The stock market isn’t done rising. Nevertheless, it’s certainly okay to begin accumulating cash with which to buy low during the next stock market correction. The way I personally handle that is when I sell a stock, I put half of the proceeds into my brokerage account’s money market fund, and I buy shares of stock with the other half. In that manner, I get to participate in the market’s bull run while also “saving for a rainy day”. The best antidote to a stock market correction is having money available to buy low!
Cabot Undervalued Stocks Advisor 519
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Property & Casualty Insurance Stocks Are On My Radar
Today I’m taking the opportunity to remove two stocks from the portfolios, in the quest to (a) pare back the number of stocks in the portfolios and (b) add new stocks to the portfolios. Clearly, those two goals are not necessarily simultaneously achievable. In addition, I keep finding good opportunities among property & casualty insurance stocks, but I’ve been overweight in financial stocks, limiting my ability to add new ones. Therefore, I’m removing some financial stocks today.
I’m Retiring Comerica (CMA) from the Growth & Income Portfolio. There’s no major problem, just prospects for very slow earnings growth in 2020, which could theoretically limit capital gain potential. I’m also Retiring Apollo Global Management, LLC (APO) from the Growth & Income Portfolio. The recent run-up gave me 90% of the upside that I was hoping for, and I’m ready to move on to P&C insurance stocks. In that light, Axis Capital Holdings (AXS) joins the Buy Low Opportunities Portfolio as a Strong Buy. I could have just as easily added AXS to the Growth & Income Portfolio, due to its attractive dividend yield. Finally, Adobe Systems (ADBE) joins the Growth Portfolio as it embarks on a journey into all-time high territory.
I wrote a review of the Anadarko Petroleum (APC) M&A situation on Friday, May 3, and by Monday, May 6 there was additional news! Here’s the article: What to Do with Anadarko Stock Amid Competing Buyout Offers. I’ll update investors as the situation unfolds. If you own shares of APC, congratulations! It’s always fun to own a stock that becomes a buyout target.
Send questions and comments to Crista@CabotWealth.com.
Portfolio Notes
Be sure to review the Special Bulletins from April 30, May 1, 2 and 3 in which I mentioned news, rating changes and/or price action on Apollo Global Management, LLC (APO), Apple (AAPL), Baker Hughes (BHGE), CF Industries (CF), Dow Inc. (DOW), DowDuPont (DWDP), Royal Caribbean Cruises (RCL), Sanmina (SANM) and Universal Electronics (UEIC).
Quarterly Earnings Release Calendar
May 6 pm: Mosaic Company (MOS) – 1Q
May 7 pm: Supernus Pharmaceuticals (SUPN) and Voya Financial (VOYA) – 1Q
May 8 am: Marathon Petroleum (MPC) – 1Q
May 9 pm: TiVo (TIVO) – 1Q
Earnings Season Scorecard
Big earnings beat: Alexion Pharmaceuticals (ALXN), Baker Hughes (BHGE), CF Industries (CF), CIT Group (CIT), Comerica (CMA), Delta Air Lines (DAL), Knight-Swift Transportation (KNX), Royal Caribbean Cruises (RCL), Sanmina (SANM), Southwest Airlines (LUV), Synchrony Financial (SYF), Total S.A. (TOT) and Universal Electronics (UEIC).
Earnings within 5% of consensus estimate: Apple (AAPL), DowDuPont (DWDP) and Schlumberger (SLB)
EPS figure not available: Dow Inc. (DOW).
(I decided to stop reporting economic net income (ENI) for limited partnerships – Blackstone Group (BX) and Apollo Global Management (APO) – because ENI is not comparable to EPS.)
Buy-Rated Stocks Most Likely* to Rise More than 5% Near-Term
Adobe Systems (ADBE)
Axis Capital Holdings (AXS)
Southwest Airlines (LUV)
Synchrony Financial (SYF)
Voya Financial (VOYA)
*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:
Adobe Systems (ADBE) joins the Growth Portfolio as a Buy.
Apollo Global Management (APO) moves from Hold to Retired.
Axis Capital Holdings (AXS) joins the Buy Low Opportunities Portfolio as a Strong Buy.
Comerica (CMA) moves from Hold to Retired.
Designer Brands (DBI) moves from Hold to Strong Buy.
Supernus Pharmaceuticals (SUPN) moves from Hold to Strong Buy.
Last Week’s Portfolio Changes:
Alexion Pharmaceuticals (ALXN) moved from Hold to Buy.
Apollo Global Management (APO) moved from Strong Buy to Hold.
