Buying stocks that are surrounded by negativity is not fun — but the best deals are often found in companies that are undergoing turnarounds yet still mired in bearish sentiment.

#-ad_banner-#This should come as no surprise. After all, the reverse is true — as Warren Buffett has said, “You pay a very high price in the stock market for a cheery consensus.”

The market is full of stories about struggling companies that were able to turn around difficult situations and become profitable — companies like Apple (Nasdaq: AAPL), General Motors (NYSE: GM) and Citibank (NYSE: C). Investors in those companies who recognized and acted upon their turnarounds reaped large profits.

To be sure, not every struggling company returns to profitability. Many wither and die on the vine, leaving investors with little to nothing to show for their trust and investment.

There is no question that investing in turnaround candidates is risky. However, the substantial potential upside, combined with tactics to control risk, can make turnaround investing a profitable strategy.

A prime example of profiting from a company that is mired in negativity but is in the process of turning things around is YRC Worldwide (Nasdaq: YRCW), a Kansas-based company that specializes in less-than-truckload transportation services. Investors who saw the value of YRC last year at this time are up over 270%, and those who jumped in at the start of 2014 are up 30%. Yet it’s critical to note that shares remain down 97% over the past three years.

Readers of Dave Forest’s premium Top 10 Stocks advisory are familiar with the lucrative nature of less-than-container load shipping. Dave examined the less-than-container load ocean freight shipper Expeditors International of Washington (Nasdaq: EXPD) recently for DividendOpportunities.com, a StreetAuthority sister site. YRC uses a similar approach, but with overland trucks rather than oceangoing vessels.

	YRC Worldwide
	YRC is a holding company for a portfolio of trucking brands through which it operates one of the largest less-than-truckload shipping networks in North America.

YRC is a holding company for a portfolio of trucking brands through which it operates one of the largest less-than-truckload shipping networks in North America. It boasted revenue of nearly $4.9 billion in its most recent fiscal year, but the company has a market cap of just under $250 million. With its fleet of aging vehicles, YRC posted a loss of slightly over $119 million over the past 12 months.

How can a company post such tremendous losses if it’s being run well?

YRC has suffered liquidity issues since it began a series of acquisitions in 2003. Next, a recession hit the economy, sending shipping volumes spiraling lower and making debt service on the acquisitions difficult. YRC nearly plunged into bankruptcy; it was saved only by aggressive shareholder maneuvers.

While YRC still has major debt problems, it has begun to address them. I believe the worst is behind YRC and there is only improvement ahead.

YRC recently completed the restructuring of just over $1 billion in debt and reached an agreement with a labor union on a revised contract. The anticipation of these events has sent shares soaring over the past year. The company expects the restructuring will save it between $40 million and $50 million a year (compared with interest expense of $151 million in its most recent fiscal year).

I’m not alone in my bullishness on YRC. Several hedge funds are also going against the negative sentiment, including Rima Senvest Management, which recently took a 6.8% stake in YRC. In addition, Solus Alternative Asset Management owns 28.5 million shares, and Marc Lasry’s Avenue Capital holds 31.7 million shares.

Risks to Consider: Trucking companies depend on a growing economy. If the U.S. economy starts to slip, heavily indebted firms like YRC will be the first to suffer. Always use stop-loss orders and diversify when investing.

Action to Take –> Although I think YRC could be the turnaround story of 2014, that could change quickly. Buying on a breakout close above $24 with stops at $19 and an 18-month target price of $36 –representing 50% upside — makes solid investing sense.

P.S. Investing doesn’t have to be complicated. If you invest in simple businesses that dominate their industries, you stand to make a killing in the market over time. In fact, the stocks in our latest report, “The Top 10 Stocks For 2014,” have delivered a total return of 237% over the past five years following this simple strategy. To learn more about our top picks for 2014 –including several names and ticker symbols — click here.