This value stock opportunity became newly independent following a recent spin-off from its iconic parent company. We like the spin-off. It provides two very appealing fundamental improvements: new leadership and more focus. We also like that Carl Icahn controls three of the eight board seats and owns a sizeable stake, which should keep pressure on the new management team to improve execution and results. EBITDA is reasonably healthy and debt will be manageable.
While we can’t say for certain where oil prices go from here, we can say that the industry has aggressively restructured to adapt to the new environment, particularly the U.S. land-based exploration and production companies. The recovery in offshore drilling is probably further away. Drilling under the ocean is inherently more expensive, and so this segment could easily take another year or more to see meaningful signs of recovery. But because of this, the stocks of the offshore servicing companies have been slower to recover than their onshore brethren. However, as global oil consumption continues to grow, demand for ocean drilling won’t go away, and the offshore servicers are likely to reward patient investors.
We created a different version of the Dogs of the Dow: We selected the seven stocks that have completely missed the rally over the past three years. If these lazy dogs get off the porch, they could have a market-beating run. All seven are solid, well-run companies with healthy balance sheets. Many offer attractive yields. Some offer defensive traits should the stock market or oil prices turn downward. Others have unique company-specific aspects that could bring them back to life.
Watch to see if ADP’s CEO Carlos Rodriguez inadvertently helps Pershing, and his aggressive and sometimes personal stance against Ackman could backfire. Overall, because of the stock’s strong returns and Ackman’s weak credibility, we would give this activist campaign a low chance of making ADP a successful turnaround investment. For turnaround investors, the Trian campaign appears to have a win-win opportunity for investors--either Peltz joins the board and learns enough to re-invigorate P&G, or loses and management must either execute (boosting earnings and the shares) or they will face a more drastic proxy campaign with higher odds of success down the road. We think the P&G campaign could turn out well for shareholders.
Warrants: A Solid Investment Opportunity
Warrants provide a valuable tool for the savvy investor. When selected and implemented well, they can be a smart addition to a diversified investor’s portfolio. Like options, warrants are not equity. They only convey the right to buy equity. As such, neither holder is entitled to dividend rights, pre-emptive rights, proxy voting or any share of any liquidation.
Warrants' return potential can be very high, but they also carry significant risks. Learn what they are, how they work, strategies to minimize risk and find profit with warrants.
Here's Why You Should Invest in Asset Managers
This Forbesarticle cites a recent MoneyShow write-up that recommends investors take advantage of the strong stock market and potential interest rate hike by "putting some of your investment assets into the shares of asset management stocks."
The article praises The Turnaround Letter's OAK purchase recommendation and quotes George Putnam: "As the corporate debt binge that we’ve experienced since 2009 comes to an end, Oaktree will benefit from a growing number of restructurings and bankruptcies."