Companies in trouble: opportunities or danger?
The turnaround record is not encouraging, but a few investors who ventured in have done well
25 July 2024 - 08:00
The problem with investing in turnaround stocks — companies that have underperformed or have been loss-making for a prolonged period — is that the best-laid plans of “slice and mend” more than often go awry.
Legendary investor Warren Buffett famously quipped that “turnarounds seldom turn”. There is often a fatal flaw. And this can mean that there is only so much cost-cutting that can be foisted on a business in a dwindling segment of the economy before the operating model is permanently compromised...
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