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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
31 Jan 15 21:08:10
RT @StockSignaling: Movers and Shakers: $TKMR $P $BITA $FEYE $SN $CONN $ARO $SUNE $KBH $OAS $CLF $AMBA $SLXP $LOCO $JCP http://t.co/S9oPUZ8…
31 Jan 15 19:49:43
Tip #4 How to identify a HOT SECTOR? http://t.co/jnfUIrz2zo $UGAZ $JCP $PBYI $UNG $DGLY
31 Jan 15 18:30:03
Top Stock Picks: $QLGC $WLL $BRCM $JCP $AAPL $IMGN $YHOO $SYNA $AMZN $BIIB http://t.co/TRx9EnjwT5 #investing #nasdaq #spy #analyst #nyse
31 Jan 15 18:17:51
RT @StockSignaling: Movers and Shakers: $TKMR $P $BITA $FEYE $SN $CONN $ARO $SUNE $KBH $OAS $CLF $AMBA $SLXP $LOCO $JCP http://t.co/S9oPUZ8…
31 Jan 15 18:02:42
RT @StockSignaling: Movers and Shakers: $TKMR $P $BITA $FEYE $SN $CONN $ARO $SUNE $KBH $OAS $CLF $AMBA $SLXP $LOCO $JCP http://t.co/S9oPUZ8…
Stock Signaling
31 Jan 15 18:01:25
Movers and Shakers: $TKMR $P $BITA $FEYE $SN $CONN $ARO $SUNE $KBH $OAS $CLF $AMBA $SLXP $LOCO $JCP http://t.co/S9oPUZ8PN3 #mkt #investors
Trading Alpha
31 Jan 15 17:36:03
$SPY, $PWR, $NWSA, $MS, $MON, $MU, $JCP, $HPQ, $HLF, $C, $CSCO, $CCL, $ABC, $AIG, $AA, $A Entries and Levels:https://t.co/ntOy4z0gPo
31 Jan 15 16:30:03
Top Stock Picks: $QLGC $WLL $BRCM $JCP $AAPL $IMGN $YHOO $SYNA $AMZN $BIIB http://t.co/Vv2VEnpBuv #trader #stockpicks #swingtrading #nasdaq
31 Jan 15 16:25:42
Our Alerts on $IJJP $QLTS $TUNG & $ETBI Gained 160% This Week! Get Our Next Pick: http://t.co/LayPQuOeI4 $JCP $AQUM $WSGI
PennyStock Zone
31 Jan 15 10:50:36
Tip #4 How to identify a HOT SECTOR? http://t.co/cFuOlMXLZp $UGAZ $JCP $PBYI $UNG $DGLY
31 Jan 15 10:50:18
Check out our alert track record here... http://t.co/BdiZMRYWH1. Sign up is free. See you soon! $ODP $JCP $ACI $IAG $SD $AKS
31 Jan 15 08:16:44
Our Penny Stock Picks Gained an overall 160% This Week! New Picks Coming: http://t.co/LayPQuOeI4 $JCP $AQUM $WSGI
MB North
31 Jan 15 07:19:54
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31 Jan 15 06:30:03
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31 Jan 15 06:11:39
Tip #4 How to identify a HOT SECTOR? http://t.co/ewe2BEND4R $UGAZ $JCP $PBYI $UNG $DGLY
31 Jan 15 04:30:02
Top Stock Picks: $HLIT $HAR $JCP $AAPL $BRCM $QLGC $YHOO $SYNA $AMZN $BIIB http://t.co/TRx9EnjwT5 #nyse #trading #stockmarket #dow #stock
fonzy cash
31 Jan 15 00:47:22
RT @TradingAlpha11: $JCP possible gap fill http://t.co/u6cMHnhNcA
Trading Alpha
31 Jan 15 00:44:53
$JCP possible gap fill http://t.co/u6cMHnhNcA
Investors Hangout
31 Jan 15 00:02:59
Stocks Trending Now: http://t.co/48sklYB0IN $BECVY $CBMC $MAOMF $NXCLF $LOUIF $JCP $INWK $RRD $CORMD $CEO $RNSFF $CBNC ~
PennyStock Zone
30 Jan 15 22:07:47
Tip #4 How to identify a HOT SECTOR? http://t.co/cFuOlMXLZp $UGAZ $JCP $PBYI $UNG $DGLY
Mark Trader
30 Jan 15 21:44:43
http://t.co/vJ93JPRWBF has the most reliable picks in the market. The move fast and never fail. $ARNA $BAC $JCP $PBR $TLM $MTG $F
30 Jan 15 21:01:11
Tip #4 How to identify a HOT SECTOR? http://t.co/jnfUIrz2zo $UGAZ $JCP $PBYI $UNG $DGLY
30 Jan 15 20:34:03
Our Penny Stock Picks Gained an overall 160% This Week! New Picks Coming: http://t.co/LayPQuOeI4 $JCP $AQUM $WSGI
30 Jan 15 19:50:50
RT @StockSignaling: Movers and Shakers: $TKMR $P $BITA $FEYE $SN $CONN $ARO $SUNE $KBH $OAS $CLF $AMBA $SLXP $LOCO $JCP http://t.co/S9oPUZ8…
Uncle Omer
30 Jan 15 19:04:57
Only chance $JCP has for survival is to become a totally different co with a different name. Could happen but chance is same as any upstart
