Cabot Stock of the Week Issue: June 17, 2024

After a down April, stocks have resumed their steady climb to new highs in May and June, and April is looking like an outlier amidst a rally that began last November. A better-than-expected inflation print helped matters last week, as have the furious run-ups in mega-cap tech leaders Apple (AAPL), Nvidia (NVDA) and portfolio holding Microsoft (MSFT). Admittedly, the rally has become too reliant on those and a handful of other AI-fueled stocks and will need more widespread participation from other sectors if it’s going to keep the momentum going.

One non-AI sector that’s held up well of late is the emerging weight-loss drugs segment. High demand for the drugs has spurred our portfolio holdings Eli Lilly (LLY) and Novo Nordisk (NVO) to record highs, and today we add a far less well-known mid-cap that could benefit from the flourishing new subsector. It’s a recommendation from Cabot Early Opportunities Chief Analyst Tyler Laundon.

Here it is, with Tyler’s latest thoughts.

BellRing Brands, Inc. (BRBR)

I’ve had BellRing Brands (BRBR) on my watch list for a while, and with the company delivering a solid Q2 (fiscal 2024) and full-year outlook right ahead of the summer “beach body” season, let’s dive in.

If you’re new to the story, BellRing is a mid-cap protein-focused packaged food company.

It sells two groups of products: ready-to-drink (RTD) protein shakes under the Premier Protein brand (83% of 203 revenue) and protein powders under the Dymatize brand (14% of revenue).

Last August management approved a plan to discontinue distribution of the PowerBar bar brand (3% of 2023 revenue), which has floundered for years.

The company’s products fit into the convenient nutrition category, so the stock is really a play on people trying to lead active, healthier lives and eating foods and shakes that help them replace typical meals and/or recover from exercise. It’s also a beneficiary of the new class of GLP-1 weight-loss drugs.

BellRing is concentrated within mega-retailers. Three-quarters of revenue comes from Costco (COST), Walmart (WMT) and Amazon (AMZN) while the remaining 25% comes from online, specialty, and convenience stores.

Growth has been fantastic for this type of company. Revenue in 2023 grew by 21% while EPS grew almost 14%.

In Q2 fiscal 2024 (reported in May), management delivered a beat-and-raise quarter as revenue grew by more than 28% (to $495 million) and EPS grew 88% (to $0.45).

Full-year guidance was increased, mostly because sales of Premier shakes and powders are going so well (some stores even sold out in April). The company is boosting production to better fill demand and marketing investments, combined with an anticipated price increase toward the end of the year, should keep revenue, EPS and margins all trending in the right direction.

For 2024, we’ll look for revenue to grow by at least 18% to $1.97 billion. EPS should be up 34% to $1.77, or better.

As a final sweetener, there’s been some chatter about BellRing being a potential acquisition target. I can get on board with that, especially given that the PowerBar divestment makes it a cleaner operation.

As for the stock, BRBR came public at 14 in October 2020 and, given the current price at 54, it’s been a huge success. There was a roughly 15-month soft spot in 2021 and 2022 but in March 2023 BRBR broke out above the September 2021 high of 34 and, for the most part, it’s been making higher lows and higher highs since. It keeps pulling back to 54 in recent months, but that has consistently acted as a floor, and shares have bounced back to the low 60s every time. With the stock trading right around 54 support again, this looks like a good entry point.

Current Recommendations

Changes Since Last Week:

Alamos Gold (AGI) Moves from Buy to Sell

Broadcom (AVGO) Moves from Buy to Hold

Honda Motor Co. (HMC) Moves from Buy to Sell

Well, we’ve finally managed to trim our portfolio back down to 25 stocks, a more desirable cap. Alamos Gold (AGI) and Honda Motor (HMC) were this week’s “victims,” as one (Alamos) has lost momentum along with other gold miners, while the other (Honda) simply hasn’t performed. Of course, to maintain a 25-stock (or less) portfolio will require selling one stock every week, which may prove difficult, as we’ve mostly trimmed what little fat there was in a portfolio full of outperformers – we currently have six stocks that have more than doubled, and four others that are touching new 52-week or all-time highs.

But that’s a good problem to have and one for another day. In the meantime, let’s dig into what’s happening with all our stocks.

