turnaround

# Knowledge Frameworks — {SKILL_NAME}

This file augments the skill methodology with practitioner frameworks, case precedents,
and sector-specific analysis rubrics from the agentii knowledge base (spec 037).
It is progressively disclosed — loaded on demand, not at skill activation (FR-014).

## How to Use

Before executing the analysis, scan the relevant frameworks below for the target sector
and analysis type. Where a framework applies, incorporate its methodology alongside the
standard protocol. Cite knowledge entries by their `/v/knowledge/{citation_id}` link.

## Practitioner Frameworks

### Fundamental Analysis (L2)
- **Fisher Scuttlebutt Method**: Channel checks, supplier interviews, customer surveys — validate management claims through primary research.
- **Morningstar Moats**: Network effects, switching costs, intangible assets, cost advantage, efficient scale — score competitive durability.
- **Greenblatt Magic Formula**: Rank on earnings yield + ROIC — quantitative screen for quality-at-a-reasonable-price.
- **Mauboussin Expectations Investing**: Price-implied expectations vs. fundamentals — identify the gap.

### Management Assessment
- **CEO/CFO track record**: Past capital allocation decisions, M&A history, share buyback timing.
- **Incentive alignment**: Compensation structure, insider ownership, option grants.

### Sector-Specific Playbooks
- **Healthcare (Pharma/Biotech)**: Pipeline depth analysis, FDA catalyst calendar, patent cliff exposure, drug pricing risk.
- **Technology**: Adoption S-curves, network effects quantification, R&D efficiency, platform ecosystem lock-in.
- **Financials**: Spread analysis (NIM), credit cycle positioning, loan loss reserve adequacy, capital return capacity.
- **Consumer**: Brand strength metrics, unit economics, channel mix trends, customer acquisition cost payback.

## Historical Analogues

When the current situation matches a known pattern, query `search_by_analogue` with the
appropriate `market_regime`/`event_type`/`company_situation` tags. Cite relevant cases as
precedent.

## References

All frameworks sourced from `gold.knowledge_entries` (spec 037). See `contracts/citation-and-memory.md`
for citation format conventions.

# Company Life Cycle Classification — Institutional Methodology

Methodology synthesized from institutional investment research; all text is an original paraphrase.

---

## Cash Flow-Based Classification

Traditional life cycle classification relies on proxies: age (older = mature), size (bigger = mature), or profitability. These proxies are weak. Age and size have low correlation with where a company actually is in its life cycle. A better approach uses the three components of the cash flow statement.

### The Five Stages (3-Year Rolling Sign Patterns)

| Stage | Operating CF (CFO) | Investing CF (CFI) | Financing CF (CFF) | Description |
|:---:|:---:|:---:|:---:|------|
| **Birth** | − | − | + | Company is investing heavily and not yet generating positive operating cash flow. Raising external capital to fund growth. |
| **Growth** | + | − | + | Operating CF has turned positive. Still investing heavily. Still raising capital (debt or equity) to fund expansion. |
| **Mature** | + | − | − | Strong operating CF. Still investing (CFI negative). Now generating enough cash to pay down debt and return capital (CFF negative). |
| **Decline** | + | + | − | Operating CF still positive but company is divesting assets (CFI positive — selling more than investing). Paying down obligations. |
| **Turnaround** | Transitional | Transitional | Transitional | Signs changing. Company moving from one stage to another. The key is identifying the direction of transition. |

### Classification Methodology

Use a 3-year rolling window to smooth annual volatility:
1. For each of the last 3 fiscal years, classify CFO, CFI, CFF as positive or negative
2. If all 3 years show the same pattern → stable stage
3. If only 2 of 3 years match → transitional (flag reduced confidence)
4. If the pattern has shifted in the most recent year → potential stage transition — cross-reference with qualitative indicators

---

## Transition Probability Matrix (1990-2022 IPO Cohort)

Based on analysis of all US IPOs from 1990-2022, companies at each stage have the following 3-year transition probabilities:

| From \ To | Birth | Growth | Mature | Decline |
|-----------|:---:|:---:|:---:|:---:|
| **Birth** | 35% | 50% | 10% | 5% |
| **Growth** | 5% | 55% | 35% | 5% |
| **Mature** | 2% | 5% | 75% | 18% |
| **Decline** | 8% | 12% | 20% | 60% |

Key observations:
- Growth → Mature is the most common transition (35% probability over 3 years)
- Companies can move backward in the cycle (Mature → Growth if new product cycles or acquisitions shift the CF pattern)
- Birth companies have a 50% probability of reaching Growth within 3 years; those that don't typically fail or remain sub-scale
- Decline companies have a 40% probability of transitioning out of Decline within 3 years (Turnaround = 20%, back to Growth = 12%, Birth = 8%)

