In my premier issue of Insiders PLUS, I recommended JCPenney as a strong turnaround candidate. All the bad news on the company was out and factored into the stock, but few people were giving credit to the potential that its new CEO, Allan Questrom, had set out to unlock. Such is the case with this week's recommendation, Winn-Dixie Stores (NYSE: WIN). Can we make 174% in 8 months like we did with JCP? I don't think we'll do quite that well, but a 55% to 75% return in the next 18 months seems very doable.

WIN, like JCP is a retailer, but WIN sells primarily groceries. At one time it was the 3^rd largest supermarket chain in America, but slow-thinking, entrenched, family-owned management let the company slip all the way back to the number 10 slot. The company was in trouble and had to call in a specialist.

It didn't take long for Rowland to start earning accolades at Winn. Burt Flickinger, a consultant and food retailing professor at Cornell University called Rowland's early turnaround plans "… a brilliant master stroke.'' And Jim Donald, chief executive officer of Pathmark Stores, said of Rowland, ''He's probably the best candidate for the job.''

The problems at Winn, like those that plagued JCP, were daunting. The chain suffered from de-centralized supply chain management, but stratified ivory-tower executive decisions. Rowland is changing all that. He's restructured the company so that information and ideas flow freely up and down the management chain, but ordering is centralized to increase purchasing power.

Unprofitable departments have been closed, as have a number of underperforming stores. Major renovations have taken place at many stores, and highly-qualified new management has been brought in to take on everything from managing the company's real estate to training its employees. The list of new managers reads like a who's who in retail achievement. It was accompanied by a long list of old managers (some there for 35 to 40 years) taking much-needed retirement.

In the last few months, Winn-Dixie Insiders have showed their faith in the company's progress by buying more than 37,000 shares of stock. The bulk of it, 20,000 shares, was bought by Rowland himself. The rest was bought by 5 others, including the CFO, the Chairman of the Board and a VP. While these buys are not huge amounts of stock, they are certainly healthy amounts. They are also probably honest amounts. Many of the tremendous buys we saw a couple of years ago, turned out to be public-relations buying -- much of it mandated by the boards of directors. I've found no sign of that here.

By the way, Winn-Dixie is one of only two companies in the S&P 500 last year that reports the cost of options compensation in their earnings statement. So, the earnings it reports will be honest.

While its debt is a bit high, Winn's interest coverage is comfortably adequate. Moreover, after the huge investment in renovations in the last few years, capital spending plans have been greatly reduced for the coming year to about $166 million. In recent years, that figure has generally been in the $330 million range. That extra free cash flow should allow the company to pay down debt relatively quickly, while still leaving enough left over for growth.

Winn-Dixie still has a lot to do to rebuild its image, improve its service, and re-shape its marketing, but the company is well on its way. It has cut the dividend to pay down the debt it incurred to restructure, and it has made all the other tough decisions it needed to make to get its act in order. Now all it needs is more time. But if you wait for all the bricks to be in place, you'll miss the best move in the stock.

WIN shares currently trade at $14. The company is expected to earn between $1.05 and $1.20 in the coming year. By 2003 I think it can return to its former $1.40 range. With most of its peers trading at a P/E of 18, Winn would probably fit right in there, bringing its price to the $22 to $25 range.

There's one last interesting tidbit about WIN. A few years ago, when it was in trouble, it was repeatedly mentioned by analysts as a potential takeover candidate. Its 1,100 stores in 14 states would make a nice addition to a chain trying to expand in the southeast where Winn is strongest. There was a big obstacle in the way of a takeover, however, that is, that the company is 40% family owned. But the new talk is that with the old generation retiring, the new generation is much less adamant about keeping independent. So, even if the stock doesn't perform well enough to reach its 1997 high of $50, you also have the possibility at any time that a suitor could bump the stock up 15% to 20% to close a deal. That wild card makes an investment in Winn-Dixie extra enticing. Buy Winn-Dixie Stores up to $15.