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Wealth Building Opportunites for the Active Value Investor

Cabot Undervalued Stocks Advisor 320

Today’s portfolio changes include one stock joining us with strong earnings growth and a stronger price chart than most stocks during this market correction, and another leaving the portfolio due to frequent downward revisions in earnings estimates.

The stock market will not likely bounce back quickly to its February highs. I’d be completely shocked if any such rebound occurred this month, or even in April. Instead, I expect a significant amount of volatility in the coming days, as buyers and sellers take turns embracing and dumping stocks. Despite the occasional up day in the market, there are many stocks that have not finished falling yet. Most such stocks are companies that will likely be harmed by a pullback in this year’s expected economic growth. After all, when people are quarantined – or just plain staying home and canceling travel and outings – many businesses suffer, not the least of which are travel, restaurant and retail companies.

I know that you will hear some friends or stock market pundits imply that the market will rebound quickly. Please, I beg you not to fall for that rosy prognosis. The market fell nearly 13%. That’s a BIG DROP. It’s going to take quite a few months to recover, and the recovery will most likely be precipitated by news that global economies are recovering from the coronavirus-induced lapse in economic output.

That’s not to say that there won’t be buying opportunities. I will continue to point out growth stocks that have somewhat bullish or tradeable price charts. These will be the ones with which you’ll want to “buy low.”

Lastly, take your time investing your cash. Many stocks will be in trading ranges, so watch for opportunities to buy low and sell high within those ranges

Cabot Undervalued Stocks Advisor 320

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Expect Continued Volatility
I’ll continue to write Bulletins more often, so that investors can navigate through this stock market correction and take advantage of trading opportunities. I might frequently mention stocks that don’t appear in these portfolios. There are lots of excellent growth stocks to choose from, and I can’t write about all of them, each week, but I can present them to you for your consideration. In that light, I mentioned NVIDIA (NVDA) a few days ago, and today the stock joins the Special Situation and Movie Star Portfolio.

Rule of thumb: if you look at a six-month price chart on a stock, and that stock just fell to a six-month low, it’s not going to rebound quickly. It might bounce upward here and there, but it’s going to bounce right back down to the current low, while it works its way out of this funk. That’s simply the way stocks move. The stocks that fell the least are the stocks that are most likely going to recover quickest, as we’re seeing right now with Netflix (NFLX).

Go ahead and continue sending me questions about stocks – one or two, not five or 20! And by all means, if you’re very worried, write to me. We need to find a better way for you to own stocks without having them disrupt your days.

Earnings season results -- Once again, our portfolio stocks fared better than the broader market during earnings season. Thirteen stocks delivered strong earnings beats, four stocks reported earnings within 5% of analysts’ consensus estimates, and only two stocks missed earnings estimates by more than 5%. The remaining companies do not operate on a December fiscal year. Their results will trickle in periodically, with retail stores now reporting January year-end results.

Upcoming webinar -- Tune in to my upcoming free webinar on March 18 at 2 PM ET, 7 Undervalued Growth Stocks with Rising Dividends for This Market. Click the link and sign up to attend! I’ll be giving investors some new ideas on dividend-paying growth stocks, and if the market’s conducive, I’ll also let you know which Movie Star Stocks seem to have the most near-term upside. (Those would be stocks like Apple and Disney and Microsoft – stocks that people love to hear about and own!)

Portfolio performance -- The average annualized total return on the 108 stocks that have been bought and then sold within these portfolios since October 2015 has been 14.96%, with an average holding period of 10.5 months. (These returns do not include compounded growth, but they do include dividends.)

Total returns on stocks that were recently removed from the portfolios are as follows:

Blackstone Group (BX) +111.0%
Citigroup (C) +14.3%
Corteva (CTVA) (9.5%)
Direxion Daily S&P 500® Bear 3X Shares (SPXS) +34.7%
Direxion Daily Semiconductor Bear 3X Shares (SOXS) +26.3%

Schlumberger (SLB) (40.7%)

(The buy and sell prices reflect the average trading prices on the days that the stocks were bought and sold.)

Send questions to Crista@CabotWealth.com.

Portfolio Notes
Be sure to review the Bulletin from February 27, two Bulletins from February 28, and one from March 2 in which I mentioned news, rating changes and/or price action on Amazon.com (AMZN), Apple (AAPL), Ameriprise Financial (AMP), Athene (ATH), Brighthouse Financial (BHF), Designer Brands (DBI), Direxion Daily S&P 500® Bear 3X Shares (SPXS), Direxion Daily Semiconductor Bear 3X Shares (SOXS), Dow Inc. (DOW), Equitable Holdings (EQH), Goldman Sachs Group (GS), Lincoln National (LNC), Netflix (NFLX), NVIDIA (NVDA), Quanta Services (PWR) and Voya Financial (VOYA).

