Cabot Undervalued Stocks Advisor 120

Today’s featured stocks are those that I sense are most likely to rise this month. We’ll probably see near-term strength in energy companies, alongside rising oil prices; and insurance companies, as their fourth quarter results include capital gains from investment portfolio performance. Earnings season kicks off this month with banks reporting fourth quarter results. It’s not too late to sell the worst stock in your portfolio and replace it with shares of a high quality, growing company that has a bullish price chart.

Cabot Undervalued Stocks Advisor 120

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Get Ready to Rumble!
We are almost past a very quiet time period on Wall Street that featured a lack of major company news, M&A activity and earnings reports. As such, this will likely be the last recent issue where I had to scour the internet for new information on our portfolio companies. Fear not! We’ve got three seasonal situations on the immediate horizon about to take place that will generate news reports, and changes in both earnings estimates and share prices.

First, many analysts and corporate executives took vacation days in late December. To a large extent, they were not attending meetings that would generate new research reports and adjustments in earnings estimates. Now that they’ve been back to work for a week, expect a flurry of updated research and balance sheet projections. In addition, investment firms will host industry conferences this month, plus the CES 2020 consumer electronics show is taking place this week. Lots of interesting corporate and product developments and industry trends will be reported for investors to digest and ponder. Lastly, earnings season kicks off mid-month with banks reporting fourth quarter results.

Since I don’t have a great amount of fascinating corporate news to feature today, I’m opening each portfolio segment, below, with the stock that I think is best poised to rise immediately. (Keep in mind that if something unusual happens that causes the stock market to temporarily fall, all of our portfolio stocks would be expected to fall with the market. I do not have levitation powers!)

In that light, today’s featured stocks are Tyson Foods (TSN), Broadcom (AVGO), LGI Homes (LGIH) and AXA Equitable (AXA). Frankly, in the Growth & Income Portfolio, it was a toss-up between Broadcom and Guess? (GES). I definitely think GES will continue rising to 24, but since AVGO has more current price support (and therefore less downside risk), I chose to feature AVGO.

As a reminder, beginning this month, Cabot Undervalued Stocks Advisor will be published on Wednesdays. (It was formerly published on Tuesdays.)

Did you receive my annual publication, Top Ten Buy and Hold Stocks for 2020 last week? Send any related questions to Crista@CabotWealth.com.

TODAY’S PORTFOLIO CHANGES
Alexion Pharmaceuticals (ALXN) moves from Strong Buy to Buy.
Designer Brands (DBI) moves from Hold to Buy.
Mosaic Company (MOS) moves from Hold to Buy.

LAST WEEK’S PORTFOLIO CHANGES
Corteva Inc. (CTVA) moved from Buy to Hold.
General Motors (GM) joined the Buy Low Opportunities Portfolio as a Buy.

BEST STOCKS TO BUY TODAY

*A good choice today for investors looking for growth (G), growth & income (DIV) or trading (T).

Growth Portfolio

Growth Portfolio stocks have bullish charts, strong projected earnings growth, little or no dividends, low-to-moderate P/Es (price/earnings ratios) and low-to-moderate debt levels.

Updates on Growth Portfolio Stocks

Featured Stock: Tyson Foods (TSN – yield 1.9%)
Tyson Foods is one of the world’s largest food companies, with operations in 20 countries, and a recognized leader in protein with leading brands including Tyson, Jimmy Dean, Hillshire Farm, Ball Park, Wright, Aidells, ibp and State Fair. Analysts expect EPS to grow 23.4% in 2020; and revenue to grow 7.5% to $45.6 billion (September year end). The 2020 P/E is 13.4. Tyson Foods was featured in the December 10 issue of Cabot Undervalued Stocks Advisor.

