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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. To read our full disclosure, please go to: http://www.equities.com/disclaimer

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Results for jcp
Sleek Money
5 Sep 15 03:35:54
Traders Sell J C Penney Company on Strength $JCP http://t.co/HIyp4de2JG
5 Sep 15 03:03:15
Weekly MidCap #Stocks Trend $THS $JCP $FLO $LANC $NVR $TECD $BWLD $GES $IM $SLH $POST $AAN $CBOE $LPX $CASY @ http://t.co/H27z0IZ4hK
5 Sep 15 03:02:59
Weekly MidCap #Stocks Performance $ANN $TCO $SUNE $GEF $JCP $ANF $JBLU $SM $THS $ALK $WPX $FLO $CHS $NVR more@ http://t.co/H27z0IZ4hK
Michael James
5 Sep 15 02:29:06
Our Penny Stock Alert On $GEQU Is Up 614.29% For Our Subscribers! Check Out Our New Pick: http://t.co/7IiluPoPtS $JCP $AQUM $WSGI
Michael Cook
5 Sep 15 02:29:06
Our Penny Stock Picks Gained Over 3,000% In The Past Year! New Pick Just Released Tonight: http://t.co/eJEU1G7cVv $JCP $AQUM $WSGI
Paul Henry
5 Sep 15 02:26:37
Over 600% Gains For Subscribers In 2 Months! Sign Up To Platinum To Get Our Picks Early: http://t.co/m7w5IRG3jS $JCP $AQUM $WSGI
Analyst Actions
4 Sep 15 23:07:02
$JCP: Bullish analyst action by Deutsche Bank on JC Penney Co: http://t.co/0kF7hp2ggs http://t.co/2rmyntc3Wa
4 Sep 15 22:35:29
Have a great Holiday weekend All! Stay safe. Where is the market heading next week? hoping some recovery early week. $AAPL $AMZN $NFLX $JCP
4 Sep 15 20:19:41
lanreser89 : XLB Materials Select Sector SPDR Summary http://t.co/wggl2NqzJo $XLB $JCP … http://t.co/OuYfw5Xsu4) http://t.co/nEhX046n6Z
Venessa Forster
4 Sep 15 20:18:05
XLB Materials Select Sector SPDR Summary http://t.co/LFGcQHhGDf $XLB $JCP $ARIA $AVXL #XLB #stockmarket #finance
Russell Barbour
4 Sep 15 18:47:36
http://t.co/MwFEenHRxs <-- This millionaire trader teaches stock trading strategy and he is the BEST $AMBA $JDST $JCP $MBLY $HALO
Russell Barbour
4 Sep 15 17:07:41
http://t.co/zkwrjCLLri <<-- SuperTrades gives many >50% on your money alerts! $UWTI $JCP $EYES $HLF $CLNE $SPLK
4 Sep 15 16:03:16
MidCap #Stocks Trend $THS $JCP $LANC $FLO $NVR $TECD $BWLD $GES $IM $SLH $POST $AAN $CBOE $LPX $CASY $WCG @ http://t.co/H27z0IZ4hK
John Mathew
4 Sep 15 15:47:06
J.C. Penney: Turning Around Or Trending Down? $JCP #JCPenny http://t.co/DXjY5MvvCG
Thomas Collins
4 Sep 15 15:08:32
$JCP Why Shares of JC Penney Company Inc. Surged 10% in August http://t.co/JAjXxqXm0O
4 Sep 15 14:00:03
$JCP "stupid long sold here" on Yahoo! Finance message boards: http://t.co/uzbaHyCbDT
Trending Articles SA
4 Sep 15 13:30:04
J.C. Penney: Turning Around Or Trending Down? http://t.co/cyhoSPXEpj $JCP
Breaking News
4 Sep 15 13:01:04
$JCP $AEZS $KBIO: Stocks Highlights: J. C. Penney Company, Inc. (NYSE:JCP …: http://t.co/GqYJeRnNnp
4 Sep 15 13:00:53
MidCap #Stocks Trend $THS $JCP $FLO $TECD $NVR $BWLD $IM $CASY $GES $LANC $ACXM $SLH $POST $WCG $AAN $CBOE @ http://t.co/H27z0JgFGk
Karl Eggerss
4 Sep 15 12:49:52
$JCP moving to the top of the box. http://t.co/ieavAh5eax
4 Sep 15 12:43:31
$JCP today would be a good time to reflect on some expert analysts predictions of a quick flush to 0. LOL
Drew Powers
4 Sep 15 12:31:37
covered most of my $JCP 9.69 scratch as not breaking - will revisit once trend changes
Alexander Morris
4 Sep 15 12:27:18
$JCP: Exc 6MoHIGH=9.70, hits:4, Rng:26%, ch:+0.7%, PDayTBnd+, allTFs+, bigFlt:290M, HiPctSht[34%:4d], 8HiDays:25%, DyVol:8.95M:0.6x:0.3x
4 Sep 15 12:14:39
@WallStJesus what's up w $JCP?
