Over 80 stocks were featured in last year's Top Picks report. The very best performer? George Putnam. Here, the editor of The Turnaround Letter updates this top-performing stock pick and highlights some additional year-end bounce candidates.

Steve Halpern: We are here today with George Putnam, Editor of the Turnaround Letter. How are you doing, George?

George Putnam: Fine. Thanks, Steve.

Steve Halpern: Today, we're concluding a series of interviews with the top performing advisors from last year's Top Picks Report, and of the 81 stocks in that report, you had the number one performing pick, MGIC Investment, which is up about 215%. Congratulations.

George Putnam: Thank you very much.

Steve Halpern: Could you review the original reasoning for choosing MGIC last year and what has occurred during 2013 to account for the stock's strong performance?

George Putnam: Sure. Well, MGIC Investment Corp. (MTG), which insures mortgages—residential mortgages—was really hammered back in 2007, 2008, and it struggled to, sort of, dig out of the hole that it got in from all of the defaults that individual homeowners made on their mortgages.

But towards the end of last year, it raised some new capital to shore up its balance sheet and was showing signs that the past problems were really being handled, and so, the stock would turn the corner, and fortunately it did work out that way.

Steve Halpern: Now are these gains, that you think of, only those that occurred in the past, and people should be selling, or would you still recommend the stock, expecting better things to come?

George Putnam: No, I think the stock has further to go, because now that they've gotten the past problems largely behind them, they can focus on their new business, which has been going well and is highly profitable.

And also, people will finally recognize that this stock has a future, so they will be more willing to buy into it, so while it's done very well over the last year, I think it's got a fair amount further to go.

Steve Halpern: Now, as an expert in turnaround situations, you focus on very long-term fundamentals, often recommending a stock for years to come. But one exception to that pattern is, every December, you provide your subscribers with year-end bounce candidates. Could you explain that strategy?

George Putnam: Sure. Every year, around this time, you get a lot of selling pressure in certain stocks, and the pressure is really tied to the calendar. It comes from two sources.

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One, people who have losses in the stocks want to sell them, so they can realize the losses and use those losses to offset gains they may have in other stocks, and also for the professional investors, they want to get the losing names out of their portfolios before they get locked-in at year-end, and get written up in their annual reports.

So, you see selling, both from the individual taxable investors, and the pros in stocks that have been going down throughout the year—but then, January 1, those pressures go away.

They can't take the tax losses anymore for this past year and the pros have a full year before their next report gets printed, so, when that pressure comes off, they can sometimes jump up fairly sharply.

Steve Halpern: Now I see there are some well-known retailing stocks on your list of balanced candidates for this year. Could you briefly tell us about those?

George Putnam: Sure. There are some pretty high-profile names; one, Abercrombie and Fitch (ANF), has had a great run identifying trends in the teen and young adult market, the clothing market, and hitting those trends just right.

The last year or two, they really stumbled, and haven't been quite so successful, but they've got a great brand still, and a good long-term business, and I think you may see a fair amount of buying in the stock right after January 1.

Steve Halpern: Now, not surprisingly, your list features a gold stock, which has been a poor performer this year. Would you highlight what you see there?

George Putnam: Sure. We think that the stock of Newmont Mining (NEM) is very well set up for a year-end bounce. Like many of the gold mining stocks, it has struggled for the last year or two, as the price of gold has come down.

And they had some other problems as well, with the result, that their stock has actually performed worse than some of the others in their sector.

But they've brought in a new CEO, which is, actually, one of the things we like to see in a turnaround, so that, when the year-end selling pressure comes off, that stock might bounce, as well.

Steve Halpern: Well, congratulations on being our best stock performer for 2013, and we look forward to your new ideas that will be featured in the upcoming 2014 report. Thanks for joining us today.

George Putnam: Thank you, Steve.

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