Companies involved in financial scandals usually see their situations deteriorate. However, companies facing short-term problems can rebound once they’ve resolved the issues. It’s about understanding this crucial difference to make informed investment decisions.
For instance, both McDonald’s and KFC faced a supplier issue in China, resulting in a stock price drop. But once the issue was settled, their stocks recovered. Apple, too, faced challenges post-Steve Jobs, but the company’s core strengths enabled its recovery. Other examples include Facebook, United Airlines, and Tencent—all faced challenges but remained fundamentally solid, making them good turnaround prospects.
It’s essential to time your investment in turnaround stocks correctly—avoid buying during a rapid decline and consider investing when there’s stability or signs of a rebound.
