Cabot Stock of the Week Issue: June 3, 2024

It’s been a difficult time to make money in the market the last two and a half years.

Yes, the major indexes were at all-time highs prior to this recent mini-slide. But for the most part, the bull market that began in October 2022 has been incredibly thin. To wit: the S&P Equal Weight Index (SPXEW) – which grants equal weight to each of the 500 stocks in the S&P 500 – is essentially unchanged since the start of 2022, going from 6,605 to 6,632. Meanwhile, the S&P index itself is up 22%. Why? Because the Magnificent Seven, and certain hard-charging artificial intelligence stocks, have thrived, helping carry the benchmark index due to their outsize weightings.

Hence the reason we have a lot of AI stocks and several of the Mag. Seven in the Stock of the Week portfolio. Microsoft (MSFT) and Netflix (NFLX) joined portfolio mainstay Tesla (TSLA), and while the latter has lagged since I took the reins from Tim Lutts in July 2022, the other two have helped pick up the slack. On top of that, our AI plays – Broadcom (AVGO), CrowdStrike (CRWD), Nutanix (NTNX), Qualcomm (QCOM), etc. – have been among our top performers, all up double- or triple-digit percentages in less than a year. As a result, we’ve more than kept pace with the increasingly unevenly weighted S&P 500, and blown the Equal Weight Index out of the water.

Now, it appears the tide may be turning on the AI theme, and perhaps the Magnificent Seven, at least temporarily. AI fervor has cooled, software names are suddenly being treated as lepers, and most of the Mag. Seven have pulled back. Other sectors are starting to draw attention from the buyers, and retail has been chief among them. We’ve benefited from that via timely buys in American Eagle Outfitters (AEO) and Cava Group (CAVA). And today, we add to our retail haul with an up-and-comer that is a new favorite of Cabot Growth Investor Chief Analyst Mike Cintolo.

Here it is, with Mike’s latest thoughts.

On Holding (ONON)

It’s not surprising to see a leading theme run into some trouble and become more selective after six to nine months on the upside, and that’s what seems to be going on in technology right now—that sector (led by AI-related names) got going in November of last year, and while many still look just fine, many are stalling out or worse. Last week, for instance, saw many software names go over the falls, including a few leading titles.

However, the good news is, in place of some of these fallen stars, we’re seeing other growth areas pick up the slack, and the most promising one now is retail. While there are a few turnaround-type names doing well, there are plenty of young, dynamic names in the sector that are acting well, and one of our favorites is On Holding (ONON).

On is a Swiss footwear firm that, to us, has huge potential as it aims to be the next Nike or Under Armour. The main attraction are its high-performance running shoes that have been designed to actually perform better—without getting into all the details, there’s a more cushion-y impact when the foot hits the ground and a more spring-y liftoff, too, that’s attracted many big fish in the running world. (Helen Obiri, the winner of the past two women’s Boston Marathons, wears Ons.)

Throw in the fact that they’re comfortable and you have many adults wearing them around town, too, helped along by the fact that Nike has been pulling back in some footwear categories.

Like its larger peers, On isn’t just resting on its running laurels—the firm has made a big move into tennis shoes, designing a few with Roger Federer, as well as training, track and field, hiking and trail running shoes, while also greatly expanding its apparel and accessory offerings. Indeed, in Q1, while shoe sales were up a strong 29%, apparel (up 25%) and accessories (up 43%) saw great uptake as well. It doesn’t hurt that all of these offerings tend to be premium priced; Q1’s gross profit margin was nearly 60%, which is a bit higher than Lululemon and miles ahead of Nike’s (45%), by comparison.

In the near term, the Olympics this summer could be a catalyst, as management said it plans to hike marketing starting this month, as well as reveal some new advancements in footwear technology that Obiri uses and some new apparel, too. But the big idea here is simply that On looks like the next big thing in athletic footwear and other apparel, which many on Wall Street think will lead to years of rapid growth assuming management continues to pull the right levers.

Because it’s located in Switzerland and sells all over the world, the numbers can become a bit messy with currency movements, but however you look at it, On has been growing nicely for a while and the next three years at least should see more of that. In Q1, currency-neutral revenues lifted 29% while EBITDA was likely up in the mid-30% range, with the top brass seeing about 30% top-line growth for all of 2024. Beyond this year, the firm has a target of mid-20% revenue growth and faster EBITDA growth with expanding margins, though many see even that as conservative.