TSN is nearing its August 2019 all-time high of 93. The price chart is extremely bullish. Barring a downturn in the broader market, I expect TSN to surpass 93 quite soon and begin a new run-up. This large-cap stock could appeal to growth stock investors and dividend-growth investors. Caveat: African Swine Fever (ASF) has killed over 300 million hogs in China. If ASF comes to the U.S., it will spread rapidly, and I will immediately recommend that investors sell TSN. Such an event in the U.S. would plummet Tyson’s share price. If you can handle that risk, buy TSN now. Strong Buy.

Adobe Systems (ADBE) is a software company that’s changing the world as an innovative leader in digitalmedia and digital marketing. Analysts expect future EPS to increase by 24.7% and 18.5% in 2020 and 2021, respectively. The 2020 P/E is 33.8. ADBE is a large-cap aggressive growth stock, great for risk-tolerant growth investors and buy-and-hold equity portfolios. The stock rose to new all-time highs throughout December. A pullback could occur at any time: traders should be cautious and longer-term investors should watch for buying opportunities. Buy.

Marathon Petroleum (MPC – yield 3.6%) is a leading integrated downstream energy company and the nation’s largest energy refiner, with 16 refineries, majority interest in a midstream company, 10,000 miles of oil pipelines and product sales in 11,700 retail stores. The company is prepared to meet the IMO 2020 demand for ultra-low-sulfur diesel fuel by the world’s ships and tankers. Marathon aims to spin off their Speedway retail stores into a separate company by early fourth quarter 2020. The company expects to update investors on strategies to optimize their midstream business in the first quarter of 2020. Marathon will report fourth quarter results on the morning of January 29. Analysts currently expect $1.17 EPS, within a range of $0.73-$2.07; and $33.7 billion revenue, within a range of $29.2-$48.1 billion.

MPC is a greatly undervalued large-cap stock with a solid dividend yield. Full-year EPS are expected to fall 28% in 2019, then rise 67% in 2020. The 2020 P/E is very low at 7.9. The stock had a November pullback after a 50%+ run-up, found a bottom near 58, and is now retesting that bottom. Oil refining stocks fell on Friday, January 3 in reaction to military action in Iran. I expect that price situation to be fleeting. This is an excellent moment for all types of growth investors and dividend investors to buy MPC. Strong Buy.

Quanta Services (PWR – yield 0.5%) is a leading specialty infrastructure solutions provider serving the utility, energy and communication industries. Their infrastructure projects have meaningful exposure to highly predictable, largely non-discretionary spending across multiple end-markets, including 65% of revenue coming from regulated utility customers. The company is working on a multi-year goal of increasing margins. Quanta Services was featured in the December monthly issue of Cabot Undervalued Stocks Advisor. PWR is a mid-cap growth stock. Wall Street expects EPS to grow 15.3% and 19.1% in 2019 and 2020, while the 2020 P/E is just 10.6. PWR rose to an annual high near 44 in November, pulled back to 40, and has been quietly resting at about 41 for four weeks. Buy PWR now before the next run-up begins. Strong Buy.

Universal Electronics (UEIC) is a manufacturer and world leader of wireless and voice remote control products, software and audio-video accessories for the smart home; with over 400 patents and a strong pipeline of new products in the areas of safety and security, climate control and lighting. Yesterday, the company announced that it will be introducing new capabilities and support across a variety of home entertainment and smart home devices for nevo.ai virtual assistant services at the CES 2020 show this week in Las Vegas. Management will also present at the Needham Growth Conference on January 14.

UEIC is an undervalued, micro-cap growth stock with very little analyst coverage, appropriate for risk-tolerant investors and traders. Profits are expected to increase 46% and 12.3% in 2019 and 2020. The 2020 P/E is 13.6. 2019 was a huge rebound year for UEIC, which peaked in November, then commenced a normal pullback. Patient growth investors can buy UEIC now while it’s near a recent low. Buy.

