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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
Ty Webb
3 May 15 19:54:43
RT @HokieZ28: $JCP didn't get a fill last week, too conservative on entry. May be more aggressive this week with risk established http://t…
HokieZ28
3 May 15 18:44:07
$JCP didn't get a fill last week, too conservative on entry. May be more aggressive this week with risk established http://t.co/WLvK91siLF
PennyStock Zone
3 May 15 18:16:19
Tip #4 How to identify a HOT SECTOR? http://t.co/WvpU6esv0n $UGAZ $JCP $PBYI $UNG $DGLY
Capital Market Labs
3 May 15 18:14:12
$KSS vs. $JWN vs. $JCP vs. $SHLD Compared Across 9 Critical Measures http://t.co/24VXjYVfyL http://t.co/z8BpAU3w7X
Stocks Pastor
3 May 15 17:52:28
$JCP reports earning 5/14. Best level to load is $8.00. Huge bullish bets last week.
Leilani Pips™
3 May 15 17:14:13
@MGMTino haha it's just an app actually not being sold in $jcp
IH NASDAQ OMX
3 May 15 16:56:35
NEM Newmont Mining Corp. Investor Opinions Click Here -> http://t.co/c1lQjBFO6J Trending $NEM $FV $DSLV $JCP #NEM #tradeideas…
Investors Hangout
3 May 15 16:56:04
MRGE Merge Healthcare Incorporated. Stock Forum Click Here -> http://t.co/MSNebipd5U Trending $MRGE $MYEC $JCP $XLY #MRGE #stock…
DSabatino
3 May 15 16:55:27
@PipsToDollars $JCP Shoppers Look for Coupons in the Sunday Newspaper, is $AAPL offering 50% off at JCP?
PolgarStocks
3 May 15 16:54:05
JCP JC Penney Co, Inc. Prev Close Click Here -> http://t.co/k6D94B7fYi Trending $JCP $RIG $EBAY $SHAK #JCP #stocks #pennystocks
jim50
3 May 15 16:52:33
GS Goldman Sachs Group, Inc. Ideas Click Here -> http://t.co/V8aJhNYVtO Trending $GS $JCP $ETSY $WFC #GS #stock #nasdaq
Investors Hangout
3 May 15 16:51:04
FV First Trust Dorsey Wright Focus 5 ETF Dividend Click Here -> http://t.co/4Tx8JKtWbP Trending $FV $AA $CSCO $JCP #FV #stocks…
IH News Desk
3 May 15 16:49:33
EIDO iShares MSCI Indonesia Investable Market Index Fund E.P.S. Click Here -> http://t.co/0G4zqbBTMu Trending $EIDO $RCPI $JCP $WFC…
Leilani Pips™
3 May 15 16:47:32
Monday: $car $el $jcp to laugh
Leilani Pips™
3 May 15 16:43:03
I just wonder how many $jcp consumers would be an owner of an $aapl #watch lol
Leilani Pips™
3 May 15 16:35:31
$jcp and $aapl lol http://t.co/61xds6JbzO
danrocks
3 May 15 16:02:34
XBI SPDR S&P Biotech Index ETF Investor Opinions Click Here -> http://t.co/DWM9RtNdY1 Trending $XBI $SYN $OII $JCP #XBI #pennystocks…
nasdaqfan
3 May 15 15:54:05
JCP JC Penney Co, Inc. Ideas Click Here -> http://t.co/wSzKc3hh5L Trending $JCP $FCX $WMIH $EWG #JCP #investing #finance
Mark Mansfield
3 May 15 13:05:48
RT @ACInvestorBlog: Stocks to keep an eye on May 04, 2015 http://t.co/pXlNprYWOx $CLDN $DGLY $HTZ $JCP $TASR $VRNG $XGTI $ZIOP
Stockaholics
3 May 15 10:24:33
Our Penny Stock Pick On $TLFX Has Gained 44% In The Past 2 Days! Big News: http://t.co/lfyqjFWSk5 $JCP $AQUM $WSGI
Penny Stock Secret
3 May 15 10:11:59
This �Millionaire Maker� For Traders Shares His Secrets! Click here http://t.co/SVqoMkrw2z .. $JCP $AQUM $WSGI
BreakingStocksNews
3 May 15 09:42:04
$CYTK $JCP: Fast Moving Stocks: Cytokinetics, Incorporated (NASDAQ:CYTK ...: http://t.co/sI15v2nYzz
Stock Dawgzz
3 May 15 09:33:29
Our Penny Stock Picks Gained 1472% In 2 Months! Get Access To Our New Picks Early: http://t.co/cyLjru6AEk $JCP $AQUM $WSGI
Breaking News
3 May 15 09:32:03
$PRTK $JCP: Investors Alert: Paratek Pharmaceuticals, Inc. (NASDAQ:PRTK), J C ...: http://t.co/iYAyB42txg
Penny Stockington
3 May 15 09:23:02
Our Winning Stock Alerts Gained Over 3115% In 6 Months! Huge News: http://t.co/bsG1ysXGSP $JCP $AQUM $WSGI
StockenheimerSchmidt
3 May 15 09:03:46
Platinum Members Saw Our Stock Alerts Gain 3100% In 6 Months! Subscribe Here: http://t.co/KjFX61Pd0S $JCP $AQUM $WSGI
