Arne Alsin
This is the second part of Arne Alsin's column on his top-10 turnaround candidates for the coming year. To learn more about the topic, return to the first part .
TRW (TRW Quote - Cramer on TRW - Stock Picks)
TRW is a diversified company with products and services in automotive (air bags), space and defense, and information systems. Management is struggling with a weak automotive market. With a potential recession looming, the auto business will probably decline for a few months. But even in this tough environment, TRW generates tremendous cash flow. Down from a high of $65 last year, expect this $36 stock to double in the next two to three years. And collect a 4% dividend while you wait.
Georgia Gulf (GGC Quote - Cramer on GGC - Stock Picks)
A producer of chemicals for a variety of industries, Georgia Gulf has a long and rich history of profitability, in good times and bad. Currently, the company is trying to maneuver in a tough environment, with earnings sagging because of weak pricing in the PVC market. If and when pricing improves, look for this $15 stock to trade north of $30.
Hasbro (HAS Quote - Cramer on HAS - Stock Picks)
It's been a terrible year for Hasbro, with its stock languishing around $10 down from an all-time high of $37. Management made some mistakes in 2000, such as an overemphasis on Pokemon in the face of slowing sales. But new initiatives have been implemented to focus on Hasbro's strong core brands, including Milton Bradley, Parker Brothers, Playskool, Nerf and Tonka, among many others. Additionally, the sale of money loser Hasbro Interactive and other cost savings programs make 2001 look much brighter. For investors, this is a rare opportunity: The stock has not sold at this level for 10 years. And in those 10 years, sales and book value have grown well over 100%. Expect at least $20 per share in the next year or two.
Office Depot (ODP Quote - Cramer on ODP - Stock Picks)
Office Depot has been hampered by slow sales especially in technology products. With the stock selling around book value, down from a high of $26 in 1999, this stock has been left for dead. But there is significant capital flight in this sector, and as I discussed in my prior column, this generally portends good times ahead. Insiders agree. Of all the stocks on my list, Office Depot is by far the most aggressively purchased by insiders. Also, an exceptional balance sheet indicates that this company has staying power even if sales remain soft. My analysis indicates a fair value of $12-$18 when sales improve.
J.C. Penney (JCP Quote - Cramer on JCP - Stock Picks)
There is no way to soft-shoe this one: Business is awful at J.C. Penney. But the new CEO Allen Questrom turned around both Federated Department Stores (FD Quote - Cramer on FD - Stock Picks) and Barneys. Can he do the same for J.C. Penney? He has the assets to work with. Expect J.C. Penney to spin off its drugstore chain Eckerd to shareholders in the next year or two. Those Eckerd shares will be worth about $10 per share, or what J.C. Penney is trading at today. J.C. Penney also has other substantial assets including a catalog business, which like Eckerd is worth about $10 in J.C. Penney stock. This story though is about turning around the core J.C. Penney department store business, and thereafter unlocking the large, hidden value in the stock.
To return to the first part,
click here.
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