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Turnaround Letter
Out-of-Favor Stocks with Real Value

Cabot Turnaround Letter 1120

Thank you for subscribing to the Cabot Turnaround Letter. We hope you enjoy reading the November issue.

This month we look at the oil refining industry. Unlike many technology stocks, this group is the opposite of “priced for perfection.” The industry’s products will remain relevant for a long time, despite investors’ enthusiasm for a shift to electric-powered vehicles. Also, the pandemic will eventually pass and demand for refined products (gasoline, diesel, heating oil and jet fuel) will return, lifting these company’s earnings and stock prices. We acknowledge the tax and regulatory risks but see real value in the higher quality and better-financed refinery companies.

We also look at technology turnarounds. Successful tech turnarounds are rare, so our discussion briefly explores why this is the case and identifies six that have interesting turnaround potential.

Our feature recommendation is the oil refining company Valero Energy (VLO), offering what we see as the best risk/reward traits among a group with strong cyclical turnaround potential.

The letter also includes a summary of our recent sale of Amplify Energy (AMPY) and our change to a Sell rating on Consolidated Communications (CNSL), as well as the full roster of our current recommendations.

Please feel free to send me your questions and comments. This newsletter is written for you. A great way to get more out of your letter is to let me know what you are looking for.

I’m best reachable at Bruce@CabotWealth.com. I’ll do my best to respond as quickly as possible.

Cabot Turnaround Letter 1120

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Oil Refiners – The Opposite of “Priced for Perfection”
The oil refining industry, like all of the energy sector, is heavily out of favor. Year-to-date, the seven stocks in our universe of traditional energy refiners are down an average of 61%. Many are approaching five- and 10-year lows. The market’s disappointment in the push-out of the recovery’s timing by perhaps a year has led to a recent sharp sell-off that has pulled refining stocks down to near their March lows. We think the group has some interesting contrarian appeal as the economy works through the pandemic.

At the most basic level, oil refining is straightforward: processing crude oil (which is essentially unusable in that form) into usable products, primarily gasoline, distillate and jet fuel. Profits are a function of the volume of barrels refined and the spread between the input (crude oil) price and the output price (determined by the mix of refined products). Volume is driven by customer demand, which currently is well below historical averages, particularly for jet fuel. And, refining spreads are exceptionally low. The benchmark 3-2-1 crack spread, which refers to the process by which heavy hydrocarbon molecules are “cracked” into their lighter components, is around $6.85/barrel, compared to a historical range of $10-$25 per barrel. Pragmatically, refiner profitability is much more complex, based on regional crude oil prices, the ability to refine different grades of crude and produce a range of end products, and access to other geographic markets.

Over the past 10-20 years, the industry structure has changed. Most refining capacity used to be owned by major integrated oil companies, but today it is increasingly owned by independent refining companies. Along with favorable industry conditions, this shift has brought more efficiency to the industry and a way for investors to directly participate. Several companies sponsor publicly-traded pipeline partnerships – which may be interesting stocks in their own right.

When the pandemic eventually passes, demand for gasoline, jet fuel, diesel (used heavily by the trucking industry) and other refined products should recover, boosting both refining volumes and margins. Most of the stocks have remarkable upside, and offer high dividend yields, as investor sentiment is dour at best. Potential investors should be aware of several risks. A prolonged downturn could lead to dividend cuts and debt service problems, post-election tax rates and regulations may increase, and input costs may rise if fracking is deterred. Also, a rapid conversion to electric vehicles could permanently weaken gasoline and diesel demand. We believe these risks are over-stated and increasingly offset by the stocks’ sharp sell-off.

Listed below are four refiners, in addition to this month’s featured recommendation, Valero Energy (VLO), that look both very interesting from an upside-potential perspective yet also have a good likelihood of enduring until the recovery. In the accompanying table, our valuations are based on consensus estimates, yet these averages obscure the wide range of underlying estimates, given the high degree of uncertainty.

