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Turnaround Letter
Out-of-Favor Stocks with Real Value

December 2, 2022

This note includes the Catalyst Report, a summary of the December edition of the Cabot Turnaround Letter, which was published on Wednesday, and earnings from Duluth Holdings (DLTH).

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 the December edition of the Cabot Turnaround Letter, we state the obvious – that investment losses are everywhere this year. But less obvious is that losses have value that can be harvested. We highlight two ways to harvest losses and discuss seven stocks, including (AMZN), Match Group (MTCH), Medtronic plc (MDT), Meta Platforms (META), Paramount Global (PARA), RH (RH), and The Walt Disney Company (DIS), that have strong appeal as year-end bounce trades.

We also highlight four attractive stocks held by highly regarded long-term value investment funds that we found in our analysis of the recent 13F regulatory filings, including Celanese Corporation (CE), Colgate-Palmolive Company (CL), New York Times (NYT) and SS&C Technologies Holdings (SSNC).

Our feature recommendation this month is theme park operator Six Flags Entertainment (SIX). This company is aggressively working to improve its profit structure under a completely new board of directors and senior leadership team. But, the turnaround is taking longer than investors would prefer, leaving the shares overly depressed. For patient long-term investors, the shares offer an attractive, asymmetric potential return, with perhaps 36% downside, yet in a reasonable turnaround scenario potentially 100% upside.

The turnaround includes investing in rides, improving maintenance, upgrading the food and beverage offerings and generally improving the guest experience to attract more families. So far, Six Flags has been successful in increasing total guest spending, including tickets and in-park food, beverage and other purchases. However, the 33% drop in attendance in the most recent quarter, driven by overly aggressive ticket price hikes, alarmed investors.

Despite the recent pricing blunder, underlying demand is generally resilient at around 30 million guests per year. Earlier this year, attendance had returned to pre-pandemic 2019 levels. Underlying cash operating profits are generally stable, as well, at around $500 million in a difficult year, so that profit level appears likely to be a floor.

The new CEO, Selim Bassoul, previously led Middleby Corporation during an 18-year stretch which produced an 80-fold increase in that company’s shares. While producing commercial grade kitchen gear is quite different from operating consumer theme parks, Bassoul’s intense focus on customer demand traits, thin bureaucracy and full accountability should eventually produce meaningful improvements in profits. While the most recent quarter’s results may have alarmed investors, we see this entire year as on-the-job training for the new CEO. Over the winter, the leadership team will certainly assess and adjust its strategy for the 2023 season.

Six Flags generates considerable free cash flow, which provides financial flexibility and should help reduce the company’s elevated $2.4 billion in debt (about 5x EBITDA). Only $110 million of its debt is due before April 2024, buying the company time for its turnaround to gain traction. Respected investor H Partners recently raised its stake to nearly 20%. The firm is a longtime shareholder and provides valuable shareholder-oriented oversight to keep management properly focused.

With low expectations, low share valuation, a solid asset base and a capable leadership team working to turn around the company’s prospects, shares of Six Flags look highly attractive. Our 35 price target is conservative, allowing us an opportunity to gauge the turnaround’s prospects before potentially committing to waiting for the full upside potential.

Earnings Updates

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, brought the founder back to the CEO seat on an interim basis, terminated the failed strategy, and hired a new, permanent CEO in May 2021. The company has immense opportunities – its challenge is to strike a successful balance between pursuit and execution.

The company reported a weak quarter. While revenues were stable, the company discounted its merchandise while it increased its advertising expenses to help push sales, leaving profits well below consensus. Even with the promotional efforts, inventory remains 24% above year-ago levels. Duluth will need to continue to promote its merchandise to clear it out, reflected in the updated and reduced full-year (only Q4 remains) guidance. The shares fell sharply on the day.

Revenues rose 1% and were about 2% above the consensus estimate. Adjusted net income of $(0.19)/share fell well short of the $(0.11) estimate and the $0.09 profit a year ago. Adjusted EBITDA of $2 million fell well short of the $8 million estimate and was 87% lower than a year ago.

While the company is caught with excessive inventory, it hasn’t had to lard up its balance sheet with much new debt. The damage appears limited to losing a year of profits rather than creating a permanent capital impairment.

However, with yet another guidance cut, management has lost some credibility. New CEO Sam Sato needs to set achievable guidance and then meet/exceed it to show that he is on top of the company’s issues and trajectory. Duluth is struggling with strategic headwinds, as well: As a niche retailer, it has less ability to push its suppliers and shippers than, say, Target which is more than 100x its size, so it is experiencing more delays and input and freight inflation. And its merchandise is more discretionary than that of Target, so it needs to create larger incentives for customers to shop at its website/stores.

Yet, despite its near-term struggles, Duluth’s website sales continue to climb, up 7% in the quarter. Also, its women’s products seem to be selling well, rising 10% and now comprising 31% of total sales. The company launched a Tik Tok ad campaign which has been successful in raising the Duluth Trading profile. To the extent that management is on the mark, next year will be a more normal year, implying that the company could earn $70-80 million in EBITDA.

We are keeping our 20 price target (although it is more of a “stretch” target now) and see the recent price drop to just over 7 as an opportunistic buying point.

