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Turnaround Letter
Out-of-Favor Stocks with Real Value

December 1, 2023

In today’s note, we discuss the recent earnings reports from Duluth Holdings (DLTH) and Kohl’s (KSS). Our note also includes the monthly Catalyst Report and a summary of the December edition of the Cabot Turnaround Letter, which was published on Wednesday.

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In today’s note, we discuss the recent earnings reports from Duluth Holdings (DLTH) and Kohl’s (KSS). Our note also includes the monthly Catalyst Report and a summary of the December edition of the Cabot Turnaround Letter, which was published on Wednesday.

We encourage you to look through the Catalyst Report. This report is a listing of all of the companies that have reported a catalyst in the past month. These catalysts include new CEOs, activist activity, spin-offs and other possible game-changers. We source many of our feature recommendations from this list. You will find it nowhere else on Wall Street.

In this month’s edition of the Cabot Turnaround Letter, we discuss two strategies for converting this year’s loser stocks into assets and winners, including tax-loss selling and buying shares that others have discarded for artificial reasons. Our crop from last year performed exceptionally well. We review five ideas for this year-end that look promising, including AMC Networks (AMCX), Driven Brands Holdings (DRVN), Mohawk Industries (MHK), Okta (OKTA), and Pfizer (PFE).

We also review four attractive ideas from the most recent batch of 13F filings, including Kenvue (KVUE), NOV, Inc (NOV), Nutrien Ltd (NTR) and Ovintiv (OVV).

This month’s Buy recommendation, Fidelity National Information Services (FIS), was discussed in our February 2023 article about how we evaluate candidates. It was too expensive then, but its recent 26% share price slide and encouraging fundamentals make it attractive to buy now.

Comments on Earnings

Duluth Holdings (DLTH) – This retailer of rugged workwear and outdoor gear struggled with a disjointed and overly aggressive store expansion strategy. Duluth ousted the CEO in September 2019, terminated the failed strategy, and hired a new, permanent CEO in May 2021. The founder continues to be a major shareholder. Duluth has immense opportunities – its challenge is to strike a successful balance between pursuit and execution.

Duluth reported a weak-ish quarter and trimmed its full-year outlook. In many ways, Duluth is doing everything right except convincing people to buy stuff at its stores. The website and stores seem to offer an improved look and better organization, the company has streamlined and improved its infrastructure, made its operations more efficient, reduced its inventory 15% from a year ago and looks well-positioned for the holidays. The balance sheet carries reasonable leverage given the company’s scale. And, despite 66% higher capital spending, free cash flow has improved.

Despite all of these improvements, sales fell 6% with traffic weak in the stores and online and lower customer conversion (% of traffic that makes a purchase). Part of the problem could be its advertising message. We’ve seen some ads during football games and thought they were off-putting to people not already familiar with the brand – this is no way to attract new customers. A bigger problem could be the merchandise itself. The company’s former core customer (workers and outdoorsmen who needed top-quality clothing) likely left long ago as the merchandise quality has been reduced. Duluth hasn’t found a new core customer yet, even as its women’s segment is showing some promise. While management provided some commentary about favorable this-n-that during the quarter, the reality is that sales are weak. We see little to inspire us to believe that Duluth’s merchandising strategy, which appears scattershot, has a boom just around the corner.

So, we are left with a directionless zombie company that has enough financial firepower to linger for years. We will likely wait to see how holiday sales fare before we exit.

In the quarter, revenues fell 6% and were 3% below estimates. The adjusted loss of $(0.32)/share was weaker than the $(0.26) estimate and the $(0.19) loss a year ago.

Kohl’s Corporation (KSS) – Investors see Kohl’s as a broken company left behind by time, trends and technology, with unsettled leadership, further pressured by bloated inventory, a possible recession, and rising labor and goods costs. Major changes, however, are underway, led by a refreshed board and new CEO (Tom Kingsbury). Kingsbury is a proven operator whose mandate and expertise is to restore and upgrade rigor and discipline in the company’s operational performance. The company’s profits and free cash flow, while weakened, are resilient. The debt burden is reasonable but being trimmed further. While the turnaround carries risks, the deeply undervalued shares provide a margin for safety.

Kohl’s reported a respectable fiscal third quarter that showed signs of progress with its turnaround under new CEO Tom Kingsbury. While sales slipped, the gross margin expanded and expenses were controlled. Sephora continues to produce strong results, as same-store beauty sales rose 30%. Inventories fell 13%, even as gross margins improved, setting up the company for a respectable holiday quarter. Sales guidance for the full year (essentially, only the incremental fourth quarter) was ticked lower while per-share earnings guidance was ticked higher.

The company declared its quarterly cash dividend of $0.50/share and reiterated its commitment to maintaining this pace as well as strengthening its balance sheet.

All-in, the Kohl’s turnaround remains on track.

In the quarter, revenues fell 5% and comparable store sales fell 6%. Revenues were 3% below estimates. Earnings of $0.53/share fell 35% from a year ago but were 43% above estimates.

Friday, December 1, 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 7 minutes and covers:

  • Summary of monthly Cabot Turnaround Letter
  • Comments on recommended companies
    • Bayer AG (BAYRY) – rough few weeks as the company loses glyphosate lawsuit and terminates a clinical trial due to lack of efficacy.
  • Elsewhere in the market
    • It’s starting to feel like 1999.
  • Final note
    • Farewell to Charlie Munger.

