Discovering Turnaround Candidates

There are many types of investment methodology out there. All of them has their own merits. I for one, personally like to invest in turnaround stocks. What is turnaround stocks? They are normally companies that are experiencing problems (hopefully short-term), and a lot of people are not willing to wait for those companies to recover.

I personally like turnaround stocks for two main reasons; First, turnaround stocks have problems in the open. The problem has been disclosed and our task as investor is to figure out how much the company is worth should the problem persists or when the problem goes away. Granted, there might be more problems discovered along the way. But at the very least, some of the problems has come out and the share price generally has dropped because of that.

Secondly, expectation is low for turnaround investment. Share price is already depressed due to known problems. The company does not have to 'beat expectation' every time it reports earning. All it has to do is clear out the problems that causes its stock price to drop on the first place.

How should one find a potential turnaround candidates for their portfolio? The one thing that I found useful is to read the financial news. Companies that are in trouble can be easily spotted in the news. For example, this week brought news from Pier 1 Imports Inc. (PIR) and Doral Financial (DRL). Are these companies in trouble? Sure. Are they turnaround candidates? Possibly.

Another good source would be the list of stocks that are touching 52 week low. Most of these lists would be companies that are experiencing problems and hence has the potential of turning around. For example ATI Technologies Inc. (ATYT) trade closes to its 52 week low of $ 11.20.

What to avoid when sifting through lists of potential turnaround investment? I would avoid company that is getting hammered due to the delay in its financial reporting. No matter how low the share price is, investors do not and should not invest in companies that has some trust issues.

Once we identify our target, we can then do some analysis to determine the fair value of the stock. There are chances that some companies may never recover. So, we have to take that into accounts when doing fair value calculation. Calculating fair value is a whole brand new topic and I won't get into the details here. But obviously, a stock will have a higher fair value if it can recover from current problems than a stock that cannot overcome its current problems.

Hari Wibowo manages a small finance website aiming to help new investors getting started. Curious? You can find his other writings at http://www.noviceinvesting.com

---

Forex Profits

The Forex Market-What, When and Why?Forex, FX and the Forex... Read More

5 Questions You Need To Have Answered Before You Back-Test Your Forex System

As 90-95% of new forex traders lose money within the... Read More

Welcome to the World of Currency Trading

Indeed large multinational and individual banks and other major financial... Read More

Forex Trading Online - 7 Reasons Why You Should!

Forex trading online is a fast way to use your... Read More

Chinas New Currency Regime

The base unit for the renminbi is the yuan, which... Read More

Trading Tips No 1: Learn How to Trade The Moment of Truth

So you have learned how to trade the markets by... Read More

How To Handle A String Of Losses

Everybody hates to lose and unfortunately no one is blessed... Read More

Is The U.S. Dollar About To Reverse Course?

For the first time in several years the U.S. dollar... Read More

Choosing A Forex Broker

With currency trading becoming ever more popular, the number of... Read More

Trading Timeframes

Long TermLong term traders will work from end of day... Read More

How To Choose Wisely A FOREX Broker

Most traders use a FOREX broker to handle their transactions.... Read More

Adaptation to the Realities of the Market

Do you think adaptation to the realities of the market... Read More

Online Futures Trading - Advantages and Disadvantages

What Is Online Futures Trading?A futures contract is an agreement... Read More

FOREX - Where Fortunes Are Made Everyday

The Foreign Exchange Market ? better known as FOREX -... Read More

6 Critical Factors For Successful Trading

Success in any profession can be broken down into a... Read More

The Secrets of the Super-Traders

The first and perhaps most important "secret" is to realize... Read More

Forex Market Overview

"FX" is an abbreviation of "forex" or "foreign exchange." Foreign... Read More

Forex2u Forex Strategy On Successful Forex Trading

The essence of the FX2u Forex strategy is that it... Read More

The Miracle of Forex

My father, who owns a small parts store and garage... Read More

The Nature of the Trading Business

Consider the following: As a trader you are in a... Read More

Reality of Online Forex Trading

Foreign exchange trading is the trading of currencies. Most currencies... Read More

Intrenet Marketing VS Forex Currency Trading

Have you noticed that when someone's trying to sell you... Read More

ISO 4217 in Forex Trading

ISO 4217 is an international standard describing three letter codes... Read More

The Basics of Forex

Foreign exchange market is also known as Forex or FX... Read More

Forex Trading Can Be Like Day-trading

Forex trading, or foreign currency trading, has become a bit... Read More

Money Management, Part 2

FEARING LOSSESThere is a huge difference between being risk averse... Read More

Day Trading Success- The Key Is Survival

Most new traders tend to focus just about all their... Read More

The Margin Advantages of Trading FOREX.

There is one aspect that is considered as one of... Read More

Ways to Acquire Discipline in Trading

One way to acquire discipline in trading..."Hey Joe! When you... Read More

FOREX Trading Philosophy

Keen on starting FOREX trading? Why would you not be?... Read More

Where to Get Forex Training

For those of you who are interested in forex trading,... Read More

What is Forex Trading?

Forex, or Foreign Exchange, is the simultaneous exchange of one... Read More

Internet and Computer Systems in the FOREX Business

With every passing year the interest in electronic trading is... Read More