Fry Sees Turnaround Opportunities in Japan and US Health Insurer

The author's investment strategy focuses on 'turnaround stocks', companies that have been knocked down, but still possess strong fundamentals. He seeks out stocks that exhibit a pattern of being 'down a lot, up a little', where prices fall sharply due to external factors, only to recover modestly.

One such example is Humana Inc. (HUM), which he recommended in 2000 after its stock price had plummeted by two-thirds. The company faced challenges from the Balanced Budget Act of 1997 and a terminated merger with UnitedHealth Group Inc. (UNH). However, these issues proved temporary, and shares rebounded threefold over the next several years.

Another opportunity arises in Japan, where the country's 'stock' was down for decades due to deflation, corporate ownership issues, and quantitative easing. However, with government initiatives encouraging individual investors to buy stocks and Japanese companies increasing spending on plant and equipment, a new cycle of outperformance is underway.