CIT Group (CIT) moved from Buy to Strong Buy.
Guess? (GES) moved from Hold to Buy.
Southwest Airlines (LUV) moved from Hold to Buy.
Total S.A. (TOT) moved from Buy to Hold.
Universal Electronics (UEIC) moved from Strong Buy to Hold.
Voya Financial (VOYA) moved from Hold to Strong 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: Adobe Systems (ADBE)
Adobe Systems (ADBE) is a software company that’s changing the world through digital experiences. Adobe is reimagining Customer Experience Management (CXM) with Adobe Experience Cloud, the industry’s only end-to-end solution for experience creation, marketing, advertising, analytics and commerce.
Wall Street expects Adobe’s earnings per share (EPS) to increase aggressively, by 42.2% in 2019 and 23.9% in 2020. Adobe’s revenue is expected to grow 28.7% in 2019 and 17.9% in 2020. For comparison, analysts expect industrywide 2019 revenue growth to be 10%.
The 2019 price/earnings ratio (P/E) is 36.0. I consider the stock to be technically undervalued, because the P/E is lower than the EPS growth rate, but really, ADBE is more of a classic growth stock. There’s no dividend, minimal share repurchases, and moderate debt levels. I’m giving the stock a Buy recommendation rather than a Strong Buy, so as to reiterate caution in relation to the P/E. This is a great stock for risk-tolerant growth investors and for buy-and-hold equity portfolios.
ADBE is a $139 billion large-cap stock. The stock recently began reaching all-time highs, which is the most bullish time to own a stock. When a stock is hitting new highs, there isn’t a single investor anywhere on the globe who has lost money in that stock. Thus, there are no disgruntled shareholders who could cause a wave of selling that pushes the share price down. Buy.
Updates on Growth Portfolio Stocks
CF Industries Holdings (CF – yield 2.7%) 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 Industries expects strong nitrogen demand through the current quarter, and to continue benefiting from low natural gas prices throughout 2019. Natural gas is recently trading close to its lowest year-to-date price.
CF is a cyclical mid-cap aggressive growth stock. The company is expected to grow full-year EPS by 67% and 34% in 2019 and 2020, with corresponding P/Es of 21.3 and 15.9. CF is trading near the top of a six-month range, and could rise to 49, 53 or 55 in the coming months, depending on price action among its industry peers and within the broader market. Strong Buy.
CIT Group (CIT – yield 2.6%) 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. CIT is an undervalued growth stock with an attractive dividend yield. The price chart has become more bullish. There’s some upside resistance at 55, then lots of capital gain potential thereafter. Strong Buy.
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. Earnings growth projections have slowed dramatically after 2018. On a positive note, Wall Street considers the P/E to be too low, and out of synch with the economic and industry outlooks. The stock has upside price resistance at 38. Hold.
Marathon Petroleum (MPC – yield 3.6%) 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.
Marathon is expected to report first-quarter EPS of $0.06, within a range of (-$0.10)-$0.27, and revenue of $26.8 billion, within a range of $16-$34 billion, on the morning of May 8. There are many moving parts expected in this earnings report, including cost synergies related to the October 2018 Andeavor acquisition, a large share repurchase, and synergies and potential changes in the business plans of Andeavor Logistics LP (ANDX) and MPLX LP (MPLX). Full-year estimates reflect 2019 EPS falling 7.8%, followed by a 56% jump in 2020 EPS. The 2020 P/E is 6.8.
The Halftime Report traders discussed their favorite stocks in their May 3 episode, including MPC. These were the comments: “This sector’s been very oversold; it’s too cheap; expectations overall are way too low; I see great value here.” The guy was talking broadly about energy refining companies, and specifically about MPC. MPC has been trading with a ceiling at about 66 since November. This week’s earnings report could finally move the stock. Strong Buy.
Sanmina Corp. (SANM) designs and manufactures optical, electronic and mechanical products for original equipment manufacturers (OEMs) primarily in the communications networks, cloud solutions, industrial, defense, medical and automotive industries.
Full-year earnings per share are expected to grow 49.8% in 2019 (September year end), and P/E is 10.3. SANM is a small-cap growth stock. A continuation of the current run-up could take SANM to 36 or 41 in the coming months as the stock retraces former trading ranges. This stock is appropriate for risk-tolerant aggressive growth investors. Strong Buy.
Southwest Airlines (LUV – yield 1.2%) 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 is currently grounding its Boeing Max 737 jets through August, which will affect capacity numbers.
