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.
At first glance, the shares have decent appeal as a turnaround investment. Looking deeper, however, the fundamentals are not as strong and stable as they appear. Surplus cash flow is tight, a key driver is weakening, it is increasingly reliant on China and has other nagging issues. We don’t see the new CEO as a catalyst for change. Despite the “first glance appeal”, Tupperware isn’t a good fit as a turnaround stock.
Comparing Stocks Vs. Bonds
While the common stock of a turnaround candidate usually has the greatest upside potential, other classes of securities, such as bonds or preferred stock, may offer attractive profit possibilities with less risk. Many turnaround companies have only one class of securities available to investors but where there are different classes to choose from, it can pay to do a little extra analysis of the various options.
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."