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.

Will Amazon Take Over the World? Not Quite.

Excerpted from the July 2017 Issue

It seems that Amazon Fever is reaching new heights. With Amazon’s recent agreement to acquire grocery retailer Whole Foods, the market can’t entirely be faulted for assuming that their ever-growing reach and apparent lack of concern about profits will ultimately take over the economy. And typically, when Amazon enters a new line of business, many of the stocks in that sector fall.

Our informal search on amazon.com returned some fascinating and unexpected products for sale: a $31,861.88 (plus $3.09 shipping) Telescoping Maintenance Lift weighing 1,420 pounds; a $237,250 Lamborghini Huracan (the real thing); a $270,834.42 (used) Cisco Services Module and a Mahatma shipping drone that carries 22 pounds of cargo over six miles selling for $40,000. Could Amazon get into travel services? Or home building? What about chemical production? It’s hard to say; but back in 1997 when Amazon had its IPO as an online bookseller, who would have thought that it would reach half a trillion dollars in market capitalization and begin setting up an air traffic control network in Paris for its incipient global drone fleet?

Amazon certainly is impressive. Realistically though, not every industry will be challenged by their profit-draining expansion, nor will every product be sold at large discounts on amazon.com. In our July 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. 

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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."