CVR Energy (CVI) – CVR has the highest risk/return trade-off of our selection of refiners. The company has two refineries with a total capacity of about 207,000 barrels/day, which are located near Cushing, Oklahoma, the storage center where West Texas Intermediate (WTI) oil prices are determined. The company also is the general partner and 35% owner of CVR Partners, LP (UAN), a producer of nitrogen fertilizer. As a pure-play refiner, the company’s shares will be highly levered to any improvement in refining margins in the mid-continent region. Importantly, CVR has a sturdy balance sheet. However, it also carries notable risks. Its nitrogen business is struggling and worth almost zero as it appears headed for bankruptcy, although CVR will likely be shielded from any liability. Carl Icahn owns 71% of CVR and has displayed an interest in acquiring public refining company Delek U.S. Holdings (DK), but investors worry that he could overpay. The company needs to buy expensive renewable energy credits, yet may invest in renewable diesel to help offset these. CVR just suspended its dividend, although this will buttress its cash reserves.

HollyFrontier Corporation (HFC) – This company, with about 500,000 barrels/day of capacity, was formed by the 2011 merger of Holly Corporation and Frontier Oil. HollyFrontier’s five refineries are located in the mid-continent and Rocky Mountain regions, which provide it with access to lower crude oil prices compared to global market prices. The company has a controlling interest in pipeline partnership Holly Energy Partners (HEP), but has no retail or other downstream operations. Much of its free cash flow has been invested in expanding its lubricants operations but these haven’t met expectations, which likely led to the return of former CEO Michael Jennings to the post this past January. We think Jennings will focus on improving profitability and upgrading its core refining operations. Also, the company’s growing renewables operations will likely boost profits by reducing its otherwise high cost of having to buy RIN credits. Holly’s $0.35/quarter dividend isn’t guaranteed, of course, but it, along with the $2.5 billion in debt (which carries an investment grade credit rating), look readily serviceable in most reasonable scenarios and is supported by $900 million in cash.

Marathon Petroleum (MPC) – Marathon has a deal-driven history, including its one-time ownership by U.S. Steel, separation from Marathon Oil Company in 2011 and its $23 billion acquisition of major refinery company Andeavor (formerly Tesoro) in 2018. This past August, the company announced a $21 billion all-cash deal to sell its Speedway convenience store chain at an attractive valuation, leaving Marathon as the nation’s largest refining company (with 16 refineries with over 3 million barrels/day of capacity), the sponsor of the publicly-traded MPLX partnership (MPLX) pipeline operation, and owner of the Marathon and Arco gas station chains. The sale will remove a stable and hefty source of cash flow, but will allow Marathon to pay down much of its debt and remain an investment grade credit. While sizeable synergies appear mostly achievable, the Andeavor deal has disappointed. New CEO Michael Hennigan (March 2020) should help improve this and other Marathon operations. Overall, the company has the diversification and financial strength to endure the downturn and benefit from an industry recovery.

Phillips 66 (PSX) – The Phillips Petroleum Company once employed Boone Pickens, who attempted a hostile acquisition of the company in 1984. Subsequently acquired by Conoco in 2002, then-named ConocoPhillips spun off its refining and marketing operations as Phillips 66 in 2012. Phillips has a geographically diversified refining portfolio with 2.2 million barrels/day of refining capacity. The company is shifting its mix to become more of a midstream/natural gas processing, renewables and chemicals business – this will provide more stable earnings (and likely a higher valuation) yet also modestly reduce its upside leverage to better industry conditions. Part of its midstream business is housed within its stake in the Phillips 66 Partners midstream MLP (PSXP). Philips’ currently constrained cash flow has led to some incremental borrowing, adding to its modestly elevated debt, but the company should have little difficulty in servicing its debts and dividend in most reasonable scenarios. Helping provide confidence in its outlook is its high-quality and prudent leadership.

