Bankruptcy/Chapter 11 / Bonds / High Yield Bonds / Post-Bankruptcy Stocks

High Yield Bonds: Time for Even More Caution Preview

 

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High Yield Bonds: Time for Even More Caution

From time to time we comment on high yield bonds (sometimes called “junk bonds”) because they are akin to turnaround stocks in several ways. While they are called bonds, many high yield issues have return--and risk--characteristics closer to stocks than to other fixed income instruments. Also, many companies that issue high yield debt are in the process of turning around, or at least trying to. Some high yield  issuers don’t make it, file for Chapter 11 and eventually provide interesting post-bankruptcy stock potential turnaround opportunities.                   

Last year at this time we urged caution in approaching high yield bonds, but our concerns proved to be unfounded as high yield had a very strong year in 2012. As measured by the Bank of America Merrill Lynch High Yield Master Index, junk bonds gained an average of 15.4% last year. In our defense, we did say “Maybe the high yield market can squeeze out another decent year before things head south…”

This year we urge even more caution towards high yield bonds.  The yields on junk bonds are at record low levels--below six percent--and we believe that at those levels you are not being adequately compensated for the risks you are taking. The risks in high yield bonds right now come from a couple of different sources. Subscribe now to read the full article.

 

 

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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."