Voya Financial (VOYA – yield 1.0%) is a U.S. retirement, investment and insurance company serving 14.3 million individuals and institutional customers. Voya has $568 billion in total assets under management and administration. The company is successfully increasing revenue and profits via organic growth, cost savings and share repurchases. Please refer to the Special Bulletin from December 19 in which I discussed Voya’s agreement to sell their in-force individual life insurance business. The news was well-received by Wall Street. This week, two investment firms raised their price targets on VOYA to 70 and 77. VOYA is an undervalued, mid-cap aggressive growth stock.

Wall Street expects EPS to grow 21.8% in 2019 and 24.4% in 2020. The 2020 P/E is 9.7. Be aware that insurance companies frequently report upside earnings surprises on the heels of stock market run-ups, because their securities portfolios reflect those gains. U.S. stock markets performed quite well during the fourth quarter of 2019, and I therefore expect Voya Financial and its peers to report good results that are well-received by investors. VOYA is paused within a new run-up to all-time highs that began mid-December. Strong Buy.

Growth & Income Portfolio

Growth & Income Portfolio stocks have bullish charts, good projected earnings growth, dividends of 1.5% and higher, low-to-moderate P/Es (price/earnings ratios), and low-to-moderate debt levels.

Updates on Growth and Income Portfolio Stocks

Featured Stock: Broadcom (AVGO – yield 4.1%)
Broadcom is a global technology leader that designs, develops and supplies semiconductor and infrastructure software solutions that serve the world’s most successful companies. Yesterday, it was announced that Accenture will acquire Symantec’s cyber security business from Broadcom. Financial details were not disclosed. The most likely results of any business sales at Broadcom will be additional acquisitions and debt repayment. Broadcom was featured in the December 17 issue of Cabot Undervalued Stocks Advisor.Analysts are expecting $23.17 and $25.48 EPS in 2020 and 2021 (November year end), representing 8.8% and 10.0% EPS growth. The 2020 P/E is 13.6. AVGO began a run-up past 315 to new all-time highs in December, but hasn’t really advanced yet, so no one has missed their opportunity to make money on AVGO. AVGO is a good choice for technology investors, dividend-growth investors, and large-cap growth investors. Buy AVGO now. Strong Buy.

Blackstone Group Inc. (BX – yield 3.4%*) is the world’s largest and most diversified alternative asset manager with $545.5 billion in client assets. The company deploys capital into private equity, lower-rated credit instruments, public debt and equity, real assets, secondary funds and real estate. Consensus earnings estimates point to 35.4% EPS growth in 2020, and the 2020 P/E is 18.3. Despite the stock’s approximate 100% run-up in 2019, the price chart remains bullish. I will likely return BX to a Buy recommendation after a pullback. Hold.
*The payout varies each quarter with the total of the last four announced payouts equaling $1.92 and yielding 3.4%.

Citigroup (C – yield 2.6%) is a global financial company that serves consumers, businesses, governments and institutions in 98 countries, and the third-largest U.S. bank by assets. The new Current Expected Credit Loss (CECL) accounting rules will bring modest downward revisions to consensus earnings estimates to all affected companies in the coming weeks, because many analysts did not have this huge, impactful situation previously calculated into their estimates. Also, be prepared for several months of scary news headlines from the financial media. My investment focus will remain on financial companies and retailers that are expected to deliver better profit growth than their peers. In that light, Citigroup remains my favorite large-cap bank stock. Wall Street expects EPS to grow 16.1% and 8.9% in 2019 and 2020. The 2020 P/E is 9.5. This month, Barclays and RBC raised their price targets on C to 98 and 84, respectively. The stock hasn’t traded above 80 since 2008, so it appears that C is preparing to enter a modern version of new high territory. Buy.

Corteva Inc. (CTVA – yield 1.8%), a.k.a. Corteva Agriscience, provides farmers with seeds and crop protection products (herbicides, fungicides and insecticides), enabling them to maximize yield and profitability. 2019 was a difficult year for seed and crop protection businesses as many months of wet weather and flooding in the U.S. disrupted normal planting cycles and yields. Analysts are expecting a return to more normalized weather and market conditions in 2020, with profits expanding due to rising margins, merger savings and lower expenses. CTVA is a mid-cap growth & income stock. Analysts expect EPS of 1.23 and 1.49 in 2019 and 2020, reflecting 21.1% growth in 2020. The 2020 P/E is 19.1. The stock had a nice run-up in December, and is now having a pullback. Hold.

