by Will Ashworth | July 5, 2012 12:00 pm
Kiplinger’s Personal Finance ran an article in June that highlighted some of the favorite stock picks of George Putnam, editor of the Turnaround Letter. Putnam looks for former IPO stars who’ve fallen on hard times and now trade for half the original offering price. But rather than rehash Putnam’s picks, I’ve come up with five of my own:
Green Dot (NYSE:GDOT) provides reloadable prepaid debit cards to customers who earn less than $75,000 and are traditionally underbanked. It’s best known as the sole provider of the Wal-Mart (NYSE:WMT) MoneyCard, a program that now has more than 2 million active cards.
Green Dot went public at $36 to great fanfare in July 2010, gaining 22.2% in its first day of trading. Since then it has lost 44.9% and overall is down 32.6% from its IPO as of July 2.
So what do investors get for this 33% discount? A company that’s increasing revenues and earnings. In the first quarter ended March 31, it raised revenues by 21.3% and operating income by 31.2%. Management expects full-year 2012 non-GAAP earnings per share of at least $1.65.
Shares jumped 10% July 2 on the news American Express (NYSE:AXP) was pulling its Bluebird prepaid reloadable card from Wal-Mart pilot locations on lackluster sales. There’s not much downside at this point.
In January 2011, Renaissance Capital, a leader in IPO information and analysis, named General Motors (NYSE:GM) its 2010 IPO of the Year. At the time, GM shares were up 17% from the IPO price of $33. Since then it’s been all downhill for the automaker with its shares trading below $20.
InvestorPlace contributor Tom Taulli recently highlighted some of the reasons GM is part of the Real America Index. The two that stand out for me — $9 billion in earnings and 10 million shares bought by Berkshire Hathaway (NYSE:BRK.B). The big three have figured out how to make money on just 12 million vehicles sold annually.
Plus, with the average car being 11 years old today, it’s going to be next to impossible for GM to mess up this once-in-a-lifetime opportunity.
Management consultant Booz Allen Hamilton (NYSE:BAH) went public in November 2010 at $17 a share. Since then its stock has lost 12.9%. Clearly, its reliance on the U.S. government and many of its agencies has been a huge drag on the stock. However, its noncompete clause with its former corporate consulting unit ended last July, and since that time it has focused much of its attention on the Middle East, opening an office in Abu Dhabi.
While government belt-tightening, especially prevalent in the Defense Department, has made it difficult to generate organic growth, Booz Allen still managed to increase revenues and earnings in fiscal 2012. Revenues grew 4.8% to $5.86 billion, and adjusted diluted earnings per share rose 29.8% to $1.61.
Its year was so solid, management paid out a special dividend on June 29 of $1.50 per share. At current prices that’s a 10% yield to shareholders. Not sure about investing? Its free cash flow yield is 14.7%, double rival Accenture‘s (NYSE:ACN).
Zipcar (NASDAQ:ZIP) shares have lost 58% since closing the first day of trading at $28 back on April 14, 2011. I feel for those poor souls who bought at the high. If you’re still holding, hang in there — better times are ahead. And if you’ve never owned its stock, you might want to consider it.
I live in Toronto, one of two cities in which Zipcar is experimenting with a monthly plan where, instead of paying the $65 annual fee, you can try the service for $6 per month for a six-month commitment. Obviously, the company is feeling the heat from the rental-car companies as well as Daimler (PINK:DDAIF), which have entered the car-sharing business. I think it’s a good idea for people like myself who don’t own a second car and haven’t looked at car-sharing because of Zipcar’s $65 annual fee. The $36 teaser rate has me giving the idea a second thought.
With excellent customer-service standards, management figures that once I test out the service, I’ll sign on permanently. You can expect this trial to be rolled out across its network, putting some zip in its membership growth. Although it’s still losing money on a GAAP basis, its non-GAAP adjusted EBITDA in 2012 is expected to grow by at least 60% to $16 million on revenue of $290 million. Zipcar’s business is moving in the right direction.
My final pick is Air Lease (NYSE:AL), which went public in April 2011 at $26.50 a share. As its name suggests, it leases aircraft to airlines like Southwest (NYSE:LUV), United Continental (NYSE:UAL) and many others around the world. Air Lease has been in business for less than three years and went public within 15 months of starting up.
As of the end of March, it had 48 new and 66 used aircraft in its fleet with a weighted-average remaining lease term of 6.9 years, providing it with lease income for many years to come. In many ways this business is like operating a bank. Air Lease makes money by charging more to the airlines to lease the planes than it paid to buy them.
As of July 3, its stock is down 26.8% from its IPO. With extremely healthy margins, I like its chances to rebound in the future.
As of this writing, Will Ashworth did not own a position in any of the stocks named here.
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