Various portfolio companies are in the midst of changes and volatility related to a spin-off, a name change, the Boeing Max 737 problem and the ongoing effects of Midwest flooding. In addition, U.S. stock markets decided that they’re ready to rise again, so I itemized several opportunities in this issue ranging from blue chip stocks to a microcap stock.
I expect 2019 to continue being a year that offers great opportunities for stock traders. While my investment style of identifying undervalued growth stocks is not conducive to day trading, investors will likely find lots of opportunities to achieve capital gains of 10% or more over several-month periods.
Cabot Undervalued Stocks Advisor 419
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A Rising Stock Market Brings Opportunites Today
U.S. stock market indexes have emerged from recent trading ranges and embarked on renewed uptrends as they seek to retrace all-time highs that were established in August through October 2018. Your stock portfolios will likely achieve additional capital appreciation this month.
Two unusual changes are happening within our portfolio stocks today. DSW Inc. (DSW) officially changes its name and stock symbol to Designer Brands (DBI); and Dow Inc. (DOW) begins trading separately from DowDuPont (DWDP).
Instincts tell me that Dow Inc. (DOW) is going to perform very nicely, right out of the gate. There are no shareholders who own it who would have a reason to sell, but there are many types of investors and institutional portfolio managers who have reasons to buy DOW. Therefore, I’m planning to buy shares today for the family account that I manage. DOW is today’s featured stock in the Growth & Income Portfolio.
Portfolio stocks that just broke out of trading ranges include Commercial Metals (CMC) and Delta Air Lines (DAL), and Blackstone Group LP (BX) appears ready to follow suit. In addition, Universal Electronics (UEIC) is in the middle of a big run-up, which is not remotely unusual for a microcap stock. Those little stocks are volatile, and when they move, they can move far and fast in either direction.
I’m surprised and pleased at how quickly the markets are rebounding from the horrendous downturns we experienced in October and December. If you’re a bit more interested in trading stocks rather than holding them longer term, pay attention to my descriptions about price resistance. When a stock rises to price resistance, it usually stops climbing for a while, so that’s the place where traders should sell. If you’re trying to identify such a point on the stock’s price chart, send me an email and I’ll help you decide how to proceed.
As we approach first quarter earnings season, please keep in mind that a wide range of companies will report subdued results that were impacted by the polar vortex weather pattern and the ongoing flooding problems in the Midwest. Wall Street is well aware of this situation. The earnings disappointments have been digested by analysts, who subsequently changed their forecasts for first quarter revenue and net income. Therefore, while there may be other types of earnings surprises and disappointments in the coming weeks, they will not likely be weather-related. Quarterly reporting will begin with financial stocks in mid-April. I’ll let you know what to expect in next week’s update.
Send questions and comments to Crista@CabotWealth.com.
Buy-Rated Stocks Most Likely* to Rise More than 5% Near-Term
Blackstone Group (BX)
Comerica (CMA)
Commercial Metals (CMC)
Delta Air Lines (DAL)
Dow Inc. (DOW)
Southwest Airlines (LUV)
Universal Electronics (UEIC)
*I can review price charts and make an educated determination about what’s likely to occur, but I will sometimes be wrong. I cannot control the stock market; I can only guide you through it.
Today’s Portfolio Changes:
Comerica (CMA) moves from Buy to Strong Buy.
Dow Inc. (DOW) joins the Growth & Income Portfolio with a Buy recommendation.
DowDuPont (DWDP) moves from Strong Buy to Buy.
DSW Inc. (DSW) changed their name to Designer Brands (DBI).
Schlumberger (SLB) moves from Hold to Buy.
Synchrony Financial (SYF) moves from Hold to Strong Buy.
Last Week’s Portfolio Changes:
Apollo Global Management (APO) moved from Buy to Strong Buy.
Apple (AAPL) moved from Buy to Strong Buy.
CF Industries (CF) moved from Strong Buy to Buy.
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.