Dow Inc. (DOW – yield 5.3%) is a commodity chemicals company that derives roughly 50% of profits from its polyethylene business. New global polyethylene capacity is coming on board in 2022, which caused the market to be too bearish with industry stocks. That situation seems to be alleviating. The company will report fourth quarter results on the morning of January 29. DOW is an undervalued stock with strong earnings growth and a large dividend yield. The company is exhibiting progress on cash flow, cost cutting, a focus on debt repayment, a litigation win and an ability to thrive during a weak global economy. Analysts expect EPS of $3.51 and $4.15 in 2019 and 2020. The projected 2020 EPS growth rate is 18.2% and the corresponding P/E is 12.6. The stock had a large run-up in September and October, and has since traded between 52-55. Patient investors who prefer dividends or large-cap stocks should buy Dow now. Buy.

Guess?, Inc. (GES – yield 2.0%) is a global apparel manufacturer, selling its products through wholesale, retail, ecommerce and licensing agreements. There are 1,724 Guess stores worldwide, in approximately 100 countries. GES is a greatly undervalued, aggressive growth, small-cap stock. Profits grew 40% in fiscal 2019 (January year end), and are expected to grow 39% and 23.5% in fiscal 2020 and 2021. The fiscal 2021 P/E is 13.2. GES has been sitting quietly at price resistance at 22 for several weeks. The high point on the share price during the last two years was 24 in April 2018. I would expect any pullback to be a buying opportunity. Strong Buy.

Schlumberger NV (SLB – yield 5.0%) is the world’s largest oilfield service company. Analysts are expecting $0.37 fourth quarter EPS, within a range of $0.31-$0.42, to be reported on the morning of January 17. SLB is a large-cap stock with a 4.9% dividend yield. Wall Street expects EPS to fall 9.9% in 2019, and then to increase 18.5% in 2020. The 2020 P/E is 23.1. So far this month, three investments firms raised their price targets on SLB to a range of 42-47. The stock has been resting at price resistance at 40, and appears capable of rising to 45 in the coming months, where it last traded in April 2019. Buy now to lock in the large dividend yield and benefit from capital gain prospects. Buy.

Total S.A. (TOT – yield 5.3%) is a French multinational integrated energy company that produces and markets fuels, natural gas and low-carbon electricity, operating in over 130 countries. TOT is an undervalued, large-cap growth & income stock with a large dividend yield. Wall Street expects Total’s EPS to fall 7.3% in 2019, then to increase 18.6% in 2020. The 2020 P/E is 10.2. TOT is rising as Middle East tensions once again escalate oil prices. When TOT breaks past upside resistance at 56, the stock could then rise to its previous peak of 61 dating back to September 2018. Investors who buy now will lock in the 5.3% dividend yield. Strong Buy.

Buy Low Opportunities Portfolio

Buy Low Opportunities Portfolio stocks appear capable of a big rebound from recent lows. They have strong projected earnings growth; low-to-moderate price/earnings ratios (P/Es); no dividend requirement and low-to-moderate debt levels. Investors should expect volatility as the stock market alternately embraces the companies’ current successes and remains wary of the stocks’ recent downturns.

Updates on Buy Low Opportunities Portfolio Stocks

Featured Stock: LGI Homes (LGIH)
LGI Homes is the tenth largest residential home builder in America. The company is currently building homes, primarily for first-time home buyers, in 19 U.S. states from coast-to-coast and the District of Columbia. LGI Homes was featured in the December monthly issue of Cabot Undervalued Stocks Advisor.

