Everyone loves a good turnaround story; assuming you catch the rebound, not the downturn. There’s high risk/reward investing in a company that was once left for dead, and being selective is a must. A beaten down stock price is not necessarily a bargain, but a potential rebound can pay off big.
“You have to be skeptical with turnaround stories, obviously these are companies that had near-death experiences for probably very good reasons,” says Kiplinger columnist Kathy Kristof, in the attached video. “It’s a riskier segment of the market, but that also often means you have more potential for profit.”
Kristof recently wrote about five comeback stocks that each have different reasons for the investor to believe in their turnaround plans.
Rebuilding Sales
First on her list is Beazer Homes (BZH) –the Atlanta-based homebuilder that almost went under during the Great Recession. Shares hit rock bottom at $1.25 in March 2009. They’ve since rebounded over 600%.
“Right now they’re gaining, the market is strong, interest rates are still low even though a lot of homebuilder stocks got hit when the Fed indicated interest rates are going to start rising,” says Kristof. “But there’s still a lot of health in the real estate market and there’s reason to think Beazer can do quite well.”
Going Bananas
Next up is Chiquita Brands International (CQB), a company that lost its way in 2012, but took decisive action to change leadership. Chiquita CEO Edward Lonergan was brought in to turn sales around and manage a heavy debt load.
“When you’re looking at a comeback story, you want to see that someone else is leading it. In this case [Chiquita], there is a turnaround specialist, they’ve been cutting costs dramatically, limited their brands, and are really focused on bananas.”
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