Featured Stock: Southwest Airlines (LUV – yield 1.2%)
Southwest Airlines is the largest U.S. domestic air carrier, transporting over 120 million customers annually to over 100 locations in the U.S., Central America and the Caribbean.
Southwest management guided earnings projections downward last week after experiencing a trifecta of problems that resulted in thousands of flight cancellations during the first quarter. The problems stemmed from polar vortex weather across much of the U.S., unscheduled maintenance disruptions that were associated with acrimony pertaining to mechanics’ union contract negotiations, and the grounding of its new fleet of 34 Boeing 737 MAX planes. Wall Street now expects EPS to grow 13.9% in 2019, and the P/E is 11. LUV remains an undervalued growth stock.
While it seems logical that a stock would fall after a company announces lower revenue and profit projections, LUV actually rose subsequent to the announcement. That’s because everybody already knew that Southwest was affected by weather, mechanics and the Boeing 737 Max situations. Therefore, when Southwest announced the raw numbers in dollars and cents, investors were mostly relieved to hear the prognosis verbalized and quantified. It’s somewhat of an opposite reaction to the adage, “buy on the rumor, sell on the news” that often occurs when good things happen to a company. When it’s bad news, investors are more likely to “sell on the rumor, buy on the news”.
LUV rose about 32% in the weeks following its December low. A normal pullback became an exaggerated pullback in March as investors fretted over the aforementioned problems. LUV is now rising again. At a price of 52.93, there’s 9% upside as LUV travels back to its February high at 58, and 19% upside to its September high at 63. Buy LUV now. Strong Buy.
Updates on Growth Portfolio Stocks
CF Industries Holdings (CF – yield 2.9%) is one of the world’s largest producers of nitrogen products, serving customers on six continents. The company operates nine nitrogen production facilities in Canada, the U.K. and the U.S. CF is a cyclical mid-cap stock, affected by both currencies and natural gas prices (lower prices being optimal). The company is expected to grow EPS by 87% and 27% in 2019 and 2020, with corresponding P/Es of 17.6 and 13.9. The share price recently weakened, then rose each day last week. Natural gas prices have been steadily declining for three weeks, which benefits CF Industries’ profitability. Buy.
CIT Group (CIT – yield 2.9%) operates both a bank holding company and a financial holding company that provide financing, leasing and advisory services to small and middle market businesses, consumer markets, and the real estate and railroad industries. Moody’s Investors Services recently upgraded CIT Group’s senior unsecured rating to Ba1 with a positive outlook.
CIT is an undervalued growth stock with an attractive dividend yield. The company plans to increase the second quarter dividend by 40% to $0.35 per share, subject to approval by their Board of Directors. The stock had a huge early-year run-up and has recently been trading between 46-51. Buy.
D.R. Horton (DHI – yield 1.4%) is America’s largest homebuilder by volume, operating in 27 states, and also providing mortgage and title services. Lennar (LEN) and KB Home (KBH) recently joined D.R. Horton in forecasting a strong spring selling season. Last week, Jim Cramer recommended DHI, calling the stock “incredibly cheap on a price-to-earnings basis and I bet they could be huge beneficiaries of pent up demand now that we’ve put the bad weather behind us.”
DHI is an undervalued stock. The market’s current expectation of stable, low interest rates has caused homebuilder stocks to move upward. DHI could rise as far as last year’s high near 47. Hold.
Knight-Swift Transportation Holdings (KNX – yield 0.7%) is the largest full truckload carrier in North America and an industry leader with an exemplary management team. The stock is fairly valued now that earnings growth is slowing. KNX rose about 44% from its December low through mid-February and has since traded quietly in the low 30s. Last week, Jacob Mintz, Chief Analyst of Cabot Options Trader reported that an investor purchased $4.7 million of August call options on KNX. I would not be surprised if KNX surpassed 35 in the coming weeks. There’s price resistance at about 38. Hold.
