Here’s what Peter Lynch said about Turnarounds
For reference Lynch had 6 categories of stocks to buy in his book One Up on Wall Street, Turnaround stories are one of them.
The pictures are charts of Dominoes and T Mobile who’ve each had a successful turnaround after their own dumpster fire played out. If you bought when their CEOs were on television you’d have a ridiculous return.
Our CEO is in a similar place now. Rebuilding on the ashes of a dumpster fire that didn’t destroy us! $GME fits here but you know that because you’re here too (as an owner or a troll but you know it).
Definition: These are battered companies that can barely drag themselves into bankruptcy, including those with "little problems" that were worse than expected, or a "perfectly good company inside a bankrupt company".
Examples: Lynch famously cited his investment in Chrysler in 1982 for $6, which became a fifteen-bagger. He also highlighted buying Apple stock after it dropped from $60 to $15 following the failure of its Lisa computer, based on his wife's observation of its continued popularity.
Strategy: Turnarounds are often "special situations" where a company is restructuring to maximize shareholder value or in the middle of a, “bail us out,” scenario.
Risks: Lynch cautioned that turnarounds are risky and, “if a troubled old turnaround has a relapse, the downside can be losing all your money,”.
Timing: He advised that rather than trying to catch the bottom, it is often better to wait until a company has shown signs of a successful turnaround.