The Turnaround Letter

February 2018

Volume: 32
Edition: 8

Stock Pick & Stock Sales

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Like all small-caps, this stock carries significant risks.

Purchase Recommendation - February 2018

This oil & gas stock pick checks many of our turnaround candidate boxes. First, it recently emerged from bankruptcy, which usually brings a discounted price but also a fresh start. Additionally, the company is led by a new CEO. Importantly, the Company has maintained its strong post-exit balance sheet and its immediate plan is to increase its strategic options by boosting free cash flow and financial strength. 
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Turnaround Investing Articles

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We would rather wait for the defaults and bankruptcies to happen.

High Yield Bonds: Two Pictures Signal Caution

While we generally like high yield bonds as a place to invest--the BofA/Merrill Lynch High Yield Index has a solid 10-year annualized total return of 7.8%, high yield returns tend to be somewhat cyclical.  And, to quote an experienced high yield investor we know, the cycles “tend to end badly.”  The two graphs in this article suggest that we may be coming to a bumpy end to the current good times in the high yield market. 
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The frenzy over cryptocurrencies may be a different story.

Are We In A Bubble? Does it Matter?

We're beginning to see articles in the financial press questioning whether we are in a new bubble. While we could perhaps be persuaded that a significant selloff in the stock market may be in the offing, we wouldn't call the current market heights a bubble. 
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With tax reform now completed, we think deal volume could surge.

Mergers & Acquisitions--The Corporate Takeout Window Is Now Open

This article discusses six value stocks that have acquisition-friendly traits: niche businesses, decent cash flows, respectable balance sheets and attractive valuation. While making no promises, we think they could attract takeover interest.
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Turnaround News & Updates

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Identify & Profit from Distressed Investing

Free Report: Turnaround Investing Mistakes

Turnaround Investing Blog

Turnaround Investing Blog

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.

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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."