LUV is an undervalued large-cap stock. Wall Street expects full-year EPS to grow 6.8% and 14.8% in 2019 and 2020. The company typically announces an annual dividend increase in the range of 25%-33% in mid-May. The stock is edging up toward short-term price resistance at 56 and 58. Buy LUV now. 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. Three of those pipeline drugs are expected to launch in 2020, 2021 and 2023.
Supernus is expected to report first-quarter EPS of $0.47 on the afternoon of May 7, within a range of $0.31-$0.59, and $103.7 million revenue, within a range of $92.3-$111.1 million.
SUPN is an undervalued small-cap growth stock. The stock bounced back quickly from a mid-April panic among healthcare stocks as national political discussions turned toward socialized medicine. I’m moving SUPN from Hold to Strong Buy, but investors need to be aware that the political landscape holds land mines for the healthcare industry. Expect volatility. 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. Voya is expected to report first-quarter EPS of $1.12, within a range of $0.96-$1.23, and revenue of $279.0 million, within a range of $270-290 million, on the afternoon of May 7. Voya’s earnings are equity-sensitive. The S&P 500 index rose 13% in the first quarter. The company could easily deliver an upside earnings surprise for any quarter that was accompanied by strong stock market performance.
VOYA is an undervalued aggressive growth stock. Analysts expect full-year EPS to grow 36.4% and 14.9% in 2019 and 2020, and the current P/E is 9.9. Voya is prioritizing share repurchases, and planning a large dividend increase this year that has not yet been finalized.
I’m very pleased that VOYA recently rose to its previous highs of 54-55 and didn’t then give up any ground. An earnings disappointment could knock the share price down 5%. An earnings or revenue beat – especially in tandem with a bullish forecast or a dividend increase – could cause a strong breakout to new all-time highs. 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.agencies, and the company is focused on continued debt reduction.
Updates on Growth & Income Portfolio Stocks
Blackstone Group LP (BX – yield 5.5%*) is the world’s largest and most diversified alternative asset manager with $512 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, all on a global basis. Blackstone will convert from a limited partnership to a corporation on July 1, 2019.
At some point, and in conjunction with the corporate conversion, shareholders will likely begin receiving regular quarterly dividends, as opposed to the varying quarterly distributions that they have thus far received. That future payout will almost certainly give investors a lower yield than they previously received under the limited partnership structure.
BX is a growth & income stock. The current run-up will likely stop-and-go intermittently. This is a great stock to buy on pullbacks. Strong Buy.
*The payout varies each quarter with the total of the last four announced payouts equaling $2.17 and yielding 5.4%.
Commercial Metals Company (CMC – yield 2.9%) 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 24.8% and 24.7% in fiscal 2019 and 2020 (August year end). The 2019 P/E is low at 9.5. The stock is trading between 16.5-18.5, and could rise to medium-term resistance at 20 in the near future. Buy CMC now. Strong Buy.
Delta Air Lines (DAL – yield 2.4%) is a U.S. and international passenger and cargo airline that serves nearly 200 million people every year, flying to more than 300 destinations in over 50 countries. DAL is an undervalued growth & income stock. Delta is expected to achieve 18.2% EPS growth in 2019, and the P/E is 8.7. Subsequent to a brief, rapid run-up, DAL has traded quietly between 56-58 for five weeks, near price resistance at the December high of 60. A breakout past 60 could happen soon, and would be extremely bullish. Strong Buy.
Dow Inc. (DOW – yield 5.2%) is the materials science division of DowDuPont (DWDP) that began trading as a separate company on April 2. Analysts currently expect Dow to report EPS of $4.82 and $5.69 in 2019 and 2020. I’m very pleased with the profit projections, the dividend yield and the moderate P/E (11.1). Subsequent to the first quarter report, five Wall Street firms adjusted their price targets for DOW to a range of 58-68. The stock is languishing right now. Patient investors can lock in the big dividend yield right now while awaiting an eventual upturn in the share price. Strong Buy.
DowDuPont (DWDP) is now composed of DuPont and Corteva, which will separate by June 1. The final DWDP dividend will be paid on May 28. Want a tutorial on DowDuPont, its history and its 2019 spin-offs? Here’s an excellent review from Barron’s.
The stock fell down to the bottom of its 2019 trading range last week (34.5-39.5). The volatility seems to have more to do with Nervous Nellies on Wall Street, heading into the June 1 final spin-off, than it does company business trends. Both Dow and DowDuPont reiterated their 2019 guidance to Wall Street when delivering first-quarter results.
I will focus on the strong U.S. economy and the current-and-expected large dividend yields of the three DowDuPont components, and continue to recommend that investors buy low within the DWDP trading range. Buy.