Marathon Petroleum (MPC – yield 3.5%) is a leading integrated downstream energy company and the nation’s largest energy refiner, with 16 refineries, majority interests in two midstream companies, 10,000 miles of oil pipelines and product sales in 11,700 retail stores. The polar vortex weather pattern impacted first quarter business among refining and marketing companies, while second quarter expectations are now being revised upward due to much better business conditions. Consensus earnings estimates reflect a lack of 2019 EPS growth followed by a 50% jump in 2020 EPS. The 2020 P/E is 6.6. MPC is trading between 57 and 67. In the meantime, West Texas intermediate oil prices rose steadily after bottoming in December and appear imminently ready to rise again. Strong Buy.
Martin Marietta Materials (MLM – yield 0.9%) is a supplier of stone, sand, gravel, cement, concrete and asphalt. The company foresees a continuing growth trajectory, fueled by strong demand from residential, non-residential and public projects. The stock is fairly valued. Consensus estimates point toward EPS growth rates of 21.5% and 17.5% in 2019 and 2020. The 2019 P/E is 22.6. MLM began a new run-up last week. There’s some price resistance at 206, where MLM last traded in August 2018. Hold.
Quanta Services (PWR – yield 0.4%) provides specialized infrastructure and network services to the electric power, oil and natural gas industries. I have both enthusiasm and concern over this stock right now.
Bullish: The 2019 consensus EPS estimate is $3.44, rising week by week. Quanta told analysts that they expect 2019 EPS within a range of $3.30-$3.75, so there’s lots of room for analysts to keep raising EPS estimates.
Bearish: While the 2019 EPS estimate keeps rising, the 2020 EPS estimate hasn’t budged. It’s reflecting just 2.9% EPS growth. Is that because analysts are so focused on catching up to 2019 projections for Quanta that they haven’t thought about 2020? Or is that because analysts truly do not anticipate earnings growth in 2020? If the 2020 earnings estimate doesn’t ratchet upward soon, I won’t be inclined to hold the stock throughout 2019.
PWR is currently rising toward price resistance at 40, where the stock will likely come to a dead stop. I’ll decide week-to-week whether to hold PWR much longer. Hold.
Sanmina Corp. (SANM) designs and manufactures optical, electronic and mechanical products for original equipment manufacturers (OEMs) in a broad variety of industries. Earnings per share are expected to grow 40.7% and 11.6% in 2019 and 2020 (September year end). The 2019 P/E is quite low at 9.6.
SANM is a small-cap growth stock. The stock pulled back after its January run-up, and will likely be in a trading range for a while. This stock is appropriate for risk-tolerant aggressive growth investors. Strong Buy.
Supernus Pharmaceuticals (SUPN) focuses on the development and commercialization of products for the treatment of central nervous system diseases and psychiatric disorders, including epilepsy and migraine. Supernus has five pipeline products, in various phases of clinical trials, which aim to treat ADHD, impulsive aggression, bipolar disorder, depression and severe epilepsy. Supernus will host an Investor Day on April 16, 2019.
Last week, Supernus announced results of its fourth clinical trial in the SPN-812 Phase III program, which administered 400 mg and 600 mg doses of an ADHD treatment to adolescents ages 12-17. The 400 mg dose of SPN-812 produced statistically significant results, whereas the 600 mg dose did not. The press release reported, “While the 600 mg dose did not reach statistical significance, it is not needed for the submission or approvability of the NDA [new drug application] for children and adolescents. It was included to check for a potentially higher level of efficacy, to help in identifying the maximum effective dose, and to help in designing our trials for the adult population.” The NDA will be submitted to the Food and Drug Administration during the second half of 2019.
SUPN is an undervalued small-cap growth stock. Analysts expect EPS to increase 14.6% and 36.6% in 2019 and 2020. The corresponding P/Es are 14.9 and 10.9. SUPN is rising after a recent price correction. Buy SUPN now. SUPN peaked at 60 in 2018, so that’s likely your maximum upside in 2019. Strong Buy.