Earnings Season Scorecard
Big earnings beat: Amazon.com (AMZN), Blackstone Group (BX), Citigroup (C), Corteva (CTVA), Dow Inc. (DOW), Equitable Holdings (EQH), General Motors (GM), LGI Homes (LGIH), Marathon Petroleum (MPC), Mercury General Group (MCY), Quanta Services (PWR), Schlumberger (SLB) and Universal Electronics (UEIC).

Earnings within 5% of consensus estimate: Alexion Pharmaceuticals (ALXN), Total SA (TOT), Tyson Foods (TSN) and Voya Financial (VOYA).

Big earnings miss: Baker Hughes Company (BKR) and Mosaic (MOS).

Today’s Portfolio Changes
Amazon.com (AMZN) moves from Hold to Strong Buy.
Designer Brands (DBI) moves from Strong Buy to Buy.
Equitable Holdings (EQH) moves from Strong Buy to Buy.
Marathon Petroleum (MPC) moves from Strong Buy to Buy.
Mercury General Group (MCY) moves from Buy to Hold.
The Mosaic Company (MOS) moves from Hold to Sell.
NVIDIA (NVDA) joins the Special Situation and Movie Star Stock Portfolio as a Strong Buy.
Universal Electronics (UEIC) moves from Buy to Hold.

Recent Portfolio Changes
Abercrombie & Fitch (ANF) moved from Strong Buy to Hold.
Baker Hughes (BKR) moved from Buy to Hold.
Broadcom (AVGO) moved from Strong Buy to Hold.
Direxion Daily S&P 500® Bear 3X Shares (SPXS) moved from Strong Buy to Sell.
Direxion Daily Semiconductor Bear 3X Shares (SOXS) moved from Strong Buy to Sell.
General Motors (GM) moved from Strong Buy to Hold.
Guess?, Inc. (GES) moved from Strong Buy to Hold.
Netflix (NFLX) moved from Buy to Strong Buy.
Quanta Services (PWR) moved from Hold to Buy.
Total SA (TOT) moved from Strong Buy to Hold.
Tyson Foods (TSN) moved from Strong Buy to Hold.
VanEck Vectors Oil Refiners ETF (CRAK) moved from Strong Buy to Hold.
Voya Financial (VOYA) moved from Buy to Hold.

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.

Adobe Systems (ADBE) is a software company that’s changing the world as an innovative leader in digital media and digital marketing. Investors may tune in to the February 12 webcast of management’s presentation at the Goldman Sachs Technology and Internet Conference 2020. ADBE is a large-cap aggressive growth stock. Adobe is expected to report $2.23 first quarter EPS, within a range of $2.17-$2.29, and $3.1 billion revenue, on the afternoon of March 12 (November year end). In each of the last four quarters, both revenue and EPS numbers came in higher than the consensus estimates. Analysts expect future EPS to increase by 24.8% and 18.5% in 2020 and 2021, respectively. The 2020 P/E is 35.1. Please note that while many companies’ profit and revenue projections have decreased recently, due to the economic impact of the coronavirus, Adobe’s earnings estimates have actually continued to inch upward. The stock rose to a new all-time high in February. I’m pleased that ADBE only fell about 10% with the market correction, and I intend to return the stock to a Buy recommendation soon. Hold.

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LGI Homes (LGIH) 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. Profits are expected to grow 11% in 2020, and the P/E is 9.7. LGIH is a small-cap stock. The stock rose to a new all-time high of 95 in February, then fell 20% with the market correction, despite a strong earnings report last week. JPMorgan then raised their price target on LGI Homes from 81 to 87. Hold.

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Marathon Petroleum (MPC – yield 5.2%) 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. There are five potential catalysts for share price appreciation in 2020:

  • Higher margins as Marathon meets industry demand as most of the world’s ships and tankers have switched to ultra-low-sulfur diesel fuel.
  • The Speedway retail store spin-off that’s targeted for early fourth quarter 2020.
  • A possible purchase of the Speedway retail store chain by the Japanese retail group Seven & I Holdings Co., which owns the 7-Eleven convenience store chain. Seven & I recently confirmed rumors that they are in talks to buy Speedway for $22 billion.
  • The strategic review of MPLX LP (MPLX), the midstream energy business for which Marathon is a majority owner, that’s due by the end of March.
  • The appointment of a new CEO.

