Macy’s is building an off-price business with Backstage, currently with 45 locations (including 38 inside of existing Macy’s stores and seven free-standing stores). Macy’s does not currently have a competitive edge in off-price retailing; and the key to making this initiative a profitable is execution—their ability to find, buy, display, price and manage this new business. We believe Macy’s is smart to experiment with an off-price concept as it will make them a better overall competitor.Read More
Chipotle's CEO signals new perspective, no longer “business as usual” and that the board is serious about making improvements. Other boxes already checked include strong cash flow and no debt; but there are also as-yet unchecked boxes: outsider CEO with a credible strategy, attractive valuation. Without attractive valuation, Chipotle may never justify an investment.Read More
The Turnaround Letter's Catalysts Report reflects our contrarian investing approach--calling attention to those companies that caught our attention as a result of some sort of recent event that could accelerate positive change.Read More
When you hear the media get excited about a 100-point move in the Dow, remember what this really means--that the media is trying to get your attention, not necessarily that anything important is going on in the market.Read More
Tesla is pressed by an age-old nemesis, which makes its financials and operations fragile. Why is Ford even in this discussion? Because Tesla’s nemesis is working to Ford’s advantage...Read More
Post Holdings shares have vastly outperformed Kellogg's and the S&P500 over the past three years. Similarly, Post's crisp revenue and earnings growth has left Kellogg's looking soggy. However, the two companies' prospects may diverge again, but in a different direction. In this note, we analyze Post Holdings' recipe for its strong returns, assess what has held Kellogg's back and explore Kellogg's outlook compared to Post Holdings' to answer the question: Should Kellogg's shareholders have Post Holdings envy?Read More
George Putnam does not follow the crowd and is widely-recognized for this contrarian perspective--with media sources and financial publications frequently seeking out his insight, value stock recommendations and unique turnaround investing expertise. Most recently, Forbes, equities and MoneyShow highlighted The Turnaround Letter.Read More
After 16 years of downsizing and asset shuffling, GE now appears to be in disarray--with abrupt changes in the board and at the top levels of management. We believe, however, that the recent drama is the natural byproduct of the speed and boldness of a new CEO who is determined to toss overboard a failed strategy and improve GE’s operating performance.Read More
The public equity markets are increasingly having to follow the rules of private equity. For public equity investors, this means the following: Private equity valuation measures like EV/Ebitda will drive public equity valuations. Underperforming companies will come under shareholder pressure more quickly. More quasi-public companies like Kraft Heinz and Advance Auto Parts will emerge. For currently in-favor tech companies like Facebook and Amazon, this could eventually lead to much higher scrutiny. We believe the privatization trend will continue.Read More
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.
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Harnessing Activists to Help Find Turnaround Stocks
Activist investors often produce attractive returns for their clients; and you can still use their influence to help your position as a turnaround investor in two ways: Buy a position in a stock with the expectation that an activist will soon follow or buy after an activist takes a stake.
While one of the many dozens of activist funds might find their way to selecting your particular stock, this approach is likely to be frustrating and unrewarding. A better approach is to buy after the activist makes their move. Once an activist takes a stake in a company, how do you evaluate whether it is worthwhile to follow on? Admittedly, this is a bit of an art... Learn how you can harness the power of activist investors to find market-beating turnaround stocks.
Turnaround Letter Stock Pick Named Top Performer of 2017
What Last Year's Top Stock Pickers Are Buying in 2018
This Forbes write-up follows up on the recent Top Stock Tips report--naming The Turnaround Letter's Crocs recommendation the top performer of 2017: With 90% gains, CROX beat out 100 other investment ideas included in the report; and the stock continues to have value investing appeal, according to Putnam.
George notes, "We see additional upside for the stock in 2018 as management's efforts continue to bear fruit, though the gains will likely be more muted than we saw in 2017."
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