NEW YORK (TheStreet) -- Identifying troubled companies that are no longer taken seriously by Wall Street, and yet are quietly putting their houses in order, can be very rewarding. The rewards go beyond monetary; there is a certain sense of accomplishment that comes along with seeing promise in beaten-up names (promise that few other investors see), then experiencing the stock's rebirth.
There were few more-troubled names in the restaurant space then casual dining chain, Denny's (DENN). After enjoying fairly wide popularity in the 1980s, with brand recognition driven by lots of advertising, the company's parent, Flagstar, filed for bankruptcy in 1997. When Denny's emerged as a standalone company from that bankruptcy, it did so with a lot of debt, and the ensuing years were difficult at best.
You just did not hear much about Denny's during that period, and I, for one, had all but forgotten that it was still around, let alone a publicly traded company. It took a memorable Super Bowl advertising campaign in 2009 to re-acquaint me with the company. In those ads, Denny's announced that it was giving away 2 million free breakfasts on the Tuesday following the Super Bowl, and all you had to do to take part was show up.These expensive ads were ultimately used as ammunition against the company as a poor use of the advertising budget in a subsequent proxy fight by activist investors, but in my view, it was a great way to let the public know that Denny's was still open for business. In fact, the company offered a similar promotion the following year. If nothing else, my rediscovery of Denny's via that first slick Super Bowl giveaway campaign, prompted me to take a look at the financials, which led to a profitable three-plus-year position in the stock. Overall, the company has quietly delivered some good numbers over the past few years, remaining profitable during the last recession, and has also bolstered its balance sheet. Denny's has adopted a "re-franchising" strategy, selling company-owned stores, and using the proceeds to pay down debt.
Select the service that is right for you!COMPARE ALL SERVICES
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
- Real Money + Doug Kass + 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV