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 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."