Buy them low and hold.
Aside from being a billionaire, Warren Buffett is a pretty colorful character whose stock-turnaround viewpoint owes as much to Will Rogers as investment guru Benjamin Graham. Consider how he explains “buy low, sell high” theory: “When hamburgers go down in price, we sing the ‘Hallelujah Chorus’ in the Buffett household.” And here’s how he views potential company comebacks: “The best thing that happens to us is when a great company gets into temporary trouble: We want to buy them when they’re on the operating table.” Which stocks have exited Wall Street’s ER to regain health, as in healthy investor returns? These seven have pulled off just such a financial feat.
Bank of America Corp. (ticker: BAC)
The Great Recession hit big banks like a wrecking ball, and BAC was no exception. The roller coaster began at a $40 per share and plunged to less than $4 by early 2009. “But by looking at the banks that had strong fundamentals, investors could’ve done extremely well,” says Brent M. Wilsey, owner of San Diego-based Wilsey Asset Management. So it was with Bank of America, which now trades at just under $23 — close to six times its recession-driven bottom.
Citigroup (C)
On April 5, 2009, Citigroup’s price hit 97 cents per share. By way of Buffett’s metaphor, that’s no operating table: It’s a near flat line. “After the recession many of the large banks were quickly blamed and fell out of favor,” Wilsey says. For Citigroup, lack of investor confidence proved punishing. But with operations in 100-plus countries, and $45 billion in government stimulus, it roared back — and could’ve made you very rich: It now trades at a robust $63-plus.
Facebook (FB)
Facebook stumbled after its 2012 IPO and skeptics wondered whether Mark Zuckerberg was better at riding his skateboard around the office than leading a social media giant. Bowing at $38, it cellar-dwelled for more than a year in the $25 range. “Then the stock became the No. 1 platform for digital and social ads,” says Evan Tarver, investments analyst for FitSmallBusiness.com. “While investors were concerned, Facebook plugged away on its Ads Manager tool.” Today FB fetches $155 per share.
McDonald’s Corp. (MCD)
Imagine Ronald McDonald pulling out his neon-red hair after CEO Don Thompson — a fast food flop — overstuffed the chain’s menu to the bafflement of loyal customers. Installed in 2012, Thompson was out less than three years later. Under his watch the stock took a McBeating, falling more than 10 percent. And since? New CEO Steve Easterbrook stripped back and souped up the menu like never before. MCD trades at $155, up 63 percent since Thompson took his order to go.
GGP (GGP)
Call this turnaround a doorbuster. A Chicago-based equity real estate investment trust, the company formerly known as General Growth Properties owns, manages, leases and redevelops regional malls. “At the height of the financial crisis, on March 9, 2009, GGP sold for 29 cents,” says Bob Johnson, president and CEO of the American College of Financial Services in Bryn Mawr, Pennsylvania. Now it has a dividend yield of 3.64 percent and fetches $23.63 per share. Says Johnson: “That represents a holding period return of 8,048 percent.”
Pfizer (PFE)
Longtime investors needed a tranquilizer after this pharmaceutical titan — which soared more than nine times between 1994 and 1999 — shed 75 percent in a downward spiral that lasted 10 years. But after Pfizer pleaded guilty in 2009 to illegally marketing the arthritis drug Bextra, it began a comeback and hasn’t looked back. As the marketer of Viagra, Pfizer has enjoyed the investment equivalent, with its stock gaining 177 percent over the last eight years to trade at $34.
Volkswagen AG
While this comeback remains a work in progress, it’s beginning to prove road worthy. In September 2015, VW admitted that it rigged 11 million cars with software to deceive diesel emissions testing. That led to terrible publicity, record-setting penalties and the ouster of CEO Martin Winterkorn. Despite a U.S. judge handing down a $2.8 billion criminal fine in April, investors seem to believe the worst is in the rearview mirror. Since the crisis, VW is up 48 percent.
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7 Stock Turnaround Champions originally appeared on usnews.com