MPC is a greatly undervalued large-cap stock with a solid dividend yield. Full-year EPS are expected to rise 28% in 2020, and the P/E is 7.5. I’m moving MPC from Strong Buy to a Buy recommendation, due to share price weakness. The stock fell with the market correction, and will likely trade between 44-56 until either the market recovers or some significant corporate news emerges. Buy.

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MKS Instruments (MKSI – yield 0.8%) is a 60-year-old global provider of instruments, subsystems and process control solutions that measure, monitor, deliver, analyze, power and control critical parameters of advanced manufacturing processes to improve process performance and productivity for their customers. Their primary served markets include the semiconductor, industrial technologies, life and health sciences, research and defense. MKS offers the largest breadth of products and services in their market, with 2200 patents and a sales presence in 100 countries. MKS Instruments was featured in the February 19 issue of Cabot Undervalued Stocks Advisor.

Investors may listen to the February 19 webcast during which CEO John Lee spoke at the Citi 2020 Global Industrials Conference. The company’s two China factories are back up and running in the wake of the coronavirus outbreak, as are most of their suppliers. Management is working on catching up on scheduled production within the quarter, though some of the work could be pushed into the second quarter. Product demand was not harmed by the virus. Management’s financial priorities include paying down debt while being open to M&A opportunities.

MKSI is an aggressive growth, mid-cap stock. Consensus estimates indicate that EPS will likely grow 38.1% and 30.0% in 2020 and 2021. The P/Es are low in comparison at 16.1 and 12.4, respectively. MKSI rose to an all-time high near 125 in March 2018, recently traded sideways between 102-120, then dipped below that range with last week’s market correction. I believe MKSI will recover more quickly than most other stocks in the aftermath of this market downturn. Expect volatility. Strong Buy.

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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 achieved record annual revenues, operating income and backlog in 2019, and is pursuing 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. The company reported a great fourth quarter last week. Full-year profits grew 18.5% in 2019, and are expected to grow 15.0% in 2020. The 2020 P/E is 10.0. PWR bounced off 37 last week, so that appears to be a support level. Buy.

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Tyson Foods (TSN – yield 2.5%) is the largest U.S. food company, 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. Management is focused on the growing global need for protein, and fulfilling that need in a sustainable and environmentally conscious manner. Investors are welcome to watch the February 19 webcast of management’s presentation at the Consumer Analyst Group of New York’s CAGNY 2020 event. Tyson Foods was featured in the December 10 and January issues of Cabot Undervalued Stocks Advisor.

China’s container ports are unclogging their backlogs as workers return to their jobs, allowing products to flow into the country once again. Analysts are forecasting EPS to increase 15.6% and 13.8% in 2020 and 2021 (September year end). These numbers were reduced due to the commerce disruption in China. The 2020 P/E is 10.7. It’s not yet time to buy low. The stock is going to have to find support and rest for a while before it rebounds. Hold.

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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. Clients include every major electronic and telecommunication company: AT&T, Cox, Dish, Comcast, Samsung, LG, Sony, Liberty, Daikin, Sky and more. Universal Electronics was featured in the February monthly issue and the February 26 issue of Cabot Undervalued Stocks Advisor.

UEIC is a volatile, undervalued, micro-cap growth stock, appropriate for risk-tolerant investors and traders. The stock reacted well to the great fourth quarter earnings report, then got tossed around with the market correction. I’m moving UEIC from Buy to a Hold recommendation until the price chart appears more conducive to producing near-term capital gains. Hold.

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Voya Financial (VOYA – yield 1.1%) is a U.S. retirement, investment and insurance company serving 13.8 million individual and institutional customers. Voya has $603 billion in total assets under management and administration. Management presented at the Citi 2020 Asset Managers, Broker Dealer, Exchanges and Insurance Investor Conference on February 25 and the 2020 Credit Suisse Financial Services Forum on February 27. VOYA is a mid-cap growth stock. Full-year 2020 and 2021 profits are expected to grow aggressively at 39% and 33%, and the P/E is 11.5. VOYA rose to a new all-time high in February. My intention is to return VOYA to a Buy recommendation in the near future. The stock will most likely trade between 52-59 in the near term. Hold.

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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.

