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Defense Stocks: Cliff May Not Be That Steep?

 

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Defense Stocks: Cliff May Not Be That Steep?

As we approach the so-called “fiscal cliff,” investors are clearly very nervous about defense stocks. Most of the stocks in this sector fell very sharply after the election, and while they have bounced back somewhat since mid-November, they still look pretty cheap to us.

Of course, these investor concerns are not completely unfounded. If Congress and the White House cannot come up with a compromise and we go over the “cliff,” there would be mandatory cuts in federal defense spending. Our best guess--and we emphasize “guess”--is that Washington will find a way to avoid the cliff. But we also believe that most, if not all, of the risks from the cliff are already priced into defense stocks.

Also, many of the defense stocks spotlighted in our full-text, subscriber-restricted December 2012 Turnaround Letter pay healthy dividends, which should dampen any cliff-related volatility. Many of these hot stock picks have also been stockpiling cash over the last couple of years, which they could use to further enhance their dividends or to repurchase stock.

 

Read your free preview of The Turnaround Letter's most recent recommendations now!

 

 


 

 

 

 


 

 

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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."