Voya Financial (VOYA – yield 0.1%) is a retirement, investment and insurance company serving approximately 14.7 million individual and institutional customers in the United States. The company is prioritizing share repurchases, and a large dividend increase this year that has not yet been announced. VOYA is an undervalued aggressive growth stock. Analysts expect EPS to grow 34.4% in 2019, and the P/E is 9.4. VOYA is trading sideways between 48-51 after a big run-up. There’s a chance that VOYA could break out of that trading range this week. The maximum upside in the coming months will likely be the stock’s 2018 highs of 54-55. 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.agencies, and the company is focused on continued debt reduction.
Featured Stock: Dow Inc. (DOW) and DowDuPont (DWDP)
Dow Inc. (DOW) is the materials science division of DowDuPont (DWDP) that began trading as a separate company on April 2, 2019. Each DowDuPont stockholder received one share of Dow Inc. common stock for every three shares of DowDuPont common stock held. DowDuPont commented that the distribution of Dow Inc. stock is expected to be a tax-free distribution, and that cash received in lieu of fractional shares will be taxable. (Scroll down to the paragraph that begins “Tax treatment of the DOW spinoff.”)
Read more about DOW and DWDP in this Barron’s article, How the Dow Spinoff Could Unlock Value and Offer a Rich Dividend.
The first DOW dividend will be paid on June 14, 2019 to holders of record of Dow common stock as of the close of business on May 31, 2019. The dividend yield is expected to be in the 4-5% range.
DOW will join both the Dow Jones Industrial Average (DJIA) and the S&P 500 indexes, replacing DWDP within the DJIA and replacing Brighthouse Financial, Inc. (BHF) within the S&P 500.
There will be a certain amount of institutional buying of DOW shares as index-oriented portfolios buy DOW, and as actively managed portfolios acquire DOW shares to fit other portfolio goals (e.g. sector representation, dividend income, long- or short-term capital gains). I think it’s a good idea to own DOW this week, to benefit from all that buying activity in the coming weeks.
I don’t expect to have accurate earnings estimates from Wall Street until analysts take 3-6 months to explore Dow’s balance sheet and quarterly earnings releases. Lacking such information, I’m giving the stock a Buy recommendation, rather than a Strong Buy. I believe the stock will fare well in the coming year, barring a downturn in the broader market. Buy.
DowDuPont (DWDP) has begun implementing its plan to break up into three companies: Corteva, Dow Inc. and DuPont. The materials science division of DowDuPont is now called Dow Inc. (DOW), and began trading on April 2, 2019. The remaining two companies will separate by June 1. All three stocks will pay dividends. The final DowDuPont dividend will be paid on May 28.
DWDP was removed from the Dow Jones Industrial Average (DJIA) prior to the market’s opening bell on April 2, and replaced by DOW. Institutional portfolios that mirror the DJIA will be required to sell DWDP in the coming weeks.
The company issued lower first quarter earnings guidance last week, citing “transportation disruptions throughout the [Midwest] region and significant road closures have halted farming operations, limited the ability to deliver products to customers, and delayed pre-season applications” and also “margin compression globally in Packaging & Specialty Plastics”.
In the coming days, the fundamental numbers for DWDP will be adjusted to reflect the DOW spinoff, so I can’t quote EPS and yield today. I’m moving DWDP from Strong Buy to a Buy recommendation until new earnings estimates become more readily available. Buy.
Tax treatment of the DOW spinoff. The following statement pertains to the adjusted cost basis between Dow Inc. (DOW) and DowDuPont (DWDP) and can be found on page 179 of the Final Form 10 of the Information Statement for New Dow:
“the aggregate tax basis of the shares of DowDuPont common stock and shares of Dow common stock in the hands of each DowDuPont stockholder immediately after the distribution (including any fractional shares deemed received, as discussed below) will be the same as the aggregate tax basis of the shares of DowDuPont common stock held by such holder immediately before the distribution, allocated between the shares of DowDuPont common stock and shares of Dow common stock (including any fractional shares deemed received) in proportion to their relative fair market values immediately following the distribution…”
I will try to provide more clarity on the cost basis calculation in the near future.