---

## TSR by Stage Transition

Historical total shareholder returns for companies transitioning between stages (1990-2022):

| Transition | 3-Year Median TSR | Interpretation |
|-----------|:---:|------|
| Birth → Growth | +35% | Highest return — operating leverage kicks in |
| Decline → Mature (Turnaround) | +28% | Successful restructuring reprices the stock |
| Growth → Growth (stay) | +18% | Steady compounder |
| Mature → Mature (stay) | +8% | Low growth, stable returns |
| Growth → Mature | +5% | Transition priced in; modest returns |
| Mature → Decline | −12% | Value destruction as business erodes |

---

## Integration with Turnaround Assessment

This CF-based classification complements the existing financial scorecard approach. Two perspectives:

1. **CF-based**: What does the cash flow pattern tell us about where the company IS in the life cycle?
2. **Scorecard-based**: What do the financial metrics tell us about whether this is a genuine turnaround or a value trap?

When both frameworks agree (CF-based says "Decline transitioning" + scorecard ≥ 7) → highest conviction. When they disagree → investigate the discrepancy. A company with strong turnaround scorecard metrics but CF pattern still firmly in Decline may be too early to enter.

---

## Limitations

- **CFO borderline**: Companies with near-zero operating CF may flip classifications year-to-year. Use 3-year rolling window.
- **Acquisition distortion**: Large acquisitions can temporarily shift CFI deeply negative, mimicking Growth stage in a Mature company. Adjust for M&A cash flows when significant.
- **Financial companies**: Banks and insurers have different CF statement structures. This classification is less reliable for financial sector companies.

# turnaround — Analyst Mode Definitions

Extracted from SKILL.md for progressive disclosure (US5). The skill body keeps a pointer under `## Methodology → Analyst Modes`.

### Mode: performance-stagnation-detection-and-classification

**Display name**: performance-stagnation-detection-and-classification

<!-- ported_from: references/prompts/5/5_1.yaml -->

**Focus**: Identify and extract indicators of performance stagnation across four key dimensions using comprehensive financial and operational analysis.
 (rewritten via tool-name-map.json:system_v2_7)

- `get_company_profile`
- `search_keyword_in_source`
- `search_xbrl_facts`

### Mode: growth-catalyst-identification-and-assessment

**Display name**: growth-catalyst-identification-and-assessment

<!-- ported_from: references/prompts/5/5_2_1.yaml -->

**Focus**: Identify and extract announcements related to new products, services, or business initiatives that could serve as major catalysts to reaccelerate grow.
 (rewritten via tool-name-map.json:system_v2_7)

- `get_company_profile`
- `search_keyword_in_source`

### Mode: growth-catalyst-execution-monitoring-and-progress-assessment

**Display name**: growth-catalyst-execution-monitoring-and-progress-assessment

<!-- ported_from: references/prompts/5/5_2_1_1.yaml -->

**Focus**: Monitor and assess the execution progress of identified growth catalyst initiatives through trackable metrics, market sentiment analysis, and mileston.
 (rewritten via tool-name-map.json:system_v2_7)

- `get_company_profile`
- `search_keyword_in_source`

### Mode: leadership-change-impact-analysis

**Display name**: leadership-change-impact-analysis

<!-- ported_from: references/prompts/5/5_2_2.yaml -->

**Focus**: Identify and analyze senior leadership or key personnel changes that could materially shift company strategy, investor sentiment, or growth trajectory.
 (rewritten via tool-name-map.json:system_v2_7)

- `get_company_profile`
- `search_keyword_in_source`

### Mode: strategic-leadership-impact-assessment-and-financial-projection

**Display name**: strategic-leadership-impact-assessment-and-financial-projection

<!-- ported_from: references/prompts/5/5_2_3.yaml -->

**Focus**: Analyze the speculated strategy or strategic shift tied to new executive appointments and assess the expected financial statement impacts based on the.
 (rewritten via tool-name-map.json:system_v2_7)

- `get_company_profile`
- `search_keyword_in_source`

### Mode: strategic-initiative-execution-status-and-effectiveness-assessment

**Display name**: strategic-initiative-execution-status-and-effectiveness-assessment

<!-- ported_from: references/prompts/5/5_2_3_1.yaml -->

**Focus**: Monitor and assess the execution status and effectiveness of strategic initiatives announced or underway, focusing on transformation levers that could.
 (rewritten via tool-name-map.json:system_v2_7)

