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

  +Follow October 4, 2013 9:00AM
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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. To read our full disclosure, please go to: http://www.equities.com/disclaimer


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Results for jcp
Penny Stockington
28 Mar 15 01:25:45
Our Penny Stock Pick On $RCGP Gained As Much As 236% In 2 Days! Get Our Next Pick Early: http://t.co/22aEoRaezM $JCP $AQUM $WSGI
Stock Rocket
28 Mar 15 00:18:10
Our Penny Stock Newsletter Picks Gained Over 1485%! Huge Update: http://t.co/cDuleLERch $JCP $AQUM $WSGI
Seeking Alpha Alerts
27 Mar 15 22:55:15
@loutocco $JCP J.C. Penney Looks To Be Almost Out Of The Woods http://t.co/NAIMjodLTe
Capital Market Labs
27 Mar 15 21:22:13
$SHLD vs. $JWN vs. $JCP vs. $M Compared Across 9 Critical Measures Chart: http://t.co/6g8184E8h5
Navin Jay
27 Mar 15 20:59:38
RT @SeekingAlpha: J.C. Penney Looks To Be Almost Out Of The Woods http://t.co/4sbL14XiZn $JCP
Andre Smith
27 Mar 15 20:51:10
RT @SeekingAlpha: J.C. Penney Looks To Be Almost Out Of The Woods http://t.co/4sbL14XiZn $JCP
JonnyP(aradeez)
27 Mar 15 20:36:57
Who wants to short $JCP? THIS GUY! Ayo @SureTraders hook a brotha up
Jason Olive
27 Mar 15 20:34:50
RT @SeekingAlpha: J.C. Penney Looks To Be Almost Out Of The Woods http://t.co/4sbL14XiZn $JCP
Alpha Maven
27 Mar 15 20:31:44
RT @SeekingAlpha: J.C. Penney Looks To Be Almost Out Of The Woods http://t.co/4sbL14XiZn $JCP
J. Wes
27 Mar 15 20:31:02
RT @SeekingAlpha: J.C. Penney Looks To Be Almost Out Of The Woods http://t.co/4sbL14XiZn $JCP
NASDAQ
27 Mar 15 20:30:15
$JCP - J.C. Penney Looks To Be Almost Out Of The Woods http://t.co/h2ntcYqL1y
C Scott-Finnigan
27 Mar 15 20:30:15
$JCP - J.C. Penney Looks To Be Almost Out Of The Woods http://t.co/TLee5YhiCf
Stocks News&Markets
27 Mar 15 20:30:14
$JCP - J.C. Penney Looks To Be Almost Out Of The Woods http://t.co/ScB1kB51Dh
StockNewsWires
27 Mar 15 20:25:02
$JCP: J.C. Penney Looks To Be Almost Out Of The Woods (JCP): http://t.co/jE3gYeJ1mG
awolam
27 Mar 15 20:24:03
RT @SeekingAlpha: J.C. Penney Looks To Be Almost Out Of The Woods http://t.co/4sbL14XiZn $JCP
Víctor
27 Mar 15 20:20:57
RT @SeekingAlpha: J.C. Penney Looks To Be Almost Out Of The Woods http://t.co/4sbL14XiZn $JCP
Chris Fry
27 Mar 15 20:20:36
"@SeekingAlpha: J.C. Penney Looks To Be Almost Out Of The Woods http://t.co/LLg1e20zO2 $JCP" @JackWelchMBA
Chris Fry
27 Mar 15 20:20:24
RT @SeekingAlpha: J.C. Penney Looks To Be Almost Out Of The Woods http://t.co/4sbL14XiZn $JCP
Long & Short Ideas
27 Mar 15 20:15:57
J.C. Penney Looks To Be Almost Out Of The Woods http://t.co/epKGlA78wO $JCP
Quantpost Service
27 Mar 15 20:15:57
$JCP News: "J.C. Penney Looks To Be Almost Out Of The Woods $JCP" http://t.co/V20kdqWt5f Quote: https://t.co/ScXQIeXP84
Seeking Alpha
27 Mar 15 20:15:57
J.C. Penney Looks To Be Almost Out Of The Woods http://t.co/4sbL14XiZn $JCP
Ophir Gottlieb
27 Mar 15 19:34:50
$SHLD vs. $KSS vs. $M vs. $JCP Compared Across 9 Critical Measures Chart: http://t.co/PFPRCfvpSU
Capital Market Labs
27 Mar 15 18:42:14
$JWN vs. $JCP vs. $DG vs. $DLTR Compared Across 9 Critical Measures Chart: http://t.co/7bEnXHcp2e
US Banking News
27 Mar 15 16:27:58
J C Penney Company’s “Hold” Rating Reiterated at Zacks $JCP http://t.co/OFuqV5sEtY
Ticker Report
27 Mar 15 16:26:24
J C Penney Company’s “Hold” Rating Reiterated at Zacks $JCP http://t.co/04X1dNvfMO
SmallCaps
27 Mar 15 15:48:23