Of course, the stock is not the company, and despite a great story and solid numbers, ONON couldn’t get moving during the past year, with the mid-30s consistently capping any advances, while a couple of air pockets were seen after quarterly reports. However, the big shakeout/recovery seen in March was a bullish clue, and after a few more weeks of testing, ONON took off after Q1 results—and has followed through nicely on the upside.

Now trading at 42 – still shy of its November 2022 highs around 45 – you can buy it right here or wait for the next dip.

Current Recommendations

Changes Since Last Week:
Nutanix (NTNX) Moves from Buy to Sell

One sell today, and it’s a very recent portfolio darling (see my intro) that is suddenly in free fall: Nutanix (NTNX). Just a week ago, NTNX was nearly a double for us. Now, after an underwhelming earnings report, the stock is down 27% in the blink of an eye – and still falling. So, we say goodbye to NTNX and pocket the very strong 47% gain. The rest of our stocks are holding up well, despite the recent market malaise.

Here’s what’s happening with all our stocks.

Updates

Alamos Gold Inc. (AGI), originally recommended by Tyler Laundon in his Cabot Early Opportunities advisory, pulled back a tad as the stock has settled into a range in the high 16s, shy of its peak around 17.25 in the third week of May. There’s been no news, though gold prices have retreated slightly from all-time highs above $2,400 an ounce, which is likely limiting AGI’s upside in the absence of news. As long as gold prices remain elevated, however, so should AGI shares. BUY

Alexandria Real Estate Equities, Inc. (ARE), originally recommended by Tom Hutchinson in the Safe Income Tier of his Cabot Dividend Investor advisory, has bounced back nicely after bottoming at 115, rising to 119 as of this writing. Here’s what Tom had to say about it: “The recent good interest rate news hit a wall over the past couple of weeks. After bouncing around with the interest rate narrative for the past few weeks, this one-of-a-kind life science property REIT was having a good month in May. But it has given up most of the gains. This is a solid REIT that reported strong earnings and raised the dividend in the last quarter. ARE will likely bounce around somewhat at the mercy of the interest rate narrative and not significantly surge higher until rates muster a sustained move downward.” HOLD

American Eagle Outfitters, Inc. (AEO), originally recommended by Mike Cintolo in Cabot Top Ten Trader, beat earnings estimates last Wednesday, but Wall Street wasn’t overly impressed. The large-cap clothing retailer reported earnings per share of 34 cents, well ahead of the 28 cents per share analysts expected. Sales, however, came in a smidge under expectations ($1.14 billion vs. $1.15 billion), which sparked some modest selling even though it marked a 6% year-over-year improvement. The EPS number was nearly four times higher than the 9 cents per share the company earned a year ago, so there was a lot to like here. I’d buy the dip if you don’t already own the stock, or want to add to a light position, as AEO seems to have been overly punished for an extremely narrow top-line miss, while profits were quite impressive. BUY

Aviva plc (AVVIY), originally recommended by Bruce Kaser in Cabot Value Investor, was flat this week on no news. The U.K.-based life insurance and investment management firm is coming off a very good May in which it recovered most of its April losses, rising from a low of 11.44 to 12.44 per share as of this writing. The stock remains cheap, trading at less than 12x earnings estimates, with a price-to-sales ratio of 0.41 and a price-to-book of 1.45. Shares have 13% upside to our 14 price target. The 6.7% dividend yield adds to our strong total return thus far. BUY

Blackstone Inc. (BX), originally recommended by Mike Cintolo in Cabot Top Ten Trader, has pulled back sharply as the market has stagnated in the last three weeks, falling from 131 to 119. BX is a Bull Market Stock (Mike’s term), which means it tends to outperform the market when times are good. It’s still a bull market, but stocks have encountered some more turbulence of late after a stellar first half of May, and so BX is in a bit of a lull. The bull market is far from over, and BX shares will be back. This dip looks quite buyable if you don’t already own the stock. BUY

Broadcom Inc. (AVGO), originally recommended by Tom Hutchinson in Cabot Dividend Investor, was down about 5% this week as AI-related stocks got knocked back in the absence of a boost from Nvidia’s earnings the previous week. Fortunately, Broadcom reports its own earnings on June 12, so it will have a chance to regain momentum if results are strong enough. Expectations are fairly modest (4.7% EPS growth), which could help the company reach a fifth straight quarterly earnings beat. Until then, you can buy the recent dip, though I’d start small. BUY

