Cabot Turnaround Letter Issue: August 31, 2022

Thank you for subscribing to the Cabot Turnaround Letter. We hope you enjoy reading the September 2022 issue.

One of our more productive methods for finding attractive turnaround stocks is to see what other like-minded investors are holding. We culled the list of hundreds of positions held by our evolving list of 50 or so preferred managers, as reported in the quarterly 13F filings, and discuss three of the most promising.

We also combed through the roster of stocks trading at low prices – another great source for turnaround stock ideas – and review four that have particular appeal.

Our feature recommendation this month is Warner Brothers Discovery (WBD). While most investors view this company as a “play” on streaming, we view it as an undervalued turnaround of the poorly managed WarnerMedia assets that it recently acquired from AT&T.

We note our recent ratings change of Lamb Weston Holdings (LW) from Buy to Sell.

Cabot Turnaround Letter Issue: August 31, 2022

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New Turnaround Ideas from 13F Filings
We have a wide variety of methods for finding attractive turnaround stocks. One of our more productive is to see what other like-minded investors are holding. While fund managers understandably want to keep their positions secret, all institutional investors overseeing assets totaling $100 million or more must file publicly available 13F reports with the Securities and Exchange Commission within 45 days of the end of every calendar quarter. These reports offer a murky but useful view of who owns what stocks.

Like in any craft endeavor, this raw material needs to be refined. We start our search with our evolving list of perhaps 50 favored managers – those with value mindsets, long-term holding periods, quality investment teams and strong reputations for performance and integrity. With this roster, we look for large positions that have recently been increased, smaller positions that have had sizeable increases, or new names that were started at meaningful sizes. These traits indicate that the manager has conviction in the stocks. We add another step that adjusts for the reality that the report shows positions with at least a 45-day lag and may no longer be high-conviction ideas.

We then put these names through our regular analytical funnel, winnowing the list to only those that meet our rigorous investing criteria. From an initial list of hundreds of fund holdings, we typically finish with a short but refined group of stocks. Discussed below are three interesting turnarounds culled from the August 15 batch of 13F filings. Our write-ups for these stocks are longer than usual, as the situations are more complicated. We thought the extra analysis would be helpful to you, the subscriber.

Intel Corporation (INTC) – Once the dominant producer of semiconductors for nearly all computing devices, Intel has fallen behind its competitors. This decay didn’t happen overnight: It took more than a decade of weak design innovations, lagging production technologies, and failure to accept that customers were shifting to third-party manufacturers like Taiwan Semiconductor Company. One strategic error is that Intel did things “the Intel way,” and emphasized its in-house designs, even as designs from other firms were superior. One casualty among many: Intel was forced to abandon its smartphone chip efforts. The gross margin, a prime indicator of the company’s sagging technological prowess, has slipped from 62.3% in 2017 to a likely 45% this year. Intel has also suffered turnover at the CEO level and is now on its third CEO in less than four years. While the balance sheet is laden with over $27 billion in cash, it is more than offset by $35 billion in debt. Intel’s immense new capital spending budget, increasing from $14 billion in 2020 to $27 billion in 2023, consumes its cash flow and potentially threatens its dividend. And a slowing global economy combined with an easing of the chip shortage could add further unwanted pressure on its profits. Perhaps it isn’t surprising that the shares have tumbled and now trade at their mid-2014 price.

Closing prices on August 26, 2022.
* EV/EBITDA is Enterprise value to Earnings before interest, taxes, depreciation and amortization. EBITDA is a proxy for cash operating earnings. Valuations based on fiscal years ending in December 2022. For Jefferies Financial Group, the multiple shown is price/tangible book value.
Sources: Company releases, Sentieo, S&P Capital IQ and Cabot Turnaround Letter analysis.

