June 13, 2025

In today’s note, we discuss pertinent developments for some of the stocks in the portfolio, including Agnico Eagle Mines (AEM), Dollar Tree (DLTR), GE Aerospace (GE), Goodyear Tire & Rubber (GT), Intel (INTC), Paramount Global (PARA), SLB Ltd. (SLB) and UiPath (PATH).

Agnico Eagle (AEM) is poised to benefit from a major change in the balance of global reserve assets.

Dollar Tree (DLTR) appears well insulated from tariff-related volatility.

Comments on Portfolio Holdings

In a key development, gold has surpassed the euro as the second largest global reserve asset, according to the European Central Bank (ECB).

At the end of last year, gold bullion constituted around 20% of global official reserves, which comprise both foreign exchange and gold holdings, overtaking the euro’s 16%, the ECB said.

The ECB further said that global holdings of gold by central banks surged to 36,000 tons, edging up towards the historical high of 38,000 tons reached in 1965.

Growing gold demand by central banks, which began with the 2022 Ukraine/Russia conflict, shows no sign of abating, with recent U.S. trade policies further accelerating demand for the metal. Indeed, central banks continued to accumulate gold at a record pace in 2024, according to the ECB, adding more than 1,000 tons to their reserve assets in 2024, while dollar holdings worldwide continue to decline. (However, the greenback still accounts for the largest amount of global holdings at 46%.)

The gold reserve news bodes well for Agnico Eagle Mines (AEM), which plans to leverage gold’s growing reserve asset status by trading on its strong position as a major gold producer. With central banks showing no letup in their desire to acquire more gold, Agnico is well positioned to benefit from higher gold sales to institutions, particularly as one of the largest and lowest-risk senior gold producers.

Moreover, Agnico’s growing gold reserves and commitment to profitability serve as attractions for increasing numbers of both individual and institutional investors seeking to gain exposure to the attractive gold space. And as the number of sovereign entities increase their gold exposure, partnerships or joint ventures—particularly in emerging markets—becomes more economically viable for Agnico, allowing it to explore more nation-backed opportunities.

In recognition of the company’s growing importance in the precious metals arena, the world’s largest gold mining ETF, the VanEck Gold Miners ETF (GDX), will soon undergo a major change as it will track the MarketVector Global Gold Miners Index instead of the NYSE Arca Gold Miners Index beginning later this year. Agnico, which currently has the second-biggest weight in GDX behind Newmont (NEM), will see its weighting in the reconfigured GDX slightly increase to around 12%, while Newmont will lose its leadership status as it falls from the current 11.5% to 9%.

The new leadership position of Agnico in the GDX should boost its visibility profile within the investment community, in turn potentially increasing its attraction as a long-term investment.

AEM remains a Hold in the portfolio.

After warning in last week’s Q1 earnings call of a potential $70 million impact on cost of goods sold in Q2 on tariff-related headwinds, Dollar Tree (DLTR) shares bounced back to new highs this week as Wall Street analysts reassessed the company’s outlook for the rest of the year.

J.P. Morgan analyst Matthew Boss said tariff mitigation efforts will “more than compensate for any near-term costs, and the company will return to double-digit EPS compounder” with top- and bottom-line drivers firmly in place. He subsequently upwardly revised his share price rating by 54% with a target of 111 a share. (Note: Our target remains 120 for the shares.)

Meanwhile, Dollar Tree CEO Michael Creedon said, “Taking a full year view, we believe that by successfully deploying our five levers, we will be able to mitigate most, if not all, of the potential earnings impact from higher tariffs, assuming the current levels remain in place.”

The five levers include negotiating with suppliers, adjusting product specification, moving country of origin, dropping “non-economic” items and leveraging multi-price categories. Boss believes the company will be able to mitigate the $70 million cost of goods tariff headwind and end 2025 net-neutral with respect to tariffs, while entering the first half of next year “with a wrap-around tailwind.”

After recently taking a one-quarter profit, DLTR remains a Hold in the portfolio.

The relentless multi-week advance in shares of GE Aerospace (GE) got a well-earned breather this week ahead of next week’s 2025 Paris Air Show. Analysts expect the company to make significant strides and announcements at the major event, which serves as a global platform to showcase the latest innovations and developments within aerospace industry.

