While investing in companies that are performing well is a great starting point, turnaround stocks can also be worthy of a place in many investors' portfolios.
Certainly, they come with greater risk but, so long as there is a sufficient margin of safety, they could prove to be excellent long term investments.
With that in mind, here are three stocks that could be top notch turnaround plays and worth buying right now.
Fortescue Metals Group Limited
Although in the last year Fortescue Metals Group Limited (ASX: FMG) has recorded growth in its bottom line of 75%, its current year numbers are set to be hit very hard by a lower iron ore price. For example, it is expected to deliver earnings per share of $0.23 versus $0.93 last year, which is a fall of 75%.
However, with Fortescue's share price now seemingly accommodating that decline as well as future weakness in the price of iron ore, now could be a good time to buy. For example, Fortescue trades on a price to book (P/B) ratio of just 0.83 which, when the ASX has a P/B ratio of 1.25, seems to be relatively appealing and could mean that shares in Fortescue perform well over the medium to long term.
Brambles Limited
In the last year, Brambles Limited (ASX: BXB) has seen its net profit fall by over 12%. Despite this, shares in the supply chain logistics company have risen by 15% in the previous twelve months as the market seemingly looks ahead to much more impressive and stable earnings moving forward.
Brambles does have a relatively rich valuation that is evidenced by a price to earnings (P/E) ratio of 23.9, but its forecast growth rate in earnings of 13% per annum over the next two years means that it seems to offer growth at a reasonable price. As a result, its share price performance could remain ahead of the wider market for the remainder of the year.
Newcrest Mining Limited
Newcrest Mining Limited' s (ASX: NCM) net profit has fallen by 4.3% in the last year, and although the gold price has been more buoyant in recent months, the gold producer is still expected to record earnings per share of $0.45c this year as opposed to $0.56c last year. That's a fall of 20% in just one year, although Newcrest still could make for a great turnaround story.
That's because it is expected to post a rise in earnings per share of 51% next year, which could send market sentiment considerably higher. Newcrest also has a P/B ratio of 1.39 and seems to offer excellent value for money when you take into account its stunning growth prospects.
Of course, finding the best stocks for the long term is a tough ask – especially when work and other commitments limit the amount of time you can spend trawling through the index for them.
