Sign in or Register

Already a member?

Sign in

Or sign in with your account on:

Not a member yet?


Turnaround Stock Portfolio Week #4: Our Losers Have (Just Barely) Prevailed!

By  +Follow October 15, 2013 7:25PM
Tickers Mentioned:

After last week’s underwhelming performance, we check in on the Equities.com turnaround stock portfolio experiment as it embarks on its fourth week of existence edging almost imperceptibly into the positive.

At the time of our last check-in, our portfolio of struggling companies had posted a weekly drop of just over 7 percent, mostly due to the seemingly relentless debacles in which J.C. Penney (JCP) and Tower Group (TWGP) currently find themselves. But the fates had a different plan in mind for this week; while J.C. Penney continues to bleed (having shed another 6 percent of its stock price since our last check-in), Tower Group has been able to slightly pare back some losses, and all other components have posted at least respectable gains, pushing the overall performance of the portfolio to an ever-so-slight weekly gain of 0.034350499 percent.



To design our Turnaround Stock Portfolio, we looked for stocks that have had a negative return on the year or have at least lost significant value in the last two years. They also possess the fundamentals to potentially regain their lost value, and are either actively engaged in or are in dire need of a radical turnaround.

To diversify the portfolio, we picked one stock from each sector, and tried to distribute our picks between micro, small, mid and large cap companies.


Component Spotlight

As we continue tracking the progress of our portfolio, we will be profiling these companies to give you an idea of why we felt their inclusion to be warranted. This week, we will be having a closer look at our Commodities, Energy, and Basic Materials picks.


Materials Sector Pick: Alcoa, Inc. (AA)
The relative slowing down over the last few months of the miracle of seemingly exponential Chinese growth is starting to cause problems for a number of metals producers, as iron ore and copper prices decline on a supply glut that analysts predict will only get bigger next year. For Alcoa, whose business revolves around the production and sale of aluminum, supply glut has been an ongoing feature of the industry for nearly a decade, a fact that has resulted in the price pressure that one might expect. For the recently ended quarter, for instance, aluminum futures on the London Metals Exchange are down 13 percent from the same period last year to an average of $1,845 per metric ton. The situation is being compounded for Alcoa by the recent uptick in China's own production. In late 2011, Alcoa's shares were trading for just shy of $12 dollars per, but by the end of August 2013 had dropped to about $7.70, with no end of aluminum oversupply in sight.

Why we Picked Alcoa
When Alcoa reported earnings for the recently-ended third quarter, nobody was expected a beat, but there it was. While the company most certainly benefitted from relatively more stable aluminum prices during the period, the real successes were found in cost cutting, greater production efficiency, and increases in sales to the commercial building, automobile and aerospace industries. Alcoa had forecast capital expenditures for 2013 at some $1.5 billion, but as of the recently-ended quarter the company had only spent some $770 million of that. Furthermore, the company is looking to restructure its upstream business in order to better navigate lower aluminum prices, which are expected to stay that way for the conceivable future. A large part of this effort will be focused on becoming less dependent on the London Metals Exchange that sets pricing, while taking advantage of the bullish atmosphere that currently prevails among both airplane and automobile manufacturers. If the company can pull off this effort to diversify its downstream business, then there is no reason why shares couldn't start making significant gains.


Energy Sector Pick: Quicksilver Resources (KWK)
For a great number companies whose business revolves around the location, extraction, and production of oil and gas from unconventional reserves, 2013 has been a banner year as America’s “shale boom” continues to transform the energy economy. The trend so far has looked as though it will favor independent oil and gas drillers more than it will the (relatively) clunky, old-school “super majors” like Chevron (CVX) and ExxonMobil (XOM) , whose traditional business models tend to be based on the ownership and year-over-year replenishment of equity oil reserves. Quicksilver, however, was particularly affected by the drop in natural gas prices in the late part of last year and the beginning of this one. Over the past twelve months, shares have taken a nearly 50 percent cut, and the company has struggled under the weight of both debt and an excessive number of assets. This is a far cry from five years ago when shares were trading for over $40 apiece.

