcy in the near future. These companies have claims against them that are greater than the value of their assets. More concretely, distressed companies don’t have the cash flow to service their debts.

Critical to the definition of “distressed”: these companies are fighting the clock--if operating results don’t improve soon or if their debts are not renegotiated, a bankruptcy will likely result. Their survival, in essence, is on the line.

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. These securities can provide greater downside protection than equities, as they may have legal claims on valuable assets and may receive new securities or cash in a bankruptcy reorganization; however, they still can provide significant upside potential, as gains of 100 to 200% are not uncommon. Get all the details you need to integrate distressed securities into your diversified portfolio with George Putnam's free e-report: Distressed Investing: Exploring Profit Potential.

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Turnaround Investing Philosophy: 32 Years Later, Some Things Never Change

Recently I was asked how my investing perspective changed over the 32 years of publishing The Turnaround Letter. It's a fascinating question because change is constant, and often beneficial (although that's not a given) in the business world. If change is the norm, can investing principles stay constant? I firmly believe that they can. Read More.

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."