Grahamcracker said about turnarounds;
"to me a turnaround involves a company that needs to overhaul their business model because the current one sucks, or needs to clean out management."
Grahamcracker....very well said.
The successful turnarounds I've been involved with fits your description to a tee.
Health Souths business model was a good one, but because Richard Scrushy, Health Souths founder and CEO, turned into a crook (he wasn't originally a crook, but circumstances involving his need to meet Wall Streets expectations caused him to commit financial fraud on a pretty large scale). The opportunity arose for me when I discovered their original business model was still in tact and they brought in Alverez and Marsal to turn Health South around.
Another turnaround involved Providian Financial, a subprime credit card business, whose CEO totally lost control and turned out to be incompetent. In this instance, I knew the individual who became the new CEO, and I was very confident in his competence, his experience and his ability to lead Providian back to health. Joe Saunders who led the turnaround at Providian is now the CEO and Chairman of the Board at Visa and according to Yahoo made a little over 4M for himself last year, and I don't begrudge him a dime.
Now Novastar is a totally different turnaround story, but it meets your definition of a company who needed to,
"overhaul their business model because the current one sucks" Granted I didn't know at first that Novastars subprime mortgage business was imploding, but I learned soon enough. Initially I "averaged down" because I thought it might make it, but I learned in 2008 when I attended my first annual meeting that the CEO, Lance Anderson had plans to save it, not just for himself, but for his peers, former employees who believed and trusted in him, and yes the shareholders who believed in his plan. Some of you may recall that this was the meeting where I complimented management on their plan to salvage Novastar and stated that I believed they were like a "Cat with Nine Lives" that was quoted in an AP press release the next day.
As you can tell, unlike many investors I know, I involve myself directly in "some" but not all of my investments.
Having been self employed all my life, I'm obviously a risk taker,but unlike going to Vegas or playing the lottery, I consider it to be calculated risk.
Maybe this board is becoming a refuge for those seriously interested in turnarounds, but until such time my bet on Novastar plays out, I don't have the time or the money thats required to focus on more than one or possibly two at a time.
Thanks for posting Grahamcracker,
Rich
aka
Rooky |
