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.