If there was any doubt about the power of new leadership to turn around an ailing organization, the stunning Thursday night upset of the Kansas City Chiefs by the Detroit Lions should wash away any skepticism.
After all, the Chiefs were the reigning Super Bowl Champions (unveiling their massive victory banner just before gametime), have played in three of the last four Super Bowls (winning two), and are led by one of the best quarterbacks in the game’s history (Patrick Mahomes). Their record over the past four years: 52 wins, 14 losses, for a nearly 80% win rate.
The Lions, on the other hand, have never played in a Super Bowl. This, despite the 10-season boost by Barry Sanders (1989-1998), perhaps the greatest running back in the history of the game, and being previously led by exceptional quarterback Matt Stafford who departed in 2021 to lead the Los Angeles Rams to a Super Bowl victory that season. The Detroit Lion’s record over the past four years: a sad 20-44-2, which includes the miserable 3-13 season in 2021.
What turned around the Lion’s pathetic fortunes (and what does this have to do with turnaround investing)? New leadership. A bit of history helps tell the story: William Clay Ford, Sr., grandson of Ford Motor Company founder Henry Ford, took control of the team in 1963. Ford’s priorities were not on-the-field performance, and the team’s record under his ownership clearly reflects this. Upon his passing in 2014, his wife Martha Ford (88 years old at the time) took control. Like all complete overhauls, external evidence was murky at best. Decades of failed leadership and processes took years to unwind as the organization’s priority shifted to building a game-winning program.
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In 2020, the turnaround accelerated when control of the team passed to Sheila Ford Hamp, daughter of William Clay Ford, Sr. and Martha Ford. Under Hamp, major personnel changes reflected both the lessons learned since 2014 and a new sense of urgency and enthusiasm. Hamp hired Dan Campbell as head coach and Brad Holmes as general manager, while the talented but hidden asset Jared Goff was lifted into the quarterback spot. The team hired legendary linebacker and Lions veteran Chris Spielman as special assistant to Hamp for his counsel in on-field and off-field football matters, his winning mindset and his passion for the game.
After decades of miserable on-field performance, the Lions turned a 1-5 start in the 2022 season into a very respectable 9-8 full-season record.
Where the Lions finish the 2023 season is unknown. But the leadership change which prompted a complete overhaul of the organization’s priorities, processes and culture has made a previously hapless loser team into a serious contender.
Investors in public company turnarounds look for the same changes: a severely out-of-favor stock of an organization with fixable problems under new leadership focused on winning. Not all turnarounds succeed, and the biggest successes often take longer than most investors are willing to wait for. Interim doubts and long-running (and warranted) skepticism keep sentiment (and stock prices) subdued until the turnaround becomes obvious. But that is where the best rewards are. Just ask Detroit Lions fans.
Currently, the Cabot Turnaround Letter has 33 Buy-rated turnaround stocks on its recommended list. Check out our advisories for more information about how our advisories can help you find attractive turnaround stocks.
As specialists in turnaround investing, we focus on companies that have “the right stuff.” We do all the extensive idea searching and analysis to help you benefit from out-of-favor stocks. Our capabilities save you time while boosting your chances of profitable investing. Over the past three years, the portfolio of Buy-rated recommendations for the Cabot Turnaround Letter has generated a 22.3% annualized return compared to the 10.5% annualized return of the S&P 500, as compiled by the independent ratings organization Hulbert Ratings.
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