​Why Some Turnarounds May Flourish or Fail

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Recently, I was interviewed by Chuck Jaffe, a senior columnist for MarketWatch and host of “MoneyLife with Chuck Jaffe.” I thought I might pass along some of the highlights, says turnaround specialist George Putnam, editor of The Turnaround Letter.

What separates turnarounds that are buying opportunities from those that will languish? A solid core business upon which to build the turnaround, new leadership and “a balance sheet that is not so awful that it will drag the company down.” We also may look for a secular trend that indicates the entire sector will turn upward.

With sectors like retailing that have secular headwinds from competitors like Amazon (AMZN), The Turnaround Letter searches for beaten down companies that look promising. Macy’s (M) has a great brand, is reinvesting in its business and has valuable real estate holdings.

We believe Macy’s will survive and eventually flourish. At the other end of the spectrum is Sears (SHLD), which has not re-invested in its operations and is dying quickly.

The battered energy sector provides some opportunities as companies have learned to live with $45-50 oil. We like Weatherford (WFT), an oil services company with new leadership that is reducing its debt and lowering its costs.

Credit Suisse (CS) is a financial stock we like. It is a large, well-known and global investment company that was poorly-managed, found itself over-extended in investment banking and facing fines.

The new CEO brings strong turnaround experience, the company has a good franchise and the stock pays an attractive dividend.

George Putnam has edited The Turnaround Letter since its founding in 1986.

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