We’ve been watching Intel’s shares unravel, looking for signs that it might be time to buy. We found it interesting that PrimeCap Management Company, a valuation-oriented manager of $154 billion in assets that is generally thought of as a growth investor, recently added to their sizeable position (a 1.2% stake) in Intel, particularly as so many other conventional managers are quickly selling down their positions. We also noticed that respected managers like Marshall Wace and the family office of the late contrarian legend Michael F. Price, raised their positions in Intel. In addition to these votes of confidence, the shares now trade at a valuation that is much more interesting. Critically, the new CEO, Paul Gelsinger (since February 2021), is aggressively addressing the company’s strategic and operational issues. While the technological and commercial turnaround will be complicated and risky, and likely measured in years, Gelsinger’s capabilities and focus have a reasonably likely chance of succeeding. The impressive new CFO, who previously held that role for competitor Micron Technologies, is helping ease Intel’s cash crunch, most recently with the just-announced and innovative co-investment deal with Brookfield Asset Management. The federal government’s recently passed CHIPS Act will help provide financial support, as well. All-in, it’s time to buy at least a starter position in Intel shares.

Jefferies Financial Group (JEF) – This company’s upcoming change in organizational structure was caught by our Catalyst Report. The shares also seem to have attracted the attention of some notable value investors, including Pzena Investment Management and Moerus Capital Management. The company is completing what has been a generations-long storied evolution that started in 1979 when two investment bankers gained control of lending company Talcott National Corporation. Re-named Leucadia in 1980, the company became an acquisition vehicle that accumulated an immense base of insurance, banking, telecom and other businesses, many of which were struggling or already in bankruptcy. It earned the “Baby Berkshire” nickname as its strategy resembled that of Berkshire Hathaway. In 2013, Leucadia combined with a unit of Jefferies, creating a complicated ownership and organizational structure. Following a series of divestitures in recent years, and the upcoming organizational change, Jefferies will soon emerge as the largest independent investment (compared to majors like Morgan Stanley, Goldman Sachs and others that are now regulated as commercial banks), with a full range of deal advisory, trading, asset management and other services.

Well-run and capable stewards of shareholder capital (notably, it has repurchased 40% of its 2018 share count), Jefferies looks like a long-term winner. While the shares have jumped with the overall market, they remain undervalued at 0.9x tangible book value and 9x estimated 2023 earnings, with the possibility that any further market sell-offs would provide an opportunity to add more shares at lower prices.

Zimmer Biomet Holdings (ZBH) – This company is a major medical devices producer, with a specialty in replacement knees, hips and various sports injury-related devices. With roots that date back to 1927 and based in the medical device “Silicon Valley” around Warsaw, Indiana, the company reached its current form with the 2015 merger of Biomet and Zimmer Manufacturing. Like many med-tech companies, Zimmer is a mature company in a competitive industry with its prospects largely captive to slow secular growth in global demand. Despite high hopes, the 2015 merger integration went poorly. However, in late 2017, new leadership at the top implemented a multi-year turnaround that brought better execution. Zimmer’s growth stalled during the pandemic as procedures were delayed, adding to doubts about the company’s prospects and leaving the shares unchanged in nearly a decade. Today, however, Zimmer is seeing an improving pace of replacement surgeries and better traction with its marketing efforts within the orthopedic parts oligopoly. Also, its efficiency improvements appear to be helping it offset rising cost inflation. The company recently spun off its ZimVie division (currently a Cabot Turnaround Letter recommendation) and added new executive talent as it continues to evolve. The balance sheet is solid, free cash flow is robust and the shares trade at a very reasonable 12.3x next year’s expected EBITDA. Highly regarded value investor Dodge & Cox raised its already-large position as reported in its most recent 13F filing.

WORTHY STOCKS TRADING AT LOW PRICES
In a world where so much is going on, including a sharply volatile stock market, newly aggressive central banks, high and persistent inflation, a protracted war in Europe with rising tensions in the Pacific, an increasingly complicated political environment and a possible (already here?) economic recession, finding attractive stocks can seem like an impossible task. Yet sometimes, using the simplest approach can generate some of best ideas. One of our favorite simple approaches is looking for stocks with low share prices.