Cava Group (CAVA), originally recommended by Mike Cintolo in Cabot Growth Investor, just keeps rising, advancing from 83 to 89 – yet another new all-time high! – after reporting earnings last Tuesday. Here’s what Mike had to say about it: “CAVA remains rare merchandise, with the prospect of rapid and reliable growth coming more into focus after the Q1 results. In the quarter, revenues rose 28% and earnings of 12 cents easily surpassed expectations (up from a two-cent loss last year) while the firm opened 14 new restaurants (ended with 323 locations). Initially, the stock was hit yesterday because there were a couple of soft spots in Q1—same-store sales lifted only 2.3%, though that was mainly due to a calendar issue (would have been up 4.3% otherwise), traffic was off a smidge (but against super-tough comparisons; traffic during the past two years combined was up 17%!) and restaurant-level margins eased a bit as the firm bumped wages. However, even after taking all of that into account, the top brass actually boosted 2024 guidance by a fair amount, including for same-store sales (should grow mid- to high-single digits the rest of the year) and EBITDA, while it’s on track to open a couple more restaurants than planned (52 for the full year). The CEO says he sees signs of both people trading down from casual dining and trading up from traditional fast food, and importantly, the company is gearing up for a nationwide launch of steak on its menu after two years of testing. (It could boost the firm’s dining business, which makes up 46% of its total sales right now.) Shares looked fairly iffy yesterday morning, but buyers swooped in when the stock tagged its 25-day line and there’s been a rush of buying ever since. We’re not complacent and expect further near-term volatility, but the action is clearly supportive and the story is as good as ever. We’ll stay on Buy, though it’s probably best to aim for dips given the recent action.” Good advice. We now have a 40% gain on the stock in just six weeks. BUY

Core & Main (CNM), originally recommended by Mike Cintolo in Cabot Top Ten Trader, dropped a couple points, from 59 to 57, but has the potential to turn around quickly this week as the pipes and valves maker reports earnings tomorrow, June 4. Analysts are looking for revenues of $1.72 billion and earnings of 51 cents per share. Stay tuned. BUY

CrowdStrike (CRWD), originally recommended by Mike Cintolo in Cabot Growth Investor, had a bad week, falling more than 10% as software stocks across the board got hammered (more on that later). In his update last Thursday, Mike wrote, “Like most stocks out there, CRWD rallied all the way back toward its old highs (and actually hit new closing highs), but it ran into resistance around there, which was normal action—but then today’s selloff in software names hit the stock very hard. The true tale will be told after earnings next Tuesday when the firm releases results; analysts are looking for revenues of $905 million and earnings of 90 cents per share, but of course many of the sub-metrics like annualized recurring revenue, free cash flow and adoption of newer offerings will be looked at closely. Stepping back, after a meaningful expansion of its offerings into new-age cybersecurity fields (creating more of a platform, rather than ‘only’ endpoint security), as well as a big reset on the chart during the bear market, we still think the stock has an opportunity for a longer, larger run, especially with management’s bullish multi-year forecast (many years of rapid free cash flow growth is likely) and history of exceeding on its outlooks.” We had already downgraded CRWD to Hold after it more than doubled for us in eight months, and we’ll keep it right there. If you own some, hang on and see what tomorrow’s earnings report brings. If you haven’t yet bought, I’d hold off on starting new positions until after the report. HOLD

Eli Lilly and Company (LLY), originally recommended by Tom Hutchinson in the Dividend Growth Tier of his Cabot Dividend Investor advisory, has broken out again! LLY shares are up nearly 3% in the last week, rising to new highs near 830 on news that the company is buying Cambridge, Massachusetts-based biotech QuraAlis for $45 million for its new ALS drug candidate. An estimated 30,000 people in the U.S. suffer from ALS, a neurogenerative disease. Meanwhile, Lilly’s existing weight-loss drug business continues to thrive thanks to Mounjaro, which helped drive sales to record highs in the most recent quarter. Also, the large-cap biopharmaceutical awaits FDA approval on its breakthrough Alzheimer’s drug candidate, which could be a major cash cow for the company if approved. Even at new highs (and now with a 150% gain on the stock since we added it 14 months ago!), LLY is a Buy. BUY

GoDaddy Inc. (GDDY), originally recommended by Tyler Laundon in Cabot Early Opportunities, keeps holding near all-time highs around 140. There’s been no news. Tyler refers to GoDaddy as a “behind-the-scenes AI play” now that it’s launched its new AI-powered Airo solution to help companies and creators build websites. The stock has taken off since Airo was announced, nearly doubling since the start of November. BUY

Green Thumb Industries Inc. (GTBIF), originally recommended by Michael Brush in Cabot Cannabis Investor, found a bottom after imploding along with other cannabis stocks the previous week, advancing slightly since we last wrote, Still, Michael says there’s a lot to like here, as he wrote last week: “Green Thumb continued to demonstrate why it is the blue-chip name in the cannabis space in the first quarter.

