Beleagured Tower Group (TWGP) Bouncing Back

Jacob Harper  |

The end of December has seen the year’s worst performing Financial sector stock bounce back slightly, regaining a sliver of a dramatic, massive valuation loss. Tower Group International (TWGP) has plummeted over 80 percent since August, when the company first delayed their second-quarter earnings report to assess the extent of losses, losses that had not been expected at all. After two more delays, the report was finally released on Nov. 22, showing the company had missed original earnings expectations by a drastically wide margin.

In the lead-up to the release of the earnings report, Tower Group gave several hints they would be experiencing an unexpected loss. After claiming they needed more time to fully assess their loss reserves, investors panicked and the company’s shares began a drastic downward spiral.

The company also revised financial statements from 2011 and 2012, which further spooked investors. Tower Group had previously been hammered by an onslaught of claims following property damage caused by the Superstorm Sandy disaster.

In the wake of the massive stock plummet Tower Group has rebounded somewhat, as analysts have opined that the investor sell-off that has taken place since has been an overreaction. On Dec. 16, Compass Point lowered their price target on the company’s shares to $8.00. However, Compass maintained a buy rating, and their price target still indicates an upside of nearly 39 percent.

The company now expects to post an EPS loss of $4.50 a share for the fiscal year. However, there are still signs the company could bounce back, and investors seem to agree. After an uninterrupted slide that lasted over four months, the company gained over 10 percent from Dec. 12 to Dec. 16.

Tower Group is included in’s Turnaround Stock Portfolio, a collection of beleaguered plays that we felt were candidates to rebound. Since the portfolio’s inception in September, Tower Group has been the worst performer in the portfolio by a significant margin.  

After spiking in early trading, Tower Group had gained 5.82 percent by midday trading to hit an even $4.00 a share. 

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not necessarily represent the views of 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:

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