Updates

Alamos Gold Inc. (AGI), originally recommended by Tyler Laundon in his Cabot Early Opportunities advisory, seems to have lost momentum as the shine appears to have come off of gold and gold miners of late. That prompted Tyler to sell AGI late last week; let’s do the same, before this (very small) winner turns into a loser. MOVE FROM BUY TO SELL

American Eagle Outfitters, Inc. (AEO), originally recommended by Mike Cintolo in Cabot Top Ten Trader, has also lost momentum as the retail environment has slowed. AEO shares are hitting their lowest point since early February and have done nothing but fall this month. This month’s earnings report was decent enough – 6% sales growth, with 34 cents per share in earnings nearly quadruple the 9 cents per share earned in the same quarter a year ago – but the top-line number came in just shy of analyst estimates, which has prompted a mini-selloff. We still have a double-digit gain in the stock, and as of this writing, shares are bumping right up against their 200-day line. Given the strong bottom-line results last quarter, it’s possible AEO could be a bounce-back candidate in the coming days. But the stock needs to prove it. So let’s keep this simple: Any decisive move below the 200-day line, and we’ll sell. For now, let’s hang in there, after downgrading the stock to Hold last week. HOLD

Aviva plc (AVVIY), originally recommended by Bruce Kaser in Cabot Value Investor, was flat again this week on no news. AVVIY has remained in the low to mid-12s since flirting with new highs above 12.7 last month. Any break above that level would be bullish. The stock remains cheap, trading at less than 12x earnings estimates, with a price-to-sales ratio of 0.40 and a price-to-book of 1.41. Shares have 13% upside to our 14 price target. The 6.9% dividend yield adds to our strong total return thus far. BUY

Blackstone Inc. (BX), originally recommended by Mike Cintolo in Cabot Top Ten Trader, bounced back nicely along with the market last week, bumping up from 117 to 121. BX is a Bull Market Stock (Mike’s term), which means it tends to outperform the market when times are good. It’s still a bull market, albeit a lopsided one of late, with very few stocks outside of the mega-cap tech behemoths participating in the rally, and so BX has been a bit mixed. The bull market is far from over, however, which means BX shares still have some utility in our portfolio. BUY

Broadcom Inc. (AVGO), originally recommended by Tom Hutchinson in Cabot Dividend Investor, is up 27% in the last week to shatter previous highs! The stock has now more than doubled since we added it to the portfolio just over 10 months ago. Why the strength? Tom did a deep-dive last week as to why: “Few stocks have benefited from the AI craze like AVGO has. In the spring of last year, Nvidia (NVDA) reported blowout earnings from demand for AI chips that blew away expectations. That’s when the AI craze got real in terms of bottom lines and stock prices. Other AI stocks also took off, including AVGO, and the stock price has more than doubled since.

“But AVGO never really pulls back. Over the last year-plus, the stock has had periodic surges higher. When the surge ends, it just sort of goes sideways for a while until the next surge. Stocks that seldom pull back and provide good entry points are ideal to target during times of market panic where everything gets pummeled.

“Broadcom is a global infrastructure technology leader and an industry Goliath with $39 billion in annual net revenues. It’s an icon of the technology revolution with roots that trace back over 50 years to the old AT&T/Bell Labs. The company has many category-leading products in semiconductors and infrastructure software solutions.

“Broadcom provides components that enable networks to operate together and communicate with each other from the service provider all the way to the end user and device. That may sound complicated. But there are two simple reasons to own AVGO. One, it will continue to benefit from businesses moving online and into cloud-based applications. Two, it is getting a huge benefit from the fever to adopt artificial intelligence technology.

“The company is an early comer to the technology party that provides crucial infrastructure that enables other technologies that come along the way. The company is so entrenched in the infrastructure of today’s technology that 90% of internet traffic uses Broadcom’s systems.

“Broadcom benefits from AI in a brilliant way. It makes generative AI chips. These chips don’t provide AI functions per se but rather the technology that enables AI to connect to all other systems, which it must do to be of any use. The sheer volume increases from the new technology as well as soaring demand for the next generations of its chips should enable Broadcom to achieve a much higher level of profit growth for years to come.”

