In doing this month’s research, I was struck by the preponderance of excellent investment opportunities within the banking industry – so many that I could fairly easily create a mutual fund entirely devoted to bank stocks!
Cabot Undervalued Stocks Advisor 818
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Valuable Investor Tools
If you’re not in the habit of listening to quarterly earnings conference calls, I suggest that you pick one of your stocks, and visit the company’s investor relations page. You’ll likely find their earnings press release, a webcast of the management conference call (complete with a Q&A between analysts and management), and sometimes there’s also a graphic presentation of interesting data. These conference calls are highly informative, especially when you own small-cap stocks that don’t have very much news or research coverage.
If you listen to one of these conference calls for the very first time, send me an email and tell me your impression of the experience! You will either be bored and never do it again, or you’ll be thrilled with the amount of useful information that you gleaned, and listening to quarterly webcasts will become a new part of your investment routine.
Are you searching for various types of stock information, and not pleased with the results? Let me know what you’re looking for. Many of my data sources are publicly available to everyone, and I’m happy to share those websites with you.
However, I’ve never found a source of free stock research that compares in quality and volume of information to the excellent research I receive from the major Wall Street investment firms. I know that people tend to be very focused on paying as little as possible for investment advice, transactions and services, but always remember, “You get what you pay for.” Even if you set up a little account at a major investment firm, you will likely have complete access to the research on their website, just as if you held a $20,000,000 account there. So consider upgrading your stock research, which just might upgrade your investment returns!
Send questions and comments to crista@cabotwealth.com.
Portfolio Notes
Be sure to review the Special Bulletins from August 2 and 3 in which I mentioned news, rating changes and/or price action on Apple (AAPL), CF Industries (CF), DowDuPont (DWDP), Quanta Services (PWR), Universal Electronics (UEIC), WestRock (WRK) and Voya Financial (VOYA).
Quarterly Earnings Release Calendar
August 7, p.m.: Delek US Holdings (DK) and Supernus Pharmaceuticals (SUPN) – 2Q
August 8, p.m.: TiVo (TIVO) – 2Q
Second Half of August: GameStop (GME), Guess? (GES) and KLX (KLXI) – 2Q
Virtually all companies offer extensive information on their websites pertaining to their quarterly earnings releases, often including slide shows or webcasts.
Earnings Season Scorecard
Big Earnings Beat: Alexion Pharmaceuticals (ALXN), Apple (AAPL), Bank of America (BAC), Blackstone Group LP (BX), CF Industries (CF), Comerica (CMA), D.R. Horton (DHI), DowDuPont (DWDP), Martin Marietta Materials (MLM) and PulteGroup (PHM)
Earnings on Target or Slight Variance (within 5%): BB&T (BBT), Baker Hughes, a GE Co. (BHGE), CIT Group (CIT), Interpublic Group (IPG), Knight-Swift Transportation (KNX), Quanta Services (PWR), Schlumberger (SLB), Southwest Airlines (LUV), Universal Electronics (UEIC), Voya Financial (VOYA) and WestRock (WRK)
Big Earnings Miss: Skechers (SKX)
Buy-Rated Stocks Most Likely* To Rise More Than 5% Near-Term:
Baker Hughes, a GE Co. (BHGE)
D.R. Horton (DHI)
Voya Financial (VOYA)
Interpublic Group (IPG)
Guess (GES)
Skechers (SKX)
TiVo (TIVO)
*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:
Royal Caribbean Cruises Ltd. (RCL) joins the Buy Low Opportunities Portfolio as a Strong Buy.
Last Week’s Portfolio Changes:
Alexion Pharmaceuticals (ALXN) moved from Buy to Strong Buy.
CF Industries (CF) moved from Strong Buy to Hold to Sell.
Universal Electronics (UEIC) moved from Strong 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.
Featured Stock: Apple (AAPL – yield 2.7%)
Apple manufactures a wide range of popular communication and music devices, and many services as well. The highly touted news last week focused on AAPL reaching a $1 trillion market capitalization. That’s an intimidating number, and might make you wonder, how can a $1 trillion stock not be overvalued? One trillion is a big number, so it naturally evokes thoughts of excess.
