This well-capitalized company has new management that is leading a turnaround.
February 1, 2019
After being out-of-favor for years, this company has new leadership with strong operating experience. Backed by a strong balance sheet, our Buy recommendation should meaningfully improve its earning power and valuation.
This services company has an unusual niche in the energy and mining industries.
December 31, 2018
Weak oil prices, some relatively minor operating issues and highly risk-averse year-end investor sentiment has pushed its shares to near-record lows. Yet the company’s business is more durable than it might appear, the management continues to improve its operations, and it is generating positive operating free cash flow. While its shares carry significant risk, we believe the considerable return potential more than offsets the risks.
Successful investing involves a tolerance for risk and patience. The market has neither right now.
December 21, 2018
At best, the broad stock market’s 15.8% drop since its peak only three months ago on September 20 has been disconcerting. The deeper 23% plunge in small cap stocks, as measured by the Russell 2000 index: startling. For the weakest 9% of S&P500 stocks – often those with some type of unfavorable macro exposure – their average loss of 40% in such a brief time has been simply jaw-dropping.
With apologies to Madame de Pompadour after her king’s setback in the Battle of Rossbach in 1757, the unfortunate turn of more recent events in the stock market could be creating at least a modest flood of opportunity for contrarian investors. This may be particularly true as we approach the year's end, when artificial selling pressure, created by investors tossing their losers, offers some unusual short-term bargains. Here at The Turnaround Letter, even we can be tempted (briefly!) to set aside our intense focus on long-term business fundamentals and underlying valuations when shorter-term bargains appear.
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.
The market’s previous assumptions about the U.S. economy--sluggish growth, rising government regulation, near-zero interest rates--seem to have reversed overnight with the election of Donald Trump. We think the changes run deeper. Households and companies are starting to move past the financial crisis, which peaked eight years ago. Demand is picking up. With it, there is a good chance that the deflationary environment is shifting back toward inflation. Trump’s election could further boost growth through more government spending and fewer regulations. Risks to the markets may increase in 2017, and investors prepared for volatility can better hold firm when it arrives.
In nearly every case, the shares of a company in bankruptcy become worthless. In very rare cases, however, they can become great investments. W.R. Grace (NYSE:GRA) shares produced a 75-fold return, as an example. With California utility PG&E (NYSE:PCG) now in bankruptcy, the range of possible outcomes for its equity is wide.
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."