This mid-cap's revenue and earnings appear to be stable, operating results are well above debt covenant limits, cash flows look reasonably healthy and overall liquidity is substantial. The value stock's very high 10% dividend appears well-covered. Valuation at 5.8x next year’s FFO is nearly half that of its peers, leaving strong upside potential.
The stock market’s sentiment certainly changed following the presidential election: After trading down for nine consecutive days followed by a sharp drop in the overnight futures market, the S&P 500 rebounded over 3% to record highs. Investors have newfound enthusiasm for domestic economic growth, as a Trump presidency could bring new infrastructure spending, lighter regulatory burdens and lower corporate taxes. While the distance between campaign promises and corporate profits can be vast, we agree with the market’s general assessment of how government policies might change.
It’s that time of the year again--bargain hunting season. Holiday shoppers flock to the malls and their favorite websites, and savvy investors search the stock market for year-end discounts. While our approach at The Turnaround Letter is heavily focused on long-term business fundamentals and underlying valuations, even we can be tempted by unusual short-term opportunities at year-end created by artificial selling pressure as investors toss their losers.
Recently I was asked how my investing perspective changed over the 32 years of publishing The Turnaround Letter. It's a fascinating question because change is constant, and often beneficial (although that's not a given) in the business world. If change is the norm, can investing principles stay constant? I firmly believe that they can.
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.
This Forbeswrite-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."