Refiners: Not Priced for Perfection
CompanySymbolRecent
Price
Change
YTD (%)
Market
Cap $Bil.
EV/
EBITDA*
Dividend
Yield (%)
CVR EnergyCVI11.96-701.24.7 0.0
HollyFrontierHFC20.39-603.34.46.9
Marathon PetroleumMPC29.89-5019.46.27.7
Phillips 66PSX50.48-5522.05.67.1

Closing prices on October 23, 2020. *Enterprise value/Earnings before interest, taxes, depreciation and amortization. Based on calendar year 2022 estimates. Sources: Company releases, Sentieo, S&P Capital IQ and Cabot Turnaround Letter analysis.

Six Interesting Tech Turnarounds
The term “technology turnaround” often is an oxymoron. Tech companies become successful because they develop proprietary products that allow them to fill rapidly growing demand. Yet once that market matures, these “one-trick ponies” (even if that pony is a massive industry) generally have little to offer. Diversification often results in value-destroying acquisitions or unprofitable ventures into fields outside of the company’s expertise. Change comes quickly in tech, and by the tim leadership finally acknowledges its predicament, its talent base, proprietary edge and profitability have probably been eroded to the point of no return. For investors, some tech turnarounds require deep technical expertise to properly evaluate whether a company can regain its edge – for generalists this requirement can put most such turnarounds out of reach.

Some companies with more strategic, rather than technical, problems are successful in pivoting. By far the most notable example is Microsoft, which was becoming irrelevant until it shifted to cloud-based and subscription-based offerings. IBM has had at least two major pivot-driven turnarounds – under Gerstner in the 1990s and Palmisano in the late 2000s – and is now attempting its third (we’re not so sanguine on this one, yet).

Other companies with healthy franchises have been successful by improving their core businesses. Apple’s turnaround under Steve Jobs is a prime example. While not in the same league as Apple, current Cabot Turnaround Letter recommended Western Digital, Nokia and Conduent reflect this type of turnaround.

In the current stock market, most large-cap tech companies are thriving, limiting the size of the tech turnaround universe. Some of the more interesting candidates are in the small- and mid-cap tiers. Listed below are six tech turnarounds that look appealing.

AT&T (T) – While technically not a tech company, AT&T has enough similarities to bona fide tech giants like Netflix, and its wireless business will be driven by the transition to 5G technology, that we will include it here. AT&T’s shares are clearly out of favor, down 29% this year and trading near 10-year lows. It is also undergoing a turnaround, with new CEO John Stankey aggressively restructuring the company’s operations to boost profits and reduce its enormous debt burden after its expensive and ill-timed Time Warner and DirecTV acquisitions under the former leadership. AT&T’s core wireless business, which provides 40% of its revenues and as much as 90% of its operating profits in recent quarters, is well-positioned as the largest in the country but needs to improve its execution. The recent T-Mobile-Sprint merger will likely help the industry’s economics. Realistically, most of the rest of AT&T’s businesses seem to provide little strategic benefit yet carry the highest competitive risk – this is where we see the largest changes under Stankey. The high dividend appears safe for now, as AT&T’s favorable third quarter suggests that the turnaround, while risky, is making progress.

A10 Networks (ATEN) – This small-cap company provides application delivery and security solutions, with a high-quality roster of major telecom, cloud, gaming and corporate clients. Its stock price has remained unchanged for five years, driven by flat revenues and small but chronic profit losses. This past December, the company hired a new CEO to improve the company’s results. Progress so far includes revenue and profit growth despite the pandemic, along with overhead cost cutting (with more to come). The board recently approved a $50 million share repurchase program (about 9% of its market cap). A10 is positioning itself to benefit from the emergence of 5G technology, and has a debt-free balance sheet with $143 million in cash.

CommVault Systems (CVLT) – Originally created within Bell Labs, this provider of data management services has been an independent public company since 2006. Since reaching a peak near 90 in late 2013, CommVault’s shares have fallen by 50% as sales growth routinely disappointed. Recent efforts to migrate to the cloud and improve its sub-par margins have been disappointing so far. Also, the company made a poor decision to acquire no-revenue Hedvig for $225 million last year. A new CEO, and a new board chairman, both appointed in February 2019, haven’t led to adequate improvements, prompting activist investor Starboard Value (9.4% stake) to exert more pressure. This past June, the company reached an agreement with Starboard to replace three board members, including a co-founder, and establish an operating committee to set margin and capital allocation targets, paving the path for improvements next year.