Guess?, Inc. (GES – yield 2.3%) 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.
Wall Street expects full-year EPS to increase 22.4% and 18.3% in fiscal 2020 and 2021 (January year end). These numbers will inevitably be adjusted upward as analysts factor in recent news of the company’s intention to repurchase approximately a quarter-billion dollars of stock. The 2020 P/E is 16.1.
The stock rose 25% in recent weeks, and is now having a pullback. The next run-up could carry GES to 23. I foresee strong prospects for capital appreciation in 2019 and 2020. Expect volatility. Buy.
Royal Caribbean Cruises (RCL – yield 2.2%) is a cruise vacation company that delivers travelers to desirable and exotic destinations on all seven continents. The company operates a total of 61 ships, with 15 on order, under the brand names Royal Caribbean International, Celebrity Cruises, Azamara Club Cruises and Silversea Cruises, and partnerships with German and Spanish cruise companies.
RCL is an undervalued, large-cap growth & income stock, and a great stock for a high quality, buy-and-hold equity portfolio. There’s upside price resistance at the September 2018 high of 132, and then smooth sailing once RCL reaches 133 and beyond. Strong Buy.
Schlumberger NV (SLB – yield 4.8%) is the world’s largest oilfield service company. Wall Street expects full-year EPS to fall 4% in 2019 and to rise 40% in 2020. The market is forward-looking, and I’m therefore not concerned about this year’s lack of earnings growth because the company is on the verge of outsized profitability next year. SLB has traded between 40-48 since mid-January. The next run-up could carry the stock to 50-52 before it rests again. Buy.
Total S.A. (TOT – yield 5.6%) is a French multinational integrated energy company operating in over 130 countries. TOT is an undervalued, large-cap growth & income stock with a large dividend yield. Total is now expected to see full-year EPS grow 7.9% and 16.1% in 2019 and 2020, and the 2019 P/E is 10.1. The stock recently fell below its two-month trading range. I plan to move my recommendation back to Buy after the price stabilizes. Patient investors who want to buy low and lock in a higher dividend should feel comfortable doing so. Hold.
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: Axis Capital Holdings Ltd. (AXS—yield 2.8%)
Axis Capital Holdings Ltd. (AXS – yield 2.8%) is a specialty insurance & reinsurance company that’s based in Bermuda. Current corporate priorities include improving the customer experience, improving portfolio quality (performance, volatility, credit quality), and cost controls. Axis is focused on profitability (vs. revenue), has strong excess reserves, and is achieving cost synergies ahead of schedule related to their Novae Group plc acquisition.
Strong 2018 industrywide pricing trends have continued into 2019. Axis reported full-year 2018 EPS of $1.92 in 2018, and is expected to report $4.96 and $5.60 in 2019 and 2020. The 2019 P/E is low at 11.5, and the dividend yield is 2.8%.
AXS is a small-cap stock with a $4.8 billion market capitalization. The company repurchased 20% of their stock in the four years through December 2018.
Other than a brief downturn in December 2018, AXS has traded sideways between 53-57 for 13 months. I’m adding AXS to the Buy Low Opportunities Portfolio today because the price chart is finally showing a readiness to surpass 57 and begin a new run-up. When that occurs, AXS could rise to its March 2017 all-time high of 66 before resting again. Strong Buy.
Updates on Buy Low Opportunities Portfolio Stocks
Abercrombie & Fitch (ANF – yield 2.7%) 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 a small-cap stock. Analysts expect EPS to grow 26.1% and 6.9% in fiscal 2020 and 2021 (January year end). ANF is rising toward long-term price resistance at 35-37, where I will probably decide to Retire the stock from the portfolio. Traders should buy now. Buy.
Alexion Pharmaceuticals (ALXN) is a biopharmaceutical company that researches and manufactures treatments of severe and rare health disorders. ALXN is an undervalued large-cap growth stock. Full-year EPS estimates continue to ratchet upward in the wake of strong first quarter results. Analysts now expect EPS to grow 19.6% and 13.4% in 2019 and 2020, and the P/E is 14.4 – rather low for a profitable biopharmaceutical company. The long-term debt-to-capitalization ratio is also low at 20%. The stock is trading between 125-142 since February. The next run-up, which could begin shortly, could carry ALXN to long-term price resistance at 160. 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.
See the Special Bulletin from May 1 for comments about Apple’s second-quarter results and announcements. Warren Buffett, CEO of Berkshire Hathaway (BRK/A), said that he “was pleased” with the quarter’s results. His company owns over $50 billion of AAPL.