There are a variety of ways that investment professionals measure value, but I assure you, market cap is not one of them. (Frankly, share price is not a measure of value either.) Price/earnings ratios (P/Es) and PEG ratios are common valuation measures, as are cash flow and debt ratios. I like to focus on P/E and debt, but AAPL’s PEG ratio is quite low as well.
Generally speaking, I want to see a P/E that’s lower than an earnings growth rate. Bigger picture, I might also consider the stock’s historical average P/E, the current average industrywide P/E, dividend yields, and next year’s expected earnings growth rate when looking at the current raw P/E number. It’s important to me to eliminate as much obvious stock market risk as possible, so that you and I are less likely to have a horrendous investment experience. Believe me, there’s enough risk in stock investing that we don’t need to voluntarily ask for more!
AAPL has been undervalued for well over a year now, and we’ll get to the current numbers in just a sec. But I also want to point out that the company spent $20 billion on share repurchases during the recent quarter, and had $243 billion in cash and marketable securities as of June 30, representing about 26% of the stock’s market value. That’s an awful lot of liquidity! For comparison, Procter & Gamble (PG) had $11.8 billion in cash and marketable securities at the end of the quarter, representing just 5.7% of its $206.2 billion market cap. I picked PG randomly, but you get the idea. Market cap does not tell us anything about value until we know more about the other moving parts of the company’s balance sheet.
Analysts now expect EPS to increase 27.4% and 15.8% in fiscal 2018 and 2019 (September year-end). The corresponding P/Es are 17.7 and 15.3. The stock is moderately undervalued based on 2019 numbers.
AAPL is my favorite stock for long-term investors. I believe almost every stock investor should own some shares. AAPL began reaching new highs again last week. I think the best price you’re likely to get will be on a brief pullback below 200. Strong Buy.
Updates on Growth Portfolio Stocks
Bank of America (BAC – yield 1.9%) is an undervalued growth stock that benefits from rising home prices and rising interest rates. The market expects Bank of America to grow EPS by 38.8% and 14.2% in 2018 and 2019. The corresponding P/Es are 12.4 and 10.9. BAC is actively rising toward its 2018 high near 33. I plan to sell above 32, to make room for a smaller bank to join the portfolio. Long-term investors should feel comfortable holding BAC, which is still an attractive investment. Hold.
CIT Group (CIT – yield 1.9%) 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. Analysts expect full year EPS to grow 21.8% and 28.1% in 2018 and 2019. The corresponding P/Es are low at 14.3 and 11.2. Morgan Stanley and Oppenheimer raised their price targets on CIT last week to 58 and 61, respectively. There’s room for the 2019 P/E to rise to 13 (near its industry peer average), pushing the share price to about 63, and offering new investors a potential 18% profit in the next 6-18 months. CIT is actively rising toward 2018 price resistance at 55.5. Strong Buy.
D.R. Horton (DHI – yield 1.1%) is America’s largest homebuilder, also providing mortgage, insurance and title services. DHI is an undervalued growth stock. Earnings estimates rose again last week, now reflecting annual EPS growth of 41.9% and 16.8% in 2018 and 2019 (September year end). Price/earnings ratios (P/E) are low at 11.1 and 9.5 for fiscal 2018 and 2019.
I love the price chart on DHI right now! The stock exhibited a shakeout pattern in late July, then traded extremely flat. Both are bullish indicators that a stock is likely to promptly launch upward. DHI could possibly rise 21%, all the way to its January 2018 peak near 53 before coming to a halt. Jacob Mintz, Chief Analyst of Cabot Options Trader, reported that on August 1 an investor spent $1.38 million on February 45 calls on DHI. I think perhaps that investor also loved the DHI price chart! Buy DHI now. Strong Buy.
KLX Inc. (KLXI) – This summer, Boeing will acquire KLX’s Aerospace Solutions Group (ASG) and KLX will spin off its Energy Services Group (ESG) to shareholders. If you own KLXI and wait for the two M&A transactions to take place, you will have $63 cash per share returned to you, and you will own shares of the new KLX Energy Services (KLXE). The combined value of the two transactions could reach $80 this year. The Boeing cash transaction is expected to be completed by September 1, and the KLXE spin-off could happen at any point between now and the completion of the Boeing transaction. Hold.