After such a massive gap up in the last week, I think new buys at the moment would be a mistake. So, I’m downgrading the stock to Hold, and highly recommend selling a portion now – up to a third of your original position – to book profits on such a fast riser. This doesn’t mean I think AVGO’s run is over or that there’s anything remotely wrong with the stock or the company. But there’s a very good chance it’s reached, or is nearing, a short-term top, and the prudent move is to cash in on at least some of our profits now. SELL A THIRD, HOLD THE REST

Cava Group (CAVA), originally recommended by Mike Cintolo in Cabot Growth Investor, is back up near its highs after a very short-lived pullback. In his latest update, Mike wrote, “CAVA has been all over the map since its quarterly report, and while we expect more ups and downs, the stock has begun to settle down a bit as it’s moved back toward its highs, which is obviously a good sign. At a conference last week, the firm relayed some interesting statistics about its business: It’s very well balanced in terms of customers (55%/45% female/male), meals (54%/46% dinner/lunch) and geographically (southwest, southeast and mid-Atlantic all 25% to 30% of sales; the Northeast is just beginning to be penetrated), though customers are higher income (59% make more than $100k annually), which should be a good thing (less affected by economy and inflation). Our thoughts on the stock haven’t changed much—it’s had a big move and the closely-held shares for sale (no confirmation if they’ve been dished out yet or not) are likely to cause further near-term volatility, but the big picture (story, numbers and chart) all look good. Hold on if you own some, and if not, we’re OK with a small buy here or (preferably) on dips of a few points.” Good advice. I suggest you do the same. BUY

CrowdStrike (CRWD), originally recommended by Mike Cintolo in Cabot Growth Investor, kept on rising after its breakout the previous week, tacking on another 3% to reach new heights above 385. We now have a whopping 140% gain on CRWD in just over nine months! In his latest update, Mike wrote, “CRWD was on the edge for us just over a week ago, having been dragged down by the general software sector weakness and poor action from many cybersecurity peers, too. But the quarterly report was essentially steady-as-she-goes, which the market liked given the ill tidings seen in other reports—essentially, top-line growth was solid in the low 30% range (sales and recurring revenue), while new business adds were strong as more clients took more of the firm’s offerings. Earnings-wise, most metrics beat estimates by a bit, with free cash flow again coming in well ahead of reported earnings ($1.25 per share or so, up 42% from a year ago), meaning the near- and longer-term outlook (for $10 billion of recurring revenue by 2027, up from $3.65 billion now) is intact. That got CRWD off its duff, and then last Friday it was announced the stock would be added to the S&P 500, which has caused a rush of buying this week—driving the stock to new highs! If you own some, we’d certainly hold on; the recent action (including what now looks like a shakeout pre-earnings) is all to the good. That said, for new buyers, it’s trickier—as we’ve written before, these S&P 500 moves tend to help for a couple of weeks and then lead to a bit of a hangover after the stock is added to the index, which will come June 24. (To be fair, UBER was an exception to that general rule late last year.) Because of that and the overall mixed environment, we’ll stay on Hold here, looking for a higher-odds entry in the days or weeks ahead.” We will too. HOLD

Eli Lilly and Company (LLY), originally recommended by Tom Hutchinson in the Dividend Growth Tier of his Cabot Dividend Investor advisory, is also hitting new all-time highs, up another 2.5% in the last week to boost our 15-month gain to 168%. Here’s what Tom had to say about the stock: “The boring old pharmaceutical stock has dwarfed the returns of most of the much-heralded ‘Magnificent 7’ stocks. Not only that, but LLY has outperformed the group with a small fraction of the volatility. It has a beta of just 0.31, meaning it is less than one-third as volatile as the S&P 500.

“LLY rarely pulls back since investors have focused on its two new potential mega-blockbuster drugs. It surges higher, then goes sideways for a while, then surges higher again. LLY did have a rare dip in price in February of last year, when I recommended subscribers buy it at that cheap price. It’s up about 160% since.

“Indiana-based Eli Lilly is a global pharmaceutical giant with over $36 billion in annual revenue, 41,000 employees, and sales in 110 countries. Founded in 1876, Lilly is noteworthy for its unusually high focus on R&D, where it allocates over 25% of sales compared to an average of high teens for the industry. The R&D focus pays off as Lilly has arguably the very best pipeline and lineup of recently launched drugs in the industry.

“The catalyst for the stock recently has been two new potential mega-blockbuster drugs. Its new weight loss drug, Zepbound, gained FDA approval this past November. These weight loss drugs are the biggest thing going on right now in big pharma because of the enormous market potential and Lilly’s drug has delivered better results than anything on the market for weight loss in trials.

“Obesity is a massive problem, and some analysts speculate that this drug, and its follow-up drugs, could eventually generate over $20 billion a year, the level of the best-selling drug of all time so far. The drug sold over $500 million in its first full quarter. Lilly is also investing heavily in production facilities to meet the soaring demand.