Many stocks join this group of “rejects” because their share prices have collapsed from much higher levels. Once below around 10-12/share or so, most investors dismiss these stocks on the presumption that the underlying companies are on their way to failure, or perhaps are not even “real” companies. While there certainly are plenty of these, we have also found some hidden gems of neglected value over the years.

Currently, several Cabot Turnaround Letter stocks are among this group of attractive stocks. See our full roster of recommendations at the end of the letter.

When considering low-priced stocks, we apply the same rigorous screening and analytical process that we use for any stock. Our motivation is a lesson learned long ago: It may seem logical to justify buying low-priced stocks by thinking, “You can’t lose much if the price is so low.” But while a $3 decline in Apple shares (164 share price) may not hurt much, a $3 decline in a $3 stock means a 100% loss.

Listed below are four companies that look appealing. They each have real businesses with substantial operating assets, capable managements, and reasonably solid balance sheets. These companies also have appealing fundamental changes underway that could lead to much higher share prices.

Like all turnaround stocks, properly timing one’s purchases can be a real challenge. One useful approach is to buy a starter position now, become more familiar with the story over time, then buy more as conviction increases and/or if the name slides further, as long as the long-term story remains intact. This “farm team” approach can help produce exceptional gains if implemented well.

Gap Stores (GPS) – This well-known retailer has clearly seen better days. Once the go-to store for daily basics like jeans, T-shirts and khakis, today the company is struggling with too many stores (nearly 3,400), low margins, uninspiring merchandise and leadership disarray. Recent second-quarter results were also burdened by bulging inventory (we estimate a $900 million excess) and large declines in comparable store sales, particularly with the Old Navy brand. Even the valuable Athleta brand struggled, as its assortment was off the mark. Only the relatively small (14% of sales) Banana Republic unit showed growth. Rising cotton, wages and transportation costs add further margin pressure. While Gap has a $708 million cash balance, this is low for the company, and the management said it is prioritizing cash preservation, which jeopardizes its dividend.

However, the shares are trading near their pandemic lows and assume a remarkably dour future, while there is considerable reason for optimism. First, the recent departure of the CEO is a positive, as her efforts were ineffective, partly due to a skill mismatch with the job. While a new CEO has yet to be selected, the talent pool is large for this position. Also, new outside leadership at Old Navy – the capable former head of Walmart Canada – brings a fresh perspective and impressive new skills to rebuild that critical segment (54% of sales). Despite its recent misstep, Athleta remains a bright light in the retail industry. Gaps’ balance sheet carries a reasonable $1.8 billion in debt. Other than the $350 million revolving credit facility, which can readily be repaid as inventories are worked down, the closest debt maturity is nearly 7 years away. The stock trades at an 8.3x EV/EBITDA multiple on depressed 2022 estimates. While this stock carries considerable risk, the upside could make this stock a great fit.

Gates Industrial Corp, plc (GTES) – This company is a specialized producer of industrial drive belts and tubing. While this niche might sound unimpressive, Gates has become a leading global manufacturer through innovation. Its customers depend on heavy-duty vehicles, robots, production and warehouse machines and other equipment to operate without fail, so the belts and hydraulic tubing that power these must be exceptionally reliable. And, few buyers would balk at a reasonable price premium on a small-priced part from Gates if it means their million dollar equipment keeps running. Even in automobiles, which comprise roughly 43% of its revenues, Gates’ belts are nearly industry-standard for their reliability and value. Helping provide revenue stability, over 60% of its sales are for replacements.