Why we Picked Quicksilver
Despite its troubles, Quicksilver Resources has still got its feet firmly planted in shale prospects, particularly in Texas’s highly coveted Barnett Shale, as well as in Wyoming, Colorado, Montana, as well as Alberta and British Columbia in Canada. It has the technical know-how to reach unconventional plays, and has been taking steps to unburden itself financially, such as its sale earlier in the year of 25 percent of its interests in the Barnett to Tokyo Gas for $485 million, which significantly reduced its debt. The company has furthermore turned out to be the portfolio’s best performer, with shares up over 36 percent since Sep 25, and over 4 percent in the last week to the current price of $2.60.


Commodities Sector Pick: Cliff’s Natural Resources (CLF)

One year ago, Cliff's Natural Resources was trading for over $45 per share. Last June, shares were barely over $15, though they've recuperated slightly to the current price of $22.50. Cliff's has suffered a great deal from a slower Chinese economy, particularly with the resulting tumble in iron ore prices  that this has caused. China is the world's largest consumer f the metal, and mining companies over the past ten years have been scrambling to up production as demand continually outstripped supply. The second half of 2013 has seen this trend reversing, with many analysts predicting substantial drops in iron ore prices that is sure to cause all sorts of trouble for mining companies. For Cliff's, however, the hurt is already here, as in 2013 the company saw less exports to Asian countries overall. Furthermore, the company is saddled with large debts, over $3 billion in the long-term, abd its assets cover just barely over half of that amount. Other than iron ore, Cliff's mines coal, which is an industry whose future becomes more uncertain with every passing day. Shares have lost about 40 percent over the course of 2013.

Why we Picked Cliff’s

Despite the industry headwinds faced by the company, and its tremendous amount of debt, all is by no means lost for Cliff's. The company is not the only miner who is going to be dealing with lower iron ore prices, and Chinese growth is only relatively lower, and the Asian economy in general could still provide some price support in the future, even if 2014 proves to be a rough year. The company also looks to be actively taking measures to hedge against price pressure, most recently with its deal with US Steel giant AK Steel (AKS) to supply iron ore pellets through 2023. Last year, AK used 6 million tones of irone ore. Furthermore, the company is in the process of restructuring some of its production, particularly at its Canadian mines, and this along with finding buyers outside of China offer enough room for Cliff's to bounce back.

Here's how our portfolio looks overall, as we approach its one-month birthday, still returning in the negative by 2.21 percent:

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.

Liked What You Read? Join Equities.com and Connect With Your Favorite Financial Experts FOR FREE! Members of Equities.com gain access to our leading financial news and content, active social investment community, proprietary research tools including the 2014 Small-Cap Stars, E.V.A. reports and more.