Among the key announcements Wall Street expects GE to make at the show are enhancements to the reliability of the firm’s new-generation turbofan LEAP engines. (The high efficiency, low noise and reduced emission engine, which is used in Airbus A320neo, Boeing 737 MAX and COMAC C919 aircrafts, has improved fuel economy by 15% compared to its predecessor).

Experts also anticipate updates on the development and advancements of the firm’s F Flight Deck system, plus updates on new AI tools designed to improve productivity. Moreover, some analysts believe GE Aerospace could raise its 2028 operating profit guidance by at least 10%.

In anticipation of these developments, several major institutional banks raised their share price targets for GE this week, contributing to the positive sentiment currently underlying the bullish backdrop.

GE remains a Hold in the portfolio.

In a move that will reduce around 900 jobs, Goodyear Tire & Rubber (GT) said it’s planning to close its manufacturing facility in Kariega, South Africa in its Europe, Middle East and Africa (EMEA) business unit.

The job cuts are expected to be completed by the end of this year and include associates and contracted positions, with the total charges associated with this action expected to be around $100 million. The company expects to record about $40 million of charges in Q2 and nearly $60 million of charges during the remainder of 2025.

In a statement, Goodyear said the actions are expected to improve EMEA’s segment operating income by approximately $10 million in 2026 and annually thereafter.

GT remains a Buy in the portfolio.

After weeks of lethargy, shares of Intel (INTC) showed signs of life on Tuesday with a 10% rally. The rally was partly the result of increased hopes for an easing of the U.S.-China tariff war, after trade talks between both countries in London suggested a possible relaxation of export restrictions on various products, including semiconductors.

But another reason for the latest show of strength was the market’s optimism regarding the ongoing artificial intelligence buildout. Specifically, investors believe that Intel can benefit from its solutions for deploying and scaling generative AI applications on the data center level, as well as for industries like retail and healthcare.

Under the turnaround CEO, Lip-Bu Tan, Intel is positioning itself as a key provider of both hardware and software solutions that enable the widespread adoption of generative AI across various industries and ecosystems, which Wall Street is beginning to notice.

While there are still concerns regarding the company’s liquidity position, under Tan’s leadership, Intel has been streamlining operations, working to deliver competitive AI platforms and spinning off assets to restore stability and, in the words of one analyst, “help the company return to its past glory.”

What’s more, with Tan leading Intel’s foundry recovery, and with the firm’s AI accelerators gaining traction among its main competitors by way of cost advantages, I believe the turnaround will ultimately be successful.

INTC remains a Buy in the portfolio.

In the first of two key developments this week, Paramount Global (PARA) saw the departure of its Chief Financial Officer, Naveen Chopra, who left the company to take the same position at gaming creation platform Roblox (RBLX).

Paramount said Andrew Warren, its current Strategic Advisor to the Office of the CEO, will assume the additional role of Executive Vice President, Interim CFO, as reported by Reuters. The move comes as Paramount seeks to close its $8.4 billion merger with Skydance Media, pending approval from the FCC.

Meanwhile on Tuesday, Paramount announced plans to shed an additional 3.5% of its U.S. workforce, which comes after already trimming its domestic headcount by 15% last year in shutting Paramount Television Studios after 11 years of operation (which management said saved the company $500 million). The latest move is in response to what the company describes as a challenging macroeconomic backdrop, with declining viewership of traditional TV in the U.S. also contributing to the decision.

A memo sent to Paramount employees by co-CEOs George Cheeks, Chris McCarthy and Brian Robbins said the workforce reductions will start on Tuesday, affecting domestic employees, and “may also result in some impacts to our workforce outside the U.S. over time,” according to Seeking Alpha.

In a related development, competitors Disney (DIS) and Warner Bros. Discovery (WBD) both laid off hundreds of employees related to the linear TV business for both firms earlier this month, with no adverse impact to the stock prices of either companies.

However, given the increasingly challenging economic environment Paramount faces, plus the continued uncertainties surrounding the Skydance merger, I’m recommending that we reduce our stake in the company by an additional quarter on Friday.

After taking the one-quarter profit, our remaining 50% position in PARA remains a Hold.