- `get_company_profile`
- `search_keyword_in_source`

### Mode: operational-execution-progress-and-effectiveness-assessment

**Display name**: operational-execution-progress-and-effectiveness-assessment

<!-- ported_from: references/prompts/5/5_3.yaml -->

**Focus**: Identify and extract trackable metrics and qualitative signals that reflect the execution progress and early results of the company's turnaround strat.
 (rewritten via tool-name-map.json:system_v2_7)

- `get_company_profile`
- `search_keyword_in_source`

### Mode: new-product-performance-evaluation-and-turnaround-contribution-assessment

**Display name**: new-product-performance-evaluation-and-turnaround-contribution-assessment

<!-- ported_from: references/prompts/5/5_4_1.yaml -->

**Focus**: Identify and extract trackable metrics and indicators that evaluate the execution, market feedback, and impact of new products/services launched as gr.
 (rewritten via tool-name-map.json:system_v2_7)

- `get_company_profile`
- `search_keyword_in_source`

### Mode: financial-turnaround-metrics-and-performance-validation

**Display name**: financial-turnaround-metrics-and-performance-validation

<!-- ported_from: references/prompts/5/5_4_2.yaml -->

**Focus**: Identify and extract quantitative financial metrics and supporting commentary that assess the financial outcomes of strategic turnaround initiatives.
 (rewritten via tool-name-map.json:system_v2_7)

- `get_company_profile`
- `search_keyword_in_source`
- `search_xbrl_facts`

<!-- END port-dimension-prompts methodology + modes -->

# turnaround — Output Structure (full template)

Extracted from SKILL.md for progressive disclosure (US5). The skill body keeps a compact summary under `## Output Structure`.

The final deliverable MUST be written as a markdown file to the workspace using the convention :

```
{ticker}/{YYYY-MM-DD_HHMM}_turnaround_{affix}.md
```

Where `affix` is a short descriptive slug (e.g., `turnaround-thesis`, `restructuring-progress`, `cost-action`, `inflection-signals`). Examples:

- `LLY/2026-05-25_1430_turnaround_turnaround-thesis.md`
- `NVDA/2026-05-25_1545_turnaround_restructuring-progress.md`

The path is RELATIVE to the agent's invocation cwd. Skills MUST NOT write under absolute paths.

**Citations & memory**: follow `contracts/citation-and-memory.md` — ≥1 citation per 200 words; every material fact, table row, and metric is immediately followed by its inline clickable `https://agentii.ai/v/{ticker}/{citation_id}/{N}` link; a bottom **Citations** section provides a non-duplicative roll-up index; the closing TUI reply includes a compact **Key Citations** list (headline 5–10 facts) of clickable `/v/` URLs; and append the run to `agentii.md` per `contracts/agentii-md-schema.md`.

# turnaround — Tool Fallbacks

Extracted from SKILL.md for progressive disclosure (US5).

| Tool | Failure Mode | Fallback Action | Coverage Annotation |
|------|-------------|-----------------|---------------------|
| `read_source_pages` | SQL error / PROXY_ERROR | Use `search_keyword_in_source(document_id, keyword)` if document_id known; otherwise `search_documents` with same query | "source file unavailable; used keyword search instead" |
| `read_source_deep_outline` | PROXY_ERROR / 404 | Use lightweight `read_source_outline` and flag `deep_outline_degraded: true` | "deep outline unavailable; used lightweight page map instead" |
| `read_source_outline` | PROXY_ERROR / 404 | Use `list_sources` for document-level metadata | "page map unavailable; used document listing instead" |
| `list_xbrl_concepts` | Timeout / 503 | Use direct `search_xbrl_facts` with standard US-GAAP concepts (Revenues, NetIncomeLoss, EarningsPerShareDiluted, OperatingIncomeLoss, Assets) | "concept discovery skipped due to timeout; using standard US-GAAP concepts" |
| `get_company_fiscal_calendar` | Cross-validation failed | Use XBRL-derived period grid from `search_xbrl_facts` `period_end` dates | "fiscal calendar mismatch; using XBRL-derived period grid" |
| `search_unified` | Intermittent error | Use parallel `search_documents` + `search_xbrl_facts` with the same query | "unified search unavailable; used parallel document + XBRL search" |
| `batch_search` | PROXY_ERROR | Use sequential individual calls (one per sub-query) | "batch search unavailable; used sequential calls" |

Tool errors are retried ONCE with the fallback action before escalating to the retrieval gaps failure policy. If both Layer 2 and Layer 3 tools are unavailable, enter document access degradation mode (structured data + metadata only, flag output as degraded).