Analyst Actions
4 Sep 15 11:54:02
$JCP: Bullish analyst action by Deutsche Bank on JC Penney Co: http://t.co/0kF7hp2ggs http://t.co/wEJ6cAMyX3
Drew Powers
4 Sep 15 11:20:06
$JCP back on the g/r test - got my add at .69
4 Sep 15 10:37:17
RT @TweetLeni: $ANF $LULU $AEO $JCP $SHLD a few names I am long. Looking for Christmas longs to add.
4 Sep 15 10:36:39
$ANF $LULU $AEO $JCP $SHLD a few names I am long. Looking for Christmas longs to add.
4 Sep 15 09:49:39
Active Movements: http://t.co/Iz2NGNeAyv $JCP $NOK $STRZA
Consumer News
4 Sep 15 09:33:42
Analysts’ Recent Ratings Changes for J C Penney Company $JCP http://t.co/LA8LH0fdFq #acn
Sweet Platform
4 Sep 15 09:32:50
JCP Top news - Sep 4th, 2015 $JCP http://t.co/yxdVVFVvtE
US Banking News
4 Sep 15 09:29:12
Analysts’ Recent Ratings Changes for J C Penney Company $JCP http://t.co/T6NZimVjcn
Ticker Report
4 Sep 15 09:25:27
Analysts’ Recent Ratings Changes for J C Penney Company $JCP http://t.co/qs5U0nOil6
Ticker Report
4 Sep 15 09:12:16
J C Penney Company Given Consensus Recommendation of “Hold” by Brokerages $JCP http://t.co/ybRLXjUhc2
Breaking News Now
4 Sep 15 09:12:03
$JCP: J.C. Penny (JCP) Stock is the ‘Chart of the Day’: http://t.co/Sm6jqjwb6v
Consumer News
4 Sep 15 09:10:34
J C Penney Company Given Consensus Recommendation of “Hold” by Brokerages $JCP http://t.co/QCDbaUAWQz #acn
Dakota Financial
4 Sep 15 09:09:43
J C Penney Company Given Consensus Recommendation of “Hold” by Brokerages $JCP http://t.co/XT1D9SPxnL
TheStreet SpeedDesk
4 Sep 15 09:06:35
J.C. Penny $JCP Stock is the ‘Chart of the Day’ http://t.co/qsp2UHtEgs
Trader Daily
4 Sep 15 09:06:07
J.C. Penny $JCP Stock is the ‘Chart of the Day’ http://t.co/vT689SR9ZO
4 Sep 15 09:03:04
$JCP: JC Penney Company Given Consensus Recommendation of “Hold …: http://t.co/KZmjRf9kUP
4 Sep 15 08:52:54
MidCap #Stocks Trend $THS $JCP $FLO $LANC $IM $TECD $NVR $BWLD $SLH $ACXM $GES $CBOE $AAN $POST $ALK $SFG @ http://t.co/H27z0IZ4hK
4 Sep 15 08:44:06
Right now JCP is number 95 for the largest percentage gain out of 250 stocks. $JCP JCP is up +7.83% in the las http://t.co/c6vhDbXrwz
4 Sep 15 08:39:09
$JCP Next week SHORTS get striped; look for $10 + before EOW Sept 11.
Drew Powers
4 Sep 15 08:36:45
$JCP LOTS of koolaid so don't underestimate how far it can go
4 Sep 15 08:36:09
$JCP Reminder: Goldman Sachs Retail Conference Sept. 9, JCP CEO Marvin Ellison to speak @ 3:10 for 30 minutes. GS about to become support
4 Sep 15 08:34:53
$JCP well well, we need to pin an Option #, $9.50 or $10 for today? At leaset we have broken the dreaded $8.50 number!!!!
Drew Powers
4 Sep 15 08:17:24
started my short 9.71 - $JCP Not a bad entry IMO http://t.co/XASg3lnYRM
Alexander Morris
4 Sep 15 08:00:26
$JCP: Exc 6MoHIGH=9.70, hits:2, Rng:26%, ch:+0.7%, PDayTBnd+, allTFs+, bigFlt:290M, HiPctSht[34%:4d], 8HiDays:25%, DyVol:4.48M:0.3x:0.2x
4 Sep 15 07:58:34
Volume Alert - JCP 9.62 J.C. Penney Company Inc $JCP Hit a high today of 9.76 Closing the day 10:30 at 9.62 -0 http://t.co/PwYHR8LiyR
John Ablemann
4 Sep 15 07:39:09
$JCP Why Shares of JC Penney Company Inc. Surged 10% in August http://t.co/5GRJpdOpT6
  +Follow October 4, 2013 9:00AM



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