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Stock of the Week
The Best Stock to Buy Now

Cabot Stock of the Week Issue: January 30, 2023

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Stocks are putting the finishing touches on a strong January but could have a bucket of Lake Champlain-level cold water (a reference to the frigid lake that spans my home state of Vermont) thrown on their heads as soon as the calendar flips to February if the Fed sticks to its recent script.

Everyone expects the Federal Reserve to raise the Federal Funds rate another 25 basis points on Wednesday, which would be a slowdown from its recent 50- and 75-basis-point hikes. However, we’ve seen the Fed raise rates in line with economists’ estimates several times in recent months, only for stocks to plummet on Fed Chair Jerome Powell’s accompanying comments, which have consistently been more hawkish and cautious than people want to hear. We’ll see if it’s Groundhog Day again – literally on Groundhog Day – this week.

For now, though, the market is in decent shape, despite a modest pullback today. The S&P 500 is up 5% for the month, which tends to bode well for the rest of the year. According to market expert Ryan Detrick of Carson Research Group, the S&P has risen at least 5% in January five previous times on the heels of a down year. All five times, it has led to double-digit returns that year, with an average gain of 29.7%.

That, of course, doesn’t preclude more short-term turbulence – perhaps even another big pullback. If recent history is any guide, the Fed will surely trigger another retreat later this week. With that possibility firmly in mind, today we’re adding a “safe” dividend stock that has been building momentum, up 18% from its December lows. It’s a very high-yielding mid-cap healthcare stock that Tom Hutchinson just upgraded to Buy in his Cabot Dividend Investor advisory portfolio.

Here are Tom’s latest thoughts on the company.

Medical Properties Trust (MPW)

Medical Properties Trust (MPW) is a healthcare Real Estate Investment Trust (REIT) that invests in hospitals and clinical spaces and leases them back to healthcare providers. It rents 434 properties in 10 countries and is the largest company to focus exclusively on hospital facilities with more than $1.5 billion in annual revenues.

The 434 properties are leased to 54 different operators primarily by a sale-leaseback arrangement. MPW buys properties from hospital operators and leases the property back to them. The arrangement provides operators with cash to fund facility improvements, make technological upgrades, and various other investments in operations. MPW gets a steady and predictable cashflow whereby operators are responsible for costs and upgrades.

The portfolio is well-diversified with no one property representing more than 3% of the total. Properties are primarily located in the U.S. (62%) with the rest in the U.K. (18%), Switzerland (6%) and several other European countries. MPW also invests in non-real estate assets in the form of the operators themselves to a small degree (roughly 7.7% of assets) in the form of high-interest loans and equity stakes, which have been profitable. But about 80% of revenue is derived from leases to hospitals.

Results for the company and the stock have been very good over the long term. MPW has significantly outperformed its healthcare real estate peers over the past five- and 10-year periods. The healthcare property REIT has grown its assets by a compound annual growth rate (CAGR) of 29% over the last 10 years. Over the same period, MPW has increased cash from operations by 810%.

A big part of the success is the property selection process. The underwriting process identifies certain characteristics that make each facility attractive to any experienced and competent operator including physical qualities, market demographics, competition, and financials of the local area. It’s good at finding facilities that are the natural result of true community need where the proper conditions are in place for lasting profitability.

The things that make the stock particularly attractive now, namely a cheap valuation and a high yield, are the result of recent bad performance. The stock price is down more than 35% over the last year. The reasons behind the stock plunge are rising interest rates, plus concern for one of its tenants.

Rising interest rates pressure the cost of funding for acquisitions and expansions. That is the more legitimate problem. REITs pay out most of their profits in the form of dividends and need to borrow money or issue stock to raise money for expansions. Higher rates make expanding more expensive and limit growth.

The higher rates are limiting near-term growth for MPW. The REIT targets $1 billion to $3 billion per year for acquisitions and 2022 was near the low end. That limits earnings and dividend growth. The concerns about the tenant are overblown because new tenants can be easily found if it comes to that.

MPW reported a great third quarter amidst all the carnage, with earnings growth at about 30%, which is an indication that perhaps the market has treated the stock unfairly.

MPW currently pays $0.29 per quarter, which translates to $1.16 per share annually for a current yield of 8.9%. That’s a big yield for a company this solid. The dividend has also been raised for eight consecutive years and MPW has one of the lowest payout ratios of its peers.

