Get $10 off your ticket to July 21 Barrel Night with Promo Code CTNOW - A night of fine whiskeys & local spirits in Branford

Investing: Bet on these battered stocks

Kiplinger's Money Power

When a company faces a crisis, investors tend to sell first and ask questions later. Yet besieged stocks often start to recuperate as the headlines fade and investors anticipate a return to precrisis sales and profits. The trick, of course, is to find companies that are more likely to rebound from a setback than collapse entirely.

If you want to bet on a revival, wait for a stock to settle after bad news hits, then buy shares gradually. Home in on companies with durable advantages, such as a strong brand. And look for firms that pay dividends and are likely to maintain them through a crisis. Even if the stock does little, you'll at least get paid while you wait for a rebound, says George Putnam, editor of the Turnaround Letter.

-- SeaWorld Entertainment (symbol SEAS, $13) is one dividend payer Putnam likes. The owner of 11 theme parks, including Busch Gardens and Sea World, the firm has faced a tidal wave of bad publicity over its treatment of orca whales. The company, which says it will phase out orca shows, is launching new rides and attractions. Both sales and profits are likely to be down in 2016, but analysts see revenues climbing 2 percent in 2017, and earnings rising 28 percent. As for dividends, SeaWorld currently pays 84 cents per share annually, giving the stock a 6.5-percent yield.

-- Chipotle Mexican Grill (CMG, $425) could be a good turnaround play, too. With the stock at $640, we advised selling in our January 2016 issue, because of concerns about a slowdown in sales and declining profit margins. The firm then faced its worst crisis ever: an outbreak of E. coli bacteria. Yet Chipotle remains a preeminent brand in the fast-casual restaurant segment. The firm has invested heavily in new food safety procedures, and it's starting to woo back customers with a loyalty rewards program. The stock trades at about three times estimated 2016 sales, well below the five-year average of 4.7 times sales, according to Morningstar. Credit Suisse sees the stock hitting $500 in 12 months and rates it a "buy."

-- Lumber Liquidators Holdings (LL, $20). The company's shares have collapsed from $70 in early 2015, following reports that the company sold toxic flooring made in China. Liabilities from related class-action lawsuits could cripple the firm. But Craig Hodges, co-manager of the Hodges Pure Contrarian Fund, says the firm should be able to handle the legal expenses and return to profitability next year. Its products remain popular with builders, he adds, and the firm should benefit from a strong housing market. Over the next 18 months, he expects the stock to climb back into the high $20s.

(Daren Fonda is an associate editor at Kiplinger's Personal Finance magazine. Send your questions and comments to And for more on this and similar money topics, visit

(c) 2016 Kiplinger's Personal Finance; Distributed by Tribune Content Agency, LLC.

Copyright © 2018, CT Now