“On top of that, FDA approval for Lilly’s Alzheimer’s drug Donanemab is expected in the months ahead. The FDA has a low threshold for approval because there is only one other drug for Alzheimer’s on the market, and Lilly’s is better. This drug also has mega-blockbuster potential. Novo Nordisk (NVO) received approval for their Alzheimer’s drug last year and Lilly’s is widely regarded as superior. This week the FDA Panel gave the drug rave reviews, making approval more likely and sooner.”

Given our outsize gains on the stock, I again recommend booking some profits if you have not already done so. But this is a long-term buy, preferably on dips, for any portfolio. BUY

GoDaddy Inc. (GDDY), originally recommended by Tyler Laundon in Cabot Early Opportunities, pulled back slightly this week after touching new highs above 142 the week before. Still, shares have nearly doubled since late October. Tyler dubbed the stock a “behind-the-scenes AI play” now that it’s launched its new AI-powered Airo solution to help companies and creators build websites. The stock took off after Airo was announced late last year. GDDY has captured Wall Street’s attention enough that the stock will be added to the S&P 500 later this month as part of its quarterly rebalance. It’s now part of the “club” – and is a strong recent addition to our portfolio. BUY

Green Thumb Industries Inc. (GTBIF), originally recommended by Michael Brush in Cabot Cannabis Investor, is back down to 11 after poking its head above 12 a week ago. There’s been no news, although a potential game-changing merger may be in the offing, as Michael wrote last week: “Green Thumb says it is interested in merging with Boston Beer (SAM), the beer company that sells Sam Adams. In a letter to Boston Beer founder Jim Koch, Green Thumb CEO Ben Kolver outlines potential advantages, including a possible U.S. listing for his company via a merger.

“’We think the combination of SAM and Green Thumb is a powerhouse of brands designed to serve the future U.S. consumer,’ Kolver said in a letter Koch, citing the trend towards declining alcohol consumption and increasing cannabis consumption.

“Boston Beer dabbles in cannabis with a cannabis-infused iced tea known as TeaPot, sold in Canada. Boston Beer is controlled by Koch because of concentrated voting rights in shares he owns. Kolver published his letter on social media after The Wall Street Journal reported that Japanese whisky maker Suntory was in talks to buy Boston Beer. Suntory says it is not in negotiations to buy Boston Beer.” That sounds promising. But this stock needs to start proving itself. A dip back below 11 may have us reconsidering its standing in the portfolio. But a move back above 12 would be encouraging. HOLD

Honda Motor Co. (HMC), originally recommended by yours truly in the Growth & Income Portfolio of Cabot Value Investor, has maddeningly underperformed since we added it to the portfolio a little over two months ago on the strength of its fast-growing hybrid car sales and offerings. While I plan to keep hanging on to Honda on the promise of its hybrid potential in Cabot Value Investor, it’s become too much of a laggard to warrant a spot in this more growth-oriented portfolio. Time to sell. MOVE FROM BUY TO SELL

Intuitive Surgical (ISRG), originally recommended by Tyler Laundon in his Cabot Early Opportunities advisory, was up another 2% to touch new all-time highs! There was no news. The maker of the da Vinci robotic surgical system is coming off a strong earnings report in late April and received approval for its new da Vinci 5 system in March. Though full-scale launch won’t come until possibly next year, it’s a potential game changer for the company, and investors have taken notice, pushing ISRG shares up 26% this year. BUY

Main Street Capital Corp. (MAIN), originally recommended by Tom Hutchinson in the High Yield Tier of his Cabot Dividend Investor advisory, kept holding at 49. In his latest update, Tom wrote, “This Business Development Company paid a regular monthly dividend of $0.72 per share in the second quarter, marking a 6.7% increase year over year, as well as a $0.30 supplemental dividend in the quarter. But the stock has pulled back a few dollars from the early-May high. Perhaps there was some selling after the dividend and some good earnings news. MAIN has also shown resilience in tough markets. The safe and high yield pays dividends every single month with a strong possibility of supplemental dividends over the course of the year as well. MAIN often pays supplemental dividends, but I only use the regular dividend to calculate the yield. With the supplements, the trailing yield is 8.47%.” BUY