Broadcom (AVGO – yield 4.7%) is a global technology leader that designs, develops and supplies semiconductor and infrastructure software solutions that serve the world’s most successful companies. Broadcom was featured in the December 17 and January issues of Cabot Undervalued Stocks Advisor. Broadcom is expected to report $5.34 first quarter EPS, within a range of $4.71-$6.16, and $6.0 billion revenue, within a range of $5.6-$6.3 billion, on the afternoon of March 12. Full year profits are expected to grow 9-10% per year in 2020 and 2021 (November year end). My intention is to return AVGO to a Buy recommendation in the near future. The stock will most likely trade between 270-300 in the near term. Hold.

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Dow Inc. (DOW – yield 7.0%) is a commodity chemicals company with manufacturing facilities in 31 countries. Dow derives roughly 50% of profits from its polyethylene business. Management is focused on cost-cutting, debt repayment and returning cash to shareholders. The consensus earnings outlook hasn’t changed one bit in the last three weeks. Clearly, analysts are not worried about coronavirus affecting business at Dow. Analysts expect full-year EPS of $3.52 and $4.22 in 2020 and 2021, reflecting 0.9% and 19.9% annual growth. The P/E is 11.8. The stock suffered with the broader market last week, but the dividend provides a safety net. Savvy investors will continue to swoop in and buy DOW in the low 40’s for a chance to lock in almost a 7% yield, prior to the share price rebound. Buy.

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Goldman Sachs Group (GS – yield 2.5%) is a major international investment bank that’s embarked on a strong foray into consumer banking. Their online bank, named Marcus, was launched in 2015. Marcus diversifies Goldman’s revenue base, potentially smoothing out the less predictable quarterly profit fluctuations associated with Goldman’s more traditional investment banking and trading divisions. Goldman Sachs Group was featured in the February issue of Cabot Undervalued Stocks Advisor. Goldman has the best prospects for 2020 earnings growth of any U.S. large-cap bank. Earnings estimates have barely changed with regard to the coronavirus. Analysts expect EPS to rise 16.3% and 11.8% in 2020 and 2021. The 2020 P/E is 8.6. My intention is to return GS to a Buy recommendation in the near future. The stock will most likely trade between 200-220 in the near term. Hold.

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GUESS?, Inc. (GES – yield 2.9%) is a global manufacturer of an iconic apparel brand, selling sexy GUESS and Marciano brand clothing and merchandise to Gen Z, Millennial and Heritage consumers through 1,743 stores worldwide, in over 100 countries. GES is a greatly undervalued, aggressive growth, small-cap stock. This company has been delivering better earnings growth than all of its retail apparel peers. Analysts expect EPS to grow 38% and 26% in fiscal 2020 (January 2020 year end) and 2021. (Full year 2020 results are expected in mid-March.) The fiscal 2021 P/E is 9.5. The stock fell a stunning amount last week, down 30% from its January high. I’m going to leave my recommendation as a Hold for a short while as the stock gets its bearings, but traders should be ready to jump in. Hold.

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Total S.A. (TOT – yield 6.9%) is a French multinational integrated energy company that produces and markets fuels, natural gas and low-carbon electricity, operating in over 130 countries. Fourth quarter results featured strong performance in all business segments. Analysts are projecting EPS and revenue to rise 21.0% and 9.4% in 2020, respectively. The 2020 P/E is 8.4. My intention is to return TOT to a Buy recommendation after the price chart turns more bullish. Dividend investors can certainly buy now. Hold.

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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.

Abercrombie & Fitch (ANF – yield 6.1%) 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 temporarily closed some stores in the city of Wuhan, China during the coronavirus outbreak. Abercrombie is expected to report $1.23 fourth quarter EPS, within a range of $1.16-$1.31, on the morning of March 4. Full-year profits fell in 2019, and are expected to rise 78% in fiscal 2020 (January 2021 year end). The P/E is 10.8. Notably, earnings estimates haven’t been affected by coronavirus problems in China.The stock is incredibly cheap, but the price chart is bearish. The reaction to the March 4 earnings report (released after this issue was in production) could be extremely bullish. I can’t imagine the reaction pushing the share price down further. Any sort of price rebound will most likely be met with the stock subsequently retesting its lows, at which time I’ll move ANF to a Buy recommendation. If you don’t mind the volatility, buy ANF for the dividend yield. Hold.

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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. Investors may listen to the webcast of management’s February 25 presentation at the SVB Leerink Global Healthcare Conference.

