Productive Turnaround Management Changes

Turnaround investing can be very profitable. But how do you go about selecting the most potentially lucrative opportunities? At The Turnaround Letter, we've come up with some basic rules for spotting successful turnaround stocks, and here's one of them: Look for management changes. Just as real estate experts say there are three keys to success in real estate--location, location, location--we believe there are three keys to success in turnarounds--management, management, management.

A change in senior management is generally a good sign. First, it indicates that the board of directors recognizes that the company has serious problems. This is often one of the largest hurdles to a recovery. Second, it usually brings in a new skill set tailored to addressing the problems. If existing management did not have the skill to keep a company out of trouble, it is not likely to have the skill or the mindset necessary to get the company back on its feet.

Third, it sends a signal that "business as usual" inside the company will be replaced with a greater sense of urgency and frugality. This often is enough to redirect employees' priorities and unleash new and productive ideas.

Finally, it can free the company to meaningfully shift its strategic priorities, including how it allocates capital, approaches customers and operates its businesses. The announcement of the hiring of a turnaround veteran is not, however, a sign that investors should immediately buy the company's stock. Even the best turnaround managers may take a long time to revive a company and return profitability. This is best measured in years not quarters, and there may be more bad news still to come.

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Turnaround Investing Blog

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.

Harnessing Activists to Help Find Turnaround Stocks

Activist investors often produce attractive returns for their clients; and you can still use their influence to help your position as a turnaround investor in two ways: Buy a position in a stock with the expectation that an activist will soon follow or buy after an activist takes a stake.


Value Investing


While one of the many dozens of activist funds might find their way to selecting your particular stock, this approach is likely to be frustrating and unrewarding. A better approach is to buy after the activist makes their move. Once an activist takes a stake in a company, how do you evaluate whether it is worthwhile to follow on? Admittedly, this is a bit of an art... Learn how you can harness the power of activist investors to find market-beating turnaround stocks.

Turnaround Letter Stock Pick Named Top Performer of 2017


stock market advicex


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."