Results for AA
20 Dec 14 04:00:06
Langan Stocks
20 Dec 14 03:25:07
$DBC Stock Price Updated Saturday, December 20, 2014 06:03:25 AM $AA $ADMD $QLD $EWZ http://t.co/qThoGHdcDN
IH News Desk
20 Dec 14 02:39:15
$ISIS News Updated Saturday, December 20, 2014 05:11:23 AM $AA $BAC $PG $MO http://t.co/88o6Hnntoz
Jaggy Mollen
20 Dec 14 02:33:34
Call/Put Highest % volume changes Calls $NFX, $DPS, $DG, $NRF, $MT, Puts $SFLY, $AMKR, $ANV, $AA, $FXY,
Tressie Clayworth
20 Dec 14 00:02:47
Shoud you sell or hold stocks like $AMAT $AA $LM $IR #NASDAQ http://t.co/TF5kXDdSvd
Kohen Birch
19 Dec 14 23:05:07
Are you looking for more winners like $JW $AA $ISRG $SSO Give it a try http://t.co/uVALLjNRvS
Joe Barbee
19 Dec 14 22:10:03
Todays movers to research $AA $MU $CCK $PCLN #moneymanagement http://t.co/1gZSmt7C29
Beckie Whittington
19 Dec 14 22:04:56
Sick and Tired of losing money on $BWC $AA $ZNGA $SSO #economy http://t.co/ZYiNAdCp8A
Arnulfo Bearden
19 Dec 14 21:38:25
Find the next hot #pennystock $AA $FOSL $PCLN $BLOX View now http://t.co/soFhR1cw5g
Alistair Perreault
19 Dec 14 20:31:36
Are you considering buying $AOS $NVDA $AA $USD #overvalued http://t.co/zDpHZVaZCh
Necole Diaz
19 Dec 14 18:51:21
5 Stocks you should be watching $AA $FRC $BEAV $YOD #Research http://t.co/Zhinl5RVBl
Zackery Hardesty
19 Dec 14 18:44:52
Would you like great research on stocks $AA $TMHC $SLGN $SSO View now http://t.co/inrJivvnQ4
German Hawa
19 Dec 14 18:41:50
5 Stocks you should be watching $AA $BBY $TXN $GOOG Check out http://t.co/EsimVHRoRs
19 Dec 14 18:39:22
I didnt know the pro members get the opening bell alerts from http://t.co/qY5MPlJPrU 1 day early. $AA $VPOR $ALU $SAN $AMD $ZNGA
Mercedes Bullard
19 Dec 14 18:32:10
Get Free research on $PETM $OKE $AA $QLYS #Stock http://t.co/e1jC71wn8i
Bodhi Thatcher
19 Dec 14 17:38:01
Looking for the next winners like $AA $LLY $UFS $SLW #money http://t.co/JyVuHdIFYT
Chng 莊
19 Dec 14 17:26:45
$AA: A nice rebound within the channel after the MACD divergence and analysts upgrades. http://t.co/ZxxmQOw6Ee
Langan Stocks
19 Dec 14 17:16:42
$AA News Updated Friday, December 19, 2014 8:03:24 PM $MA $AA $ONVO $RAD http://t.co/FM27gLGcFF
Langan Stocks
19 Dec 14 17:16:38
$AMAT Company Info Updated Friday, December 19, 2014 8:03:24 PM $CSCO $NG $AA $RAD http://t.co/GT5LxgQyQO
Rosner Stocks
19 Dec 14 17:13:38
$SLTD Investor Opinions Updated Friday, December 19, 2014 7:59:24 PM $MO $AA $BABA $VHC http://t.co/FqrhA2aT0D
Rosner Stocks
19 Dec 14 17:13:34
$AA Short Sales Updated Friday, December 19, 2014 7:59:24 PM $INTC $AZFL $GGAL $WLL http://t.co/9nBL0QeyFa
Tempie Ramey
19 Dec 14 17:06:41
This weeks Stocks you should Watch $AA $CNX $GCI $IR #liquidity http://t.co/o9VqQpin2I
Mad Money On CNBC
19 Dec 14 16:51:10
Don't take it from @jimcramer - these c-suite perspectives are straight from the source! CEO's from $AA, $HON & more http://t.co/MKbSnLx73r
IH News Desk
19 Dec 14 16:30:43
$FXE Percent Change Updated Friday, December 19, 2014 7:11:21 PM $AA $SUNE $UVXY $BBRY http://t.co/5MSaE97UOL
19 Dec 14 16:18:53
http://t.co/NYsxQOU64w DennyT: ACHN Balance Sheet $ACHN $AGNC $CAT $AEO $AA: DennyT http://t.co/lqTguK8Yth http://t.co/NYsxQOU64w
19 Dec 14 16:18:51
http://t.co/QkCFZ8YF3c DennyT: ACHN Balance Sheet $ACHN $AGNC $CAT $AEO $AA: DennyT http://t.co/lKMIaMfCew http://t.co/QkCFZ8YF3c
Robért Aouad
19 Dec 14 16:14:34
What $HON $AA $D $TNET $PAYX $RH $RHT $COLM $KS & @hamptoncreek told @jimcramer this week. In 60 seconds: http://t.co/TIE18dNRkz #cnbc
Rosner Stocks
19 Dec 14 16:13:07
$HIMX News Updated Friday, December 19, 2014 6:59:24 PM $SIL $BLTA $GLD $AA http://t.co/kCEjXFOSnW
19 Dec 14 16:00:06
FinSentS SP500
