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Skidmore College, Saratoga Springs ​hello this is Mike Swanson Wall Street winner dot-com I got a very special guest to me today he's new to the show and speaking with Bruce Berger who runs the website turn around stock investing calm how you doing today Bruce I'm great today yeah I'm glad you're here this is as I said the first time you've been on the show with me so I thought real quickly I would let people know how I met you in and so forth so back in March I went to a conference in Orlando it was full of industry people it was a financial conference and it happened to bump into you and meet you meet you and we had a couple drinks or went out to dinner one night a couple other people and one thing about you did really struck my attention is that which I found refreshing is that you're someone who actually looks at balance sheets and the fundamentals of stocks that you invest in whereas nowadays so many people just use algorithms or you know only charts or ETFs and really have no idea what's going on with companies that they're investing in which is just the day and age we live in but there's something to be said for old-fashioned work and digging into the filings so somebody you could explain what it is you look for when you invest in a stock and may actually maybe you should ask you first what how'd you get into this business and what's your background sure thanks Mike well you know exclusively focus on investing in public companies that are going to have a corporate turnaround and I got into this because for the past three decades that's all I've been doing I have a background in thought actually bought distressed companies and turned them around and I've been doing that for about two decades I'm also a certified public accountant Certified Fraud examiner and I started out interestingly enough when I was in high school in college being fascinated with financial statements and I met a famous value investor named Morty Whitman and I worked with the world-renowned value investor Bob Abadi who is still a great friend of mine and just progressed through those decades continuing to invest in in turnarounds both public and private I started I created turnaround stock investing in December of last year so it's really just been running for a few months previously two that I've been working at a large distressed hedge fund that just focused on turnarounds and I work for them for about a year and a half but I've always had the entrepreneurial spirit and decided that I would just go back out on my own and continue to buy companies and invest in public stocks what I do is sort of unique most value investors in public companies really just focus in on the financials which I do also I you know again my background as a CPA looking at financial statements is something I'm very familiar with but I'm also a sound believer that you have to really manage your positions and so most value investors will you'll get a stock they'll buy something at ten dollars that they think is worth twenty twenty-five and they'll just if the stock continues to go down they'll just write it down and I don't do that I really do cut my losses and I look at charts which is sort of Voodoo for value investors but because I've been doing this for so long I actually do believe that the public markets have a lot of wisdom when the stock is trading and the other thing that I really bring to the table is that I actually fix companies so when I sit down and speak to a CEO or CFO of a company it's hard to fool me because I've been there done that I've sweated payrolls I fixed companies and I know when somebody is really fitting to me or not and usually what you'll have with the CEO who's turning around a company if he's very good he'll often say I don't know and that's the case with turnarounds is that you don't know if they're gonna work you can have great industry experience and you can even have a great balance sheet going into a turnaround but you just don't know if it's going to work and that's my philosophy of turnaround stock investing I believe in the 2080 principles the Pareto rule that 20% of the stocks that you buy in any given year are going to give you 80% of your gains and when you go and buy those stocks you never know which ones are going to be the 20% that win and people on Wall Street rarely mention that right everybody's got a wonderful pedigree Ivy League schools and they think their analysis is great and they do do good analysis but there's a lot of uncertainty in investing in value stocks you know as I like to say a value stock is created because it's in trouble and it's and it takes it takes a lot to turnaround companies and that's what I like to incorporate the fundamental analysis and the technicals well when when I'm when we were talking before you are looking at or had invested in in the past a ship a shipper and that was real interesting to me because around I think it was 2012-2013 somewhere in that time frame the shipping sector had gone through a terrible bear market and had started to go sideways the stocks inside the

sector as a whole and I took a stab at buying a couple of them back then but I use charts primarily to identify when I think a sector might be bottoming out and there's various you know technical patterns but a problem with that is that when you just look at the charts after a big bear market you really have no idea of knowing which stock in a sector is going to be the best one which one isn't going to recover and so forth so what are some of the things you kind of look at to determine what companies might do well and what whoa right so that's a great question what you're looking different types of turnarounds you can invest in an industry like I can discuss the fertilizer industry or the tanker industry right now would you want in it when you're betting on a cycle turn and the industry as opposed to a specific company where their CEO comes in it's a healthy industry but the company's doing trouble you know there are two different types of turnarounds so what you want to do with a cyclical turnaround you want to make sure that the balance sheet is strong enough so that you can survive because what often happens with with a cyclical turnaround in like oil service or shipping is that it always goes on longer than you could ever expect typically what has to happen is rates companies have to burn cash flow they I'd like to say they have to burn all the furniture to stay alive because that's just what happens when these industries turned down everybody wants to be the last man standing and those who can survive are those who are the best balance sheets and what typically happens in an industry is those that are leveraged will go bankrupt and in today's world the debt holders will convert that debt to equity they'll come out with a clean balance sheet and that company will start competing against other companies that are LeFort that's so that's why the first criteria when you're looking at a trouble company in cyclical industry is what are the balance sheet look like and you say to yourself does it have enough cash to survive for two or three years because whatever you think if the time it will take to turn around double it typically in my experience it takes seven years for an industry to bottom from the actual peak to the bottom now it could be five it could be five you know but it's usually five to seven years and that's a long time that's why I do but that's why I also use charts when I am invest and I will go through all the financial statements and determine what the cash burn rates you know can the company just break even but then the markets are so wonderful at usually you know it's a company that is going to start the bottom I'll give an example at the dry bulb industry so dry bulk have been going down for years and years and then in 2016 many of these stocks everyone was losing a vast amount of cash and companies then equity offerings and what's interesting is they did these equity of offerings right at the bottom of the market so you would just see