Jacob Wolinsky
3 May 15 07:51:25
@BluegrassCap $RSH $JCP and $SHLD JK - i dunno but for private companies have wanted to buy Trader Joes for past 15+ yrs
Invest | Donate
3 May 15 07:14:02
@rosnerstocks: CVX Chevron Corp. Current Price Click Here -> http://t.co/R8IAcZf6Qt Trending $CVX $JCP $TASR $MDWD #CVX #investing #invest
Rosner Stocks
3 May 15 06:54:09
JCP JC Penney Co, Inc. Bid Size Click Here -> http://t.co/O2gpdqf9mA Trending $JCP $HAL $HRS $LB #JCP #share #finance
Rosner Stocks
3 May 15 06:49:14
CVX Chevron Corp. Current Price Click Here -> http://t.co/wr63kdiA1G Trending $CVX $JCP $TASR $MDWD #CVX #investing #invest
Wantabetrader
3 May 15 06:45:41
RT @ACInvestorBlog: $JCP $AAPL JCPenney lands partnership with Apple for watch app http://t.co/tqBIerLzx2
Steven Bell
3 May 15 06:39:20
RT @ACInvestorBlog: $JCP $AAPL JCPenney lands partnership with Apple for watch app http://t.co/tqBIerLzx2
Osama B-D
3 May 15 06:30:36
RT @ACInvestorBlog: Stocks to keep an eye on May 04, 2015 http://t.co/pXlNprYWOx $CLDN $DGLY $HTZ $JCP $TASR $VRNG $XGTI $ZIOP
Antonio Costa
3 May 15 06:10:52
Stocks to keep an eye on May 04, 2015 http://t.co/pXlNprYWOx $CLDN $DGLY $HTZ $JCP $TASR $VRNG $XGTI $ZIOP
Adriana Cristina
3 May 15 05:33:35
RT @ACInvestorBlog: $JCP $AAPL JCPenney lands partnership with Apple for watch app http://t.co/tqBIerLzx2
Dave
3 May 15 05:26:49
RT @ACInvestorBlog: $JCP $AAPL JCPenney lands partnership with Apple for watch app http://t.co/tqBIerLzx2
Antonio Costa
3 May 15 05:26:40
$JCP $AAPL JCPenney lands partnership with Apple for watch app http://t.co/tqBIerLzx2
Invest | Donate
3 May 15 05:22:57
@IHNASDAQOMX: JD http://t.co/LfHvwIr6du, Inc. Last Price Click Here -> http://t.co/Kc3mNkd6GK Trending $JD $JCP $EWY $JCP #JD #stock #in…
danrocks
3 May 15 05:02:04
XLF Financials Select Sector SPDR Prev Close Click Here -> http://t.co/Gyw8aAm7oa Trending $XLF $JCP $NUGT $XLB #XLF #investing…
PolgarStocks
3 May 15 04:55:34
JCP JC Penney Co, Inc. Investor Opinions Click Here -> http://t.co/0inyHbthrx Trending $JCP $ADI $XLY $WBA #JCP #stockmarket…
IH NASDAQ OMX
3 May 15 04:55:04
JD http://t.co/QqdtvmgP1J, Inc. Last Price Click Here -> http://t.co/6UCDDJzPte Trending $JD $JCP $EWY $JCP #JD #stock #invest
Capital Market Labs
3 May 15 00:06:04
$BLKI.B vs. $JCP vs. $BIG vs. $BURL Compared Across 9 Critical Measures http://t.co/H7PIePgRfh http://t.co/YjiJGP69U6
Capital Market Labs
2 May 15 23:36:58
$KSS vs. $JWN vs. $JCP vs. $M Compared Across 9 Critical Measures http://t.co/yQwZltrozi http://t.co/UrLaF3di2S
Penny Stockington
2 May 15 23:03:15
Our Winning Stock Alerts Gained Over 3115% In 6 Months! Huge News: http://t.co/bsG1ysXGSP $JCP $AQUM $WSGI
StockenheimerSchmidt
2 May 15 22:43:11
Platinum Members Saw Our Stock Alerts Gain 3100% In 6 Months! Subscribe Here: http://t.co/KjFX61Pd0S $JCP $AQUM $WSGI
Capital Market Labs
2 May 15 22:24:33
$KSS vs. $JCP vs. $DG vs. $M Compared Across 9 Critical Measures http://t.co/TjwQsFkhYk http://t.co/x29AFXc8oF
Penny Stock Secret
2 May 15 20:39:01
Yesterday We Made $54,000 In Just One Trade More Info Here http://t.co/SVqoMkrw2z .. $JCP $AQUM $WSGI
Stock Rocket
2 May 15 19:27:22
Our Stock Pick On $THCZ Is Up 587.69% From Our Initial Release! Major News: http://t.co/Wvu7rPUNzU $JCP $AQUM $WSGI
Stock Dawgzz
2 May 15 18:44:01
Our Penny Stock Picks Gained 1472% In 2 Months! Get Access To Our New Picks Early: http://t.co/cyLjru6AEk $JCP $AQUM $WSGI
Stockaholics
2 May 15 18:01:34
Our Penny Stock Pick On $TLFX Has Gained 44% In The Past 2 Days! Big News: http://t.co/lfyqjFWSk5 $JCP $AQUM $WSGI
				
				
  +Follow October 4, 2013 9:00AM
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