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Could you make big returns on these wrecked stocks?

One of the investing community’s favourite phrases is ‘buy low, sell high’. But the human trait of avoiding danger makes this strategy very hard to follow.

When BHP Billiton Limited (ASX: BHP) fell to a multi-year low in 2016 of $15 it would have taken a brave investor to jump in at that point. However, that brave investor is now sitting on a total return of more than 100%.

That doesn’t mean that a share which is at a low price won’t keep going lower. It’s hard to see Cabcharge Australia Limited (ASX: CAB) recovering significantly at any point in the future.

It’s worth considering whether the following shares could be in for a turnaround like BHP’s:

The Reject Shop Ltd (ASX: TRS)

The Reject Shop has seen its share price fallen by nearly two thirds since the end of 2013. The retailer has struggled to grow its sales sustainably during this time, which is why the share price has been a bit of a see-saw.

Management believe that it could be one of the most resilient businesses to online shopping because the cost of shipping would make it uneconomical.

The business is also focusing on a simpler strategy of low-cost basics, which should prove to be a winner with value shoppers.

Vita Group Limited (ASX: VTG)

Vita is heavily reliant on the earnings that it generates from running Telstra Corporation Ltd (ASX: TLS) retail stores and business stores. The constant negative news coming out from Telstra about the contract has seen the Vita share price hurt heavily.

Vita has recently entered the medical aesthetics and men’s ‘athleisure’ sectors, both of which could be decent growth opportunities for the business in the future.

Accent Group Ltd (ASX: AX1)

This business was previously known as RCG, it changed to Accent to reflect the importance of that segment of the business.

Management have continued to grow underlying profit over the years and reported further growth in its trading update. Underlying group earnings before interest, tax, depreciation and amortisation (EBITDA) for the first quarter of FY18 was 6% higher, total retail sales were 12% higher and like-for-like sales were 1% higher. Management expect profit growth in FY18.

Foot retailing could be one of the best retail stores to be internet-proof because most people like to wear the shoes before buying them.

Foolish takeaway

All three shares are interesting opportunities at the current price. If I had to invest in one today I’d probably choose Vita because it’s being smart by diversifying into other sectors, which should help future-proof the business. However, all three could be risky choices because of how distrusting the market has been over the last year about their long-term potential.

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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Telstra Limited. The Motley Fool Australia has recommended The Reject Shop Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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