The Turnaround Letter

March 2018

Volume: 32
Edition: 9

Stock Pick & Stock Sales

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Stock moved to sell recommendation following acquisition.

Sale Recommendation - March 2018

This engineering and water services firm agreed to be acquired in an all-stock deal, and we recommended the sale of its shares.
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This stock is in limbo, but there are two paths to significant gains for shareholders.

Purchase Recommendation - March 2018

While an investment in this mid-cap insurer carries significant, speculative risks, we believe that the upside potential justifies these risks. On the one hand, there is a determined buyer working toward completing a cash deal worth 90% more than the current share price. On the other hand, if the deal fails to pass regulatory muster, the company is currently valued at a remarkably low 11% of book value and 2x earnings, even as the underlying businesses appear to be improving.
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Turnaround Investing Articles

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Over the past few weeks we've been reading a lot about "the return of volatility."

Return of Volatility? No, Return of "Normal"

Sizeable market moves can increase the temptation to sell on downdrafts and buy on upswings.  However, we strongly advise against attempting to do that. The chances of getting out at the right time and then back in again before the market rebounds are extremely slim. 
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We look at gold-mining companies differently. 

Good As Gold? Finding Value In Major Gold Mining Companies

This article names five appealing value stocks. They are all major, well-run mining companies whose shares or ADRs trade on the New York Stock Exchange, with generally beaten-down valuations and prices. They provide potentially more sparkle: If the price of gold does begin to go up, the stocks of gold mining companies generally rise faster than the commodity itself.
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Crocs has been a strong performer, but from the nadir it took several years and a few new CEO's to finally get the turnaround right.

New CEOs & Turnarounds: Patience Often Required

Investing when an outsider arrives as the new CEO of a struggling company can be quite rewarding. It's one of our favorite catalysts--few changes bring as much potential improvement as the fresh perspective and energy that new leadership provides. However, bringing in an outsider isn't necessarily a sure path to an immediate turnaround. This article details four turnaround situations where a new CEO's arrival hasn't yet produced much in the way of stock performance, but which have promising prospects once the company moves beyond transitional issues.
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Turnaround News & Updates

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Identify & Profit from Distressed Investing

Free Report: Turnaround Investing Mistakes

Turnaround Investing Blog

Turnaround Investing Blog

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.

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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."