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.

Bonds

Turnaround Investors Must Be Wary of Debt

There is an old saying among turnaround investors: “earnings and assets come and go, but debt is forever.”

Equity investors sit at the very bottom of a company’s capital structure. Everyone else, including all debt holders, must be fully paid before any value can go to the stockholders. When a company has a high level of debt, its earnings and assets need to cover a lot of obligations. Should those earnings and assets weaken, it can leave a pittance for shareholders and result in a poorly performing stock, or worse.

You can often get a sense of the magnitude of this risk by looking at the price of a company’s bonds. If the bonds are trading well below their face value, it can indicate that stockholders could be in trouble.

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Turnaround Investing Blog

Turnaround Investing Blog

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."