19 Dec 14 15:30:09
$AA:US Alcoa's Pullback: Why Investors Should Not Miss This Buying Opportunity #ALCOA INC http://t.co/1S38ZbC50r #SP500
19 Dec 14 14:55:56
Platinum Memberships Rose, After 528% Gains On Penny Stocks, In One Month! Big Update: http://t.co/2W3yKD2d5Q $AA $BRSS $SHOO
Cyrus Abrams
19 Dec 14 14:38:22
Dont want to lose like you did with $LPS $AA $TDG $IR #wallstreet http://t.co/ExM2TE7S9w
Langan Stocks
19 Dec 14 14:15:33
$BAC Stock Price Updated Friday, December 19, 2014 5:03:31 PM $TWTR $AA $EFA $SDS http://t.co/e2loUJhaQf
19 Dec 14 14:13:38
$AA Financials Updated Friday, December 19, 2014 5:07:38 PM $XLE $EFA $ALXN $GDX http://t.co/3fZ6ZkWY00
Rosner Stocks
19 Dec 14 14:12:09
$NFLX Reviews Updated Friday, December 19, 2014 4:59:24 PM $VRTX $EPI $AA $EEM http://t.co/YJwBAsyiQJ
19 Dec 14 13:33:45
I didnt know the pro members get the opening bell alerts from http://t.co/qY5MPlJPrU 1 day early. $AA $VPOR $ALU $SAN $AMD $ZNGA
Hit The Bid Radio
19 Dec 14 12:19:28
going to hang on to some $FEYE $RIG so far as I dip back into a market that doesn't seem to want to go down anymore. NO $QQQ or $AA yet
19 Dec 14 12:16:24
$AA doin a little work today tho. #BackAtNormalLevels #BuyTheDip http://t.co/Lmxi1MzrHb
Wall Street
19 Dec 14 12:13:21
http://t.co/iQWRYqnOQl....Top penny stocks, NYSE, and NASDAQ trades from the stock market today. +296% last week. $AVP $ABEV $BMY $AA
19 Dec 14 12:12:34
$DVY Financials Updated Friday, December 19, 2014 3:07:40 PM $DDD $IBM $AA $AGN http://t.co/Dpcu6gQe8w
Mark Trader
19 Dec 14 11:58:23
Thanks to the pros at http://t.co/6cvEHBeuNR for the $TINO swing trade idea. Up 45% so far. $AVP $ABEV $BMY $AA
Future Tech Investor
19 Dec 14 11:38:00
19 Dec 14 11:33:43
$ECIG breakout up 50%, target $0.50 $WMT ex-CEO on BOD $BBRY $BABA $GILD $AA $VZ traders read: http://t.co/RB85WZsWYu http://t.co/xi3978GuDs
Dmitri Nabors
19 Dec 14 11:23:42
Looking for the next winners like $MPC $DELL $AA $CI Try this http://t.co/Zlm2cPj4Td
Langan Stocks
19 Dec 14 11:12:55
$LNKD Financials Updated Friday, December 19, 2014 2:03:31 PM $AA $SWKS $DAL $XLY http://t.co/M8nJcSkfjI
Rosner Stocks
19 Dec 14 11:09:14
$SLB Stock Message Board Updated Friday, December 19, 2014 1:59:23 PM $DOW $AA $UNH $MCD http://t.co/BWKJXqiUJI
Rosner Stocks
19 Dec 14 11:09:11
$AA Reviews Updated Friday, December 19, 2014 1:59:23 PM $RSP $KO $V $MO http://t.co/8HgFmv9bsG
Jack Trader
19 Dec 14 11:02:29
$AA 3 Reasons Alcoa Inc. Stock Could Give Back Its Gains http://t.co/69Jhuc065G
Samuel Brown
19 Dec 14 11:02:28
$AA Alcoa's Pullback: Why Investors Should Not Miss This Buying Opportunity (AA) http://t.co/yyOm9i4sNC
Asha Carvalho
19 Dec 14 10:55:31
Couple of Stocks you should Watch $WPX $ATO $AA $IR #overvalued http://t.co/Ho4i1KSccK
By  +Follow October 15, 2013 7:25PM



blog comments powered by Disqus

About us

Equities.com is the most advanced interactive online social ecosystem for the financial industry, serving as a resource center and next-generation communication platform that connects self-directed investors with public issuers, market experts, and professional service providers and vendors. Registered members can leverage our exclusive proprietary research tools such as the Small-Cap Stars, which outperformed 90% of all small-cap mutual funds, and robust do-it-yourself E.V.A. research reports. The Equities.com Issuer Dashboard is the ideal tool to communicate and manage investor awareness campaigns to the investment community, as well as to access valuable resources to help your company grow.

Market Data powered by QuoteMedia.
Copyright © QuoteMedia. Data delayed 15 minutes unless otherwise indicated. Terms of Use.