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Turnaround Stock Portfolio Week #2: Our Losers Are Winners! (So Far)

  +Follow October 4, 2013 9:00AM
Tickers Mentioned:

On Sept. 25 Equities began tracking ten stocks we dubbed “the Turnaround Stock Portfolio.” Unlike our other ongoing experiment the FUNY index, which is arbitrary and made up entirely of stocks with funny ticker symbols, the Turnaround Portfolio is based on quantified performance – poor performance, that is.

In 8 out of 10 cases, the stock had a negative return on the year. In the other two, the stock was either down over the last two years or was up marginally. And every stock in the portfolio was, at the start date, experiencing an ongoing crisis in leadership, worrying competition, or other major crisis.

But we didn’t pick stock destined for the toilet – in every case the stock had a potential to come back, and rebound from their past underperformance.

Component Spotlight

As we continue tracking the Turnaround Portfolio, we’ll be highlighting a few of its components and delve further into why we included this or that particular stock. This week, we’ll be looking at our Financial, Tech, and Consumer picks.  

Financial Sector Pick: Tower Group International Ltd. (TWGP)

Tower Group is a Bermuda-based property and casualty insurer who, at the time of the Turnaround Portfolio formation, was experiencing a fairly unusual crisis. Simply put, Tower Group was refusing to release their second quarter earnings report, having delayed it twice, which understandably spooked the heck out of investors. As a result, the stock lost over 60 percent of its value in six weeks.

Tower Group has only hinted that losses were far more numerous and severe than anticipated, and the company needed time to fully assess the extent of them. Estimates peg the unexpected losses at up to $110 million. Tower’s troubles date back to last summer, when the company was initially rocked by a rush of Hurricane Sandy claims.

Why We Picked Tower Group:

If an insurance company survives a natural disaster like Sandy, it can actually work out better for them in the long run, as it will cause future premiums for customers to rise. After all, the areas hit by Sandy have shown that they are in a hurricane prone-area.

That is, after all, a big “if,” and investors will know more when the company does finally release those second quarter earnings in “the week of October 7.”

Technology Sector Pick: Zynga Inc. (ZNGA)

Zynga was supposed to signal a new development in gaming. As Facebook Inc. (FB) built a social media empire Zynga was tight in the thick of it, making games exclusively for the burgeoning social media behemoth. The game Farmville, especially, was a robust hit for the company.

The company had their IPO on Dec. 2011 at $10 a share for a $7 billion evaluation. Things went downhill from there. Zynga was targeted for spamming Facebook user’s feeds with its game, and Facebook took action to scrub Zynga off their platform. The stock proceeded to tank, the company’s founder and CEO quit, and the company got surpassed by red-hot competitor King, who is about to have an IPO of their own. A last-ditch foray into gambling was recently officially shelved.

Why We Picked Zynga:

Zynga is an anomaly in the portfolio, as they are actually up substantially on the year. But they are still viewed overall as a disappointment, as they are down over 60 percent since IPO. Gaming stocks in general are doing well this year, and if Zynga can continue riding social gaming’s resurgence there’s still a chance they could get it together.

Consumer Sector Pick: JC Penney (JCP)

Where to start? The case of JC Penney is going to be taught in business schools for years to come in as a cautionary tale of what not to do to turn a company around.

The short version is, in a radical attempt to revamp the company, activist investor Bill Ackman installed Ron Johnson from Apple Inc. ($AAPL) as the new CEO, and the company engaged in a massive reform. The overhaul, which attempted to modernize the storied department chain, failed miserably, and customers fled in droves. Ackman ended up selling his stake with his tail between his legs, finally admitting the whole thing was a huge mistake.

The company still hasn’t recovered. Formerly the second-worst performing stock in the S&P 500 at just a tick better than Turnaround Portfolio stablemate Cliffs Natural Resources (CLF) , JC Penney is now far and away the index' worst returner, with a 57 percent loss in value this year.

Why We Picked JC Penney:

As is right now, it sits at its lowest price since the day after the October 1929 crash. If new CEO (actually, old CEO, re-installed) Myron Ullman can right the ship, JC Penney has the proven capability and resources to once again become profitable. The stock could see a nice upswing if they can win customers back that Ron Johnson lost.

Turnaround Portfolio Performance Check-In

Here’s how the Turnaround Portfolio looked after the bell on October 3:

Portfolio Return Since 9/25: 1.55 Percent

S&P Return Since 9/25: 0.06 Percent

So far, the Turnaround Portfolio is beating the S&P handily. Good work, us!* The excellent week of Quicksilver Resources Inc (KWK) and Atlantic Power Corp (AT) definitely carried it, while JC Penney continued getting rocked.

Check in with us next week as we continue profiling this group of losers that so far is beating the S&P.

