Don’t Try and Time the Stock Market

 

There is an old saying in the investment business: “You can always tell the market-timers: they’re the ones with the holes in their shoes.” While there may be cycles in the stock market, The Turnaround Letter doesn’t know anyone who can successfully time those cycles, so our stock market advice for turnaround investors is not to attempt market timing.

Consistently profitable market timing requires two different sets of very challenging decisions: when to pull out of the market and when to get back in—and it is nearly impossible to get both decisions right. We know people who are still bragging that they pulled out of stocks just before the big stock market crash in October 1987. Unfortunately, once out of the market, they’ve never been able to pull the trigger to get back in. As a result, they’ve missed the more than fourfold gain in the S&P 500 since the 1987 market high.

We also know investors who worried about being left behind when the stock market was hitting new highs in the summer of 1987, and they bought stocks like crazy. Then, when the market crashed in October, they panicked and sold everything—locking in big losses. Those same people probably repeated this pattern in 2000 and 2008.

Both groups would have been better served resisting their impulses and staying the course with a reasonable long term investing strategy. The Turnaround Letter always recommends that investors put as much money into stocks as will still allow them to sleep at night—then keep that allocation pretty constant in both good times and bad.

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IBM: Not Yet Time to Swing at this Pitch

IBM’s stock underperformance since IBM’s current CEO took the helm in 2012 has been stark, with the shares declining 23% while the S&P500 Index has more than doubled. One big problem: revenue growth rate is zero, at best. Without revenue growth, what’s left to entice investors? The real driver of value at IBM – free cash flow that is used to repurchase shares. Can IBM borrow its way to shareholder prosperity as its cash flows shrink? What to do with IBM shares? Wait for a better pitch in the form of a catalyst or much lower valuation. 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."