This month's purchase recommendation is a financial institution that previously was poorly run, which resulted in credit losses and declines in its book value. Now under completely new management, this company is aggressively re-shaping its loan portfolio to improve its quality and profitability while also reducing its risks. Selling at a considerable discount to fair value, the shares offer considerable upside potential as well as an attractive dividend.
Over the past few months, we’ve seen an increase in the number of companies outside the United States that have shown up on our screens as undergoing meaningful change. We also thought it was interesting to look outside the U.S. because international markets (measured by the MSCI EAFE index) have underperformed U.S. stocks (measured by the S&P 500 index) so far this year.
Participating in some of the savviest investment funds often requires a minimum investment of $5 million or more, a commitment to tie up one’s money for years and a tolerance for less than full disclosure about the fund’s holdings. These funds are essentially out of reach to all but a few large investors. However, some funds offer alternative ways to participate, available to investors in the form of publicly-traded equities. Listed below are six stocks that can provide access to some of the smartest fund managers, in several cases at meaningful discounts to the underlying NAV.
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."