Many people profess to be patient investors. In reality, not many can stand the heat of waiting their investments to turn around. You can identify such investors by asking them the reason why they invest on their stocks. If they said that they invest because such and such has an exciting products in the pipeline, then they are most likely are not going to be patient with that investment.

If they admit that things look gloomy for their investment but, they believe that the company will turn that around with certain new executions, then they are patient investors. The truth is turnaround investors are patient investors. They are willing to invest in a seemingly gloomy company with the expectation that things will change. No, it is not a stream of baseless hope. It is the patience to wait until the company can sort its mess out. That is hard to do, even for the most-seasoned turnaround investors. The reason is simple. You invest in companies that people love to hate. You need to have strong conviction in order to stay on the course. A lot of novice investors would buy some beaten down companies, only to sell it later due to emotional reasons.

For instance, one folk might talked unfavorably about your company and you start to think that maybe he was right. After a while, another folk would talk some other terrifying things about your company and your mind started to tremble. At that point, you could not wait to dump your investments in this stock and you were glad you sold the stock. That happens a lot and that is the reason why turnaround investors are rewarded so much. Since not a lot of investors are willing to wait that long, the stock price can be bought at a much lower price than normal. This increases your potential return.

What are examples of turnaround investments? Hindsight is 20-20. But, let me give a few examples in the past. Altria Inc. was a good turnaround investment in the early 2000s. It was hit by lawsuits left and right and nobody is willing to buy a stock with 'tobacco' labelled in them. Fast forward five years later, people still do not have a favorable view on tobacco but Altria stock price increase anyway. It is not a mere penny increase that we are talking about. Altria increases more than 200% since its low price in the year 2000. How about Seagate Technology in the middle of last year? Analysts worry about the competition from flash disk which would cripple the hard-drive industry forever. The result? Seagate stock price rose almost 100% within one year. Not a bad return for investing in un-loved companies.

One final example would be the pharmaceutical companies. Concerns about their future pipeline depressed their stock price for much of 2005. In 2006, when it is clear that the pipeline is not all dry, stock price rose steadily to reflect that change. You could have bought Merck shares in the $ 26 range last year and your investment would have gained 36% thus far. This is despite the uncertainty revolving around it. When the vioxx case is all settled, I think the stock price can rise approaching the pre-vioxx announcement.

The key here though is to be knowledgeable about your companies and be patient. This way, you will have a strong conviction about your investment and you will not sell a potentially good investment portfolio. That is not easy to do but you will get better at it with practice. For starter, our website features a regular commentary that gives you free investing idea about potential turnaround investment.