George Putnam’s The Turnaround Letter released its top five stock recommendations for 2017, which includes post-bankruptcy telecom services provider NII Holdings (NASDAQ: NIHD). The Company has filed for Chapter 11 protection with the U.S. Bankruptcy Court on two separate occasions, most recently emerging in June 2015.
It is important to recognize the difference between the old stock in a company in Chapter 11 and the new stock issued by the company upon its emergence from bankruptcy (post-reorganization stock). The new, post-reorganization stock often has significant value, particularly if the company has used bankruptcy as an effective turnaround tool. These post-bankruptcy stocks, like NIHD, are often over-looked and under-valued and present significant investment opportunities.
Putnam notes that NII Holdings carries a speculative level of risk as its profits and balance sheet position are precarious, yet it holds tremendous upside potential if it is acquired. After emerging from Chapter 11 bankruptcy in 2015 with a much-improved balance sheet, NIHD is expected to rebound sharply in 2017 due to its spectrum and subscriber base–currently worth around $1 billion.
The top stocks report also recommends Oaktree Capital Group (NYSE: OAK), a leading investment firm in turnarounds and distressed securities. Putnam feels current weakness in this stock’s shares represents a very attractive opportunity to buy into a premier money manager, with a 6.0% dividend yield as an added bonus.
Disclosure: Accounts managed by an affiliate of the Publisher own NII Holdings stock.
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