Ask George
Ask George RSS FeedRSS

George Putnam, one of the country's leading turnaround and distressed investing professionals, answers your investing questions. This is your chance to find out everything you wanted to know--but were afraid to ask--about turnaround investing.

To submit your question, please click here.

Media / Technology Hardware, Equipment, & Services

With all the hoopla over Facebook, what do you recommend that individual investors do?

May 24, 2012

I normally don’t like to discuss particular stocks in the Ask George section, but I’m going to make an exception with Facebook because it is instructive on two fronts: 1) because of all the hype and 2) because it says something about IPO’s in general.

With all the hype about Facebook, I think there is a very good chance that the stock is significantly overvalued—even after falling about 20% from the IPO price. The stock currently trades at about 22 times revenues and 76 times trailing earnings. In other words, the company has to grow phenomenally to justify its current valuation. While it is possible for Facebook to achieve the necessary growth in revenues and profits, that seems unlikely to me. The company would have to do just about everything right for quite a long time.

This brings me to IPO’s in general. My personal view is that they are often a “rigged game” designed to benefit the investment banks and some of their institutional investor friends. There is substantial academic research showing that the majority of IPO’s do not perform well for several years after the initial price surge following the offering. (And Facebook didn’t even make it beyond the first day before fading.)

I much prefer to focus on seasoned companies with established track-records and cheap valuations.  In the upcoming (June 2012) issue, the Turnaround Letter will look at some interesting stocks trading well below their IPO price. Also, in contrast to Facebook, we will examine a household name technology company trading at a fraction of sales and a very low multiple of earnings.

(Question submitted by K. Moore)

View more "Ask George" Q&A

 or submit your own question.

Learn George Putnam's Turnaround Secrets

stock picks

Turnaround Investing Blog

Turnaround Investing Blog

Stocks Don't Know Who You Voted For: Thoughts About Clinton Vs. Trump & The Stock Market

A common temptation is to mix emotions with investing. Your candidate won, and so you are more optimistic--or your candidate lost, and now you’re more pessimistic. Stocks don’t know who you voted for. Avoiding emotionally-driven post-election buying and selling will be beneficial to your financial health. Read More.

Market-Beating Profit: The 200+ Club

Turnaround stocks present a unique opportunity for savvy investors to buy in at bargain prices. Take a look at this list of just a few of our purchase recommendations that have realized a return rate of 200% or better:

* Bristow remains in our active portfolio (currently as a Hold), and 2,057% gain is as of 11/9/16.

Bet on These Battered Stocks

value stock

x

Chicago Tribune highlighted this Kiplinger's Money Power write-up on George's contrarian investing approach and The Turnaround Letter's April 2016 monthly turnaround stock pick.

 

Darren Fonda notes, "…besieged stocks often start to recuperate as the headlines fade and investors anticipate a return to precrisis sales and profits. The trick, of course, is to find companies that are more likely to rebound from a setback than collapse entirely."

 

Learn more about Putnam's turnaround investing strategy.