The valuation is there. MPW sells at just nine times funds from operations (FFO) compared to about 17 times for its peers and its own five-year average. Meanwhile, hospital properties are a highly recession-resistant business. The stock has also recently added momentum to the cheap valuation and safe dividend. Investors seem to be realizing the benefits as the stock has soared more than 17% YTD already.


MPWRevenue and Earnings
Forward P/E: 11.7 Qtrly RevQtrly Rev GrowthQtrly EPSQtrly EPS Growth
Trailing P/E: 32.5 (mil) (vs yr-ago-qtr)($)(vs yr-ago-qtr)
Profit Margin (latest qtr) 77.5%Latest quarter352-10%0.452%
Debt Ratio: 580%One quarter ago4005%0.467%
Dividend: $1.16Two quarters ago41013%0.4712%
Dividend Yield: 8.88%Three quarters ago40923%0.4715%

Current Recommendations


Date Bought

Price Bought

Price on 1/30/23



Arcos Dorados (ARCO)






BioMarin Pharmaceutical Inc. (BMRN)






Centrus Energy Corp. (LEU)






Chewy (CHWY)






Cisco Systems Inc. (CSCO)






Citigroup (C)






Comcast Corporation (CMCSA)






Corteva, Inc. (CTVA)






Green Thumb Industries Inc. (GTBIF)






Kinross Gold Corp. (KGC)






Las Vegas Sands (LVS)






Medical Properties Trust, Inc. (MPW)






NextEra Energy, Inc. (NEE)






Novo Nordisk (NVO)






Realty Income (O)






TELUS International (TIXT)






Tesla (TSLA)






Ulta Beauty (ULTA)






WisdomTree Emerging Markets High Dividend Fund (DEM)






Xponential Fitness, Inc. (XPOF)






Changes Since Last Week:
Centrus Energy (LEU) Moves from Hold to Buy
Green Thumb Industries (GTBIF) Moves from Hold to Sell
NextEra Energy (NEE) Moves from Buy to Sell

After several weeks of doing nothing but adding, our portfolio has gotten a bit crowded, so it’s time to cut two stocks that stick out like a sore thumb for their underperformance. I like Green Thumb’s (GTBIF) long- and even intermediate-term prospects given how oversold cannabis stocks are these days, but the reality is it’s been a big loser for us, so it’s time for it to go. NextEra Energy (NEE) is a more recent addition and was doing fine up until the last couple of weeks when the bottom fell out, prior to and certainly after reporting mixed earnings results last week.

The rest of our portfolio appears quite strong, with several stocks hitting 52-week or even all-time highs on almost a weekly basis. Another, Centrus Energy (LEU), has regained its late-summer strength without an earnings assist, necessitating an upgrade back to Buy.

Here’s what’s happening with all our stocks.


Arcos Dorados (ARCO), originally recommended by Bruce Kaser in Cabot Undervalued Stocks Advisor, touched as high as 9 last week – a new two-year high – before retreating a bit to finish the week virtually unchanged. The company’s annual Investor Event is this Thursday, February 2, which could bring some news and possibly move the needle further, depending on how the market reacts to the interest rate hike and Fed speak the day before. Arcos is the largest McDonald’s franchisee in Latin America, and sales are on track to rise 34% in 2022 while earnings per share are expected to more than double. BUY

BioMarin Pharmaceutical Inc. (BMRN), originally recommended by Mike Cintolo in Cabot Top Ten Trader, is up to 115, new two-year highs. Mike views it as a potential new leader in the biotech space in large part due to Roctavian, its new one-time infusion drug for severe hemophilia that recently gained approval for conditional use in the European Union and is reportedly nearing FDA approval here in the U.S., perhaps as early as the first quarter. Right now, Wall Street appears to be betting on that approval. BUY

Centrus Energy (LEU), originally recommended by Carl Delfeld in Cabot Explorer, had a great week, rising from 36 to 42, its highest point since early November. Quite a bounce-back after dipping as low as 31 a month ago. In his latest update, Carl wrote, “Centrus Energy (LEU) shares have been performing well and the role of nuclear energy in the energy transition is growing with more countries embracing the technology as they look to reduce carbon emissions. Centrus stock trades at relatively low multiples to future earnings. Buy a Half.” With the stock trading back above its 50- and 200-day moving averages, and with plenty of momentum, let’s bump it back up to Buy as well. MOVE FROM HOLD TO BUY