DXC Technology (DXC) – This company is the result of the 2017 combination of the Enterprise Services division of Hewlett-Packard Enterprise (itself the acquirer of Electronic Data Systems) and Computer Sciences Corporation (CSC). In 2018, DXC spun off its public sector business as the publicly-traded Perspecta. After an encouraging start, the shares have collapsed nearly 70% from their 2017 inception due to disappointing revenues. Much of the problem is that the core legacy business is becoming less relevant in a cloud-driven tech world. Also, the company’s previous focus on integration and cost-cutting likely weighed on employee motivation, leading to contract performance issues. In September 2019, the company launched a full-scale revamp, bringing in a talented Accenture executive, who has subsequently hired numerous other Accenture staffers. Also, in February, Ian Reed, Pfizer’s former chairman, joined DXC as its new chairman. Reed brings immense connections and oversight skills. Helping to restore focus and paying off much of its debt, DXC just sold its U.S. Health operations in a $5 billion cash deal and is selling its healthcare provider business for $525 million. The turnaround will be challenging, but the new leadership and DXC’s highly discounted share price make this stock appealing.

ON Semiconductor (ON) – While ON Semiconductors’ shares are clearly not beaten down, they are flat over the past three years while the benchmark Philadelphia Semiconductor Index has gained 85%, suggesting that something is wrong with ON. The company was built-up through a series of acquisitions over the past 15 years into a diversified maker of chips for the automotive, communications and other industries, yet its margins have remained depressed due to weak integration of these deals. Also, it produces many of its chips itself, which is capital-intensive and margin-reducing. Disappointing organic revenue growth is also adding to the weight on the shares. Earlier this month, activist investor Starboard Value highlighted these short-comings, lifting the shares. With the long-time CEO announcing his retirement last month, a new CEO could either fix the margin problem or sell the company. ON shares trade at a sub-par multiple on sub-par profits, so a boost to one or both could lift the shares sharply. Given the price spike, investors may want to take a starter position and wait to buy more aggressively if the shares fall back.

OneSpan (OSPN) – This company specializes in digital security for financial institutions and other corporate customers. The shares fell 40% in August when OneSpan reported weak results, weak guidance and what is likely a minor accounting issue. Much of the problem appears to be with its low-margin and weakening hardware business, which is obscuring the growing and higher-value software and services businesses. Also, the company is transitioning to a subscription model, adding to the obscurity of its revenue growth. Making matters worse, a founder/board member sold about $1.7 million in personally-held shares the day before OneSpan’s disastrous earnings report, raising concerns that the board is ineffective. Under pressure from the respected activist investor Legion Partners (5.6% stake), the officer resigned. Also, the company recently hired a talented former Oracle senior officer as its top technology executive. The current CEO, who joined in 2015, is now likely freed to implement needed changes. The company has a clean balance sheet and generates free cash flow, providing time for a transition. Investors may want to buy a starter position and wait for further weakness to accumulate a larger position.

Six Interesting Tech Turnarounds
CompanySymbolRecent
Price
Change
YTD (%)
Market
Cap $Bil.
EV/
EBITDA*
Dividend
Yield (%)
AT&TT27.82-29198.28.77.5
A10 NetworksATEN7.1740.614.30.0
CommVault SystemsCVLT42.32-52.023.50.0
DXC TechnologyDXC19.84-475.06.10.0
ON SemiconductorON26.16710.719.80.0
OneSpanOSPN23.78391.043.20.0

Closing prices on October 23, 2020. *Based on calendar year 2021 estimates. Sources: Company releases, Sentieo, S&P Capital IQ and Cabot Turnaround Letter analysis.