*We make no assumptions about what may or may not happen to this portfolio going forward, nor do we advocate investing or not investing in these stocks. Investors are expected to do their own due diligence and consult professionals before sinking their money into anything.

Our interest is purely academic, and we made the Turnaround Portfoilo for our own amusement. We are easily amused.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions.

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Results for jcp
19 Dec 14 08:23:50
$COST TA $COST Most recent stock chart and technical analysis. $AA $JNK $JCP $ISIS $BABA $HAL http://stockchar http://t.co/s2nR59lwUU
Stock Rocket
19 Dec 14 08:20:38
Thanks to the 5 pro traders at http://t.co/5jbX6mNKQv for an amazing week! My win rate was 80%. So sweet. $ANR $JCP $AU $HL
19 Dec 14 08:17:28
$ARNA Arena Pharmaceuticals (ARNA) 4.03 -0.01 (-0.25%) $EMES $JCP $DIA http://t.co/Ldt0vhH9Qh
Etos Etana
19 Dec 14 08:08:43
RT @IHPosts: DennyT: JCP Nasdaq $JCP $GE $AMAT $TSLA $ISIS http://t.co/Xykjg4mk2l
Investors Hangout
19 Dec 14 08:06:42
DennyT: JCP Nasdaq $JCP $GE $AMAT $TSLA $ISIS http://t.co/Xykjg4mk2l
Investors Hangout
19 Dec 14 08:06:42
DennyT: JCP Nasdaq $JCP $GE $AMAT $TSLA $ISIS http://t.co/b5PB9OA7Fm
Etos Etana
19 Dec 14 07:59:40
RT @iHangout: DennyT: The Launch Pad: JCP Nasdaq $JCP $GE $AMAT $TSLA $ISIS http://t.co/ErCU6D0XU7
Etos Etana
19 Dec 14 07:57:09
RT @IHPosts: danrocks: $GLD Hit my list a few days ago $JCP $F $FXE http://t.co/x9ua7u078N
19 Dec 14 07:54:51
http://t.co/NYsxQOU64w danrocks: $GLD Hit my list a few days ago $JCP $F $FXE: danrocks http://t.co/u1k1cTUuV3 http://t.co/NYsxQOU64w
Investors Hangout
19 Dec 14 07:47:08
danrocks: $GLD Hit my list a few days ago $JCP $F $FXE http://t.co/x9ua7u078N
Investors Hangout
19 Dec 14 07:47:07
danrocks: $GLD Hit my list a few days ago $JCP $F $FXE http://t.co/PwS6lY7YNY
19 Dec 14 07:42:36
DennyT: The Launch Pad: JCP Nasdaq $JCP $GE $AMAT $TSLA $ISIS http://t.co/ErCU6D0XU7
Clayton Gilman
19 Dec 14 07:42:31
Support levels: $RAD 6.70, $JCP 6.50, $SIRI 3.45, markets, IMO, roll over today
19 Dec 14 07:40:44
JCP Nasdaq $JCP $GE $AMAT $TSLA $ISIS Opinion,Chart,Close,News,any other opinions on this? Stock Quote http:// http://t.co/6cyhgRtXQ5
Stellan Tharp
19 Dec 14 07:38:04
#Stocks you might want to hold onto $LM $JCP $CRM $FB #singedinvestor http://t.co/n1HFmf8TOV
19 Dec 14 07:34:33
$GLD Hit my list a few days ago $JCP $F $FXE $UVXY $AZN http://t.co/mhVjLLQpNC
19 Dec 14 07:33:06
$jcp $ms I guess the $165b that people will save annually on gas is not going to be spent on clothes
19 Dec 14 07:28:03
$AAL American Airlines Group Inc. (AAL) 50.63 +0.49 (+0.98%) $DAL $ETN $JCP http://t.co/nytVKeXX7w
Clayton Gilman
19 Dec 14 07:25:48
$JCP stopped out 7.56 from yesterdays swing, +5
Stock Screener
19 Dec 14 07:18:17
Advanced Stock Screener rated "J.C. Penney Compa" $JCP 100/100 strategy: Penny Value http://t.co/gi9zrfpDFE @AvStockScreener #stockmarket
Jann Gobble
19 Dec 14 07:01:29
RT @MarkBoone17: $JCP If you don't know what you looking at, you really need to get out of this. Not for you. JMO. GLTA
19 Dec 14 07:00:51
Tip #4 How to identify a HOT SECTOR? http://t.co/ewe2BEND4R $UGAZ $JCP $PBYI $UNG $DGLY
Mark S Boone
19 Dec 14 06:57:10
$JCP If you don't know what you looking at, you really need to get out of this. Not for you. JMO. GLTA
