Investing in Turnarounds

719
-1

Published on

http://www.profitableinvestingtips.com/profitable-investing-tips/investing-in-turnarounds

Investing in Turnarounds

In the aftermath of the worst economic recession in nearly eighty years there are a lot of companies that are just putting themselves back together. The prime example was the company that once was the world’s largest corporation and the world’s largest auto maker. Things got so bad that General motors filed for bankruptcy and required a government bailout to stay in existence as a company. GM came out of bankruptcy. At the beginning of 2012 its stock sold for under $20 a share and now it sells for $35 a share. This brings up the topic of investing in turnarounds. Investing in turnarounds does not necessarily mean investing in companies that went broke. It can just be investing in companies that are displaying growth and vitality after a period of stagnation. For the long term investor interested in profiting by investing in turnarounds there are a number of things to look for. Some of these opportunities may be the most solid opportunities in today’s value investing.

0 Comments
0 Likes
Statistics
Notes
  • Be the first to comment

  • Be the first to like this

No Downloads
Views
Total Views
719
On Slideshare
0
From Embeds
0
Number of Embeds
0
Actions
Shares
0
Downloads
2
Comments
0
Likes
0
Embeds 0
No embeds

No notes for slide

Investing in Turnarounds

  1. 1. Investing in Turnarounds
  2. 2. In the aftermath of the worst economic recession in nearly eighty years there are a lot of companies that are just putting themselves back together http://www.profitableinvestingtips.com/profitableinvesting-tips/investing-in-turnarounds
  3. 3. The prime example was the company that once was the world’s largest corporation and the world’s largest auto maker. http://www.profitableinvestingtips.com/profitableinvesting-tips/investing-in-turnarounds
  4. 4. Things got so bad that General motors filed for bankruptcy and required a government bailout to stay in existence as a company. GM came out of bankruptcy. http://www.profitableinvestingtips.com/profitableinvesting-tips/investing-in-turnarounds
  5. 5. At the beginning of 2012 its stock sold for under $20 a share and now it sells for $35 a share. http://www.profitableinvestingtips.com/profitableinvesting-tips/investing-in-turnarounds
  6. 6. This brings up the topic of investing in turnarounds. Investing in turnarounds does not necessarily mean investing in companies that went broke. http://www.profitableinvestingtips.com/profitableinvesting-tips/investing-in-turnarounds
  7. 7. It can just be investing in companies that are displaying growth and vitality after a period of stagnation. http://www.profitableinvestingtips.com/profitableinvesting-tips/investing-in-turnarounds
  8. 8. For the long term investor interested in profiting by investing in turnarounds there are a number of things to look for. http://www.profitableinvestingtips.com/profitableinvesting-tips/investing-in-turnarounds
  9. 9. Some of these opportunities may be the most solid opportunities in today’s value investing. http://www.profitableinvestingtips.com/profitableinvesting-tips/investing-in-turnarounds
  10. 10. In an improving economy many companies may seem to have a new lease on life. http://www.profitableinvestingtips.com/profitableinvesting-tips/investing-in-turnarounds
  11. 11. However, the same fundamental analysis that guides all long term investment should apply when investing in turnarounds. http://www.profitableinvestingtips.com/profitableinvesting-tips/investing-in-turnarounds
  12. 12. If the company is showing a profit it is important to understand where that profit is coming from. Is the company increasing its cash reserves? http://www.profitableinvestingtips.com/profitableinvesting-tips/investing-in-turnarounds
  13. 13. If it once paid dividends is it paying dividends again? http://www.profitableinvestingtips.com/profitableinvesting-tips/investing-in-turnarounds
  14. 14. A company that increases cash flow by selling assets may be trimming down and getting rid of obsolete aspects of its business. http://www.profitableinvestingtips.com/profitableinvesting-tips/investing-in-turnarounds
  15. 15. However, the investor should not be fooled into thinking that this sort of cash flow represents a turnaround. http://www.profitableinvestingtips.com/profitableinvesting-tips/investing-in-turnarounds
  16. 16. The company needs to be improving products, widening markets, and profiting from sales. http://www.profitableinvestingtips.com/profitableinvesting-tips/investing-in-turnarounds
  17. 17. Big companies like General Motors, historically, are dividend stocks, as well as value opportunities. http://www.profitableinvestingtips.com/profitableinvesting-tips/investing-in-turnarounds
  18. 18. If GM continues its recovery investors should expect to see quarterly dividends resume. http://www.profitableinvestingtips.com/profitableinvesting-tips/investing-in-turnarounds
  19. 19. They should also expect to see the company’s products start to reclaim market share from competitors. http://www.profitableinvestingtips.com/profitableinvesting-tips/investing-in-turnarounds
  20. 20. In the case of GM this means Toyota, Ford, and to a lesser degree other automakers. http://www.profitableinvestingtips.com/profitableinvesting-tips/investing-in-turnarounds
  21. 21. Of course, once this is accomplished, the company in question will have a stock price commensurate with its success. http://www.profitableinvestingtips.com/profitableinvesting-tips/investing-in-turnarounds
  22. 22. The basic idea of investing in turnarounds is to invest before the turnaround drives the company’s stock price up. http://www.profitableinvestingtips.com/profitableinvesting-tips/investing-in-turnarounds
  23. 23. A useful clue as to what others with a vested interest think of the turnaround is if the turnaround company can get credit. http://www.profitableinvestingtips.com/profitableinvesting-tips/investing-in-turnarounds
  24. 24. In the case of GM it secured early on a $5 billion line of credit to assure constant cash flow. http://www.profitableinvestingtips.com/profitableinvesting-tips/investing-in-turnarounds
  25. 25. And it started making money fairly quickly once it was out of bankruptcy. http://www.profitableinvestingtips.com/profitableinvesting-tips/investing-in-turnarounds
  26. 26. Considering how tight banks had become in offering credit early in the recession this was a vote of confidence. http://www.profitableinvestingtips.com/profitableinvesting-tips/investing-in-turnarounds
  27. 27. Investing in turnarounds is like investing in growing companies. http://www.profitableinvestingtips.com/profitableinvesting-tips/investing-in-turnarounds
  28. 28. The investor will want to asset how much market penetration the company will be able to accomplish and to what degree it will be able to profitably price its products. http://www.profitableinvestingtips.com/profitableinvesting-tips/investing-in-turnarounds
  29. 29. In the case of a large company accomplishing a turnaround there will always be a limit to how far it can recover and grow. http://www.profitableinvestingtips.com/profitableinvesting-tips/investing-in-turnarounds
  1. A particular slide catching your eye?

    Clipping is a handy way to collect important slides you want to go back to later.

×