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.
Activist investors—fund managers that hope to drive up share prices by actively changing their target company’s strategy—often produce attractive returns for their clients. If you’re not one of the fortunate few to be a client, you can still use their influence to help with your turnaround investing. As a turnaround investor, you can harness activists 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.Read More
Excerpted from the September 2017 Issue
Determining what EV/EBITDA multiple makes a stock attractive, just as with a P/E multiple, is admittedly a form of art. We uncovered four companies that have low EV/EBITDA multiples but noticeably higher P/E multiples that might be worth a closer look.Read More
A term that’s tossed around in the financial media is “value compression.” What exactly is value compression and how can it affect turnaround investing?Read More
With more than 30 years of turnaround investing and market-beating results, it's no surprise that media and market pundits often seek George Putnam's commentary, stock picks and unique contrarian expertise. Most recently, both Forbes and equities.com praised The Turnaround Letter.Read More
With nearly $180 billion in assets under management, “activist” investment funds have become a powerful force in the capital markets: Nearly 40% of companies in the S&P 500 attracted activist attention in recent years. According to Activist Insight, 320 companies in the U.S. experienced an activist campaign in just the first half of 2017; but who, exactly, are these activists, what are they after, and what role do they collectively serve?Read More
Excerpted from the August 2017 Issue
Even though energy bankruptcies are on the decline, we believe there will continue to be good opportunities for distressed/turnaround investors in that sector for some time.Read More
Steve Cohen, the high profile hedge fund manager, narrowly escaped a prison sentence for trading on insider information. Yet cable billionaire John Malone’s recent insider buying of $16 million of Liberty Global shares, where he is Chairman of the Board and clearly knows a lot of non-public information, is perfectly legal and may be a valuable signal to investors. Can both be possible at the same time? The not-so-simple answer: yes, and no.Read More
Excerpted from the July 2017 Issue
Amazon certainly is impressive; but, realistically, not every industry will be challenged by their profit-draining expansion, nor will every product be sold at large discounts on amazon.com. In this month's Turnaround Letter, we explore a brief selection of companies that would probably be among the last ones to succumb to Amazon Fever. Each has traits that are well outside of the Amazon model, are out of favor and have some interesting turnaround aspects.Read More
Identify & Profit from Distressed Investing
Turnaround Investing Blog
Amazon joined Apple in reaching a $1 trillion market capitalization. $1 trillion is about the same as the total value of New York City property and the total value of loans at JP Morgan, the nation’s largest bank in terms of assets. Jeff Bezos’ $160 billion stake would place him (personally) as the #33 largest company in the S&P 500 in terms of market cap, next to Coca-Cola, Disney and Netflix. We aren’t bold enough to predict whether the shares will continue upwards or if they are in a bubble reaching maximum inflation. Setting aside for a moment their investment prospects, let’s admire the truly remarkable milestone that these two companies have reached.
EV/EBITDA: What Is It & Why Are We Using It More?
In reading recent editions of The Turnaround Letter, you have probably noticed that we are increasingly using EV/EBITDA as a valuation measure, rather than the better-known price/earnings multiple. We thought it might be useful to describe this measure and why we like it.
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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