This week, LGI Home announced all-time records for one-month, quarterly and full year home closings, reaching 7,690 closings in 2019, up 18.1% vs. a year ago. The company has 106 active selling communities, up 20% vs. a year ago. I anticipate this news to be bullish for the share price. CEO Eric Lipar commented, “As we start the new year, we maintain our positive outlook on the future. We are continuing to see strong demand for homeownership in our markets and assuming that general economic conditions, including interest rates and mortgage availability, in 2020 are similar to those in the fourth quarter of 2019, we believe we will close between 8,400 and 9,400 homes in 2020 and end the year between 120 and 130 active communities.”

Prior to this news, analysts expected full year EPS to grow 7.5% and 14.4% in 2019 and 2020. The 2020 P/E is 9.4. The stock is reacting well to this news. I anticipate Wall Street’s consensus earnings estimates to rise in the coming weeks as analysts re-work their projections for LGI Homes’ 2020 revenue and profits.

LGI is a small-cap stock with a $1.6 billion market capitalization. The stock broke past long-term price resistance at 80 in August, peaking near 88 in October (a new all-time high), then immediately pulled back and settled into a 70-72 range in November. The stock had one more pullback, with a double-bottom chart pattern, after I added it to the portfolio in December. The rebound has now begun. LGIH could rise to anywhere between 78-88 as it retraces previous trading patterns. LGIH is a good choice for traders and experienced growth stock investors. Strong Buy.

Abercrombie & Fitch (ANF – yield 4.6%) is a specialty retailer of Abercrombie & Fitch (a.k.a. A&F), abercrombie kids, and Hollister brand apparel and accessories for men, women and kids. The company operates 677 U.S. stores and another 204 international stores that are heavily concentrated in Europe. Revenue among the U.S. stores has consistently increased for nine straight quarters, while international revenue has lagged. The company is in the middle of a three-year plan aimed at both store transformation (updating and right-sizing their stores) and revenue growth. Management is repaying debt and repurchasing stock, which lowers interest and dividend costs. The long-term debt-to-capitalization ratio is quite low at 19.5%.

ANF is an undervalued small-/micro-cap stock. Wall Street projects EPS to fall in 2019, then rise 84% in 2020. The 2020 P/E is 14.0. The company’s management team, small size, profitability and strong balance sheet make it an attractive takeover target as well as an attractive stock for retail and institutional equity portfolios.

Deutsche Bank and Wedbush raised their price targets on ANF to 15 and 18 this week, respectively. Their actions frankly appear to be “a day late and a dollar short”. The price chart indicates an imminent breakout above 18.5, which would most likely carry ANF to 21, offering a 15% short-term capital gain opportunity. At that point, the P/E would be 17 and the new dividend yield would be 3.8%, and I would hardly anticipate a selling stampede. Whether you’re looking for a small-cap growth stock, a dividend stock, a short-term trade or a potential takeover target, ANF can fill the need. I expect ANF to perform well in 2020. Buy ANF now. Buy.

Alexion Pharmaceuticals (ALXN) is a biopharmaceutical company that researches and manufactures treatments of severe and rare health disorders. Current marketable drugs include Soliris, Ultomiris, Strensiq and Kanuma. The company is focused on three goals: converting patients from Soliris to Ultomiris, expanding indications for Ultomiris, and diversifying their portfolio to fuel continued long-term profit and revenue growth. Management will present at the J.P. Morgan Healthcare Conference on January 14.

Yesterday, Apellis Pharmaceuticals announced that their Phase III study of an experimental drug for a blood disorder showed greater improvement in patients’ hemoglobin levels than Alexion Pharmaceuticals’ Soliris. Patients showed a lesser need for blood transfusions, but also a higher occurrence of diarrhea and hemolysis (the destruction of red blood cells). Alexion management spoke with at least one Wall Street analyst and conveyed their opinion that the Apellis patient population represented a specific type of patient that was unlike over 90% of Soliris’ PNH patients. Additionally, management indicated that ongoing research with recently-acquired Achillion Pharmaceuticals could add to Soliris’ effectiveness in treating PNH patients.