Microsoft (MSFT), originally recommended by Tyler Laundon in Cabot Early Opportunities, had another good week, gaining more than 4% to reach new all-time highs above 440! The arms race with hard-charging Nvidia and Apple over which stock will be the most valuable public company in the world by market cap (it’s still Microsoft) appears to be lifting all boats, with a common thread: AI is driving all three. Microsoft’s artificial intelligence leadership position has made believers out of Wall Street, including Oppenheimer analyst Timothy Horan, who recently raised his price target on the stock to 500, saying that its partnership with ChatGPT creator OpenAI has helped create the “premier AI platform.” “We see this as a positive and sustainable partnership, which gives OpenAI access to the best AI infrastructure, critical data, and funding, and Microsoft exclusivity to the best AI model,” he said in a client note. Microsoft’s partnership with OpenAI and its industry-best large language models are a major reason why shares have nearly doubled since the start of 2023, and why MSFT should be part of any long-term portfolio. BUY

Neo Performance Materials (NOPMF), originally recommended by Carl Delfeld in his Cabot Explorer advisory, had a strong first week in our portfolio, breaking above 6 for the first time since January before pulling back today. All told, the rare earth stock is up 10% since we added it last week. As Carl notes, “Neo remains a buy due to its strategic importance; it also trades at a 50% discount to book value, pays a nice dividend, and maintains a strong cash position coupled with low debt. Some rare earth prices are in an uptrend though trading at price levels far from their recent highs.” BUY

Netflix, Inc. (NFLX), originally recommended by Tyler Laundon in Cabot Early Opportunities, was up 5% this week to break above resistance in the mid-650s and reach new 52-week highs above 670. There was no major news, though a couple analysts (Keybanc, Needham) reiterated their Buy ratings on the stock. Coming off another very strong quarter (sales up 14.8%; EPS up 78.7%), Netflix continues to assert its dominance as the top video streaming service in the world. Like MSFT, it’s a long-term buy for any portfolio. BUY

Novo Nordisk (NVO), originally recommended by Carl Delfeld in Cabot Explorer, pulled back about 2% after touching new highs above 140 last week. CEO Lars Jorgenson is being asked to testify in front of Congress as to why the price of Novo’s smash-hit weight-loss drugs Ozempic and Wegovy cost so much in the U.S. In America, those drugs cost users $1,349 a month; they’re a mere $140 a month in Germany, and just $92 in the U.K. So perhaps that “bad look” knocked shares backward a bit. I’d buy the dip if you don’t already own any NVO shares or want to add to your position. The stock has more than doubled since we added it to the Stock of the Week portfolio at the end of 2022 and, given the extreme popularity of its weight-loss drugs, there’s plenty more upside ahead. BUY

On Holding (ONON), originally recommended by Mike Cintolo in Cabot Growth Investor, gave back some of its gains from the previous week but remains well above its June lows after a breakout in the second half of May. Here’s what Mike had to say about it: “ONON has been acting just fine, refusing to give up hardly any of its post-breakout run and even notching new highs earlier this week. On the marketing front, the firm signed a multi-year deal with popular actress Zendaya, who’s also known for top fashion and more; we’re not marketers so we won’t go there, but the deal should help On expand its reach and buzz. Back to the stock, there are no sure things, but after a lot of false starts, the evidence suggests ONON has finally gotten going on the upside—and given its growth outlook and long-term potential as another major footwear/athletic brand, we think the move could be a sustained one as big investors build positions.” BUY

PulteGroup, Inc. (PHM), originally recommended by Mike Cintolo in Cabot Growth Investor, was flat this week despite some bouncing around. In his latest update, Mike wrote, “Frankly, we were close to pulling the plug on PHM late last week when interest rates ramped up and homebuilders took a hit—but the two-steps-forward, one-step-back advance in recent months was still intact (higher highs and higher lows since February), and this week’s tame inflation report helped the stock bounce somewhat. It’s a good sign, and at some point, the odds favor a more sustained resumption of the overall upmove as earnings remain not just elevated but continue to advance (nearly $13 per share this year, up 10% from 2023 and likely conservative). Thus, we’re hanging on, but given that the stock is still whipping around in a range, we still favor new buying being focused elsewhere.” BUY

Qualcomm, Inc. (QCOM), originally recommended by Tom Hutchinson in the Dividend Growth Tier of his Cabot Dividend Investor advisory, was up more than 3% this week to punch its way to new all-time highs above 215! There was no company-specific news, though the stock is riding the coattails of the renewed fervor over AI in the wake of Nvidia’s massive earnings report, Apple’s new AI focus, Microsoft’s increased spending, etc. Qualcomm is a major beneficiary of the coming AI touches included in the next wave of upgrades to smartphones – which could be a shot in the arm for the company’s sales. Qualcomm is a leading provider of chips that enable AI for smartphones, something that may be on the cusp of becoming far more prevalent – and lucrative. BUY

