​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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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.

Companies

Symbol Name Price Change % Volume
CS Credit Suisse Group American Depositary Shares 12.95 -0.17 -1.30 2,952,639 Trade
M Macy's Inc 17.42 0.28 1.63 10,813,122 Trade
SHLD SHLDQ Sears Holdings Corporation n/a n/a n/a 0
WFT WFTIF Weatherford International plc (Ireland) n/a n/a n/a 0
AMZN Amazon.com Inc. 1,807.84 -31.50 -1.71 3,675,926 Trade

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