Updates on Growth & Income Portfolio Stocks
Apollo Global Management, LLC (APO – yield 6.4%*) is an alternative asset manager with assets under management (AUM) totaling $280 billion, dispersed among credit, private equity and real estate investments. APO is an undervalued mid-cap growth & income stock. The stock has traded between 28-30 since early February. Strong Buy.
*The payout varies each quarter with the total of the last four announced payouts equaling $1.83 and yielding 6.4%.
Blackstone Group LP (BX – yield 6.0%*) is the world’s largest and most diversified alternative asset manager with $472 billion in client assets. The company deploys capital into private equity, lower-rated credit instruments, hedge funds and real estate. BX is an undervalued growth & income stock, and an excellent choice for dividend investors. The stock appears to be continuing an advance that began three weeks ago. There’s medium-term price resistance at 38. Buy BX now. Buy.
*The payout varies each quarter with the total of the last four announced payouts equaling $2.14 and yielding 6.0%.
Comerica (CMA – yield 3.6%) is a financial services company engaged in domestic and international business banking & lending, wealth management and consumer services. Comerica will report first quarter results on the morning of April 16. CMA is an undervalued growth & income stock. The stock rose about 37% from its December low to its February high, then experienced a large pullback in March. I’m moving CMA from Buy to a Strong Buy recommendation, now that the stock appears to be recovering from the pullback. At a share price of 75.57, there’s 16% upside as CMA travels back to its February high of 88, where it will still be undervalued. Strong Buy.
Commercial Metals Company (CMC – yield 2.7%) is a recycler and manufacturer of steel and metal products, including rebar and fence posts. CMC is an undervalued aggressive growth stock with an attractive dividend yield. Analysts expect EPS to increase 26.2% and 23.4% in fiscal 2019 and 2020 (August year end). The 2019 P/E is low at 9.4. The stock broke out of a trading range yesterday. Buy CMC now. Strong Buy.
Delta Air Lines (DAL – yield 2.7%) is a U.S. and international passenger and cargo airline with an extensive and efficient hub complex. In this CNBC video, Berkshire Hathaway CEO Warren Buffett talks about his ownership of four airline stocks, airline safety, the Boeing 737 Max problem, and why he broke his “10% rule” to buy more DAL. DAL is an undervalued growth & income stock. Analysts expect 14.5% EPS growth in 2019, and the P/E is 8.1. DAL is just now breaking out of an eight-week trading range and could climb as high as 60 before resting again. Buy DAL now. Strong Buy.
Guess?, Inc. (GES – yield 4.6%) is a global apparel manufacturer, selling its products through wholesale, retail, ecommerce and licensing agreements. The company is growing revenues aggressively in Asia and significantly expanding in both Asia and Europe. GES is an undervalued, aggressive growth, small-cap stock with a big dividend yield. Wall Street expects EPS to increase 19.4% and 21.4% in fiscal 2020 and 2021 (January year end). The 2020 P/E is 16.8. GES is rising within a wide trading range. Buy GES now. Strong Buy.
Royal Caribbean Cruises (RCL – yield 2.4%) is a cruise vacation company that delivers travelers to desirable and exotic destinations on all seven continents. The company operates a total of 59 ships, with 17 on order, under the brand names Royal Caribbean International, Celebrity Cruises, Azamara Club Cruises and Silversea Cruises.
Royal Caribbean is an undervalued, large-cap growth & income stock. Competitor Carnival (CCL) announced weaker European and Alaskan pricing last week, which harmed CCL shares and temporarily impacted the price on RCL. Fortunately, RCL bounced back rather quickly. The stock has traded steadily sideways for nine weeks, presumably gathering strength for its next move. New investors can potentially earn a 13% capital gain as RCL returns to its 2018 high of 132, at which time the stock will still be undervalued (based on current earnings estimates). Buy RCL now. Strong Buy.