Based in Denver, Colorado, Gates was founded in 1911, and was owned by private equity firm Blackstone from 2014 until its IPO in 2018 (Blackstone retains a 63% stake today). Gates was poorly run by its prior owners, but during its Blackstone ownership the company improved its product lineup and quality, operating efficiency, culture and financial performance. Today, its 20% EBITDA margin is on-par or above its larger and more diversified peers. It is well-positioned to prosper in an electric vehicle world, as its average content per EV, which require water pumps and other thermal management components for the battery and inverters, is likely to be considerably higher than its average content per gas-powered vehicle. The management and board are high-quality, which help it follow a disciplined operating and capital allocation strategy. Gates’ debt balance has been reduced to a reasonable level, with considerable support from robust free cash flow. The shares trade at a modest 8.0x EV/EBITDA valuation and remain 41% below the 2018 IPO price of $19. Highly regarded value investor Cooke & Bieler, with $12 billion in asset, continued to add to its position on the weakness.

Closing prices on August 26, 2022.
* EV/EBITDA is Enterprise value to Earnings before interest, taxes, depreciation and amortization. EBITDA is a proxy for cash operating earnings. Valuations based on fiscal years ending in December 2022, except for Gap Stores which is based on the fiscal year ending in January 2023.
Sources: Company releases, Sentieo, S&P Capital IQ and Cabot Turnaround Letter analysis.

Hanes Brands, Inc. (HBI) – This company is a leading global producer of everyday basic innerwear and activewear apparel that are marketed under iconic brands including Hanes, Champion, Bali, Maidenform and Playtex. Hanes Brands is battling headwinds from low barriers to entry, which have allowed weaker brands to reduce profits across the entire industry. Adding to its secular challenge are currently high cotton prices, supply chain issues, a disruptive cyber-attack and the glut of inventory piling up as major retailers address the sudden shift in consumer preferences away from innerwear/T-shirts. Hanes previously generated considerable free cash flow, but this year it will likely produce a cash flow deficit of as much as $200 million due to weak profits while cash is tied up in inventory. We would suggest investors not rely on the dividend being sustained. The hefty $3.8 billion in debt (about 4.8x EBITDA) has a two-year runway before any major maturities, but a refinancing at a minimum would almost certainly come at a higher interest rate, and bondholders may pressure it for a dilutive equity offering. Reflecting these problems, Hanes’ shares have fallen 54% from their November 2021 high and are approaching their pandemic low.

However, stepping up its efforts to address the secular and cyclical headwinds, the company hired a 15-year senior Walmart executive, Stephen Bratspies, as the CEO in June 2020. Under Bratspies and other new executives, Hanes is implementing the “Full Potential” turnaround plan to boost the value of its brands, tighten its focus, improve its profits and pay down its elevated debt burden. The divestitures of its European operations, the PPE business, and its sheer hosiery business (including L’eggs) are encouraging indicators of management’s resolve. To further simplify its operations, Hanes is reducing its SKU count by as much as 50%. We believe there is a strong good chance that the company can efficiently sell its excess inventory given its evergreen nature.

Hanes’s shares are considerably undervalued at 9.2x depressed EBITDA. If Hanes undertakes a dilutive equity offering, that might mark an ideal time to buy shares. These shares could also qualify for our article on 13F stocks, as noted value investors Pzena Investment Management and Diamond Hill Capital Management hold large positions in the stock.

Jeld-Wen Holdings (JELD) – Jeld-Wen is one of the world’s largest producers of new and replacement windows and doors, with a primarily residential end-market. The company was a previously successful Cabot Turnaround Letter recommendation, producing a 69% gain at its sale in July 2021. Our investment thesis at the time was that Jeld-Wen was underperforming its potential, and that the new CEO would help rejuvenate the company. However, we sold when that CEO seemed to begin prioritizing empire-building rather than value-creating. Not surprisingly, the company’s operating performance suffered, which helped drag the shares down 55% and led to the recent (August) departure of the CEO. Jeld-Wen shares remain further pressured by a slowing economy and home-building industry, in addition to its struggles with a questionable court order to divest a factory. We believe Jeld-Wen continues to underperform its potential, which a more closely supervised CEO could help it achieve. Shareholders would also appreciate more capital being returned in the form of dividends (currently none) and buybacks. Jeld-Wen remains reasonably profitable and generates plenty of free cash flow. While its leverage is elevated for a cyclical company, at 4.1x EBITDA, the nearest maturity is 2025, offering plenty of time. The shares, which trade at a 6.1x EV/EBITDA multiple based on depressed earnings, undervalues the company relative to the franchise and its potential profits. Impressive but generally unknown Turtle Creek Asset Management is a 16% owner and added to their position on the stock’s recent weakness.

