Helicopter services provider Bristow Group (NYSE: BRS) reported good 4Q18 results but provided FY2019 revenue and earnings guidance that were lower than the market expected, combined with recent oil price weakness. This news reversed the strong YTD stock performance. Despite this setback, the company continues to improve its operating performance, financial condition and leverage to an energy industry recovery.
Boeing's 111% one-year return has left three of the fabled FANG stocks in the rearview mirror, with Netflix's 114% return only narrowly beating BA shares. Boeing's gains haven't been fueled much by the company's fundamentals, but rather by expectations for clear skies in the foreseeable future. The business cycle has yet to be repealed. Cloudy skies eventually will re-appear, and gravity's renewed effect on BA shares could be unpleasant.
We now see more downside risk than upside potential for one of our previous large-cap stock picks. Additionally, we believe the likelihood of further gains in another stock from our mid-cap portfolio is now offset by fundamental risks and high valuation.
Construction equipment maker Caterpillar (NYSE: CAT) reported another blow-out quarter, with 2Q17 results well ahead of estimates. Full-year guidance was raised again. We are raising our Buy limit to $120.
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.
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."