David Sterman

The appeal of investing in turnaround stocks is very compelling. Some companies look to revamp products to re-invigorate sales growth. Others find ways to slash expenses and unlock major profit-margin gains. Still, others look to clean up a debt-laden balance sheet, which is often a key reason for investors to disregard a stock.  No matter the plan, long-depressed shares can get a new life as these moves pay off.

A portfolio filled with turnaround candidates is a bad strategy. Even the best turnaround plans often go askew. Still, stocking your portfolio with one or two potential rebound candidates can help you beat the market averages. 

Here are three potential turnaround stocks I'm watching closely. Some of these ideas may fail to gain traction, but holding a basket of these should pay off.

1. Wendy's (NYSE: WEN)
Roughly a month ago, I suggested this fast food operator's new CEO, Emil Brolick, had a great industry track record and would soon articulate an impressive turnaround plan.

David Sterman

David Sterman has worked as an investment analyst for nearly two decades. He is currently an analyst for StreetAuthority.com

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