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.

Insurance / Materials

Mortgage Insurance Stocks: Beneficiaries of Increasing Home Prices

Excerpted from February 2013 Issue

One interesting way to play a rebound in the housing market is through the mortgage insurance stocks. These companies provide insurance against defaults by borrowers who take out mortgages to buy homes. When defaults and foreclosures skyrocketed, beginning around 2006, these companies suffered huge losses and some of them went out of business. Needless to say, their stocks got crushed, and most of them have yet to really rebound.

All of the surviving mortgage insurers have been much more conservative since 2008, with the result that the new business they are writing is very profitable. The problem is that they are still trying to get out from under the poor risks that they took on prior to the 2008 financial collapse.

Rising home prices help the insurers get out from under these legacy problems. As home prices begin to recover, fewer homeowners are likely to default because they can now hope to rebuild their equity in their homes. In addition, the losses on defaulted mortgages should be smaller as the homes fetch higher prices in foreclosure sales. The full-length, subscriber-restricted February 2013 Turnaround Letter article names four potential turnaround opportunities in mortgage insurers' industry.

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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."