Schlumberger NV (SLB – yield 4.5%) is the world’s largest oilfield service company. Wall Street expects EPS to fall 2% in 2019 and to rise 43% in 2020. Since the market is forward-looking, I’m not concerned about this year’s lack of earnings growth, since the company is on the verge of outsized profitability next year. The stock has traded between 41-46 for two months and appears capable of finally advancing. I’m therefore moving SLB from Hold to a Buy recommendation. The next run-up could take SLB to 50-52 before it rests again. Most types of investors could benefit from buying SLB right now. Buy.
Total S.A. (TOT – yield 5.4%) is a French multinational oil and gas company operating in over 130 countries. Total is expected to see EPS grow 5.0% and 17.9% in 2019 and 2020, and the 2019 P/E is 10.5. The stock rose about 20% from its December low, then pulled back a bit. There’s price resistance at 59 and 64. Buy TOT now. Buy.
WestRock Company (WRK – yield 4.6%) is a global packaging and container company. WRK is an undervalued growth & income stock. The stock has not yet participated in the 2019 bull market; rather, it’s been trading sideways all year, currently rising toward short-term price resistance at 42. Patient investors should buy now to lock in the large current yield. Buy.
Buy Low Opportunities Portfolio
Buy Low Opportunities Portfolio stocks have neutral charts, strong projected earnings growth, low-to-moderate price/earnings ratios (P/Es) and low-to-moderate debt levels. (Dividends are not a portfolio requirement, but some of the stocks will have dividends.) Investors should be willing to wait patiently for these stocks to climb.
Sometimes a stock in the Buy Low Opportunities Portfolio produces good capital gains and the share price is no longer low, yet the stock remains an attractive investment. Those stocks will then be moved into the Growth Portfolio or the Growth & Income Portfolio.
Featured Stock: The Mosaic Company (MOS—yield 0.4%)
The Mosaic Company is the world’s largest supplier of 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.
One thing that stands out in Mosaic’s March 28 Analyst Day presentation is the string of successes in cost-cutting throughout their businesses. Management additionally anticipates lowering costs in their phosphate business by 15% over the next two years, largely through technological advances.
The fast-growing fertilizer market in Brazil provides continued growth prospects for Mosaic, where the company is logistically well positioned, especially in light of the poor logistical infrastructure that competing companies are left to deal with.
MOS is an undervalued mid-cap stock. Poor U.S. weather impacted myriad U.S. industries. Mosaic expects to achieve second quarter sales volumes that compensate for lower-than-expected first quarter revenues.
The company is willing to return excess capital to shareholders via an existing share repurchase authorization. Management intends to be cautious with the dividend, making sure to be able to consistently pay the dividend while preserving balance sheet integrity during trough periods in their economic cycle.
MOS recently pulled back amid weakness among peers’ stocks, and now appears to be rebounding. At a share price of 27.68, there’s 21% upside as MOS heads back to its February high of 33.5. Buy.
Updates on Buy Low Opportunities Portfolio Stocks
Abercrombie & Fitch (ANF – yield 2.9%) is a leading global specialty retailer of apparel and accessories for men, women and kids, operating under the Abercrombie & Fitch, abercrombie kids, Hollister and Gilly Hicks brands. ANF is an undervalued small-cap growth stock with a big dividend yield. Analysts expect EPS to grow 26.1% and 6.9% in fiscal 2020 and 2021 (January year end). ANF is rising toward price resistance at its 2018 high near 29. Hold.
Alexion Pharmaceuticals (ALXN) is a biopharmaceutical company that researches and manufactures treatments of severe and rare health disorders. Investors may view the presentation or listen to the webcast from Alexion’s March 20 Investor Day. Last week, RBC raised their price target on ALXN from 165 to 186, which is a rather significant change. ALXN is an undervalued large-cap growth stock. Wall Street expects 2019 EPS to increase 17.3% and the P/E is 14.5. The stock is acting well and could begin a new run-up shortly. A breakout past 140 would be extremely bullish. Buy.
