Dealmaker’s Diary: A Controversial Shot at 160% Gains
Editor’s Note: Welcome to the Dealmaker’s Diary! Each week, hedge fund CEO and trading champion Alpesh Patel will give you an inside look at how he analyzes stocks with his proprietary – and award-winning – Growth-Value-Income (GVI) system. Plus… he’ll share the secrets to his decades of success as an investor, entrepreneur and Dealmaker to royalty.
I made my subscribers a lot of money when I recommended investing in casual footwear maker Crocs (CROX).
Now… I think its shoes are ridiculous. But you know what?
It doesn’t matter. Demand for Crocs soared during the pandemic… and the stock more than doubled in a year.
That’s why I always say it doesn’t matter WHAT a company does. As the numbers fit my proprietary Growth-Value-Income system… all stocks are on the table.
So keep that in mind when you watch today’s Dealmaker’s Diary.
The company I’ve found is in a controversial business… and some of you may refuse to invest in it.
But forecasted growth is strong… and the valuation is cheap. Plus, the stock has low volatility and is outperforming the market.
Get all the details on the company – including the ticker – in my latest video.
And if you have a stock you’d like me to run through my GVI system, send the ticker to email@example.com.
Time for another Stock of the Week, friends. Of course, I try with the Stocks of the Week to make them unusual and interesting, but they’ve still got to hit a lot of my valuation buttons.
So let’s have a look. Now, as you know, my team will send me these to look at. I then narrow them down and then settle upon the final few.
So this week I’ve gone with GEO Group (GEO). It’s headquartered in Boca Raton, Florida. It’s a company that invests in private prisons and mental health facilities. Now, remember, I’m looking at this purely from a financial investment perspective. No judgment.
Some of you might say, “Well, we don’t want to invest in companies like General Dynamics, which make missiles and so on.”
And others might say, “Well, I don’t want to invest in private prison companies.”
And that’s perfectly understandable and fine. I’m not looking at it from a moral perspective, just purely, what are the numbers like?
Now GEO Group provide these facilities in North America, Australia, South Africa and the U.K. It includes in-custody rehabilitation – I’m pretty sure that’s a euphemism – and post-release support through its award-winning continuum of care as well. It provides secure transportation, electronic monitoring, community-based programs and correctional health and mental healthcare facilities as well.
Its market cap is $1.47 billion.
Well, let’s have a look at some of these numbers as well and just see what drew the company to my attention.
On a Growth-Value-Income basis, in other words, the valuation of the shares to the profits they make, the revenue growth, dividend yields. Remember, that’s my proprietary algorithm. Growth-Value-Income.
I look at that in order to determine whether a company that scores 7, 8, 9 or 10, makes my database, and to determine whether it should actually be in my shortlist database, as it were.
The forecast P/E is a multiple of 14. You’re paying $14 for every forecasted dollar of profits. Not expensive by any means. Not ridiculously cheap, but certainly not expensive.
CROCI, a little bit low this one. Cash return on capital invested is used by Deutsche Bank and Goldman Sachs Wealth Management. I’d want it to be higher, but at least it’s generating cash on the capital it invests. Sortino is not too bad at 0.28. I want it to be above 0.4. It’s a measure of the risk versus return. But I’ll take 0.28. That’s fine. It’s the average return versus the downside risk.
The stock is also not too volatile. That’s good. And it’s been recently outperforming the market as well.
Now I’ve put a projection on that if all things were to turn out nice… it’s a very optimistic, bullish projection. I appreciate that. It is the high-end extreme bullish projection. But it’s done for fun to see what would it look like if it really did knock the ball out of the park. Now, I’m not saying it necessarily will knock the ball out of the park.
The stock is trading at about 60% below fair value, based on a discount cash flow. Earnings are forecast to grow as well in the future. And they’ve been growing in the past.
So a lot of things ticking the boxes on this one. I hope you like it and hope, God willing, you’ll never need their services.
Wishing you the best. Thank you all.