Chewy (CHWY), originally recommended by Tyler Laundon in his Cabot Early Opportunities advisory, inched up to 45, its highest point since last August. An upgrade from Wedbush Analysts (from “Neutral” to “Outperform”) helped. The firm sees steady demand and growth for the pet store in 2023, and indeed analysts are looking for 12.9% revenue growth with narrowing EPS losses (from -$0.18 in 2022 to a mere -$0.02 this year). People don’t stop buying pet food in a recession (if there is one), so this is a perfect all-weather stock with lots of momentum. BUY

Cisco Systems (CSCO), originally recommended by Bruce Kaser in the Growth & Income Portfolio of his Cabot Undervalued Stocks Advisor, remains in the 47-49 range it’s been in for the past three months. In his latest update, Bruce wrote, “Cisco Systems (CSCO) is facing revenue pressure as customers migrate to the cloud and thus need less of Cisco’s equipment and one-stop-shop services. Cisco’s prospects are starting to improve under a relatively new CEO, who is shifting Cisco toward a software and subscription model and is rolling out new products, helped by its strong reputation and entrenched position within its customers’ infrastructure. The company is highly profitable, generates vast cash flow (which it returns to shareholders through dividends and buybacks) and has a very strong balance sheet.

“There was no significant company-specific news in the past week.

“CSCO shares … have 39% upside to our 66 price target. The valuation is attractive at 9.3x EV/EBITDA and 13.4x earnings per share. The 3.1% dividend yield adds to the appeal of this stock.” BUY

Citigroup (C), originally recommended by Bruce Kaser in Cabot Undervalued Stocks Advisor, held firm this past week as the market continues to digest its recent earnings report. Bruce provided some color on those earnings in his latest update: On January 13, Citigroup reported bland fourth-quarter results. Earnings (excluding the effect of divestitures) were $1.10/share, which fell 45% from a year ago and was about 8% below the $1.19 consensus estimate. Revenues (excluding the effect of divestitures) rose 5% from a year ago and were about 1% above estimates.

“Rising interest rates helped boost net interest income, but this was more than offset by higher credit costs and elevated transformation and other expenses. Citi’s already-healthy capital strength increased further. Overall, nearly two years into CEO Jane Fraser’s term, the bank is making progress with its turnaround. But, given the paltry 5.5% return on tangible equity compared to its medium-term goal of 11-12%, the bank has a long way to go.

“In the quarter, net interest income rose 23% from a year ago, as the net interest margin expanded to 2.39% from 1.98% a year ago. Partly offsetting the higher margin, loans balances fell 2%. However, excluding to-be-divested Legacy businesses, loans grew 2%. Fee income fell 27% (ex-divestitures): better trading profits were more than offset by weaker asset management and investment banking fees.

“Operating expenses rose 5% (ex-divestitures), which we find disappointing as we would like these to remain flat given all of the efficiency improvements underway. However, we recognize that with most turnarounds, expenses increase as the company spends on new staffing, software and other upgrades before it removes older costs, creating an expensive but temporary redundancy. This appears to be where Citi is today.

“Credit costs surged to $1.8 billion compared to a negative ($465 million) a year ago. We view this sharp reversal as a return to more normal credit costs. Loan losses increased 36% but impressively were still below 0.2% of average loans. Non-accruing loans also remain low. The bank increased its reserves by a reasonable $593 million, compared to the unusual post-pandemic $1.2 billion reduction a year ago. Total reserves are now 2.6% of total loans, a size we consider healthy. In the credit card segment, reserves are 7.6% of these loans, also robust even as the economy slows. For perspective, the credit card portfolio is about 23% of total loans – indicating that this bucket is a sizeable driver of Citi’s growth and profits.

“Citi’s capital of 13.0% (using the CET1 ratio) is sturdy, particularly when combined with its 2.6% credit reserves. However, despite this strength, the bank has no immediate plans to repurchase shares given the macro and market exit uncertainties.

“For 2023, the bank expects revenues to increase 5%, coming almost entirely from higher fee income as it anticipates minimal improvement in net interest income. Expenses will increase 7%, with credit costs continuing to normalize (increase). Overall, 2023 will likely be an uninspiring year for profit improvement at Citigroup. We see stronger results in 2024, as the benefits of the turnaround become clearer. Exits of the legacy businesses in Mexico, Asia, Russia and Poland are underway and likely to be mostly done by year’s end or so.