Apple Inc. (AAPL – yield 1.5%) is a manufacturer and provider of many popular technology devices and services, including the iPhone, iPad, Mac, App Store, Apple Care, iCloud and more. Five new services will roll out in the coming months: Apple News+, Apple TV+, Apple TV Channels, Apple Arcade and Apple Card. There are over 1.4 billion active Apple devices globally, which provide a strong and growing revenue base for Apple Services. AAPL is currently on an uptrend, with price resistance at 230, where it last traded in October. Strong Buy.
Baker Hughes, a GE Co. (BHGE – yield 2.6%) offers products, services and digital solutions to the international oil and gas community. The number of U.S. rigs drilling for crude oil and natural gas fell by ten last week to a total of 1,006, up 13 vs. a year ago. BHGE is an undervalued aggressive growth stock. The stock has been ratcheting upward since December, and could easily reach 30 in the near-term, and possibly 34. Buy.
Designer Brands Inc. (DBI – yield 4.5% – formerly DSW Inc.) is a footwear, accessories and apparel retailer that operates Designer Shoe Warehouses and a variety of other brands of retail stores, totaling nearly 1,000 locations in 44 U.S. states and Canada, and ecommerce at DSW.com. The company changed its name from DSW Inc. to Designer Brands Inc. in March. Beginning April 2, the new ticker symbol is DBI.
DBI is an undervalued growth stock with a hefty dividend yield. Wall Street is currently expecting EPS to increase 12.0%, 15.1% and 26.2% in the next three years. At a share price of 22.22, the P/E is 11.9 (January year end). The stock recently fell, despite a lack of bad news, and I therefore expect it to continue rebounding this month. Patient growth stock investors can buy now and lock in the large dividend yield. Strong Buy.
Synchrony Financial (SYF – yield 2.6%) is a consumer finance company with 80.3 million active customer accounts. Synchrony partners with retailers to offer private label credit cards, and also offers consumer banking services and loans. SYF is an undervalued, mid-cap growth & income stock. Wall Street expects 2019 EPS growth of 12.3%, and the P/E is low at 7.7. Now that SYF has stabilized from its tremendous early-year rebound, I’m moving the stock from Hold to a Strong Buy recommendation. SYF is trading between 31-33.5 and could travel as high as 39 this year, where it last traded in January 2018. Strong Buy.
TiVo (TIVO – yield 7.6%) — Hold.* (last review March 19)
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. Investors may listen to the webcast of management’s March 28 presentation at the Sidoti Spring 2019 Investor Conference.
UEIC is an undervalued micro-cap growth stock with very little analyst coverage, appropriate for risk-tolerant investors and traders. UEIC is actively rising toward medium-term price resistance at 44-45, at which price traders should exit. Strong Buy.
* In order to focus attention on newsworthy changes in our portfolio stocks, I’m eliminating descriptions of Hold-rated stocks during weeks when there are no significant news announcements or changes in consensus earnings estimates. As a reminder, Hold does not mean Sell. Hold means that I am not recommending additional purchases of the stock today, either due to price chart action, earnings outlook, or stock valuation. I expect Hold-rated stocks to perform well in the coming months.
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YOUR NEXT CABOT UNDERVALUED STOCKS ADVISOR ISSUE IS SCHEDULED FOR May 7, 2019
Cabot Undervalued Stocks Advisor is published by Cabot Wealth Network, an independent publisher of investment advice. Neither Cabot Wealth Network nor its employees are compensated in any way by the companies whose stocks we recommend. Sources of information are believed to be reliable, but they are in no way guaranteed to be complete or without error. Recommendations, opinions or suggestions are given with the understanding that subscribers acting on information assume all risks involved. Copyright © 2019 - COPYING AND/OR ELECTRONIC TRANSMISSION OF THIS NEWSLETTER IS A VIOLATION OF THE U.S. COPYRIGHT LAW. For the protection of our subscribers, if copyright laws are violated by any subscriber, the subscription will be terminated.
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