Tip #4 How to identify a HOT SECTOR? http://t.co/ewe2BDWPGF $UGAZ $JCP $PBYI $UNG $DGLY
Sleek Money
27 Mar 15 15:35:21
J C Penney Company’s “Hold” Rating Reaffirmed at Zacks $JCP http://t.co/ORMpVTXPER
WKRB News
27 Mar 15 15:17:28
J C Penney Company’s Hold Rating Reiterated at Zacks $JCP http://t.co/2ccOPALue3
Capital Market Labs
27 Mar 15 14:42:17
$DDS vs. $BONT vs. $BIG vs. $JCP Compared Across 9 Critical Measures Chart: http://t.co/V2w7LvC834
Garage Traders
27 Mar 15 14:37:56
RT @TradingAlpha11: $SPY, $AAPL, $AA, $AMZN, $APA, $ADSK, $CSX, $EOG, $XLF, $FE, $JCP, $YELP Entries and Levels: https://t.co/L2A7ASCiTU
Steven Bell
27 Mar 15 14:24:38
RT @TradingAlpha11: $SPY, $AAPL, $AA, $AMZN, $APA, $ADSK, $CSX, $EOG, $XLF, $FE, $JCP, $YELP Entries and Levels: https://t.co/L2A7ASCiTU
Trading Alpha
27 Mar 15 14:13:32
$SPY, $AAPL, $AA, $AMZN, $APA, $ADSK, $CSX, $EOG, $XLF, $FE, $JCP, $YELP Entries and Levels: https://t.co/L2A7ASCiTU
John Kapihe
27 Mar 15 13:59:07
RT @TradingAlpha11: $JCP Short Entry: 7.55; would not hold overnight though http://t.co/Y61B8rXJS2
Trading Alpha
27 Mar 15 13:54:42
$JCP Short Entry: 7.55; would not hold overnight though http://t.co/Y61B8rXJS2
Cabin Parker
27 Mar 15 10:44:40
$JCP Don't be fooled people. This is a gift! https://t.co/t4VZdMnL94
Stockaholics
27 Mar 15 10:32:25
Our Stock Tips Have Gained Over 230% In Less Than 24 Hours! Huge News: http://t.co/FW1zCkmOE6 $JCP $AQUM $WSGI
1 TRADER
27 Mar 15 10:28:36
fwiw $JCP $TRIP Calls are basically breakeven. + or -, 1%-20%, I don't even count as gain or loss.
StockenheimerSchmidt
27 Mar 15 09:57:36
$RCGP Has More Than Tripled In Value In The Past 2 Days! Big News: http://t.co/RWkbXZLnwm $JCP $AQUM $WSGI
M F M
27 Mar 15 09:50:46
$JCP volume way down, shorts hoping for buyers to cover, nobody hiome. Easter bunny coming soon along with Q1 sales #'s = positive JCP
M F M
27 Mar 15 09:43:43
$JCP if people want to talk about Primark, use Primark twitter feed / bd; get off JCP; your ruining your o wn reputation by being negative!
JCPenney News
27 Mar 15 08:41:48
Mike Rodgers promoted to EVP of Omnichannel http://t.co/tkfahpgUE5 $JCP
Stacey Widlitz
27 Mar 15 08:34:31
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Jann Gobble
27 Mar 15 07:53:05
$JCP News: Budget-friendly and adorable Easter outfits for kids http://t.co/qv2k96EBBU
James DiPlata
27 Mar 15 07:01:05
RT @IOOptionsTrades: PriceWatch Alerts for $BAC, $NVO, $INFN, $JCP & $O from InvestorsObserver today: http://t.co/r0dDsKJdxN #OptionsTradin…
James DiPlata
27 Mar 15 07:01:05
RT @JulianClose_MIC: PriceWatch Alerts for $BAC, $NVO, $INFN, $JCP & $O from InvestorsObserver today: http://t.co/EdQWuh6OQT #OptionsTradin…
ProVesting
27 Mar 15 06:42:02
$AAPL $JCP: Top Stories: Apple Inc. (NASDAQ:AAPL), J C Penney Company Inc ...: http://t.co/MfhQrEVUOY
Investors Observer
27 Mar 15 06:25:57
PriceWatch Alerts for $BAC, $NVO, $INFN, $JCP & $O from InvestorsObserver today: http://t.co/r0dDsKJdxN #OptionsTrading #CoveredCalls
Julian Close
27 Mar 15 06:25:57
PriceWatch Alerts for $BAC, $NVO, $INFN, $JCP & $O from InvestorsObserver today: http://t.co/EdQWuh6OQT #OptionsTrading #CoveredCalls
Chris K
27 Mar 15 06:02:07
@CramersShirt it's not a $BBRY vs $AAPL story in any way. And it all happens at the margin. You should get that concept with being on $JCP.
BreakingStocksNews
27 Mar 15 02:00:02
$APOL $JCP: Stocks Losing their Charm: Scientific Games Corp (NASDAQ:SGMS ...: http://t.co/ofRmk8WKXT
				
				
  +Follow October 4, 2013 9:00AM
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