2 'Must-Buy' Turnaround Plays For 2025

2025-01-12 01:15:18 ET

Summary

• I typically avoid turnarounds but invest in high-quality companies facing temporary setbacks, as long as their core business remains intact.
• Currently, I'm overweight on LVMH and ASML, both facing macroeconomic headwinds, but poised for recovery in 2025.
• LVMH's shares are down due to China's economic slowdown, but strong fundamentals and potential M&A activity make it an attractive buy.
• ASML, despite export restrictions and slow non-AI recovery, offers strong EPS growth potential, making it a compelling long-term investment.

My investment strategy generally doesn't include investing in turnarounds; instead, in my portfolio, you can mostly find high-quality businesses with strong historical bottom-line growth track records. By saying turnarounds, I mean businesses facing pressure either as a result of deteriorating fundamentals, structural issues, those losing market share, or the ones who failed to innovate.

Turnaround plays present higher-than-average risks as the path to recovery is often uncertain, and while success stories exist with outstanding ROR, success in this area is hard to come by.

However, the situation is very different when we speak of respective market leaders with excellent balance sheets that trade at significant discounts simply due to temporary setbacks, particularly outside of the company's control....

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