Recommendations

Purchase Recommendation: Valero Energy Corporation

Valero Energy Corporation
One Valero Way
San Antonio, Texas 78249
(210) 345-2000
valero.com

Symbol: VLO
Market Cap: $17.1 billion
Category: Large-Cap
Business: Refining
Revenues (2020E):$64.8 Billion
Earnings (2020E):($1.4) Billion
10/23/20 Price:$41.97
52-Week Range: $101.99-31.00
Dividend Yield: 9.3%
Price target: $70

VLO - Last 5 years stock chart

Background
Valero is the world’s largest global independent oil refining company. Its 15 refineries are located primarily in the Gulf coast and mid-continent regions, with two in California, one in Quebec, Canada and one in Pembroke, England. In total, the company has 3.2 million barrels/day of refining capacity. Created in 1980 from a collection of natural gas transportation assets, the company has grown through a series of acquisitions and divestitures to its current form as a focused refining company with closely-related pipeline, storage and loading dock assets. Valero owns its midstream assets internally, having bought out its Valero Energy Partners partnership in 2019. The company is also the largest renewable fuels producer in North America through its renewable diesel partnership with Darling Ingredients and its 14 ethanol production facilities.

The industry is currently in a deep recession, as the pandemic has reduced demand for the gasoline, heating oil, diesel and jet fuel that refineries produce. The combination of weak volumes (which pulled down Valero’s second-quarter refinery utilization rate to 74%) and slim refining margins (to $5.10/barrel, about half the year-ago level) are producing sizeable losses. Investors worry that the slow economic recovery, combined with high inventory levels across the industry, will continue to produce losses. With these losses, Valero investors see considerable risk to its generous dividend and potential financial pressure from its $15.2 billion in debt. Another wide-cited worry is that a Democratic win in next week’s elections would bring higher taxes and regulations, as well as higher domestic oil prices, quashing much of the gains once conditions rebound. The industry’s long-term relevance is also being doubted as interest increases in electric-powered vehicles.

Reflecting these concerns, Valero’s stock is trading at its March 2020 lows, having declined 55% year-to-date. A brief bounce this past summer was sharply reversed as investors worried that a recovery would be pushed out much further than hoped.

Analysis
Valero’s future is brighter than its dour share price suggests. First, we see little risk to the company’s relevance. While we recognize that this coming winter may exacerbate the pandemic, it will inevitably fade, allowing the global economy to recover and restoring much of refining’s profits. Passage of the long-delayed federal stimulus package would quickly boost Valero’s prospects. While a Democratic election win would increase the chances of higher taxes and costs, we see little likelihood that a new administration would add additional burdens onto a weak economy.

Also, the transition to electric vehicles will likely be measured in decades – much slower than the market currently expects. Valero’s renewable fuels programs provide valuable low-carbon benefits, and its hydrocarbon-intensive operations could help it produce hydrogen fuel if the economics become favorable.

As a well-run refining specialist, Valero is recognized as having the industry’s lowest-cost and among the highest-quality assets. Combined with its refineries’ advantageous locations, considerable operating flexibility and an extensive global network of export markets, Valero has more ability than its peers to extract profits from the wide range of crude oil feedstocks. This should help it outlast weaker peers who may need to close refineries.

Valero’s leadership is respected for its record of efficiently using its capital to maintain the company’s high asset quality while providing shareholders with cash returns. Over the past eight years it has steadily increased its dividend while also repurchasing over $10 billion in shares. It continues to target a payout of 40-50% of its operating profits each year. Management is also well-regarded for its transparent communications with investors.

The company remains committed to maintaining its investment grade balance sheet. It recently (and easily) borrowed $2.5 billion at interest rates under 3% to provide it with additional financial flexibility. Its $15.2 billion in debt appears readily serviceable and is supported by over $4 billion in cash. On its earnings call last week, Valero’s management firmly backed its commitment to the $0.98/share quarterly dividend. This nearly $4/share annual cash return, if sustained, would mitigate much of the risk of waiting for a recovery. We would encourage potential investors to buy Valero for its turnaround potential, not for its high dividend, as this $1.6 billion/year cash drain would likely be suspended if difficult conditions endure.

