Seeking Alpha

Choose "turnaround stocks" when rates rise: Barron's

  • So-called "turnaround" stocks are where you want to be when bond yields start to rise, Jack Hough writes, citing a study by Credit Suisse.
  • According to Barron's summary of the investment bank's analysis, companies with "a history of subpar returns" on invested capital that are currently seen as "turning things around," tend to outperform when yields rise on two-year government paper.
  • Why is this the case? Because periods of rising rates "often feature an improving economy, which can help a restructuring succeed."
  • Among Barron's picks: Delta Airlines (DAL), GM, Hewlett-Packard (HPQ), and Safeway (SWY).
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Comments (12)
  • wyostocks
    , contributor
    Comments (9105) | Send Message
     
    Rates will rise because of the Fed. Not because the "economy" is improving.
    With the whole world printing zillions in currencies, the bubble will burst. That will be the catalyst. Not "an improving economy".
    1 Dec 2013, 01:33 PM Reply Like
  • Papa of Four
    , contributor
    Comments (756) | Send Message
     
    Prefer (SAVE) to (DAL) in a rising rate environment.
    http://seekingalpha.co...

     

    up about 50% no need to change. Minimal debt make both (ALK) and (SAVE) winners if the landscape changes.
    1 Dec 2013, 07:51 PM Reply Like
  • bgold1955
    , contributor
    Comments (2267) | Send Message
     
    Turnaround stocks? As a GM & DAL shareholder for sometime I would say the turnaround has been occurring. If it continues in a higher interest rate environment that is great too.
    1 Dec 2013, 01:54 PM Reply Like
  • markcc
    , contributor
    Comments (1519) | Send Message
     
    Unless there is a global taper, the bell goes off and inflation will definitely kick-in. Governments induce inflation because the twenty trillion dollar evaporation of asset values in 2008 has impaired the economies so badly that many have lost houses, cars, etc. In the mean time by the government pumping in money, there has been a massive increase in asset values including real estate and stocks. The problem is knowing when to lift the foot off the gas pedal before so many assets and dollars are created that money is chasing a shrinking pool of assets (AKA: bubble). Already Greece is getting an upgrade by Moodys!
    Stay away from cash or bonds.
    1 Dec 2013, 01:57 PM Reply Like
  • dctodd27
    , contributor
    Comments (119) | Send Message
     
    Once again Barron's is late to the party. I guess they were waiting for HPQ and SWY to go up more than 100% before picking them? What value do they feel they are adding? Alan Abelson's column was the only one worth reading, but now......?????
    1 Dec 2013, 02:00 PM Reply Like
  • Uncle Pie
    , contributor
    Comments (3658) | Send Message
     
    Of the four stocks chosen, two have been in bankruptcy recently. Is this the best America can do?
    1 Dec 2013, 03:25 PM Reply Like
  • bgold1955
    , contributor
    Comments (2267) | Send Message
     
    I would say because of bankruptcy & then subsequent restructuring along with an improved economy/environment is why those stocks have outperformed. Look at RAD, American Airlines, ALU, C, etc. BTW, GM shareholders were left with zero during its bankruptcy, however, investing at low 20's months after IPO has been a profitable trade thus far.
    1 Dec 2013, 04:27 PM Reply Like
  • markcc
    , contributor
    Comments (1519) | Send Message
     
    dctodd, Bankruptcy? Are we looking back or forward? My investments are based on what stocks will do in the future. With a massive lift from the government and the fact that the current administration can't afford for it to fail again, means that GM has a solid floor under the current stock price.
    1 Dec 2013, 05:09 PM Reply Like
  • Willow Street Investments
    , contributor
    Comments (1253) | Send Message
     
    I like Barron's. Its one of the last even remotely credible Financial newspapers left...even if it is owned by that creep Murdoch.
    1 Dec 2013, 06:31 PM Reply Like
  • dctodd27
    , contributor
    Comments (119) | Send Message
     
    Ya got the wrong guy mark...
    1 Dec 2013, 08:50 PM Reply Like
  • ocn8
    , contributor
    Comment (1) | Send Message
     
    I am a consultant and in the early 2000's, spent two years working on GM's supply chain. What most people are missing is the fact that not only are they doing well in the US but they are the # 1 auto company in China. They have more than a solid footing under them they,have an increasingly successful global product. Forget the Japanese auto companies. It is doubtful they will ever secure a meaningful foothold in what is fast becoming the worlds larget automobile market, China.
    1 Dec 2013, 07:56 PM Reply Like
  • jraskib
    , contributor
    Comments (526) | Send Message
     
    VW sold more cars in China than GM, not much more, but still more. Hopefully, GM has learned its lesson: get profit, not the volume, although volume helps.
    2 Dec 2013, 09:24 AM Reply Like
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