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.

Return of Volatility? No, Return of "Normal"

Excerpted from the March 2018 Issue

Over the past few weeks we’ve been reading a lot about “the return of volatility.” The S&P 500 certainly has shown a hefty amount of volatility this past month, falling as much as 4.1% in one day (February 8) and a total of 10% over nine days, only to bounce back to approach its prior peak. But this type of volatility isn’t anything new--it actually is normal. 

It was the remarkably stable period between early 2016 and early 2018 that didn’t have any 5% corrections that was abnormal. Another sign of this abnormality is the fact that going into this past month, the S&P 500 had not produced a negative monthly total return since October 2016, which tied the record for the longest stretch of consecutive monthly gains (15) that was set way back in 1959. 

Sizeable market moves can increase the temptation to sell on downdrafts and buy on upswings; however, we strongly advise against attempting to do that. The chances of getting out at the right time and then back in again before the market rebounds are extremely slim. For example, even if you had been smart enough to bail out of stocks before the S&P 500 fell 37% in 2008, at what point would you have been brave enough to come back into the market?

And how much of the S&P’s almost 270% gain since the beginning of 2009 would you have missed? As baseball legend Yogi Berra once said, “Predictions can be hard, especially about the future.” We always recommend that you put as much of your portfolio into stocks as will still allow you to sleep at night and stick with that allocation regardless of what the market does.  

Read more of The Turnaround Letter's latest stock market advice. Our March issue includes details on five value investing opportunities within the gold industry, four timely turnaround stock opportunities poised to benefit from new management and much more.

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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."