like for instance there were star ball carriers which are gone down like 90 percent right the stock just kept making lower lows and lower lows and lower lows but then it got to the point where they knew it stopped falling with horrendous news because daily rates were such that everybody was losing cash they get the stocks weren't falling so the market started to sniff out a bottom was occurring and that's exactly what happened so you had stocks like well of these drive home shippers start to rise enormously a lot of them went up five six hundred percent from there that's why I think it's always important i actually invested in star ball but i had been early in it like i had invested before the bottom and I stopped myself out which was which is beautiful because then you have there's not only the physical but the psychological capital to wait for the actual bottom because it's usually a question it's not if it will turn because these are cyclical industries it's when and you want to be there when it turns and most people what they do value investors they said you just keep progressively buying more and more and more as the stock falls and they have a large white bath and they usually sell at the bottom and that's what you don't want to happen that's why you have to do the fundamentals and the technicals and that's what I do right well in today's you know what I when I said at the beginning really refreshing is that in today in today's markets it seems like everyone wants to buy you know Netflix or Tesla or Facebook that's what they tend to talk about on television these kind of momentum technology stocks but these stocks have been going up for years and now honestly I think some of our faults are starting to falter like Tesla obviously but Facebook is even looking this price action is a little shaky but it doesn't matter these stocks to me you know I don't know what they'll do six months from now but I don't want to own them over years from here so I'm more the longer boredom trying to sell more and more I'll do this and as the years go by the more and more I want to become more of a value investor myself that holds things with a your look of an outlook of years down the road instead of weeks or something which seems to be the focus but but to do that you really have to do the type of work you're talking about but let me ask you this you mentioned the agriculture industry that's a sector that I'm interested in because the commodities themselves a corn we cotton and so forth sugar they have had bear markets now I mean for years even though they're up a little bit here today I think it's four or five years they've been falling so that seems to me to be something that might be an area where perhaps agriculture companies could be something for turnaround plays what do you think or not looking in the wrong direction yeah no that's true I actually got the members of my website in mosaic we still we start by mosaic shares about 22 I think it's about 27 now and I think that's a company you know if you look they sell potash and they sell phosphate both of those businesses you have to look at the supply demand within both of those categories and it's

probably going to get better you know the supply is going to decrease because the margins have been horrific people have not been doing well so I like mosaic there's also a company quotes see your partner symbol uan which is a an LP which is fallen from about $22 a share it's a $3 and I've been I'm not guessing trading but I've been in I like that particular stock but again I follow very specific technicals at the bottom so I I've been in and out of it I've been buying it at like 3:30 and I stopped at at like 290 etc because it's when I'm investing in a very leveraged balance sheet I'm very cautious so I do believe that something like senior partners can go up three times but if you're early as I mentioned before it's not pleasant so you have to watch these things if CVR had a very clean balance sheet I would just sit in it to give you an example I had my members invest indoors and geophysical which is a geophysical company which had a tremendous amount of cash per share it could survive anything there was service business you know stock is now seven and a half and I think that will go substantially higher in that case you know you can invest and sort of even average down because the balance sheet is like a fortress you really don't have any risk of going out of business and a mosaics balance sheet even though it's slightly leveraged is also very solid but when you invest in something like a CBR which is a very large balance sheet you'd have to watch it so I've told people with like for instance see if you're on once it breaks out at three and a half or four dollars a share on a lot of volume you know you're sort of home free so you can again I'm not an investment advisor I basically have a membership where I show people what I'm doing and they're out they can do what they want based on their own risk you know I I'm managing my own capital I'm just sharing the opportunities that I see so people have to establish what they're comfortable at but I do believe there's a lot of opportunity if you look at the charge for all of the agriculture products we corn soybeans they're all at a decade loads so now is a great time to get involved with agriculture and nobody talks about it right everybody talks about pot stocks and this and that when's the last time anybody ever since you they're gonna buy corn so that's the ultimate contrarian indicator also and the charts look good so you look at the fundamentals and the technicals and they're both lining up nicely actually I did like I think it was 2007 or 10 was like a member which year it was but it was either 2007 or 2010 I launched someone that lives in my area that very wealthy individual and they hear about all these agriculture stocks and we were at the top of the market herd for the commodities so but yet no one's interested in them now that's that's for sure at all but I'm very interested to see you know what they do and I've got my eye on them I don't know how to call the bottom maybe they have bottom though usually in my opinion what happens is that bottoms are created technically when you see horrendous news and the stock or the commodity doesn't fall anymore mmm that's your signal that you're very close to a bottom yeah you mentioned that with the the bunkers of that that's what happened to them and exactly well I don't want to keep you all day and hopefully we can do a follow-up interview sometime next couple weeks or a month or two or whenever you're available but as we've wrap up just so you can tell people real quick where can they go to get more information from you people can visit me at triple W turnaround stock investing com if they come to the site they can take a look I have a bunch of videos up there so you can see how I do my analysis I have a membership service where I offer for $99 a month people can get all of the opportunities that I'm looking at and what I'm buying and I also have a free ebook which I think everybody should download there's a wealth of knowledge in there and it's free and that basically is a culmination of 30 years of experience so it's a great it's a great opportunity for somebody to to learn what I do and how they can do it themselves I I'd like to say what I'm really trying to accomplish is to help people become their own hedge fund manager because they can do it and that's my goal yeah it doesn't sound I know that the word sounds intimidating hedge fund manager to people but it if you don't think of a hedge fund as a computer program but is picking out stocks and in hedging positions perhaps it's not as complicated as it sounds at all exactly people pay a lot of fees for things that they could really do on their own they just have to get the confidence that they can do it and that's really what I'm helping people do to have confidence to become a value investor appreciate it myself well thanks for talking with me and everyone else and talk again soon thanks Mike Law Center, Central Islip.