Turnaround Investing Blog

George Putnam, one of the country's leading turnaround and distressed investing professionals, shares his timely insight on the economy and turnaround investing opportunities.

Large Cap / Transportation

Don't Chase the Headlines

The recent unfortunate accident involving the Costa Concordia cruise ship, which is owned by a subsidiary of Carnival Corp., raises an important investing question: Should you bail out of a stock if the company is affected by a serious negative event? Unless the event could be part of a series or trend, the answer is usually “no,” for two reasons.

The first reason is that, unless you are a professional investor with a serious trading platform, you won’t be able to get out early enough to protect yourself. By the time you hear the news and place a sell order, all of the professional stock jockeys with hair triggers will have already driven the stock price down—which leads to the second reason.

The second reason is that the market usually over-reacts to bad news. For example, Carnival’s stock lost $4.7 billion in value immediately after the Costa Concordia accident. It seems highly unlikely that the accident will cost the company anywhere near that much. The ship was reportedly worth about $500 million, and it is almost certainly fully insured. Sure, there will be lawsuits, but the damages will likely be in the hundreds of millions, not billions—and they are probably covered by insurance too. While some number of potential cruise-goers will now choose some other type of vacation, Carnival is not likely to lose $4.7 billion worth of future business. In fact, we think the market’s over-reaction makes Carnival’s stock look like a good buy now.

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Amazon = US GDP 1970

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. Read More.

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.

Read More.

Turnaround Letter Stock Pick Named Top Performer of 2017

 

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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."