Underdog Catcher George Putnam's Long and Short Picks - Barron's

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 |  Includes: AXL, BKHM, BKUNA, CNXT-RETIRED, DPHIQ, DWNFQ, FED, GW, HAYZ, MSPD, MTOR, NR, NT, PKD, SUP, VIAV, WMIH, ZHNE
by: SA Eli Hoffmann

"Underdog catcher" George Putnam III of New Generation Research has averaged 17.1% returns for subscribers to his The Turnaround Letter by looking for companies with distressed shares ripe for a turnaround. Companies he likes:

  • Nortel and JDS Uniphase -- while not distressed, these out-of-favor companies have lots of cash to keep them afloat.
  • Zhone, Conexant, Mindspeed and Bookham are all low-priced semi stocks that are plays on triple-play telecom (phone, TV, internet).
  • Auto suppliers: Superior Industries, ArvinMeritor and American Axle have solid balance sheets, have been beaten up in recent years, and are more likely to recover than the Big Three (Chrysler, Ford, GM). More speculative plays on the group: Hayes Lemmerz and Delphi.
  • Small oil-field-service companies: Even if oil prices drop back to the $50s, there will still be plenty of new exploration. Putnam likes Parker Drilling, Newpark Resources, and Grey Wolf.
  • Short ideas: Housing bottom is still "a fairly long way away." Mortgage lenders Washington Mutual, First Fed Financial, Downey Financial and BankUnited are likely to see far steeper-than-expected default rates down the road.

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