Notably, earnings estimates haven’t been affected by coronavirus problems in China. Consensus estimates project ALXN to grow EPS by 5.0% and 9.9% in 2020 and 2021. The corresponding P/Es are 8.7 and 7.9, which are extremely low for a biopharmaceutical stock. The company grew EPS 27%, 35% and 33% in 2017 through 2019, with earnings projections rising frequently each year. Patient growth investors should accumulate shares while the stock is cheap. Strong Buy.

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Baker Hughes Company (BKR – yield 4.2%) offers products, services and digital solutions to the international oil and gas community. Management is achieving strong free cash flow. The company’s Turbomachinery & Process Solutions (TPS) business is expected to produce strong revenue and margin growth this year, heavily weighted toward the second half of 2020 due to project timing. BKR is an undervalued, mid-cap aggressive growth stock. Notably, earnings estimates haven’t been affected by coronavirus problems in China, nor by the drop in oil prices. Profits grew 31% in 2019, and are expected to increase 31% and 44% in 2020 and 2021. The 2020 P/E is 15.4. It’s not time to buy this stock yet. Hold.

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Designer Brands Inc. (DBI – yield 7.5%) 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. This spring, Designer Brands will debut the JLO JENNIFER LOPEZ collection, a line of footwear and handbags that will be sold exclusively at DSW Designer Shoe Warehouse stores in the United States and Canada, and online at DSW.com.

Fourth quarter 2019 results will be reported on the morning of March 17 (January year end). Analysts expect ($0.06) EPS, within a range of ($0.08)-($0.05), and $841.6 million revenue, within a range of $827-$857 million. Recall that management made some bad decisions regarding tariffs that affected their third quarter results, and therefore residual problems could materialize in the fourth quarter report. Generally, though, the company is thriving and management has an excellent growth plan.

Notably, earnings estimates haven’t been affected by coronavirus problems in China. Consensus earnings estimates project EPS rising 19.7% in fiscal 2020 (January 2021 year end). The 2020 P/E is low at 7.3. In February, CEO Roger Rawlins reaffirmed his previously stated full year 2019 earnings guidance, and the stock reacted well. DBI is an undervalued, small-cap stock with a huge dividend yield. I’m moving DBI from Strong Buy to a Buy recommendation, because the stock is suffering from the market correction. As a result, the dividend yield is huge. (When share prices fall, dividend yields rise.) Dividend investors should buy now. Buy.

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General Motors (GM – yield 4.9%) -- GM’s 2020 new vehicle launches, expense reductions, returns of capital, and their commitment to an all-electric future are driving bullish sentiment on Wall Street. Management is focused on both high margin pickups in the North American market and battery electric vehicles (BEVs). Last week, GM announced that they’re adding 1,200 jobs at their Lansing, MI plants to meet growing demand for SUVs. GM was featured in the December 31, 2019 issue and the February issue of Cabot Undervalued Stocks Advisor. Notably, earnings estimates haven’t been affected by coronavirus-related auto production problems in China. Full-year 2020 profits are expected to rise 24.7%. The 2020 P/E is 5.2. The share price suffered during the market correction The stock will need to rest for a while before attempting a successful rebound. Hold.

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Mercury General Group (MCY – yield 5.5%) 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. MCY is an undervalued, aggressive growth, small-cap stock with an unusually large dividend yield. Earnings estimates haven’t been affected by coronavirus problems in China. Full-year 2019 profits rose 44.4%. Analysts are expecting EPS to grow 23.8% and 12.4% in 2020 and 2021. The 2020 P/E is 14.2. I’m moving MCY from Buy to a Hold recommendation. The stock has suffered from the market correction, and it’s going to need to stabilize before it can recover. Hold.

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The Mosaic Company (MOS – yield 1.2%) 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. Analysts’ earnings estimates for Mosaic have become chronically problematic. Although full-year EPS numbers reflect strong annual growth, the numbers keep shrinking. I’m removing MOS from the Buy Low Opportunities Portfolio, due to the deteriorating earnings outlook. Sell.

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Special Situation & MOVIE STAR PORTFOLIO

This is a portfolio for capital gain opportunities that do not conveniently fit into the other three portfolios. These stocks will often be glamorous companies, which I call “movie star stocks,” that investors love to own and follow, such as Amazon.com, Apple Inc. and Walt Disney Co.