Knight-Swift Transportation Holdings (KNX – yield 0.7%) is a truckload carrier formed from the September 2017 merger between Knight Transportation and Swift Transportation Company. Knight-Swift is a thriving industry leader with an exemplary management team. Throughout the trucking industry, demand is strong, rates are rising, and there’s an extreme shortage of truck drivers. KNX is an undervalued mid-cap aggressive growth stock. Analysts expect full year EPS growth of 64.5% and 19.4% in 2018 and 2019. The corresponding P/Es are 14.3 and 12.0. Investors who love to buy bargains should buy KNX today. The stock could easily fluctuate between 32 and 38 in the near future, although it will likely take a while longer to break past 38. Strong Buy.
Martin Marietta Materials (MLM – yield 0.8%) is a supplier of crushed stone, sand, gravel, cement, concrete and asphalt. Full-year earnings estimates have been slowly increasing since early May. Analysts now expect EPS growth of 30.2% and 19.9% in 2018 and 2019. The corresponding P/Es are 22.1 and 18.5. Management is bullish on the construction recovery in the U.S. accelerating in the second half of 2018 and continuing next year. MLM is a somewhat undervalued aggressive growth stock. In late July, MLM fell to recent price support, despite the fantastic earnings report, and then immediately began a rebound. Buy MLM now. Strong Buy.
PulteGroup (PHM – yield 1.3%) is a U.S. homebuilder. Earnings estimates did something curious last week that’s worth mentioning. The 2018 consensus EPS estimate leaped upward to $3.75, while the 2019 estimate rose modestly to $3.83. At this point, earnings growth is slated to be 82.0% and 2.1% in 2018 and 2019. The corresponding P/Es are 7.6 and 7.5. The 2019 EPS growth rate is problematic for me, although I promise the market won’t focus on it until much later this year. I expect the stock to rise toward short-term price resistance at 33 relatively soon. In the interim, I’ll monitor the earnings estimates, which could continue to change in the wake of the strong second-quarter earnings report. Buy PHM now. Strong Buy.
Quanta Services (PWR) provides specialized infrastructure and network services to the electric power, oil and natural gas industries. PWR is an undervalued mid-cap growth stock. Wall Street expects full-year EPS to grow 38.6% and 15.4% in 2018 and 2019. The corresponding P/Es are 12.8 and 11.1. There’s 12% upside as the stock heads back to its January high of 40. An interim pullback to 34.50 would be perfectly normal, and likely brief. Once the stock breaks past 40, there will be no upside price resistance in sight. Strong Buy.
Southwest Airlines (LUV – yield 1.1%) 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. Wall Street expects full-year EPS to grow 18.3% and 21.3% in 2018 and 2019. The corresponding P/Es are 13.9 and 11.4. Jacob Mintz, Chief Analyst of Cabot Options Trader, reported that on August 2 an investor sold $1.1 million of September 55 puts on LUV – a bullish trade. LUV is trading in the upper 50s, on its way to its March high of 61. I expect the stock to rest there before approaching its January high of 66. 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, migraine and ADHD. SUPN is an undervalued, small-cap stock with a high degree of institutional ownership. The company is expected to report second quarter EPS of $0.43 on the afternoon of August 7, within a range of $0.37 to $.0.50.
SUPN is an undervalued aggressive growth stock. Analysts expect full year EPS to grow 46.8% and 40.5% in 2018 and 2019. Corresponding P/Es are 28.5 and 20.3. SUPN has recently been trading between 52 and 60. There’s room to make 13% profit within the trading range, and I also expect the stock to surpass its June all-time high of 60 at some point this year. Buy SUPN now. 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. Earnings estimates rose a bit last week. Wall Street now projects Voya’s full-year EPS to grow 121% and 24.9% in 2018 and 2019. The corresponding P/Es are 11.7 and 9.4. At 50, the share price is near the center of its 2018 trading range, and there’s 10% upside to the top of the range. I would expect the stock to continue rising after it pauses at 55. Buy VOYA now. 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.
Featured Stock: DowDuPont (DWDP – yield 2.2%)
DowDuPont joined the Growth & Income Portfolio in June. There’s a lot going on with the company and the stock, and I want to be sure that every investor has seriously assessed whether DWDP belongs in their portfolio, because I think the stock’s about to make a move.