“The company reported a 240% increase in net income on May 8 to 13 cents per share year over year, on revenue gains of 11% to $276 million. Sales advanced in large part due to store openings. It added fifteen RISE stores in the quarter. Same-store sales or sales at stores open more than a year, advanced 1.8%. The launch of recreational-use sales in Maryland also helped.

“Operating cash flow increased 12% to $84 million. It was a record quarter for sales and operating cash flow. Green Thumb bought back one million shares. It ended the quarter with $224 million in cash against debt of $310 million.

“The company has good exposure to several states where recreational-use sales are coming online, like Ohio, and Minnesota. It also has good exposure to states that will potentially see this change, or Florida and Pennsylvania. ‘In the last 24 months, we’ve deployed significant capital into these markets and our well-timed investments should provide strong shareholder cash-on-cash returns,’ said president Anthony Georgiadis

“Unlike other cannabis companies, Green Thumb is not currently challenging the federal 280E tax. But it estimates it would save over $100 million in taxes a year if 280E went away.” We downgraded to Hold on weakness last week and will keep it right there. Given the schizophrenic nature of cannabis stocks this year, chances are the stock will bounce back nicely in June after a rough May. HOLD

Honda Motor Co. (HMC), originally recommended by yours truly in the Growth & Income Portfolio of Cabot Value Investor, was mostly flat again, as the stock has set up shop in the 33 range for about a month. Some good news: Morgan Stanley hiked its price targets on HMC and fellow Japanese automaker Toyota Motors (TM), but highlighted Honda as its top pick, saying it liked the company’s ever-expanding hybrid car model options and improving supply. It also singled out Honda’s motorcycle division, which has improving margins thanks to reduced costs. Meanwhile, the stock remains dirt cheap at 8x forward earnings and with a price-to-sales ratio of 0.43. This is the definition of a growth stock at value prices, which is something I’ve been seeking to add more of since taking over Cabot Value Investor. BUY

Intuitive Surgical (ISRG), originally recommended by Tyler Laundon in his Cabot Early Opportunities advisory, held serve around 400. There was no news. The recent action (mostly holding its gains after breaking to new highs above 404) has been impressive considering how stagnant the market has been the last few weeks. The maker of the da Vinci robotic surgical system is coming off a strong earnings report in late April and received approval for its new da Vinci 5 system in March. Though full-scale launch won’t come until possibly next year, it’s a potential game changer for the company, and investors have taken notice, pushing ISRG shares up 19% this year. BUY

Main Street Capital Corp. (MAIN), originally recommended by Tom Hutchinson in the High Yield Tier of his Cabot Dividend Investor advisory, was up a point, from 48 to 49 on no major news. The stock has fallen off a bit since reporting strong earnings a little over a month ago, though the damage has been fairly limited considering shares were at new highs just after the report. The trade-off for the recent stagnation is that this business development company pays a very generous monthly dividend (current yield: 8.5%), which it just raised again. So, the stock bears fruit even when its share price is sluggish. BUY

Microsoft (MSFT), originally recommended by Tyler Laundon in Cabot Early Opportunities, was down about 4% after briefly touching new highs above 430. The pullback was likely market-driven, as AI stocks have had some air come out of their balloons after some initial fervor following yet another standout earnings report from Nvidia. The biggest news is that Microsoft is investing $3.2 billion in Sweden to expand the country’s AI offerings. Specifically, Microsoft plans to deploy 20,000 of the most advanced graphics processing units, which speed up computer calculations, at its Swedish data centers in Sandviken, Gavle and Staffanstorp. It’s part of Microsoft’s European expansion plan, after it invested in data centers in the U.K. in November and in Germany and Spain in February. Denmark, Finland, Iceland and Norway are next on Microsoft’s AI expansion wish list. BUY

Netflix, Inc. (NFLX), originally recommended by Tyler Laundon in Cabot Early Opportunities, was down about 2% after hitting new 52-week highs above 650 a week ago – normal consolidation in the midst of a down week for the market. There was no major news for the company. Coming off another very strong quarter (sales up 14.8%; EPS up 78.7%), Netflix continues to assert its dominance as the top video streaming service in the world. Like MSFT, it’s a long-term buy for any portfolio. BUY

