Investors appear to be overly worried about this small-cap value stock opportunity: While cash flow remains robust, the temporary dividend cut provides additional financial flexibility. The Company’s government franchise looks durable, and we believe its expansion strategy makes good strategic sense and provides more opportunities for growth. The Company has many strengths to help it persevere and grow; plus, valuation is a modest 9.6x forward earnings.
We’ve received some questions lately about cryptocurrencies. Their prices have skyrocketed, new ones come out seemingly every week and their legitimacy has been bolstered by Bitcoin’s approval as legal tender in Japan. As for their merits, there are probably as many opinions as there are opinion-givers. So, what exactly are cryptocurrencies? Are they a passing fad or part of the future? We think it is some of both.
It’s that time of the year--when shoppers search their favorite websites and local shopping malls for holiday savings, and savvy investors look for year-end discounts in the stock market. Here at The Turnaround Letter, even we can be tempted to briefly set aside our intense focus on long-term business fundamentals and underlying valuations when artificial selling pressure, created by investors tossing their losers, offers some unusual short-term opportunities at year-end.
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.
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."