John W. Green JW
19 Dec 14 06:50:23
Donald W.
19 Dec 14 06:47:33
Quantpost Service
19 Dec 14 06:42:57
$AMZN $JCP News: "Actives on open @CBOE: $AAPL $FB $TSLA $BBRY $AMZN $CELG …" https://t.co/ly3On3sK6Q Board view: https://t.co/mh4vncCc2F
19 Dec 14 06:42:56
David Darby
19 Dec 14 06:34:14
looks like $jcp had an earnings non earnings move LoL
19 Dec 14 06:18:03
$JCP $DDS $SHLD $KSS: Give Yourself The Gift Of Returns With This Iconic Retailer - Macy's ... http://t.co/zmuYh4c0vD http://t.co/01jsIepiaW
PennyStock Zone
19 Dec 14 06:12:13
Tip #4 How to identify a HOT SECTOR? http://t.co/cFuOlMXLZp $UGAZ $JCP $PBYI $UNG $DGLY
Mark S Boone
19 Dec 14 05:41:36
$JCP MS sees apparel lagging for the next 5 years. Hmmm....So no new clothes for you for 5 more years! Got that? That's Genius!! LMAO!!
Josiah Lopes
19 Dec 14 05:10:40
Are you considering buying $JCP $G $ETFC $FEYE #newsletter http://t.co/dO1xVF0K5L
John Turner
19 Dec 14 05:04:20
$JCP Stock in Focus: J C Penney Company Inc (NYSE:JCP) http://t.co/22wIpWoP1B
anurag dabas
19 Dec 14 04:56:07
"@Benzinga: Morgan Stanley Sees Apparel Lagging For The Next 5 Years $GPS $JCP $KSS http://t.co/FqiwSeTBHL"
Kymberly Jaquez
19 Dec 14 04:44:44
Shoud you sell or hold stocks like $JCP $SYY $FMC $PCLN Goto http://t.co/bQFTPMHiYI
PennyStock Zone
19 Dec 14 04:41:50
Tip #4 How to identify a HOT SECTOR? http://t.co/cFuOlMXLZp $UGAZ $JCP $PBYI $UNG $DGLY
Don Fishback
19 Dec 14 04:30:47
1 Week Decrease in ATM IV (Point change) $PAY, $JBL, $RAD, $JCP, $PBYI http://t.co/SAsH8cIVZD
19 Dec 14 04:30:47
1 Week Decrease in ATM IV (Point change) $PAY, $JBL, $RAD, $JCP, $PBYI http://t.co/jvasI09sux
Jim Sheetz
19 Dec 14 04:23:43
RT @Benzinga: Morgan Stanley Sees Apparel Lagging For The Next 5 Years $GPS $JCP $KSS http://t.co/CKCloDgaHU
Quantpost Service
19 Dec 14 04:22:11
$JCP News: "Morgan Stanley Sees Apparel Lagging For The Next 5 Years $GPS $JCP …" http://t.co/6lZh2XGzuy Board view: https://t.co/gJQWU9nGmU
19 Dec 14 04:22:11
Morgan Stanley Sees Apparel Lagging For The Next 5 Years $GPS $JCP $KSS http://t.co/CKCloDgaHU
Penny Stock Secret
19 Dec 14 04:19:16
Make Money With BitCoin Every Single Day More Info Here http://t.co/SVqoMlijqL .. $JCP $AQUM $WSGI
Brendon Ronald
19 Dec 14 03:37:05
$CMCSA $JCP: Services Stocks Watch List -Comcast (CMCSA ...: $CMCSA $JCP: Services Stocks Watch List -Comcast… http://t.co/RXMP9KSddA
19 Dec 14 03:23:02
$CMCSA $JCP: Services Stocks Watch List -Comcast (CMCSA), American Airlines ... http://t.co/gAEU8Nv3cT http://t.co/ANIfpsKvGx
HotStockAlert $PKGM$
19 Dec 14 03:20:33
DollarsOnPennies: $JCP Gallery View http://t.co/SlBS77JIdz
19 Dec 14 03:20:13
DollarsOnPennies: $JCP Gallery View http://t.co/Xhj7ENKhcX
Thuy Espinal
19 Dec 14 01:16:05
#Stocks you might want to buy $ANAT $JCP $ATVI $CI Give it a try http://t.co/HpXcgScQAT
19 Dec 14 01:13:04
$GPS $JCP $KSS: Morgan Stanley Sees Apparel Lagging For The Next 5 Years http://t.co/5RCzmIhcr7 http://t.co/TwJysS7far
Leonie Machado
19 Dec 14 00:46:30
Latest information on #stocks like $JCP $ESV $VNO $RAX #overvalued http://t.co/BRV94gh25F
PennyStock Zone
19 Dec 14 00:12:01
Tip #4 How to identify a HOT SECTOR? http://t.co/WvpU6f1Hx1 $UGAZ $JCP $PBYI $UNG $DGLY
  +Follow October 4, 2013 9:00AM



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