I anticipate AAPL climbing to 230 in the coming months, then resting for quite a while. AAPL is a great stock for a high quality, buy-and-hold equity portfolio. Earnings growth is not always double digits, and the P/E is not always low, but the company is a consumer products & services powerhouse and a cash machine. Buy AAPL now. Strong Buy.
Baker Hughes, a GE Co. (BHGE – yield 3.0%) 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 one last week to a total of 990, down 42 vs. a year ago. The international rig count grew by 12. In reaction to first-quarter results, investors were pleased with prospects for revenue growth in Oilfield Services and margin growth in Oilfield Equipment, and disappointed in weak bookings in Turbomachinery and Process Solutions. BHGE is an undervalued aggressive growth stock. The stock advanced steadily for three months, then gave back half those gains in an April pullback. 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. DBI is an undervalued growth stock with a hefty dividend yield. The stock appears capable of surpassing 23.5 soon, thereafter heading back to the mid-to-upper 20s. I’m therefore moving my recommendation from Hold to Strong Buy. Strong Buy.
The Mosaic Company (MOS – yield 0.4%) 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.
As a result of new Brazilian regulations governing mine tailings dams, Mosaic has temporarily ceased production at two Brazilian phosphate mines as they work on providing requested information to Brazil’s National Mining Agency. Mosaic continues to meet demand within the Brazilian phosphate market. The stock has a Hold recommendation while we await results of this interaction.
MOS is an undervalued mid-cap growth stock. The company is expected to report first-quarter EPS of $0.24, within a range of $0.13-$0.30, and revenue of $1.9 billion, within a range of $1.7-$2.2 billion, on the afternoon of May 6. Full-year earnings estimates have come down for 2019, and remain strong in 2020. Analysts now expect EPS to increase 3.3% and 17.4% in 2019 and 2020. The price chart is currently bearish. Hold.
Synchrony Financial (SYF – yield 2.4%) is a consumer finance company with 77.1 million average 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 full-year 2019 EPS growth of 15.5%, and the P/E is low at 8.1. The price chart indicates that SYF just began a new run-up that could stretch to 39, where SYF last traded in January 2018. Buy SYF now. Strong Buy.
TiVo (TIVO – yield 7.8%) – I held this stock due to the company’s statements of intention to seek an M&A deal, which emerged subsequent to several entities expressing interest in buying all or part of TiVo in late 2017. Nothing has materialized.
TiVo continues to periodically announce new products and new contracts with major companies. First-quarter results will be reported on the afternoon of May 9. Expect volatility. TiVo remains a profitable company with advanced media and entertainment technologies.
Investors should continue paring back their positions in TIVO. Sell into strength. This is a micro-cap stock, which means if I issue a blatant Sell recommendation on the stock, it will crash the share price. I aim to repeat this suggestion to pare back your shares for several weeks before finally issuing a Sell recommendation and removing TIVO from the portfolio, in order to protect your ability to sell at recent prices. Hold.
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. The company reported first quarter EPS of $0.82 vs. the consensus estimate of $0.73. Revenue was $182.7 million, about 1% higher than expected. Comcast and Dish were the two biggest customers in the quarter, accounting for 15.7% and 10.7% of revenue, respectively. Universal Electronics recently added Verizon to its list of advanced platform customers.
The company has been moving 40% of its production volume from China to its facilities in Mexico and the Philippines, in order to circumvent tariffs.
Management guided second quarter EPS and revenue to $0.70-$0.80 and $178-$188 million, respectively, vs. the consensus estimates of $0.53 and $167.9 million. The full-year 2019 analysts’ earnings estimate now reflects 28.9% growth, and the P/E is 14.7.
We probably won’t see relevant earnings estimates for 2020 until much later this year. UEIC is an undervalued micro-cap growth stock with very little analyst coverage, appropriate for risk-tolerant investors and traders. The stock is rising rapidly. There’s longer-term resistance at 55. Expect volatility. Hold.
* 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.
**As a reminder, Retired means I’m removing the stock from the portfolio due to less attractive nuances in earnings growth, valuation, news and/or price charts. Sell means that I don’t think anybody should own the stock, due to at least one major problem. I differentiate the two because there are investors who become paralyzed at the idea of making sell decisions. I want to help you make that decision by emphasizing my degree of concern about the stock.
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Send questions or comments to crista@cabotwealth.com.
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YOUR NEXT CABOT UNDERVALUED STOCKS ADVISOR ISSUE IS SCHEDULED FOR June 4, 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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