Novo Nordisk (NVO), originally recommended by Carl Delfeld in Cabot Explorer, has set up shop in a new range between 132 and 136 after breaking out of its previous 122-to-129 range. There was no news, but like Eli Lilly, Novo Nordisk remains a co-leader in the nascent, booming weight-loss drug market thanks to Ozempic and Wegovy. The Danish company now accounts for half of private-sector job growth, outside of agriculture, in Denmark. The stock has doubled since we added it to the Stock of the Week portfolio 18 months ago. BUY

Nutanix (NTNX), originally recommended by Mike Cintolo in Cabot Top Ten Trader, has completely fallen apart after earnings – nose-diving from 73 to 53 in just two and a half trading days – so it’s time to sell. Mike sold in a note to his Cabot Growth Investor readers late last week, saying, “NTNX released another steady-as-she-goes quarterly report last night: Billings were up 20%, annualized recurring revenue was up 24%, operating margin lifted 3.8 percentage points (from 10.2% to 14.0%) and free cash flow of $78 million was about triple that from last year. Nevertheless, NTNX unraveled today for a couple of reasons, the first of which is that the outlook for the current quarter was OK at best, and the top brass mentioned that some of the bigger deals that the firm thrives on are seeing longer sales cycles (i.e., clients are hesitating a bit). Probably just as important is that theme was heard elsewhere in the sector last night, causing the group to tank today (go look at Salesforce.com’s (CRM) reaction to earnings today). Of course, NTNX had been a nice winner for us and we had already taken partial profits before this, so we debated selling some/holding some—and if you want to do that, we wouldn’t argue with it. However, the near-uninterrupted run since last November combined with the action today (of both the stock and the sector) has us thinking that there will likely be big investors looking to sell or reduce for a while. Thus, it’s a disappointing ending, but we decided to take the rest of our profit off the table and look for fresher leaders going forward. We sold on a special bulletin earlier today.” We’ll do so as well, with a very nice 47% return in less than seven months to show for it. MOVE FROM BUY TO SELL

PulteGroup, Inc. (PHM), originally recommended by Mike Cintolo in Cabot Growth Investor, bounced back nicely after a down week, bottoming at 112 before clawing its way back to 116. In his latest update, Mike wrote, “Interest rates remain the story that won’t go away—after what looked like a breakdown in the middle of this month, rates kited right back to near their 2024 highs before a little slippage today. Combined with a poorly received quarterly report from peer Toll Brothers (TOL) and news of a pickup in new home inventories, that’s conspired to pull PHM lower. The stock has essentially been in a three-steps-forward, two-steps-back pattern since January—certainly not powerful, but also not disqualifying, either. A decisive drop below the April lows (at 105) would be iffy, but right here we’ll practice patience, thinking that if PHM can hold up and interest rates can settle down a bit, the major uptrend (driven by huge earnings and share buybacks) will reassert itself.” BUY

Qualcomm, Inc. (QCOM), originally recommended by Tom Hutchinson in the Dividend Growth Tier of his Cabot Dividend Investor advisory, finally eased off the gas pedal after going nowhere but up for more than a month, falling from highs of 213 to 205. But considering the stock was at 157 in mid-April, and 140 to start the year, this mini-retreat is little more than a blip. Here’s what Tom had to say about it: “The mobile device chip maker is continuing its torrid advance since the earnings report last month. QCOM has soared over 35% since April 19. Earnings beat estimates and the company raised earnings guidance for 2024. But the real excitement is the growing talk about artificial intelligence coming to smartphones and Qualcomm as a major beneficiary of the upgrade cycle. It has been a while since phones had a significant upgrade and sales growth has been dwindling. But more analysts are contending that an AI-driven super cycle is coming soon. Qualcomm is at the leading edge of chips that enable AI for smartphones and PCs and should benefit mightily.” This rare dip looks like a buying opportunity, if you haven’t already done so. BUY

Sea Limited (SE), originally recommended by Carl Delfeld in his Cabot Explorer advisory, got back a point after falling from 73 to 68 the previous week. It seems the hand-wringing over the company potentially violating antitrust laws in Indonesia by favoring its own delivery services for orders placed on its Shopee e-commerce platform has subsided a bit, as predicted. As Carl noted, “Sea recently launched an ‘on-time guarantee’ and delivered 70% of packages within three days in Southeast Asia. Investing in live streaming about a year ago led to Shopee’s e-commerce platform becoming the largest live-streaming e-commerce platform in Indonesia.” I’d buy the dip on this dominant Singapore-based tech conglomerate that trades at just a fraction of its 2021 highs. BUY