“NEGATIVE ENTERPRISE VALUE” COMPANIES – YES, THEY ACTUALLY DO EXIST

Every business has some value, or so it would seem. Yet, while exceedingly rare, there can be businesses that are valued by investors at a negative value, in that they trade for less than the value of the net cash on their balance sheets. These can make for fascinating investments, or more accurately, speculations.

Enterprise value (“EV”) is the value of a business’ operations. It is different from market value, which is the value of only the equity. While market value is the company’s stock price multiplied by the number of shares outstanding, enterprise value factors in the company’s debt and cash. The math: EV = market value - cash + debt. Another way to think about it is that EV is the amount you would pay to buy the entire company if it had no debt or cash.

We recently found two public companies with negative enterprise values (one has recently seen an uptick in its share price to a fractionally positive EV). Both are early-stage biotech companies whose products are still under development. As such, they have no revenues yet are spending immense amounts of cash to commercialize their treatments. Their negative EV suggests that investors have no confidence in the company’s ability to be successful before its cash runs out. In today’s tight capital markets, negative EVs also imply that future funding won’t be available to help the company stay afloat.

How can investors profit from these rare creatures? One way is when an activist investor calls for the company to be shut down and liquidated. With no debt obligations to be paid off, the activist and other shareholders would receive distributions of all of the cash, and profit from the excess of the cash over the market value of the stock. Managements are believers in their research capabilities, so activists have an uphill battle and the most likely outcome is either hefty dilution from a new equity offering or a total loss from the failure of the company. However, like a lottery ticket, any positive turn of its fortunes could generate many multiples of one’s investment. As such, these stocks are highly speculative and should be chosen only by investors well aware of the high risk.

Listed below are two negative EV companies with catalysts that might prove worthwhile in unlocking the value of the cash.

Adagio Therapeutics (ADGI) – This company was founded about two years ago, yet the initial investors seem to have already lost patience with its leadership team. Recently, following its annual shareholder meeting, the company underwent a major board and management overhaul led by Mithril Capital, a venture capital firm co-founded in 2012 by highly successful and outspoken investor Peter Thiel. Mithril led a consortium of founding investors who held a combined 49% ownership stake in the company, who believed Adagio has lost its way and want it to return to its original mission. We have no view on the merits of its treatments or its odds of achieving any commercial success, and the company will likely burn over $200 million in cash per year – about half of its $475 million cash balance – but it is reasonable to expect that any favorable improvement in its trajectory could lift the shares sharply.

Forte Biosciences (FBRX) – Forte is a very small company with perhaps not the highest quality governance or product outlook. One indicator of its murky quality: It has only five employees. Forte carries $39 million in net cash, compared to its $26 million market value, although it will likely burn half of that cash over the next 12 months. However, a value-oriented investor in the Midwest, BML Capital, holds a 10% stake and is campaigning for the company to liquidate. One of BML’s complaints is that Forte’s management seems to have found a high-potential treatment “out of thin air” following the failure of a prior treatment under development. If other hedge funds and institutional investors support BML’s campaign, a liquidation could release as much as $1.92/share in cash compared to the $1.31/share current price.

Closing prices on August 26, 2022.
Net cash balance is cash balance net of debt.
Sources: Company releases, Sentieo, S&P Capital IQ and Cabot Turnaround Letter analysis.