A potentially hidden asset is Valero’s Diamond Green Diesel joint venture, a high-growth potential business in which it receives 50% of the profits. This stake could be worth more than $2.5 billion. Its partner, Darling Ingredients, has seen its share price surge this year, partly due to the attractive prospects of Diamond Green Diesel.

Overall, while the risks are high, Valero’s return potential is very appealing at the current share price.

We recommend the purchase of Valero Energy (VLO) shares with a 70 price target.

Sell Recommendations
On October 2, we moved Amplify Energy (AMPY) to a Sell. In our letter on Sept 8, we had decided to retain our HOLD rating on Amplify Energy, while acknowledging that their clock, and our patience, were wearing thin. As we’ve described, Amplify became a call option on oil prices, with a limited remaining time window until that option expired due to its leveraged balance sheet and weak cash flow. A related risk is that Amplify may be delisted from the NYSE due to undercapitalization.

While we think the company will correct the capitalization shortfall, the cost of that correcting exercise – raising highly dilutive new equity – gets a lot higher once oil prices stay below about $40. With no relief to weak oil prices on the horizon, we moved the shares to a Sell. Amplify has clearly been a disappointing stock, and we are ready to put it behind us.

We are reducing our rating on shares of Consolidated Communications (CNSL) to a Sell. This company originally entered the Turnaround Letter portfolio in July 2011 as FairPoint Communications. Following years of disappointment, it was acquired by Consolidated in 2017. While the aggressive cost-cutting potential was promising, the results were still disappointing. Similarly, their early 2019 decision to redirect their dividends to debt repayment was strategically the right move but weighed heavily on the shares.

Last month, Consolidated agreed to a deal in which a private equity firm would invest $450 million to fund an accelerated telecom fiber expansion program in exchange for a 35% equity stake in Consolidated. To us, this deal cements our concern that Consolidated is a capital-intensive but not shareholder-return intensive company. As such, we are moving the shares to a Sell.

Performance

The following tables show the performance of all our currently active recommendations, plus recently closed out recommendations.

Small Cap1 (under $1 billion) Current Recommendations

RecommendationSymbolRec.
Issue
Price at
Rec.
10/23/20
Price
Total
Return (3,4)
Current
Yield
Current
Status (2)
Consolidated CommunicationsCNSLJuly 1112.905.01-370.0%Sell
Gannett CompanyGCIAug 179.221.47-60.0%Buy (9)
Amplify EnergyAMPYFeb 1816.88*0.76-930.0%*Sell
Oaktree Specialty Lending Corp.OCSLAug 184.914.83+168.7%Buy (7)
Signet Jewelers LimitedSIGOct 1917.4726.54+560.0%Buy (35)
Peabody EnergyBTUDec 199.821.57-840.0%Buy (15)
Duluth HoldingsDLTHFeb 208.6816.88+940.0%Buy (17.50)

Mid Cap1 ($1 billion - $10 billion) Current Recommendations

RecommendationSymbolRec.
Issue
Price at
Rec.
10/23/20
Price
Total
Return (3,4)
Current
Yield
Current
Status (2)
Mattel, Inc.MATMay 1528.4314.16-380.0%Buy (38)
BorgWarnerBWAAug 1633.1839.75+281.7%Buy (46)
ConduentCNDTFeb 1714.963.74-750.0%Buy (6)
Adient, plcADNTOct 1839.7724.10-390.0%Buy (28)
JELD-WENJELDNov 1816.2023.71+460.0%Buy (28)
GameStop Corp.GMEApr 1910.2915.00+460.0%Buy (16)
Trinity IndustriesTRNSept 1917.4721.12+263.6%Buy (26)
Meredith CorporationMDPJan 2033.0112.47-600.0%Buy (52)
Lamb Weston HoldingsLWMay 2061.3672.11+181.3%Buy (85)
GCP Applied TechnologiesGCPJul 2017.9623.21+290.0%Buy (28)
Albertsons, Inc.ACIAug 2014.9514.83-13.2%Buy (23)

