Making money with turnaround...

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   Whenever there is talk of multibaggers, there is almost always weight on growth stocks and rightly so. But there is big segment being missed and that is turnaround situations where you can make tons of money. And in certain situations turnaround companies become growth companies and that is icing on the cake.

How to identify T/O: As Jim says look for industry where all major players are loosing money. But tricky part starts when to buy? Look for catalyst.  Example is boom in BPO sector. That led t/o in Hotels and most benifit went to Hotel Leela and Taj GVK. They did much better than EIH, Ind Hotels or even other smaller players because they had locational advantage. Leela went 10 to 400+ but no BPO gave that kind of return.

In T/O I would not look into industry of agarbatties or candles or something like that. It has to be big t/o in big Industry.

Next T/O potential:
It is hard to find T/O in such a booming period but not impossible.
Look at BPCL/HPCL:
Nobody likes T/O candidates before T/O happens. Companies are doing badly and no optimism. But is it possible that these companies go bankrupt and stop functioning? They have valuable assests. Refining margins world over are great. How can these companies loose money for ever. These companies used to make lot of money in past and has potential of same thing when(no question of if) govt. takes thier hands off. In tough time like this, even PSU companies have to tighten their belt too so there is automatic control on Cost. Good for long run.

When to invest?
This is not time to put 30% of capital in these companies and enjoy vacation. One can buy small qty now. As we all assume, oil price run is not over. So Govt will have to match market price with some time lag. Or give some tax break or give oil bonds or something that we don't know. So if there is runup in oil price, and BPCL gets beaten up add some. Ultimately Govt will have to match price. And at some point oil price will correct somewhat from higher price and Govt wont reduce price at pump or reduce less than mkt price, paying off for OIL BONDS.

These companies used to have EPS of 50-60 few years back. If you add some growth and some inflation their EPS should be higher as demand of their product is there. I dont think Govt can control price for ever or we will start seeing shortages and black markets. Gail is also there but in T/O most beaten up companies make you most money. If in big oil spike BP/HP goes to 150-200 it could muplty 5-10 times in future.