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Non-Tech : Turnaround Plays

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To: Melissa McAuliffe who wrote (141)	12/8/1997 9:57:00 AM
From: Robert Graham	Read Replies (1) of 206

Some possible turnaround situations: 1. A company mismanaged the entry of a new product. This showed up in anticipated profits not being realized on time. 2. The company mismanaged their funds for one or two quarters. 3. The company became inwardly focused, lost sight of their customers, and lost customers which significantly impacted revenue. 4. The company lost revenue and/or mismanaged their funds and cooked the books which was found out later. 5. Analyst downgrade(s) or reduction in earnings estimates. 6. The stock moved down in sympathy to its industry leader taking a hit. 7. A high-flyer missed their whisper numbers by 2 cents. A company in a high-flying industry missed the consensus earnings estiamte by a couple of cents. 8. A company missed earnings by a significant amount, but a closer look reveals a non-recurring expense such as the shut down of an unproductive part of their business. Their products in the market and their ballance sheet are still sound. But the stock market reacted. 9. The stock moved down with the rest of its industry in the stock market. Apparent out of favor industry or sector rotation. 10. A company took an agressive stance in the market place which has placed them in a risky position where they are commiting much of their funds to the development and marketing of a new product. Here they ran into cash flow problems. They even lost some revenue in their focus on their new product and away from their core revenue stream. The market responded and the stock dropped. 11. A company's stock is selling below their book value. I think this is a special case because there are many investors who are bargain hunters that look for this type of situation: they make an asset play on the company. If the company turns around, or is taken over, they still look to make out. 12. A small company with a promising future and a history of good stock performance runs into cash flow problems and is even looking for new financing and possibly even a new leader. Perhaps investors went elsewhere for the time being. 13. A speculative "glamour" or shooting star type of stock is left behind by the investors. But this company may have its run as a "glamour" stock in the future. Polaroid was like this. Perhaps even some small biotechs can be considered like this when their latest product during trials ended up being canned with no other products in its pipeline. 14. Analyst downgrades due to stock being overvalued. 15. Other bad press with no real substance in terms of the big picture. This can be rumoured competition from a big hitter moving into their market place, a rumour that a bank financing deal fell through, and so forth. And these rumours may have turned into realities. But the company' potential for success in the future still looks intact. 16. A company during hard times, market-inflicted or self-inflicted, becomes the focus takeover rumours. There may be truth to the rumours because there was solid evidence that other companies have been demonstrated interest in purchasing the company. The company has value beyond its assets, perhaps synergy with another comapny's products. But the comapny looks like it will not make it alone. Just a few ideas off of the top of my head. Comments anyone? Bob Graham

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