Large Cap1 (over $10 billion) Current Recommendations

RecommendationSymbolRec.
Issue
Price at
Rec.
10/23/20
Price
Total
Return (3,4)
Current
Yield
Current
Status (2)
General ElectricGEJuly 0738.127.63-560.5%Buy (20)
General MotorsGMMay 1132.0936.83+430.0%Buy (45)
Weyerhaeuser CompanyWYApr 1221.8929.43+760.0%Buy (40)
Freeport-McMoRanFCXAug 1328.2118.36-260.0%Buy (20)
Royal Dutch Shell plcRDS-BJan 1569.9524.36-365.3%Buy (85)
Nokia CorporationNOKMar 158.024.30-340.0%Buy (12)
The Mosaic CompanyMOSSept 1540.5518.70-471.1%Buy (27)
Macy’sMJuly 1633.617.23-620.0%Buy (13)
ViacomCBSVIACJan 1759.5729.53-433.3%Buy (54)
Volkswagen AGVWAGYMay 1715.9117.40+173.2%Buy (24.50)
Credit Suisse Group AGCSJune 1714.4810.87-162.4%Buy (24)
Toshiba CorporationTOSYYNov 1714.4913.72-40.6%Buy (28)
LafargeHolcim Ltd.HCMLYApr 1810.929.36-34.2%Buy (16)
Newell BrandsNWLJune 1824.7818.00-195.1%Buy (39)
Vodafone Group plcVODDec 1821.2414.84-236.7%Buy (32)
Barrick GoldGOLDFeb 1913.0526.81+1081.2%Buy (30)
Mohawk IndustriesMHKMar 19138.60104.68-240.0%Buy (147)
Kraft HeinzKHCJun 1928.6831.37+185.1%Buy (45)
Molson CoorsTAPJuly 1954.9635.68-320.0%Buy (59)
BiogenBIIBAug 19241.51265.00+100.0%Buy (360)
DuPont de NemoursDDMar 2045.0759.82+342.0%Buy (70)
Berkshire HathawayBRK/BApr 20183.18212.71+160.0%Buy (250)
Wells Fargo & CompanyWFCJun 2027.2223.28-141.7%Buy (43)
Baker Hughes CompanyBKRSept 2014.5314.29-25.0%Buy (23)
Western Digital CorporationWDCOct 2038.4741.72+80.0%Buy (59)

* Please note corrections to the October 2020 issue: the Price at Recommendation for ViacomCBS is 59.57, not 35.52, due to a conversion error related to the Viacom/CBS merger. Target prices for BWA, ADNT and TAP were corrected, as well.

Notes to ratings:
1. Based on market capitalization on the Recommendation date.
2. Price target in parentheses.
3. Total return includes price changes and dividends.
4. Prices and returns are adjusted for stock splits.
SP Given the higher risk, we consider these shares to be speculative.
* Indicates mid-month change in Recommendation rating. For Sells, price and returns are as-of the Sell date.
Bold font indicates that this stock is a “Most Timely” Buy recommendation.

Most Recent Closed-Out Recommendations

RecommendationSymbolCategoryBuy
Issue
Price
At Buy
Sell
Issue
Price
At Sell
Total
Return(3,4)
Thor IndustriesTHOMidNov 1967.60*Jul 20109.75+64
Janus Henderson GroupJHGMidAug 0532.36Jul 2021.01-8
BP plcBPLargeJuly 1341.78Jul 2023.48-4
Rolls-Royce Holdings plcRYCEYLargeMar 169.25*Aug 203.26-58
Gilead SciencesGILDLargeMay 1964.92*Sept 2065.04 +6


The next Cabot Turnaround Letter will be published on November 25, 2020.

Cabot Wealth Network
Publishing independent investment advice since 1970.

CEO & Chief Investment Strategist: Timothy Lutts
President & Publisher: Ed Coburn
176 North Street, PO Box 2049, Salem, MA 01970 USA
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