Super Micro Computer (SMCI), originally recommended by Carl Delfeld in his Cabot Explorer advisory, had a miserable week, falling nearly 14% as almost all AI plays with meat on the bone took several steps back. There was no company-specific reason for the fall, although blowups in software names like Dell, MongoDB, and Nutanix (see above) likely contributed to some bad sentiment toward the group. It’ll pass. The stock is still up 169% year to date and is trading well above its April and even early-May lows. Meanwhile, the company is launching a new large-scale AI data center in Japan, its revenue is expected to more than double (122%) this year, and it is rumored to be on the cusp of a stock split. BUY

Tesla (TSLA), originally recommended by Mike Cintolo in Cabot Top Ten Trader, keeps hovering in its newfound comfort zone in the 170s. CEO Elon Musk is still embroiled in a fight over his outrageous compensation package ($56 billion, the largest for any CEO in U.S. history) and some of its models were just recalled. Neither of those news items is good for business, though they haven’t impacted the share price much, which suggests that the worst for TSLA (a closing low of 142 in mid-April) may be over. Any good news that demonstrates signs of life from the company’s sagging sales and narrowing margins could finally give the moribund share price some much-needed smelling salts. But those might not come for a few weeks. So, we continue to wait patiently until the best-performing stock in the history of this newsletter wakes up again. HOLD

Uber Technologies (UBER), originally recommended by Mike Cintolo in Cabot Growth Investor, was flat at 63 this week, which qualifies as a victory after two straight months of share price declines. Mike has cut bait on part of his position, but not all, as he noted in his latest update: “We shaved our position in UBER a bit more last week, as the stock continues to lag. To be fair, there are some rays of light out there—the stock is approaching its 200-day line (nearing 61 and rising slowly; about the same as its 40-week line…) is 21% off its high (not unusual given the prior run) and really hasn’t fallen much from the lows of its earnings day as volume dries up somewhat. Given the still-strong story in our view, we wouldn’t be surprised if the stock can start testing on the upside … but investing on maybes isn’t usually a good tactic, which is why we pared back further last week. From here, we’re content to hold our remaining shares above the 200-day line—a break below it would tell us something is likely amiss longer term, but if shares can bounce, we’ll hold on and see how things progress. For now, sit tight.” Good advice. We will keep UBER at Hold as well. HOLD

United Airlines (UAL), originally recommended by yours truly in the Growth/Income Portfolio of Cabot Value Investor, had a solid debut week in our portfolio, up from 50 to 52. The International Air Transport Association just projected that airlines would do $996 billion in sales and make $30 billion in profit this year; the latter number is up from a previous estimate of $25.7 billion. Indeed, I added UAL to Value Investor in part because people are flying planes again in Covid’s aftermath, and United is the fastest-growing major U.S. airline. It’s expected to grow sales by 7.4% in 2024 – more than its two larger competitors, American and Delta – and that’s with revenues already topping a record $50 billion in 2023 – 19.6% higher than in 2022, which was also a record year. For United, business has not only returned to pre-pandemic levels; it’s better.

Meanwhile, the stock is cheap. It trades at a mere 5x forward earnings estimates, with a price-to-sales ratio of just 0.32 and a price-to-book value of 1.90. The stock peaked at 96 a share in November 2018; it’s currently in the low 50s.

The stock has 38% upside to my 70 price target. BUY

UnitedHealth Group Inc (UNH), originally recommended by Tom Hutchinson in the Dividend Growth Tier of his Cabot Dividend Investor advisory, was down 2% this week and has been backsliding the last couple weeks. Still, the healthcare giant is coming off a quarter in which it reported earnings that soundly beat expectations with an 8.6% revenue rise and a better than 10% increase in adjusted earnings from last year’s quarter. The company also issued strong guidance. The stock rose about 20% after the report but has given back 6% over the past two weeks. There isn’t any bad news that seems to be dragging the stock lower. BUY

If you have any questions, don’t hesitate to email me at chris@cabotwealth.com.

Here, too, is the latest episode of Cabot Street Check, the weekly podcast I host with my colleague Brad Simmerman.

The next Cabot Stock of the Week issue will be published on June 10, 2024.

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