Earnings estimates are incredibly stable. In late March, consensus earnings estimates pointed to EPS of $4.12 and $4.92 in 2018 and 2019. Despite two subsequent quarters of earnings releases, the current consensus estimates are $4.18 and $4.92. The consistency in those numbers tells us two important things. The first is that DowDuPont management has a firm grasp on business operations, despite the fact that two huge companies merged less than a year ago. That first post-merger year is more typically a time period when companies are still hoping and praying that the merger will succeed.
The second notable point is that management is apparently very clear when discussing company prospects – including earnings projections – with Wall Street analysts. A lot of the volatility associated with stock ownership stems from the disparity between Wall Street’s expectations vs. the real numbers that are reported when quarterly results are announced. We’re not seeing that problem with DowDuPont. If you missed DowDuPont’s second-quarter report, here’s a synopsis from The Wall Street Journal. DowDuPont management has a confident grasp on business operations and they’re openly willing to share that information with the entire financial community.
DowDuPont is breaking up into three companies. The company’s three divisions – Agriculture, Materials Science and Specialty Products – will each become independent, publicly-traded companies by June 2019. Management is planning the spin-offs because they fully expect the value of the three stocks to be higher than the value of the current stock. Considering their business acumen in managing a company with $87 billion in revenue and successfully forecasting profits almost to the penny, I believe management has likely made another wise assessment when forecasting the potential market value of the spin-off companies.
The stock might now be ready to break past 70. Subsequent to the second-quarter earnings release, four brokerage firms changed their price targets for DWDP to a range of 79-88. The stock has been ratcheting upward since early April. While I realize that reading price charts is a bit like reading smoke signals, I think the DWDP price chart, in conjunction with the market’s evolving upbeat disposition toward value stocks, is indicating that DWDP is finally ready to rise past 70. I certainly believe the stock could retrace its January high of 76 before year end. And of course, I expect additional capital appreciation in 2019 as the spin-offs take place. Buy DWDP now. Strong Buy.
Updates on Growth & Income Portfolio Stocks
BB&T Corp. (BBT – yield 3.1%) is a 145-year-old financial holding company with $222 billion in assets and 2,100 financial centers that serves businesses and individuals. The market expects BB&T to make a significant acquisition in the coming year. BB&T raised its third quarter dividend by 3 cents to 40.5 cents in July, an 8% increase. Analysts expect full-year EPS to grow 41.9% and 9.6% in 2018 and 2019. Corresponding P/Es are 13.0 and 11.9. The stock recently bounced at the bottom of its 2018 trading range at 50, and is once again rising toward the top of the range near 56. Buy BBT now. Strong Buy.
Blackstone Group LP (BX – yield 6.3%*) is the world’s largest and most diversified alternative asset manager, with $439 billion in client assets. The company deploys capital into private equity, lower-rated credit instruments, hedge funds and real estate. Analysts expect Blackstone’s economic net income (ENI) to grow 8.5% and 5.6% in 2018 and 2019. The corresponding P/Es are 11.5 and 10.9. BX retraced its 2018 highs in mid-July. I encourage both growth investors and dividend investors to add to their positions on dips below 35. Buy.
*The payout varies each quarter, with the total of the last four announced payouts (excluding the $0.30 special 2018 distribution) yielding 6.3%.
Comerica (CMA – yield 2.4%) is a financial services company engaged in domestic and international business banking & lending, wealth management and consumer services. Comerica is one of the most asset-sensitive banks in the U.S., with a very high percentage of variable rate loans, thus benefiting from rising interest rates. Comerica increased its third quarter dividend to $0.60 per share in July, on the heels of a second-quarter dividend increase to $0.34 per share. The huge dividend increase had a lot to do with Comerica’s recent exemption from the Federal Reserve’s annual Comprehensive Capital Analysis and Review (CCAR), giving the company more flexibility to allocate capital to shareholders. The company will also repurchase $500 million of its stock during the third quarter. Earnings per share are expected to increase by 48.5% and 11.7% in 2018 and 2019. The corresponding P/Es are 13.9 and 12.4. CMA is somewhat undervalued. CMA is rising in recent weeks, heading toward its 2018 high near 102. Strong Buy.