Uncle Omer
30 Jan 15 19:01:21
$AMZN 2016 340 calls were up 100% today. On the short-side greatest VALUE is still in $JCP 2017 Puts as this co gradually liquidates to $0
Stock Signaling
30 Jan 15 18:01:16
Movers and Shakers: $TKMR $P $BITA $FEYE $SN $CONN $ARO $SUNE $KBH $OAS $CLF $AMBA $SLXP $LOCO $JCP http://t.co/S9oPUZ8PN3 #analytics #mkt
Misty Mckay
30 Jan 15 16:38:18
If you think $JCP is different from $RSH or $SHLD, you're wrong, Going down, not special, Not different,
Stock Rocket
30 Jan 15 16:18:29
Our Penny Stock Picks Gained an overall 160% This Week! New Picks Coming: http://t.co/vJR8lXzozx $JCP $AQUM $WSGI
Stocks News&Markets
30 Jan 15 14:52:09
$JCP - Statement of Changes in Beneficial Ownership (4) http://t.co/ipWbjIF4yr
Insider Alerts
30 Jan 15 14:50:06
$JCP: New Insider Transaction on JCP by Chief Executive Officer ULLMAN MYRON E III: http://t.co/RVZMelBxIt http://t.co/5WAiM1aNFy
30 Jan 15 11:26:02
$JCP: News Recap-J C Penney (JCP), Suncor (SU), Gold Fields (GFI), Box ...: http://t.co/uYhuXguePV
Bidness Etc
30 Jan 15 10:56:41
Where Stocks Of J C Penney , Sears Holdings , And Macy’s Are Heading http://t.co/zzFQi38zRF $JCP $SHLD $M http://t.co/Yy8L7I61OL
Trader News Daily
30 Jan 15 10:55:49
Wow http://t.co/PeRPkZkWiw just posted last weeks results. +429%. Crazy. They offer a free trial too. $SD $JCP $FNMA $MCP $DRYS $ZNGA
30 Jan 15 10:06:56
Check out our alert track record here... http://t.co/BdiZMRYWH1. Sign up is free. See you soon! $ODP $JCP $ACI $IAG $SD $AKS
Peter Bardens
30 Jan 15 10:04:02
$JCP Deutsche Bank Rating Disclosure on J C Penney Company Inc http://t.co/GETZVFhOJi
30 Jan 15 09:43:03
$JCP $SHLD $M: Where Stocks Of JC Penney (JCP), Sears Holdings (SHLD), And ...: http://t.co/Pftle5PQ8z
Media Sentiment
30 Jan 15 09:15:15
$JCP received a new alert. Find out why at http://t.co/5lwmDm2SCs #stocks #daytrading #trading #mkt #NYSE #NASDAQ #markets 324
Market Int Center
30 Jan 15 09:14:39
JC Penney $JCP Showing Bearish Technicals With Support At $6.95 ( http://t.co/dPXEBiXHFG )
Stocks News&Markets
30 Jan 15 08:30:59
$JCP - Amended Statement of Ownership (sc 13g/a) http://t.co/0PVyNWFZoh
30 Jan 15 08:30:19
$JCP New JCPenney SEC Filing Alert From our Stock News Alerts App
30 Jan 15 08:29:45
$JCP - Amended Statement of Ownership (sc 13g/a) http://t.co/CsUNiI93R5
30 Jan 15 08:23:24
$JCP Ammended SC 13G filed by: Blackrock Inc., subject: J C Penney Co Inc, Percent: 9.0% http://t.co/T7Q3tO2RsV
Stock Rocket
30 Jan 15 08:07:07
After 140% Gains On Alerts In 4 Days, $ETBI Is Our New Penny Stock Pick! Check It Out: http://t.co/CCkNDZnoyc $JCP $AQUM $WSGI
Jann Gobble
30 Jan 15 07:43:22
$JCP News: Deutsche Bank Rating Disclosure on J C Penney Company Inc http://t.co/lEnRJc9OMp
Jann Gobble
30 Jan 15 07:43:21
$JCP News: JCPenney Blinds & Shades: Up to 74% off + coupon + free shipping w/ $99 http://t.co/ekKrIStbkl
Casey Baker
30 Jan 15 07:37:45
$JCP looks like yesterday all over. Pick a spot again? http://t.co/TNpFIrTRCB
30 Jan 15 05:06:07
$MCEP $JCP: Top Movers: Mid-Con Energy Partners (NASDAQ:MCEP), J C ...: http://t.co/hqtWrB0bi4
30 Jan 15 03:14:45
DollarsOnPennies: $JCP Gallery View http://t.co/qRFW5PFg37
Jet Life PennyStock$
30 Jan 15 03:08:39
DollarsOnPennies: $JCP Gallery View http://t.co/o1Ovc84QPu
  +Follow October 4, 2013 9:00AM



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