RecommendationS

Purchase Recommendation: Warner Brothers Discovery (WBD)

Warner Brothers Discovery (WBD) 230 Park Avenue South New York, New York 10003 (212) 548-5555 www.wbd.com

Symbol: WBD Market Cap: $32 billion Category: Large Cap Business: Media Revenues (2022e): $48 Billion Earnings (2022e): $3.3 Billion 4/29/22 Price: 13.16 52-Week Range: 12.69-31.55 Dividend Yield: 0% Price target: 20

Background
Warner Brothers Discovery is a global media company, with properties including the Warner Brothers film studio, HBO, the Discovery Channel, The Learning Channel, CNN, HGTV, DC Comics, TBS and Harry Potter, as well as sports and international cable networks and other valuable assets. The company generates revenues from distribution fees (49% of total revenues), advertising (28%), content licensing (21%) and various other sources (1%). Founded by John Hendricks in 1982, with its first broadcast in 1985, the Discovery Channel originally focused on educational programming and quickly developed a global viewership. In 2008, the company combined many of its operations with Advance/Newhouse and accelerated its expansion into reality-based shows under relatively new CEO David Zaslov. This past April, Discovery completed its long-awaited transaction with AT&T. Discovery acquired AT&T’s WarnerMedia operations in exchange for $40 billion in cash and 1.7 billion in shares, with a total deal value of over $80 billion. AT&T now owns 71% of Warner Bros Discovery.

Investors have taken a dour view of the deal, cutting the WBD share price nearly in half to essentially an all-time low. Investors have justification for their doubts. First, the company needs to rationalize and then integrate the WarnerMedia operations into a unified single business – a gargantuan, time-consuming and expensive task. Also, the company is attempting to build its streaming capabilities but is late to the game, with many aggressive and well-funded competitors. Its network segment faces slow erosion as consumers and advertisers shift away from cable television. Advertising revenues may weaken near-term as the economy slows. Against these headwinds, Warner Bros Discovery must generate enough profits and cash flow to make all of the efforts worthwhile to shareholders, not to mention to allow it to service its enormous $53 billion debt burden (at 4.5x estimated 2023 EBITDA). Reflecting the challenges, only months after the deal closed the company pushed back some of its strategic and operating targets and reduced its near-term outlook.

Analysis
Despite these challenges, Warner Brothers Discovery shares have considerable contrarian appeal. Most important, while most investors view the company as a “play” on streaming and hobbled by many challenges, we view it primarily as a turnaround of the WarnerMedia assets within a stable and profitable Discovery business. Once part of AOL Time Warner (arguably the worst acquisition in American business history), then owned by AT&T since 2018 in another disastrous combination, the WarnerMedia assets are poorly managed and in disarray. The turnaround is led by the aggressive, determined and highly focused Warner Bros Discovery CEO, David Zaslov, who built Discovery from an average-sized business into a global media powerhouse. Notably, he successfully integrated the $15 billion combination (closed in 2018) of Scripps Network Interactive. Zaslov sees as much as $3 billion in cost-savings, equal to nearly 10% of WarnerMedia’s revenues. He has moved quickly, firing nearly the entire WarnerMedia senior leadership team and many business-level executives, closing CNN+ and slashing several other programs. This turnaround drives most of the value creation in the WBD story.

Supporting the integration is a healthy and profitable Discovery business. In 2021, its $12 billion in revenues produced over $3.8 billion in adjusted EBITDA and $2 billion in free cash flow. With the addition of WarnerMedia, the new company brings together one of the world’s largest and most highly regarded video libraries and new-content creation machines that has strong appeal across a wide range of audiences. Its 92 million paying subscribers already make it one of the largest streaming services in the industry, behind leaders Netflix (220 million), Disney+ (94 million) and Amazon Prime Video (undisclosed but estimated to be 100-200 million). This scale and breadth provides it with considerable operating flexibility and bargaining power to maintain and potentially expand its revenues. The company is pressing hard on offering a unified streaming service, targeted for next year, which it aims to capture as many as 130 million total subscribers and generate $1 billion in profits by 2025. An Investor Day, planned for later this year, will help outline in more detail the operating and strategic plan.