ALXN is an undervalued growth stock. Full-year EPS are expected to grow 31.1% and 8.3% in 2019 and 2020. The 2020 P/E is 9.5, which is extremely low for a biopharmaceutical stock. I’m moving ALXN from Strong Buy to a Buy recommendation, based on slower projected 2020 earnings growth and the neutral price chart. The stock has traded between 105-115 for several months, and does not yet appear ready to rise above that range. Buy.

Baker Hughes Company (BKR – yield 2.9%) offers products, services and digital solutions to the international oil and gas community. Both the Turbomachinery & Process Solutions segment and the Oilfield Equipment segment experienced very strong order growth during the third quarter, and are expected to carry that strength into 2020. Analysts are expecting $0.31 fourth quarter EPS, within a range of $0.22-$0.36, to be reported on the morning of January 22. BKR is an undervalued, mid-cap aggressive growth stock, expected to increase EPS by 34% and 47% in 2019 and 2020. The 2020 P/E is 19.2.

Despite increases in oil prices, energy stocks fell yesterday. I think it was simply a down day during an uptrend. This week, Citigroup and Scotiabank raised their price targets on BKR to 33 and 32, respectively. I expect continued upside in the coming months. Buy.

Designer Brands Inc. (DBI – yield 6.1%) is one of North America’s largest designers, producers and retailers of footwear and accessories. The company operates DSW Warehouse, The Shoe Company and Shoe Warehouse stores with nearly 1,000 locations in 44 U.S. states and Canada; and Camuto Group. Consensus earnings estimates project no earnings growth in 2019 (January 2020 year end) and 19.7% EPS growth in 2020. The fiscal 2020 P/E is low at 9.0. DBI is an undervalued, small-cap stock. I’m moving DBI from Hold to a Buy recommendation, now that earnings projections and the share price have stabilized, subsequent to the disappointing third quarter. Buy.

General Motors (GM – yield 4.4%) delivered 2,887,046 vehicles in 2019 in the United States, including more than one million crossovers for the second year in a row, and more than one million full-size pickup trucks and SUVs. Management is focused on both high margin pickups in the North American market and battery electric vehicles (BEVs). General Motors is the first automotive company to mass-produce an affordable electric car, and they are committed to an all-electric future. GM was featured in the December 31, 2019 issue of Cabot Undervalued Stocks Advisor.

Profits are expected to rise 32.6% from $4.82 EPS in 2019 to $6.39 EPS in 2020. Revenue is expected to rise 6.3% from $136.5 billion in 2019 to $145.1 billion in 2020. 2020 is expected to deliver improving margins and substantial improvement in free cash flow. The 2020 P/E is 5.4. This stock is for people who would like to make about 20% profit as the stock travels back to its 2018 high of 42, and for investors who rely on dividend income. Buy.

Mercury General Group (MCY – yield 5.3%) operates as Mercury Insurance, the leading independent agency writer of automobile and home insurance in California. Mercury also writes automobile, home and/or other lines of insurance, including business and mechanical breakdown insurance, in ten additional U.S. states. Analysts are expecting EPS to grow 44.4% in 2019 and 22.7% in 2020. The 2020 P/E is 15.0. The stock has begun its rebound from the October price drop. I expect the stock to rise nicely, now that December selling pressure is gone. Growth investors and income-oriented investors can buy MCY now, lock in the large 5.2% current dividend yield, and expect a 10-17% capital gain as the stock retraces October trading levels of 53-56. Buy.

The Mosaic Company (MOS – yield 1.0%) is the world’s largest producer of finished phosphate and potash, supplying crop nutrients and animal feed ingredients via production facilities in the U.S., Canada, South America and the Asia-Pacific region. Profits are expected to fall to $0.55 per share in 2019 and then to rise 167% to $1.47 in 2020. The 2020 P/E is 14.1. This week, Citigroup raised their price target on MOS from 25 to 29. MOS rose nicely in December, followed by a small pullback. I’m moving MOS from Hold to a Buy recommendation. The price movement is still somewhat indecisive, although improving. Buy.

