I'm a value guy at heart, so would rather buy early than late. The problem with being late is that you're already paying for the turnaround itself, so you have to count much more on the turnaround resulting in sustained revenue and profit growth.
While management changes aren't always necessary, we often view management changes positively in turnaround situations. You're much more likely to get a frank,thorough appraisal of what has gone wrong and why, so you'll probably understand the situation better. My confidence also increases when a strong new manager has been attracted to a situation and is [...]
Just because a company is capable of throwing off lots of cash doesn't mean they're doing so at any given moment or that they're using the cash correctly. We're value investors first, so we're looking for depressed stock prices. Often what causes a depressed stock price is a misallocation of free cash flow, through ill-timed [...]
Multiples tend to contract further when small companies mess up than when large ones do, so there's more room on the upside when a small company grows out of a turnaround. I'd also argue that it's generally quicker and easier for a small company to be turned around, which improves your chances of investment success.