Financially, Warner Bros Discovery generates free cash flow of around $3 billion. This could rise to $6 billion or more as the likely conservatively estimated $3 billion in synergies come to fruition. While the debt burden is clearly elevated, most of the maturities occur beyond three years – plenty of time for the company to improve its cash flow to allow for repayment and refinancing at reasonable terms. Management recognizes the weight of the debt and is prioritizing debt reduction.

Shares of Warner Bros Discovery trade at a discounted 8.0x estimated 2023 EBITDA. This metric is based on a highly conservative assumption that nearly all of the deal synergies are offset by cyclical and secular headwinds next year and in future years. More likely, most (and potentially more) of the net synergies will be realized and the sizeable free cash flow will accrue to shareholders as debt is repaid. Our model assumes little to no increase in the valuation multiple, although a successful integration will likely lift that multiple. All-in, we see the shares having a realistic potential of reaching $20, more than 50% above the current price.

New buyers of WBD shares are in good company: Notable value investors including Boston-based hedge fund Baupost, Polaris Capital Management, Hotchkis & Wiley, and Southeastern Asset Management either started or significantly raised their positions in WBD in the second quarter, based on the recent 13F filings.

We recommend the purchase of Warner Brothers Discovery (WBD) shares with a 20 price target.

Ratings Changes
On Friday, August 26, we moved shares of Lamb Weston Holdings (LW) from Buy to Sell. We think highly of this company and are reluctant to part ways. However, the shares have essentially reached our 85 price target. Its recovery from the pandemic as well as this season’s potato shortage has been impressive. However, we see the risk-return trade-off as fair at this point. Also, our Recommended List now includes nearly 40 stocks, so we would like to narrow our focus to those stocks with much more attractive turnaround potential.

The Lamb Weston Holdings position generated a 35% total return since our initial recommendation at 61.36 in the May 2020 edition.

Disclosure: The chief analyst of the Cabot Turnaround Letter personally holds shares of every company on the Current Recommendations List. The chief analyst may purchase securities discussed in the “Purchase Recommendation” section or sell securities discussed in the “Sell Recommendation” section but not before the fourth day after the recommendation has been emailed to subscribers. However, the chief analyst may currently hold and may purchase or sell securities mentioned in other parts of the Cabot Turnaround Letter at any time.

Performance

The following tables show the performance of all our currently active recommendations and recently closed out recommendations.

Large Cap¹ (over $10 billion) Current Recommendations

Mid Cap1 ($1 billion – $10 billion) Current Recommendations

Small Cap¹ (under $1 billion) Current Recommendations

Most Recent Closed-Out Recommendations

Notes to ratings:

1. Based on market capitalization on the Recommendation date.
2. Price target in parentheses.
3. Total return includes price changes and dividends, with adjustments as necessary for stock splits and mergers.
4. SP - Given the unusually high risk, we consider these shares to be speculative.
5. *Indicates mid-month change in Recommendation rating. For Sells, price and returns are as-of the Sell date.

The next Cabot Turnaround Letter will be published on September 28, 2022.

About the Analyst

Bruce Kaser has more than 25 years of value investing experience in managing institutional portfolios, mutual funds and private client accounts. He has led two successful investment platform turnarounds, co-founded an investment management firm, and was principal of a $3 billion (AUM) employee-owned investment management company.

Previously, he led the event-driven small/midcap strategy for Ironwood Investment Management and was Senior Portfolio Manager with RBC Global Asset Management where he co-managed the $1 billion value/core equity platform for over a decade. He earned his MBA degree in finance and international business from the University of Chicago and earned a Bachelor of Science in finance, with honors, from Miami University (Ohio).