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.

Healthcare Equipment & Services / Insurance

Health Management Value Stocks: Cheap in the Face of Uncertainty

Excerpted from May 2014 Issue

I’m pretty sure that the Affordable Care Act (or ACA, also known as ObamaCare) is going to create some great investment opportunities, but I have no idea what the ultimate effects of the new government programs will be on the different individual stocks and groups of stocks in the healthcare sector. Even though I can’t predict the broad trends in the sector, I can still focus on traditional valuation measures among the sectors and individual stocks; and when I do that, the HMO’s look pretty cheap almost regardless of what happens with the ACA. 

One reason for the cheap valuations is that many investors have been afraid to buy HMO stocks because they don’t know exactly how they will be affected by the ACA. I don’t know either, but at their current low valuations, I think it is likely that the stocks will go up as the uncertainty dissipates. Also, the ACA is likely to result in more industry consolidation, which could make some of the smaller HMO companies buyout targets.

The eight health management value stock picks discussed in our most recent Turnaround Letter represent a range of different market capitalizations, and some occupy specialized niches, but they all appear poised to achieve higher valuations in the not-too-distant future.

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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."