7 Blue-Chip Stocks That Are Due for a Turnaround

If you had invested $100,000 five years ago in a low-cost fund that tracks Standard & Poor’s 500-stock index, you’d be sitting pretty today.

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If you had invested $100,000 five years ago in a low-cost fund that tracks Standard & Poor’s 500-stock index, you’d be sitting pretty today. Over that period, the index has returned an annualized 14.6%, so you would have almost doubled your money. But not every company in the S&P 500 joined the party, for reasons ranging from fickle fashion tastes to plunging commodity prices.

In a world where past pain is often a precursor to future gain, Wall Street's dustbin can be a great place to find companies that have the potential to come back and make investors a tidy profit in the process. But turnaround investing requires patience. It can take a year or more for these kinds of companies to work through their problems.

To identify stocks that could beat the market over the next five years, we started with a list of the worst performers in the S&P 500 over the past five years. Beyond that, we looked for stocks with three-year share-price targets in Value Line that are at least 50% higher than today's prices. We excluded energy stocks, most of which rise and fall with the price of oil and natural gas, a subject on which we’re agnostic.

For those who believe that good things come to those who wait, here are seven turnaround stocks for long-term investors.

Share prices and returns are as of September 19; price-earnings ratios reflect projected earnings over the next 12 months.

Kathy Kristof
Contributing Editor, Kiplinger's Personal Finance
Kristof, editor of SideHusl.com (opens in new tab), is an award-winning financial journalist, who writes regularly for Kiplinger's Personal Finance and CBS MoneyWatch. She's the author of Investing 101, Taming the Tuition Tiger and Kathy Kristof's Complete Book of Dollars and Sense. But perhaps her biggest claim to fame is that she was once a Jeopardy question: Kathy Kristof replaced what famous personal finance columnist, who died in 1991? Answer: Sylvia Porter.