Sea Limited (SE), originally recommended by Carl Delfeld in his Cabot Explorer advisory, added another couple points, advancing from 73 to 75 as its steady climb continues. The stock is a play on Southeast Asian growth, as this Singapore-based company boasts three fast-growing arms: Shopee, the largest e-commerce platform in Southeast Asia and Taiwan; SeaMoney, a leading digital payments platform and financial services provider; and Garena, an online games publisher and developer. The latter lagged for a while but is showing signs of a turnaround. Meanwhile, its Shopee e-commerce platform has become the largest live-streaming e-commerce platform in Indonesia, a key market with 265 million people. This was a $357 stock as recently as November 2021 and was a 10-bagger for Carl’s longtime Explorer subscribers. Up 85% year to date, SE still has plenty of upside. BUY

Super Micro Computer (SMCI), originally recommended by Carl Delfeld in his Cabot Explorer advisory, was up another 10.5% this week as the stock recovers from a late May/early June swoon. A resurgence in the AI narrative has surely had a hand in the rebound. As Carl noted in his latest update, “Keep in mind that Supermicro benefits not only when Nvidia releases new advanced chips but other leading chipmakers do as well. Supermicro’s strategy of working closely with these companies means it can build equipment fast. Supermicro stock is trading at about 33x forward earnings estimates. Perhaps there’s more room to grow, considering the company’s long-term growth prospects. This is an aggressive stock at the heart of the AI boom.” BUY

Tesla (TSLA), originally recommended by Mike Cintolo in Cabot Top Ten Trader, got a modest bump (about 6%) after the company’s board voted to approve Elon Musk’s record-setting $56 billion compensation package. It still needs approval from a Delaware judge, but the board’s support of Musk at least assures some continuity and stability at the top. The next (and far more meaningful) hurdle will be to get back on track sales-wise, as revenues declined for the first time in four years last quarter while margins have progressively narrowed as the company cuts costs on some of its signature models to better compete with hard-charging competitors, especially in China, where BYD (BYDDY) is suddenly king. It’ll be a few weeks before we see any second-quarter figures, so for now, the Musk pay package will have to suffice as a short-term catalyst. Keeping at Hold until the stock can demonstrate more sustainable momentum; climbing back above 200 a share would be a good start. HOLD

Uber Technologies (UBER), originally recommended by Mike Cintolo in Cabot Growth Investor, is back above 70 for the first time in more than a month, though it pulled back a bit after closing as high as 73 last Wednesday. In his latest update, Mike wrote, “UBER’s 23% drop from March through late May was anything but pleasant, and we trimmed our position a couple of times because of that. But now we’re seeing some intriguing action: Shares tightened up a bit in the low 60s, saw some buying after peer Lyft released an enticing longer-term outlook, and now UBER has popped above its 50-day line on good volume on the post-inflation rally ... though, like most things, it gave up a chunk of that today. The stock is only halfway back from its tedious decline and there is resistance at this area, so there’s certainly more to prove, but we’re holding on and seeing if the still-strong free cash flow story here will gradually bring in some fresh buying. Hang on.” Let’s do the same. HOLD

United Airlines (UAL), originally recommended by yours truly in the Growth/Income Portfolio of Cabot Value Investor, had a bad week, falling from 53 to just under 50. There was no news, and thus no real reason for the pullback. Thus, with summer travel season upon us, I suggest buying on this latest dip with UAL trading at less than 5x forward earnings. BUY

UnitedHealth Group Inc (UNH), originally recommended by Tom Hutchinson in the Dividend Growth Tier of his Cabot Dividend Investor advisory, keeps holding in the 490s. In his latest update, Tom wrote, “The stock reversed its negative course after earnings put fears about the hacking to rest. UnitedHealth reported earnings last month that soundly beat expectations with an 8.6% revenue rise and a better than 10% increase in adjusted earnings from last year’s quarter. The company also issued strong guidance. The stock rose about 20% after the report but has given back about a third of that surge in the past three weeks. I’m disappointed. UNH has a great track record but can never get going anywhere. I’ll stay with it for now because it’s defensive and has a great track record. But my patience is wearing thin.” Having just added the stock to the Stock of the Week portfolio a month ago, I still have patience to spare. But UNH does need to start showing signs of life soon. BUY

If you have any questions, don’t hesitate to email me at chris@cabotwealth.com.

Here, too, is the latest episode of Cabot Street Check, the weekly podcast I host with my colleague Brad Simmerman.

The next Cabot Stock of the Week issue will be published on June 24, 2024.

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