Portfolio manager Jeff Markunas often buys stock of companies with troubled pasts or poor public images. But he avoids shaky businesses and favors strong balance sheets and the ability to increase earnings consistently for several years.
A poor public image can turn off many investors and prevent them from appreciating that a company’s outlook is improving. But Markunas sees past that public image.
He sometimes finds special bargains among spin-offs. In a spin-off, a company may turn one of its divisions into an independent public company. Shares of the spin-off often drop because investors are not eager to buy stock in an unfamiliar company. But spin-offs sometimes have profitable businesses, Markunas says. He likes to grab depressed shares before other investors embrace the new stocks.
His favorite bargain stocks include…
Tyco Electronics, Ltd. (TEL). This maker of electronic components was spun off from Tyco International Ltd., a company that became notorious after its chief executive was convicted of looting the business. Under new management, Markunas believes, the spin-off should record double-digit earnings gains. Recent share price: $38.99.
Western Union Company (WU). The money-transfer company was spun off from First Data Corp. Some investors avoid the stock because they associate it with small money transfers, often by people of limited means. But the business is used by a broad range of customers around the world. Sales are increasing in emerging markets, such as India. Recent share price: $23.77.