Commercial Metals Company (CMC – yield 2.2%) is a recycler and manufacturer of steel and metal products, including rebar and fence posts. U.S. industrywide pricing is expected to remain strong due to robust economic activity, lower steel supply, and lower import volumes due to tariffs. CMC is an undervalued aggressive growth stock. Wall Street analysts expect full-year EPS to grow 108% and 57.4% in 2018 and 2019 (August year-end). The 2019 P/E is 9.1. There’s 14% upside as CMC returns to its recent high of 24.50, and additional appreciation potential thereafter. Buy CMC now. Strong Buy.
GameStop (GME – yield 10.2%) is actively reviewing strategic alternatives and could possibly announce a major corporate change by the second quarter earnings release due in late August. I fully expect that there will either be a buyout, or that GameStop will hire a prominent CEO to head up the company, and that either piece of news would cause the share price to rise. Sell Half.
The Interpublic Group of Companies (IPG – yield 3.8%) is a large conglomerate of advertising, marketing, communication and public relations companies serving all global markets. The company reported strong organic growth in the second quarter and increased their full-year organic growth guidance. The stock is recovering from recent weakness, now that the market understands that trouble with U.S. revenue growth at Omnicom (OMC) did not spread to Interpublic. I expect IPG to rise toward its 2018 high near 25. (I might sell thereafter, depending on price momentum and the earnings outlook.) Buy IPG now. Strong Buy.
Schlumberger (SLB – yield 3.0%) is the world’s largest oilfield service company. The number of U.S. rigs drilling for crude oil and natural gas fell by four last week to a total of 1,044, up 90 vs. a year ago. SLB is an aggressive growth stock, undervalued based on 2019 numbers. Analysts expect EPS to grow 22.7% and 49.5% in 2018 and 2019. The corresponding P/Es are 35.8 and 24.0. The stock is low within a solid trading range. There’s short-term price resistance at 74. Buy SLB now. Strong Buy.
WestRock Company (WRK – yield 3.1%) is a global packaging and container company. I realize that the share price has not been acting well, and that causes a certain amount of worry among shareholders. Earnings estimates for 2018 and 2019 have increased each month since December 2017, so there hasn’t been anything negative happening with the company’s prospects. Analysts expect full-year EPS to increase 55.0% and 14.5% in 2018 and 2019. The corresponding P/Es are 13.6 and 11.8. The share price is weak, and not yet ready to rise. Strong 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: Royal Caribbean Cruises (RCL – yield 2.1%)
Royal Caribbean Cruises joins the Buy Low Opportunities Portfolio today as a trading opportunity. Royal Caribbean Cruises is a cruise vacation company that delivers travelers to desirable and exotic destinations on all seven continents. The company operates a total of 50 ships that are wholly owned, or jointly owned with companies in Germany, Spain and China. The company is future-focused on attracting the millennial generation.
Royal Caribbean is a large-cap stock within the consumer cyclical sector; a sector which also houses travel and leisure, restaurants, retailers and homebuilders.
Wall Street expects Royal Caribbean’s earnings per share (EPS) to grow 18.2% and 13.1% in 2018 and 2019 (December year end). The respective price/earnings ratios (P/E) are low at 12.5 and 11.1. Debt levels are fair.
The stock pays a quarterly dividend of $0.60 per share, currently yielding 2.1%. Even better, the company announced a dividend increase of 20-28% in each of the last four years during the month of September. New shareholders will therefore be likely to see their dividend yield increased to 2.6% next month! The share count has been slowly declining since 2014, and the company continues to make ongoing share repurchases.
Risks to owning RCL include the adverse effects of rising energy prices, international political turmoil and economic downturns.
RCL fell during the 2018 stock market correction, and is just now beginning to head back to its January 2018 all-time high of 133. Nobody has missed their opportunity to capitalize on the share price advance. New investors can potentially earn a 20% total return through early 2019. Buy RCL now. Strong Buy.
Updates on Buy Low Opportunities Portfolio Stocks
Alexion Pharmaceuticals (ALXN) is a biopharmaceutical company that researches and manufactures treatments of severe and rare health disorders. Alexion’s new drug ALXN1210 is undergoing an FDA priority review for the treatment of Paroxysmal Nocturnal Hemoglobinuria (PNH). ALXN is an undervalued aggressive growth stock. Analysts expect EPS to grow 23.7% and 19.2% (the highest consensus estimates to date). The corresponding P/Es are 17.1 and 14.3. There’s 18% upside to 147 where ALXN last traded in September 2017. I expect additional capital appreciation thereafter. Strong Buy.