Featured Stock: NVIDIA (NVDA – yield 0.2%)
NVIDIA is the pioneer and leading designer of graphics processing unit (GPU)-accelerated computing chips. Target markets include gaming, professional visualization, data center, and autonomous driving. NVIDIA is in the process of acquiring Mellanox, an early innovator in high-performance interconnect technology, routinely used in supercomputers and hyperscale data centers. The acquisition is expected to immediately add to NVIDIA’s gross margins and EPS.NVIDIA’s profits declined 13% in fiscal 2020 (January 2020 year end). Earnings per share (EPS) are now expected to rise to record levels in fiscal 2021 and 2022, increasing 36% and 19% respectively. The 2021 P/E is 34.5. The company beat earnings expectations in each of the last five years and in the last five quarters, which translates into investor confidence that Nvidia tends to under-promise and over-deliver. The company is managing its cash flow quite well, maintaining low debt levels and aiming to repurchase $2 billion of its shares once the Mellanox transaction is completed.NVIDIA joins the portfolio today with a Strong Buy recommendation. The stock surpassed its former all-time high of 290 in January, rising as high as 315 before pulling back with the current market correction. I expect NVDA to trade between 250-315 during this volatile period in the broader market, and to eventually lead the market higher. NVDA is a great stock for growth investors and traders. Strong Buy.

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Amazon.com (AMZN) -- Amazon’s innovations and forays into new industries are seriously disrupting established global businesses, including freight companies, retailers, entertainment and technology companies. The company is experiencing growth in Prime membership, Prime Video viewer hours, revenue and free cash flow. Earnings projections have not been harmed by the coronavirus outbreak. Analysts expect EPS to grow 25% and 40% in 2020 and 2021. The P/E is 69.0. AMZN rose to a new high in February, then dropped to January support levels with the market correction. This was actually a bullish chart pattern in comparison to the vast majority of stocks. I’m moving AMZN from Hold to Strong Buy. The stock could bounce a few times at 1900, but I expect AMZN to recover from this market correction far more quickly than most stocks. Strong Buy.

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Equitable Holdings (EQH – yield 2.8%) owns two principal franchises: Equitable Life Insurance Co. and a majority stake in AllianceBernstein Holdings L.P. (AB), an investment management firm. Assets under management have grown to $735 billion.

Equitable Holdings was featured in the February issue of Cabot Undervalued Stocks Advisor.
The company recently reported a fantastic fourth quarter, with growth in all four business segments. Profits are expected to grow 2.3% and 9.9% in 2020 and 2021. (The 2020 estimate has been consistently rising for many months, and has not been harmed by the coronavirus outbreak.) The 2020 P/E is extremely low at 4.4, and the book value per share was 29.19 at year-end 2019. The upcoming second-quarter dividend will increase by 13.3%, from 15 cents to 17 cents per share.

The stock rose to a new all-time high in February, then swiftly fell with the correction in the broader market. I love this stock for the valuation, but the price chart is weak, so I’m reluctantly lowering my recommendation from Strong Buy to Buy. Buy.

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Netflix (NFLX) is the world’s leading streaming entertainment service with over 167 million paid memberships in over 190 countries. Viewers can enjoy unlimited access to TV series, documentaries and feature films across a wide variety of genres and languages, all without commercial interruptions. The company is experiencing rapid international subscription growth and creating original foreign language content for international markets. Netflix was featured in the January 22 issue of Cabot Undervalued Stocks Advisor.

Consensus earnings estimates point to EPS increasing 45% and 40% in 2020 and 2021, respectively. The P/E is 64. Netflix is one of the rare companies that stands to benefit from the coronavirus outbreak, as people avoid public places, instead staying home and watching movies. The price chart remains bullish, with upside resistance at 420. Risk-tolerant growth investors and buy-and-hold investors should buy NFLX now. Strong Buy.

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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.

Many energy companies reported strong refining profit margins in their fourth quarter reports, with a bullish 2020 outlook. Refining margins are continuing to expand thus far in 2020. For now, though, oil prices and energy stocks are down due to the economic impact of the coronavirus epidemic and the stock market correction. Hold.

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Glossary
Strong Buy – This stock meets all of my fundamental investment criteria.
Buy – This stock meets most of my fundamental investment criteria.
Hold – Do not add to your position in this stock until a particular issue is resolved.
Retired – This stock has been removed from the portfolio for a specific reason, yet remains an attractive holding for long-term investors who would rather minimize portfolio turnover.
Sell – This stock has a problem that increases portfolio risk. Sell it.


The next Cabot Undervalued Stocks Advisor issue will be published on April 1, 2020.

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