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.
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.
It has been a tough year for Bitcoin as its price has fallen 65% from the December 2017 highs. Other cryptocurrencies haven’t been as fortunate, with many becoming worthless. In the December 2017 issue of The Turnaround Letter we shared our view that cryptocurrencies were a fad not unlike the internet bubble of 18 years ago.
Global financial institution Citigroup (NYSE: C) reported healthy results for the fourth quarter. Better internal execution and strong external conditions, combined with a strong capital base and a sizable boost from the tax reform bill, offers the potential for per-share earnings of $9 in 2019 or 2020, up nearly 70% from last year's (2017) per-share earnings of $5.33.
Investment fund manager Janus Capital Group (NYSE: JNS) closed its merger with Henderson Group. The new ticker symbol is “JHG,” and we are adjusting our Buy limit to 44.50 to reflect the share exchange.
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."