Baker Hughes, a GE co. (BHGE – yield 2.1%) offers products, services and digital solutions to the international oil and gas community. Baker Hughes’ management expects good international revenue growth in the second half of 2018. The number of U.S. rigs drilling for crude oil and natural gas fell by four last week to a total of 1,044, up 90 vs. a year ago. BHGE is an aggressive growth stock, undervalued based on 2019 numbers. Analysts expect EPS to grow 69.8% and 107% in 2018 and 2019. The corresponding P/Es are 46.4 and 22.4. BHGE rose to 37, then fell, three times in the last year. Now that the stock is again rising toward 37, and the energy industry is understood to be on solid international footing and quite profitable, I believe the stock could soon surpass 37. Buy BHGE now. Strong Buy.
Delek U.S. Holdings (DK – yield 1.9%) is a diversified downstream energy company, with businesses that include petroleum refining, transportation, marketing, renewables (producing biodiesel fuel) and asphalt operations. Refining revenue is growing, and higher gross margins in all business sections and lower costs are contributing to a dramatic increase in profits. Delek is expected to report second quarter EPS of $1.17 on the afternoon of August 7, within a range of $0.93 - $1.66. Expect volatility. The 2018 earnings estimate rose again last week. Analysts now expect Delek’s full-year EPS to grow 371% and 56.5% in 2018 and 2019. The corresponding P/Es are extremely low at 9.6 and 6.1.
Delek raised its quarterly dividend payout by 33% and 25% in the first and second quarters of 2018. I’m therefore curious as to whether the dividend will increase yet again, when the next payout is announced, likely this week. There’s 17% upside as DK rebounds to its recent high at 60, and additional appreciation potential thereafter. Buy DK now. Strong Buy.
Guess?, Inc. (GES – yield 4.1%) is a global apparel manufacturer, selling its products through wholesale, retail, ecommerce and licensing agreements. Revenue growth largely stems from expansion in Asia and Europe, while rising operating margins are contributing to multi-year earnings per share (EPS) growth. Wall Street expects EPS to grow 50.0% and 23.8% in 2019 and 2020 (January year-end). Corresponding P/Es are low in comparison to earnings growth rates, at 21.1 and 17.1. GES has traded quietly between 21 and 23 for nine weeks, with upside resistance at 26. Buy GES now. Strong Buy.
Skechers USA Inc. (SKX) is an apparel company that designs and manufactures affordable footwear for people of all ages. Skechers is the third-largest footwear brand globally, behind Nike and Adidas. International revenue is growing dramatically, including huge growth in China. Skechers reported record second quarter revenue and gross margins, and also intense investment in international wholesale and retail operations that cut into profits. Skechers remains an incredibly successful and rapidly growing company, with huge ongoing growth opportunities in international markets. Analysts expect EPS to fall (1.7%) in 2018 and then rise 15.4% in 2019. In the coming weeks, SKX could rise to recent price resistance at 33 before having a pullback. Buy SKX now. Strong Buy.
TiVo (TIVO – yield 6.3%) is an entertainment technology company that joined the Buy Low Opportunities Portfolio specifically because it’s a takeover target. The company is interested in being acquired or going private because the shares are so undervalued. TiVo intends to complete the process of its strategic review by the time second-quarter results are reported on the afternoon of August 8. I expect any announcement that reflects another company purchasing TIVO to be greeted with a share price that rapidly rises to the buyout price. Despite the weakness in the share price, there has been no news whatsoever regarding the upcoming financial release or the potential outcome of the M&A activity. Buy TIVO now. Strong Buy.
Universal Electronics (UEIC) is a manufacturer and cutting-edge world leader of wireless and voice remote control products, software and audio-video accessories for the smart home; with a strong pipeline of new products in the areas of safety and security, climate control and lighting. UEIC is an undervalued micro-cap stock. UEIC rose dramatically upon its bullish earnings release last week, and will most likely pull back and rest a bit before continuing its advance. Watch for opportunities to buy in the upper 30s. Hold.
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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 September 4, 2018
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 © 2018 - 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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