Friday, December 2, 2022 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 14½ minutes and covers:

  • Earnings updates
    • Duluth Holdings (DLTH)
  • Comments on other recommended companies:
    • Volkswagen AG (VWAGY) – shareholder-friendly improvements continue.
    • Warner Bros Discovery (WBD) – Will be helped by Disney+ emphasis on profits.
    • Macy’s (M) – adding Claire’s to its store-within-a-store program.
    • Viatris (VTRS) – completed its biosimilar divestiture to Biocon Biologics.
    • Gannett (GCI) – announced a round of layoffs.
    • General Electric (GE) – rumored to be a bidder for Aerojet Rocketdyne.
  • Elsewhere in the markets
    • Weakness in public markets is migrating to private venture capital markets.
    • Economy looks like it is undergoing a rare and massive inventory cycle.
  • Final note
    • Michigan beats Ohio State
    • Team USA beats Iran in World Cup match.

Please know that I personally own shares of all Cabot Turnaround Letter recommended stocks, including the stocks mentioned in this note.

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.

The Catalyst Report

Deal activity was healthy in November despite rising interest rates and the slowing economy. Several companies have new leadership, and activists wrote some pointed letters, notably to Alphabet and Envestnet.

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:


Hasbro (HAS) $8.7 billion market cap – Shares of this iconic toymaker are trading near their pandemic lows due to weak revenues and margins, along with the fallout of the disappointing eOne acquisition (which will now be divested). The new CEO is shifting Hasbro’s strategy toward digital gaming under the Blueprint 2.0 program. Expectations are low, making this stock worth a look.



Hain Celestial Group (HAIN) $1.7 billion market cap – Once a reliable growth company with an open field in natural foods, Hain has succumbed to strong competition by well-funded competitors as well as to strategic blunders. The 4-year CEO cleaned up many of the operational problems but the strategic issues remained, so the board (in a surprise move) just hired a new CEO. This may bring no real change or it could bring the long-hoped-for sale of the personal products segment and possibly the entire company. The shares are deeply washed out but sliding earnings means the valuation is still a bit elevated. Hain shares are worth watching, at least.

Market CapRecommendationSymbolRec. IssuePrice at Rec.12/1/22Current YieldRating & Price Target
Small capGannett CompanyGCIAug 20179.22 2.46 - Buy (9)
Small capDuluth HoldingsDLTHFeb 20208.68 7.29 - Buy (20)
Small capDril-QuipDRQMay 202128.28 23.21 - Buy (44)
Small capZimVieZIMVApr 202223.00 9.43 - Buy (32)
Mid capMattelMATMay 201528.43 18.45 - Buy (38)
Mid capConduentCNDTFeb 201714.96 4.16 - Buy (9)
Mid capAdient plcADNTOct 201839.77 37.78 - Buy (55)
Mid capXerox HoldingsXRXDec 202021.91 16.476.1%Buy (33)
Mid capIronwood PharmaceuticalsIRWDJan 202112.02 11.96 - Buy (19)
Mid capViatrisVTRSFeb 202117.43 11.244.3%Buy (26)
Mid capOrganon & Co.OGNJul 202130.19 26.424.2%Buy (46)
Mid capTreeHouse FoodsTHSOct 202139.43 49.26 - Buy (60)
Mid capKaman CorporationKAMNNov 202137.41 20.633.9%Buy (57)
Mid capThe Western Union Co.WUDec 202116.40 14.476.5%Buy (25)
Mid capBrookfield ReBAMRJan 202261.32 46.751.2%Buy (93)
Mid capPolarisPIIFeb 2022105.78 114.00 - Buy (160)
Mid capGoodyear Tire & RubberGTMar 202216.01 11.22 - Buy (24.50)
Mid capM/I HomesMHOMay 202244.28 46.49 - Buy (67)
Mid capJanus Henderson GroupJHGJun 202227.17 25.666.1%Buy (67)
Mid capESAB CorpESABJul 202245.64 47.35 - Buy (68)
Mid capSix Flags EntertainmentSIXDec 202222.60 24.03 - Buy (35)
Large capGeneral ElectricGEJul 2007304.96 85.260.4%Buy (160)
Large capNokia CorporationNOKMar 20158.02 5.001.8%Buy (12)
Large capMacy’sMJul 201633.61 23.182.7%Buy (25)
Large capToshiba CorporationTOSYYNov 201714.49 16.946.1%Buy (28)
Large capHolcim Ltd.HCMLYApr 201810.92 10.414.2%Buy (16)
Large capNewell BrandsNWLJun 201824.78 12.847.2%Buy (39)
Large capVodafone Group plcVODDec 201821.24 11.289.0%Buy (32)
Large capKraft HeinzKHCJun 201928.68 39.494.1%Buy (45)
Large capMolson CoorsTAPJul 201954.96 54.972.8%Buy (69)
Large capBerkshire HathawayBRK.BApr 2020183.18 315.84 - HOLD
Large capWells Fargo & CompanyWFCJun 202027.22 46.872.6%Buy (64)
Large capWestern Digital CorporationWDCOct 202038.47 35.84 - Buy (78)
Large capElanco Animal HealthELANApr 202127.85 13.19 - Buy (44)
Large capWalgreens Boots AllianceWBAAug 202146.53 41.314.6%Buy (70)
Large capVolkswagen AGVWAGYAug 202219.76 19.463.9%Buy (70)
Large capWarner Bros DiscoveryWBDSep 202213.13 11.63 - Buy (20)
Large capDowDOWOct 202243.90 51.075.5%Buy (60)
Large capCapital One FinancialCOFNov 202296.25 99.322.4%Buy (150)

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.