“There was no significant company-specific news in the past week.

“This past week, the yield spread between the 90-day T-bill and the 10-year Treasury bond, which approximates the drivers behind Citi’s net interest margin, widened incrementally to negative 116 basis points (100 basis points in one percentage point). This spread is the widest since at least the early 1980s. Our interpretation is that investors are assuming that the Fed rate hikes and other macro drivers will drag inflation down to sub-5% or less this year. Given that the inflation metrics are flattening out or declining (inflation over the past four or five months has been tame at sub-3%), this assumption seems reasonable.

“Citi shares trade at 63% of tangible book value and 8.4x estimated 2023 earnings. The remarkably low valuations assume an unrealistically dim future for Citi.

“Citi shares … have 64% upside to our 85 price target. Citigroup investors enjoy a 3.9% dividend yield. We anticipate that the bank is done with share buybacks until there is more clarity on the economic and capital market outlook, which could readily be a year or more away.” BUY

Comcast Corporation (CMCSA), originally recommended by Bruce Kaser in the Growth & Income Portfolio of his Cabot Undervalued Stocks Advisor, reported fourth-quarter earnings last Thursday, and the results – while not great – were better than expected. The 82 cents per share topped the 77 cents per share analysts anticipated, while revenue ($30.55 billion) narrowly edged estimates. However, EBITDA declined 5% year over year, with its streaming service, Peacock, and the slowdown in the housing market (and thus, in people wanting to sign up for new TV and internet services) being the primary culprits behind the drop-off. The mixed results have thus far led to a mixed reaction from Wall Street, with the stock down a point. However, it’s still up 23% in the last three months, so a one-point decline after so-so earnings is not something to fret over. Shares still have 7% upside to Bruce’s 42 price target. Keeping at Buy. BUY

Corteva (CTVA), originally recommended by Carl Delfeld in his Cabot Explorer advisory, was up from 62 to 65 ahead of earnings this Wednesday, February 1. The stock has recovered nicely since dipping to 58 in December. We’ll see how it reacts to earnings when a revenue slowdown is expected. HOLD

Green Thumb Industries (GTBIF), originally recommended by Tim Lutts and then Michael Brush in the Sector Xpress Cannabis Advisor, fell below support at 8 last week, when most other stocks were ascending. With our losses now in excess of 30%, let’s step away. I still believe a huge rally in cannabis stocks is coming – the sector is simply too beaten down with so many potential catalysts that could spark the next upmove – but we can no longer tolerate this kind of loss. I anticipate we’ll add another Sector Xpress Cannabis Advisor stock – perhaps even GTBIF again – down the road, but let’s wait for the sector to finally get off its knees rather than try and anticipate a bottom. MOVE FROM HOLD TO SELL

Kinross Gold (KGC), originally recommended by Clif Droke in his Sector Xpress Gold & Metals Advisor, has held steady in the 4.5-4.8 range since finally breaking above 4.38 resistance earlier this month. The stock is up 36% in the last six months, outperforming the 10% rise in gold prices during that time by more than 3-to-1. BUY

Las Vegas Sands (LVS), originally recommended by Mike Cintolo in Cabot Top Ten Trader, was up to 57 from 55 this past week despite falling short of Q4 earnings and revenue estimates. Mike elaborated on the report in his latest update: “Sands’ Q4 wasn’t great, but that was because travel to Macau was just 14% of pre-pandemic levels, while travel to Singapore’s main airport (near the firm’s casino) was off by about one-third. So the turnaround story is still very much intact.” Wall Street seems to think so too. BUY

NextEra Energy (NEE), originally recommended by Tom Hutchinson in Cabot Dividend Investor, has cratered since – and actually before – reporting fourth-quarter earnings last Wednesday, falling from 86 to 75 in less than two weeks. While earnings per share topped estimates, revenue fell short, and the company expects slower growth in 2023. The stock now trades well below its 200-day moving average. While I like a clean energy utility company in theory, the combination of slowing revenues and a sinking stock is not a good one. So even though we only added NEE six weeks ago, let’s part ways with it now to make room for faster-growth opportunities down the road. MOVE FROM BUY TO SELL

Novo Nordisk (NVO), originally recommended by Carl Delfeld in his Cabot Explorer advisory, more or less held firm ahead of earnings this Wednesday, February 1. That comes on the heels of rising to new all-time highs the previous week. We’ll see what the earnings report brings; expectations are high, with analysts anticipating 30% top-line growth and 20% EPS growth. BUY

