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Second Acts in Finance: The 5 Most Astonishing Comeback Stories


Tales of the previously powerful being brought down to earth with a thud only to rise again, are irresistible. Here, a "fierce five" of corporate American comebacks.

And so it is with many of our protagonists, I'm afraid. Martha Stewart's Cinderella story took a darker turn sometime just after midnight. The stock tumbled 44.32% last year, finishing 2012 at a fresh low of only $2.28 amid an exodus of key executives and serious questions about the staying power of its 71-year-old star. Her flagship show was cancelled in the spring due to low ratings on the Hallmark Channel, a television wasteland to which it was exiled after failing to make the grade at NBC. Meanwhile younger rivals are nipping at her expensively attired heels, and Martha's overall opulence appears altogether ill-suited to our Age of Austerity.

JP Morgan, master of all it surveys? Not so fast. As Frank Sinatra -- who himself knew all about dramatic comebacks -- sang at the start of "That's Life," "You're riding high in April" only to be "shot down in May." Ain't that the truth. Last year, on what would be an especially fateful Friday the 13th of April, the bank stood utterly ascendant after announcing $5.4 billion of net income amid an impressive increase in per share earnings. That same morning Jamie Dimon characterized a brewing issue involving employee Bruno Iksil as "a complete tempest in a teapot" and, such was the CEO's standing, analysts everywhere unquestioningly accepted his assessment. Fast-forward to May 10, and this rogue trader now known as the "London Whale" became a $5 billion debacle that did enormous reputational damage to the erstwhile man with the Midas touch.

Apple, utterly invincible? As if. An odd thing happened en route to its seemingly shoo-in shot at becoming history's first trillion-dollar company. Having hit an intra-day high of $705.07 on September 21, 2012, the stock subsequently skidded into bear market territory in the blink of an eye. While finishing the year up a tidy 30%, it nonetheless ended fully 30% from its peak as margin erosion, underwhelming product launches, ferocious tablet competition, map app missteps, and the inexorable Law of Large Numbers all combined to catch up with it. Not long after being anointed the most valuable entity on Earth, Apple found itself playing second fiddle to a visitor from another Galaxy. Whether the firm is able to recover recent glories absent its legendary founder will be one of the most compelling investment questions of 2013.

Who knows how all these stories will ultimately end, and what the next 12 months will bring by way of other corporate comebacks. The previously omnipotent Oprah Winfrey, who hailed Martha Stewart's own immediate post-prison resurgence, is herself an unlikely early candidate for redemption in 2013. Her eponymous television network has suffered serious rating erosion since bolting from ABC (NYSE:DIS) but on Saturday she revealed six new original series in a valiant attempt to scale the summit again. Suffice it to say that University of Phoenix owner Apollo Group (NASDAQ:APOL), whose 61.17% slide made it last year's single worst S&P 500 (INDEXSP:.INX) stock, would also make a wonderful Phoenix rising from the ashes. One thing is certain however, with or without second acts: "It ain't over till it's over." A quote which comes not from Jay Gatsby but another American icon who arrived on the scene in the same spring of 1925: Yogi Berra.
No positions in stocks mentioned.
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