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Is Investing in Turnarounds a Good Idea? 🔄
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Hi Reader, Turnarounds are tricky beasts. They can make you rich or leave you broke. In 1997, Apple was on the brink of bankruptcy. The stock was trading below ten cents when Steve Jobs returned to the company and redefined the tech industry starting with the iPod. Today it trades above $200. A $10,000 investment back then would now be worth $20+ million today. But for every Apple, there's a Toys"R"Us trying to turn things around for years just to file for bankruptcy in 2018. So, what makes a successful turnaround?First, you need a rockstar CEO. Think Alan Mulally at Ford during the 2008 crisis. He steered that ship like a pro. Next, cash is king. Apple got a $150 million lifeline from no other than Microsoft! Without it, we would have no iPhone and no Apple. Lastly, the company needs a solid core business. After declaring bankruptcy in 2009, General Motors focused on what they did best—making cars people want to drive. Turnarounds are no walk in the park.Most turnarounds fail. The old saying “turnarounds seldom turn” is very real. Turnarounds take time. We're talking 2-3 years minimum. Turnarounds feel bad. The market often stays pessimistic even when things are improving. It's frustrating, but it's the reality. So, should you invest in turnarounds? Well, that totally depends on you. Do your homework. Look for strong leadership, sufficient cash, and a viable core business. And remember that investing in turnarounds doesn’t feel good… until it does! As always, please remember this isn't investing advice—make sure to read our disclaimer. Invest at your own risk. If you enjoyed this, feel free to share it with a friend and, if someone forwarded this to you, you can sign up at https://convert.monk.st. Have an amazing week and... happy investing! Best, Alberto
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