Special Situation Stocks

This is a portfolio for capital gain opportunities that do not conveniently fit into the other three portfolios.

Updates on Special Situation Stocks

Featured stock: AXA Equitable Holdings (EQH* – yield 2.5%)
AXA Equitable Holdings (EQH* – yield 2.5%) has two principal franchises: AXA Equitable Life Insurance Co. and a majority stake in AllianceBernstein Holdings L.P. (AB), an investment management firm. The company has $701 billion in assets under management. AXA Equitable Holdings has agreed to sell U.S. Financial Life Insurance Company and MONY Life Insurance Company of the Americas, Ltd. to Heritage Life Insurance Company. The transaction is expected to close in early 2020. “This transaction simplifies our balance sheet and is aligned with our strategy to improve the return on capital of our Protection Solutions segment,” said Anders Malmstrom, Chief Financial Officer of AXA Equitable Holdings.The company is expected to grow EPS 18.8% and 4.5% in 2019 and 2020, respectively. The 2020 P/E is 5.1 and the dividend yield is 2.5%. Be aware that insurance companies frequently report upside earnings surprises on the heels of stock market run-ups, because their securities portfolios reflect those gains. U.S. stock markets performed quite well during the fourth quarter of 2019, and I therefore expect AXA Equitable and its peers to report good results that are well-received by investors.AXA Equitable lacks strong 2020 EPS growth prospects; however, I love the bullish price chart, very low P/E, and dividend yield. This week, Wells Fargo and Evercore ISI raised their price targets on EQH to 30 and 36, respectively. I’m planning to keep EQH in the portfolio for the current run-up, which could last quite a few months. EQH began reaching new all-time highs in November, settled into a trading range of 23.5-25, and now appears ready to rise again. Buy EQH now. Strong Buy.
* Please note that AXA Equitable (EQH) is a different company from the French AXA S.A. (AXAHY or AXAHF). Don’t make the mistake of trading shares of AXA S.A. when aiming to trade AXA Equitable.

Amazon.com (AMZN) will unveil its transportation strategy at this week’s CES 2020 consumer electronics show. The company plans to be a major player in self-driving vehicle technology, connected cars, electric vehicles and consumer data. In other news this week, Amazon said its streaming device, Fire TV, has surpassed 40 million active users globally, up 8% from 37 million users the device recorded in September. Fire TV bundles content from different streaming platforms, include Netflix and Hulu.Amazon’s slow 2019 profit growth of 2.6% is expected to be followed by 30.7% EPS growth in 2020. AMZN has a high P/E – currently 70.5 – so it’s riskier than the stocks that I normally recommend. On the bright side, the P/E ranged between 100-300 in 2014 through 2018; therefore, a double-digit P/E reflects an historical bargain for the stock. AMZN continues to rise after breaking free from a five-month trading range in late December. I expect the stock to reach 2025, where it traded in 2018 and again in July 2019. Growth stock investors should buy AMZN now. Strong Buy.

VanEck Vectors Oil Refiners ETF (CRAK) seeks to replicate as closely as possible, before fees and expenses, the price and yield performance of the MVIS Global Oil Refiners Index (MVCRAKTR). The International Maritime Organization is mandating the use of either scrubbers or low-sulfur diesel fuels for the world’s 39,000 ships and tankers, beginning in January 2020. The purpose of the mandate is to minimize sulfur oxide (SOx) emissions into the atmosphere, and the mandate is nicknamed IMO 2020. Oil refining companies are expected to profit from the demand for low-sulfur diesel fuel. Read more here: IMO 2020: The Big Shipping Shake-Up. CRAK is recovering from its November pullback. I expect good performance from CRAK in 2020. Buy CRAK now. Strong Buy.

The next Cabot Undervalued Stocks Advisor issue will be published on February 5, 2020.

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