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Turnaround Letter
Out-of-Favor Stocks with Real Value

August 18, 2023

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There were no earnings reports this week. Macy’s (M) is now scheduled to report earnings next Tuesday, August 22. Kohl’s (KSS) will report the following day, August 23. Duluth Holdings (DLTH) will report on August 31.

Today we are moving shares of four companies, Toshiba (TOSYY), Holcim AG (HCMLY), First Horizon (FHN) and ESAB Corporation (ESAB) from BUY to SELL.

With its go-private tender offer now underway, we see essentially zero chance of any overbid by another party for Toshiba (TOSYY). The company’s shabby governance, in which the board repeatedly looked out for its own personal interest rather than the shareholders to which it presumably has a fiduciary duty, is a dark blotch on the entire country’s public markets. Fortunately, this episode is helping catalyze a sharp improvement, led ironically by the government, in governance across Japan’s corporate realm. We exit our Toshiba position with an approximate 24% total return.

Holcim AG (HCMLY) reported strong first-half results, with organic revenues increasing 7% and organic profits increasing 13%. The company is firing on all cylinders except for its Solutions & Products segment where temporary problems are now reversing. Holcim’s turnaround is complete, and the CEO and CFO that led the turnaround are transitioning out. The company is producing strong revenue growth and wide profit margins, generating impressive free cash flow and has a solid balance sheet. The top-down strategy is sound and well-executed. All of this seems to be fully recognized by the stock market. While the shares haven’t quite reached our 16 price target, they are close enough, and we won’t quibble about being about a ½ turn too aggressive on our 7.0x EBITDA multiple target. We exit the Holcim position with a total return of approximately 49%.

Following the collapse of its deal to sell to TD Bank, First Horizon (FHN) would have remained a Buy. But, it is now being caught in the secular problems of rising deposit costs and the declining value of its loan book – both driven by higher interest rates. First Horizon’s capital base is reasonably strong but if rates continue to rise and new government regulations become law, the bank’s underlying profitability and value will likely be squeezed. We are disappointed with the roughly 23% loss on the position, but it is time to exit.

ESAB Corporation (ESAB) has moved above our 68 price target. We see only limited potential for the stock to move significantly higher as the fundamentals are increasingly being priced into the shares. The position generated a 55% profit.

Earnings Updates

None this week.

Friday, August 18, 2023, Subscribers-Only Podcast:

Covering recent news and analysis for our portfolio companies and other topics relevant to value/contrarian investors.

Today’s podcast is about 9½ minutes and covers:

Ratings changes

  • Toshiba (TOSYY) – moving rating from Buy to Sell.
  • Holcim AG (HCMLY) – moving rating from Buy to Sell.
  • First Horizon (FHN) – moving rating from Buy to Sell.
  • ESAB Corporation (ESAB) – moving rating from Buy to Sell.

Comments on recommended companies

  • Tyson Foods (TSN) Putting its China poultry operations on the block.
  • Walgreens Boots Alliance (WBA) – More bad news with the opening of a new litigation front and a new competition front.

Elsewhere in the market

  • Incremental federal government spending as the recession/no recession toggle.
  • Why many are feeling a slowdown in the economy.

Final note

  • Chicago Cubs – relative winners.

Market CapRecommendationSymbolRec. IssuePrice at Rec.8/17/23Current YieldRating and Price Target
Small capGannett CompanyGCIAug 20179.22 3.08 - Buy (9)
Small capDuluth HoldingsDLTHFeb 20208.68 7.49 - Buy (20)
Small capDril-QuipDRQMay 202128.28 27.91 - Buy (44)
Small capL.B. FosterFSTRJul 202313.60 18.75 - Buy (44)
Small capKopin CorpKOPNAug 20232.03 1.46 - Buy (5)
Mid capMattelMATMay 201528.43 21.15 - Buy (38)
Mid capAdient plcADNTOct 201839.77 37.72 - Buy (55)
Mid capXerox HoldingsXRXDec 202021.91 14.796.8%Buy (33)
Mid capViatrisVTRSFeb 202117.43 11.204.3%Buy (26)
Mid capTreeHouse FoodsTHSOct 202139.43 46.47 - Buy (60)
Mid capKaman CorporationKAMNNov 202137.41 21.733.7%Buy (57)
Mid capThe Western Union Co.WUDec 202116.40 11.678.1%Buy (25)
Mid capBrookfield ReBNREJan 202261.32 33.471.7%Buy (93)
Mid capPolarisPIIFeb 2022105.78 114.35 - Buy (160)
Mid capGoodyear Tire & RubberGTMar 202216.01 12.66 - Buy (24.50)
Mid capJanus Henderson GroupJHGJun 202227.17 25.946.0%Buy (67)
Mid capESAB CorpESABJul 202245.64 68.401.4%SELL
Mid capSix Flags EntertainmentSIXDec 202222.60 21.09 - Buy (35)
Mid capKohl’s CorporationKSSMar 202332.43 27.177.4%Buy (50)
Mid capFirst Horizon CorpFHNApr 202316.76 12.744.7%SELL
Mid capFrontier Group HoldingsULCCApr 20239.49 7.04 - Buy (15)
Large capGeneral ElectricGEJul 2007304.96 110.960.3%Buy (160)
Large capNokia CorporationNOKMar 20158.02 3.772.4%Buy (12)
Large capMacy’sMJul 201633.61 15.044.4%Buy (25)
Large capToshiba CorporationTOSYYNov 201714.49 15.756.6%SELL
Large capHolcim Ltd.HCMLYApr 201810.92 13.533.3%SELL
Large capNewell BrandsNWLJun 201824.78 10.292.7%Buy (39)
Large capVodafone Group plcVODDec 201821.24 9.0811.2%Buy (32)
Large capBerkshire HathawayBRK.BApr 2020183.18 353.19 - HOLD
Large capWells Fargo & CompanyWFCJun 202027.22 42.473.3%Buy (64)
Large capWestern Digital CorporationWDCOct 202038.47 40.42 - Buy (78)
Large capElanco Animal HealthELANApr 202127.85 11.46 - Buy (44)
Large capWalgreens Boots AllianceWBAAug 202146.53 28.196.8%Buy (70)
Large capVolkswagen AGVWAGYAug 202219.76 14.536.3%Buy (70)
Large capWarner Bros DiscoveryWBDSep 202213.13 13.19 - Buy (20)
Large capCapital One FinancialCOFNov 202296.25 105.072.3%Buy (150)
Large capBayer AGBAYRYFeb 202315.41 13.853.9%Buy (24)
Large capTyson FoodsTSNJun 202352.01 54.103.5%Buy (78)

Disclosure: The chief analyst of the Cabot Turnaround Letter personally holds shares of every Rated recommendation. The chief analyst may purchase securities discussed in the “Purchase Recommendation” section or sell securities discussed in the “Sell Recommendation” section but not before the fourth day after the recommendation has been emailed to subscribers. However, the chief analyst may purchase or sell securities mentioned in other parts of the Cabot Turnaround Letter at any time. Please feel free to share your ideas and suggestions for the podcast and the letter with an email to either me at or to our friendly customer support team at Due to the time and space limits we may not be able to cover every topic, but we will work to cover as much as possible or respond by email.

Bruce Kaser has more than 25 years of value investing experience in managing institutional portfolios, mutual funds and private client accounts. He has led two successful investment platform turnarounds, co-founded an investment management firm, and was principal of a $3 billion (AUM) employee-owned investment management company.