Don’t Try and Time the Stock Market

 

There is an old saying in the investment business: “You can always tell the market-timers: they’re the ones with the holes in their shoes.” While there may be cycles in the stock market, The Turnaround Letter doesn’t know anyone who can successfully time those cycles, so our stock market advice for turnaround investors is not to attempt market timing.

Consistently profitable market timing requires two different sets of very challenging decisions: when to pull out of the market and when to get back in—and it is nearly impossible to get both decisions right. We know people who are still bragging that they pulled out of stocks just before the big stock market crash in October 1987. Unfortunately, once out of the market, they’ve never been able to pull the trigger to get back in. As a result, they’ve missed the more than fourfold gain in the S&P 500 since the 1987 market high.

We also know investors who worried about being left behind when the stock market was hitting new highs in the summer of 1987, and they bought stocks like crazy. Then, when the market crashed in October, they panicked and sold everything—locking in big losses. Those same people probably repeated this pattern in 2000 and 2008.

Both groups would have been better served resisting their impulses and staying the course with a reasonable long term investing strategy. The Turnaround Letter always recommends that investors put as much money into stocks as will still allow them to sleep at night—then keep that allocation pretty constant in both good times and bad.

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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."