Realty Income (O), originally recommended by Tom Hutchinson in Cabot Dividend Investor, had a nice week, rising from 67 to 68. In his latest update, Tom wrote, “The legendary income REIT isn’t exciting, but it tends to deliver as advertised over time. O has delivered a positive return over the last year while the overall market is down double digits. It also returned more than 17% over the last three months and has finally overtaken the elusive 65 per share level. Hopefully, O can keep running. It’s a popular and defensive income stock that should hold its own in the event of a recession.” BUY

TELUS International (TIXT), originally recommended by Tyler Laundon in Cabot Early Opportunities, had a nice debut, inching to 23 from 22 in its first week in the portfolio. As Tyler wrote in this space last week, “TELUS is a digital customer experience company that serves over 600 major brands around the world. It designs, builds and manages next-gen engagement, HR, AI and content moderation tools that clients use to better serve their customers.

“The company is particularly strong in high-growth markets, including tech and games (47% of Q3 revenue), media and communications (24%), eCommerce and fintech (11%) markets.

“TELUS was spun out of parent company Telus Corporation (TU), one of Canada’s leading telecom providers, in February 2021. This relationship continues today as TELUS still derives over 16% of revenue from its parent company, which remains a controlling shareholder (owns about 75% of voting shares).

“Revenue was up 11% to $615 million in Q3 2022. Full-year 2022 revenue should be up around 13% to $2.49 billion when Q4 is in the books. EPS should be about $1.21 (+21%).

“Looking into 2023, revenue should continue to grow by around 12%, to $2.8 billion, while EPS should be up around 13%, to $1.37.”

Earnings are due out February 9. As for the stock, shares have pushed past their 50-day line and are now fast approaching their 200-day. It’s an encouraging trend. BUY

Tesla (TSLA), originally recommended by Mike Cintolo in Cabot Top Ten Trader, has officially regained its mojo – at least for one month. The stock is up roughly 20% since reporting stellar fourth-quarter earnings last Wednesday. The electric vehicle maker reported record revenue of $21.3 billion, up 33% from Q4 a year ago. Meanwhile, adjusted EPS of $1.19 topped analyst estimates of $1.13. There are also signs that recent price cuts have sparked increased demand, according to Elon Musk, who said, “Thus far in January we’ve seen the strongest orders year-to-date than ever in our history. We’re currently seeing orders of almost twice the rate of production.”

For now, those positive earnings and production vibes are enough to drown out all the non-Tesla-related noise from Mr. Musk that clearly hurt the stock late last year. TSLA shares are up a whopping 40% this month after dipping as low as 108. The longer its founder can stay at least relatively out of the news (no easy task for him, it seems), the more investors can focus on Tesla’s growth and fundamentals, where there’s a lot to like.

Still shy of its 200-day moving average, let’s keep the stock at Hold. But the swift rebound after a nightmare year has been encouraging. HOLD

Ulta Beauty (ULTA), originally recommended by Mike Cintolo in Cabot Top Ten Trader, rose to new all-time highs yet again! The stock has crossed the 500 per share barrier for the first time in its history on no news. ULTA is now up more than 8% year to date and 16% from its December lows. If you bought shares when we added them to the portfolio last May, when they were trading in the low 380s, you could book profits on a few shares now, perhaps selling a quarter position. If you still haven’t bought shares of this thriving beauty retailer, it might make sense to wait for the next dip before buying. BUY

WisdomTree Emerging Markets High Dividend Fund (DEM), originally recommended by Carl Delfeld in his Cabot Explorer advisory, dipped slightly, from 39 to 38. But this remains a slow-and-steady gainer, which is the job we hired it to do when we added it to the portfolio at 34 in October. The fund offers a high dividend yield and some of the highest-quality emerging market stocks in the world with an average price-to-earnings ratio of around 5. This ETF gives broad exposure with an emphasis on income and value. BUY

Xponential Fitness (XPOF), originally recommended by Tyler Laundon in his Cabot Early Opportunities advisory, bounced back last week to touch new all-time highs above 27! It sagged a bit this morning along with the market, but the trend is definitively up for one of our best performers. Buy on dips. BUY

The next Cabot Stock of the Week issue will be published on February 6, 2023.

Chris Preston is Cabot Wealth Network’s Vice President of Content and Chief Analyst of Cabot Stock of the Week.