The Catalyst Report

November was a reasonably busy month for catalysts. Mega-deal activity continues (following two recent mega-deals by ExxonMobil (XOM) and Chevron (CVX)). Several spin-offs either were announced or completed. We are seeing more companies file for bankruptcy – not surprising given the tighter credit markets and slowing economy. Two Cabot Turnaround Letter recommended names had catalysts: Western Digital Corp (WDC) announced its long-anticipated memory chip spinoff, and Six Flags Entertainment (SIX) announced a merger with Cedar Fair LP (FUN).

The Catalyst Report is a proprietary monthly report that is unique on Wall Street. It is an extensive listing of companies that have experienced a recent strategic event, such as new leadership, a spin-off transaction, interest from an activist investor, emergence from bankruptcy, and others. An effective catalyst can jump-start a struggling company toward a more prosperous future.

This list is intended to be comprehensive. While not all catalysts are meaningful, some can bring much-needed positive changes to out-of-favor companies.

One highly effective way to use this tool is to pair the names with weak stocks. Combining these two traits can generate a short list of high-potential turnaround investment candidates. The spreadsheet indicates these companies with an asterisk (*), some of which are highlighted below. Market caps reflect current market prices.

You can access our Catalyst Report here.

The following catalyst-driven stocks look interesting:


Wolfspeed (WOLF) $4.5 billion market cap – This company was previously called Cree and has transitioned to producing semiconductors. Its expertise is in silicon carbide technology but investors remain skeptical. Investment giant Capital Group holds a 26% stake and activist JANA Partners initiated a small position. It seems like something will happen here.



Primo Water Corp (PRMW) $2.3 billion market cap – This company distributes purified water to a range of customers through multi-gallon bottles, dispensers, self-service refillable machines, and water filtration appliances. The shares have been stagnant for years, but a new CEO, a consumer products industry veteran who previously led PepsiCo’s Quaker Foods North America, starts on January 1. The change could restore some sparkle to Primo’s prospects and share price.

Market CapRecommendationSymbolRec. IssuePrice at Rec.Current Price *Current YieldRating and Price Target
Small capGannett CompanyGCIAug 20179.22 1.85- Buy (9)
Small capDuluth HoldingsDLTHFeb 20208.68 5.01- Buy (20)
Small capDril-QuipDRQMay 202128.28 22.22- Buy (44)
Small capL.B. FosterFSTRJul 202313.60 19.96- Buy (44)
Small capKopin CorpKOPNAug 20232.03 1.52- Buy (5)
Small capAmmo, Inc.POWWOct 20231.99 2.04- Buy (3.50)
Mid capMattelMATMay 201528.43 19.00- Buy (38)
Mid capAdient plcADNTOct 201839.77 32.20- Buy (55)
Mid capXerox HoldingsXRXDec 202021.91 13.991.8%Buy (33)
Mid capViatrisVTRSFeb 202117.43 9.181.3%Buy (26)
Mid capTreeHouse FoodsTHSOct 202139.43 40.71- Buy (60)
Mid capKaman CorporationKAMNNov 202137.41 20.271.0%Buy (57)
Mid capThe Western Union Co.WUDec 202116.40 11.632.0%Buy (25)
Mid capBrookfield ReBNREJan 202261.32 35.190.4%Buy (93)
Mid capPolarisPIIFeb 2022105.78 82.47- Buy (160)
Mid capGoodyear Tire & RubberGTMar 202216.01 13.89- Buy (24.50)
Mid capJanus Henderson GroupJHGJun 202227.17 26.191.5%Buy (67)
Mid capSix Flags EntertainmentSIXDec 202222.60 24.90- Buy (35)
Mid capKohl’s CorporationKSSMar 202332.43 23.452.1%Buy (50)
Mid capFrontier Group HoldingsULCCApr 20239.49 3.91- Buy (15)
Mid capAdvance Auto PartsAAPSep 202364.08 50.792.0%Buy (98)
Large capGeneral ElectricGEJul 2007304.96 121.800.1%Buy (160)
Large capNokia CorporationNOKMar 20158.02 3.480.7%Buy (12)
Large capMacy’sMJul 201633.61 15.861.0%Buy (25)
Large capNewell BrandsNWLJun 201824.78 7.630.9%Buy (39)
Large capVodafone Group plcVODDec 201821.24 9.062.8%Buy (32)
Large capBerkshire HathawayBRK.BApr 2020183.18 360.00- HOLD
Large capWells Fargo & CompanyWFCJun 202027.22 44.590.8%Buy (64)
Large capWestern Digital CorporationWDCOct 202038.47 48.31- Buy (78)
Large capElanco Animal HealthELANApr 202127.85 11.78- Buy (44)
Large capWalgreens Boots AllianceWBAAug 202146.53 19.942.4%Buy (70)
Large capVolkswagen AGVWAGYAug 202219.76 12.891.8%Buy (70)
Large capWarner Bros DiscoveryWBDSep 202213.13 10.45- Buy (20)
Large capCapital One FinancialCOFNov 202296.25 111.660.5%Buy (150)
Large capBayer AGBAYRYFeb 202315.41 8.521.6%Buy (24)
Large capTyson FoodsTSNJun 202352.01 46.841.0%Buy (78)
Large capAgnico Eagle MinesAEMNov 202349.80 53.703.0%Buy (75)
Large capFidelity Natl Info ServicesFISDec 202355.50 58.643.5%Buy (85)

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.