Post Holdings shares have vastly outperformed Kellogg's and the S&P500 over the past three years. Similarly, Post's crisp revenue and earnings growth has left Kellogg's looking soggy. However, the two companies' prospects may diverge again, but in a different direction. In this note, we analyze Post Holdings' recipe for its strong returns, assess what has held Kellogg's back and explore Kellogg's outlook compared to Post Holdings' to answer the question: Should Kellogg's shareholders have Post Holdings envy?Read More
George Putnam does not follow the crowd and is widely-recognized for this contrarian perspective--with media sources and financial publications frequently seeking out his insight, value stock recommendations and unique turnaround investing expertise. Most recently, Forbes, equities and MoneyShow highlighted The Turnaround Letter.Read More
After 16 years of downsizing and asset shuffling, GE now appears to be in disarray--with abrupt changes in the board and at the top levels of management. We believe, however, that the recent drama is the natural byproduct of the speed and boldness of a new CEO who is determined to toss overboard a failed strategy and improve GE’s operating performance.Read More
The public equity markets are increasingly having to follow the rules of private equity. For public equity investors, this means the following: Private equity valuation measures like EV/Ebitda will drive public equity valuations. Underperforming companies will come under shareholder pressure more quickly. More quasi-public companies like Kraft Heinz and Advance Auto Parts will emerge. For currently in-favor tech companies like Facebook and Amazon, this could eventually lead to much higher scrutiny. We believe the privatization trend will continue.Read More
Watch to see if ADP’s CEO Carlos Rodriguez inadvertently helps Pershing, and his aggressive and sometimes personal stance against Ackman could backfire. Overall, because of the stock’s strong returns and Ackman’s weak credibility, we would give this activist campaign a low chance of making ADP a successful turnaround investment. For turnaround investors, the Trian campaign appears to have a win-win opportunity for investors--either Peltz joins the board and learns enough to re-invigorate P&G, or loses and management must either execute (boosting earnings and the shares) or they will face a more drastic proxy campaign with higher odds of success down the road. We think the P&G campaign could turn out well for shareholders.
Activist investors—fund managers that hope to drive up share prices by actively changing their target company’s strategy—often produce attractive returns for their clients. If you’re not one of the fortunate few to be a client, you can still use their influence to help with your turnaround investing. As a turnaround investor, you can harness activists in two ways: buy a position in a stock with the expectation that an activist will soon follow, or buy after an activist takes a stake.Read More
Excerpted from the September 2017 Issue
Determining what EV/EBITDA multiple makes a stock attractive, just as with a P/E multiple, is admittedly a form of art. We uncovered four companies that have low EV/EBITDA multiples but noticeably higher P/E multiples that might be worth a closer look.Read More
A term that’s tossed around in the financial media is “value compression.” What exactly is value compression and how can it affect turnaround investing?Read More
With more than 30 years of turnaround investing and market-beating results, it's no surprise that media and market pundits often seek George Putnam's commentary, stock picks and unique contrarian expertise. Most recently, both Forbes and equities.com praised The Turnaround Letter.Read More
With nearly $180 billion in assets under management, “activist” investment funds have become a powerful force in the capital markets: Nearly 40% of companies in the S&P 500 attracted activist attention in recent years. According to Activist Insight, 320 companies in the U.S. experienced an activist campaign in just the first half of 2017; but who, exactly, are these activists, what are they after, and what role do they collectively serve?Read More
Identify & Profit from Distressed Investing
Turnaround Investing Blog
In nearly every case, the shares of a company in bankruptcy become worthless. In very rare cases, however, they can become great investments. W.R. Grace (NYSE:GRA) shares produced a 75-fold return, as an example. With California utility PG&E (NYSE:PCG) now in bankruptcy, the range of possible outcomes for its equity is wide.
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.
Turnaround Letter Stock Pick Named Top Performer of 2017
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."
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