In news that potentially bodes well for the intermediate-term outlook for SLB Ltd. (SLB), U.S. crude oil production is forecast to decline next year due to a predicted slowdown in drilling activity, according to a U.S. Energy Information Administration (EIA) report. If realized, this would be the first annual decline in U.S. oil production since Covid-related setbacks in 2020 and 2021.

Industry analysts have expressed concern that the nearly two-decades-long shale production boom in the U.S. may be nearing an end. Moreover, OPEC+ group’s supply curb easing is contributing to multi-year lows in oil prices, which in turn is forcing drillers to scale back on further production.

Crude output in the U.S. will drop to around 13.3 million barrels per day (bpd) in 2026, according to EIA, after previously expecting domestic output to increase to 13.5 million bpd next year.

In response to the news, industry analyst Rory Johnston said a decline in U.S. output could “help establish a floor under oil prices,” with increasing demand prospects potentially pushing prices higher.

SLB remains a Buy in the portfolio.

On Wednesday, UiPath (PATH) unveiled its strategic shift towards a comprehensive automation platform at the Mizuho Technology Conference 2025 in New York.

Sounding a note that has become all too common, the company admitted it faces a challenging macroeconomic backdrop—particularly as it regards “federal uncertainty.” But management emphasized the firm’s strong recent financial performance and AI advancements, led by a strong Q1 that featured free cash flow exceeding $100 million. UiPath’s transition from a traditional robotic process automation (RPA) company to an AI-driven automation leader was another emphasis of the presentation.

Meanwhile, at another major industry conference this week, UiPath underscored its recent deals and partner programs, including collaborations with global systems integrators like Deloitte, which the firm said bolsters its market position while allowing it to deal with federal challenges.

UiPath’s top brass told attendees of the BMO 2025 Virtual Software Conference that in spite of the government-related uncertainties, it seems improvements in the “clarity around who are the decision-makers within the [Trump] administration,” adding that it sees this enabling budgets and priorities to be set.

“What we’re excited about is, as we talk to a lot of our federal customers and federal partners, Department of Government Efficiency (DOGE) aligns very well with what UiPath does,” said the company’s CFO, Ashim Gupta. He added the firm is “really pleased with the renewal rates we’ve seen,” as well as with the recent Agentic Airman deal in Q1, which he said “highlights a combination of how deep we are with some of our agencies in the Department of Defense.”

PATH remains a Buy in the portfolio.

RATINGS CHANGES: I recommend reducing our stake in Paramount Global (PARA) by an additional quarter, leaving us with a remaining 50% stake. SELL A QUARTER, HOLD THE REST

NEW POSITIONS: None this week.

Friday, June 13, 2025 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 10 minutes and covers:

• Cybersecurity is becoming an increasingly bigger concern for both public and private sector enterprises.
• Chinese hackers in particular are targeting companies and supply chains in the U.S., providing opportunities for investors.
• Worldwide central bank gold purchases show no signs of relenting.
• Final note
  
  • Intel’s (INTC) streamlining operations, spinoffs and AI platform development should help propel the company’s turnaround.

Market Outlook

The broad market showed signs of slowing momentum this week, with some of the best-performing sectors—including the white-hot defense and aerospace stocks—cooling off a bit. One of the few industries to actually outperform, however, is one we don’t normally cover in the Cabot Turnaround Letter: cybersecurity.

It’s for good reason that cybersecurity companies aren’t typically mentioned here, since few of them are faced with a genuine turnaround situation, owing to the categorical strength of the overall space. Nevertheless, I think it’s worth bringing this industry to your attention since there appear to be some deep problems brewing on the cybersecurity front as it concerns the U.S. public and private sectors—problems that could serve as a bullish catalyst for not only the cybersecurity stocks, but for other areas of the market as well.

To begin with, consider the industry-tracking Amplify Cybersecurity ETF (HACK), which is up over 30% since the early-April market low (versus 20% in the S&P 500 index). Led by companies like Zscaler (ZS), CrowdStrike (CRWD) and CyberArk (CYBR), the cyber stocks are reflecting not only the accelerating adoption of AI in cybersecurity solutions, but also an increasing threat environment.

Last weekend, the Financial Times ran an essay entitled, “Cyber Crime is Surging. Will AI Make it Worse?” The article highlighted the rapid spread of problems like computer hacking, ransom and blackmail and other cyber-related threats. Putting aside the discussion of AI, the acknowledgment that cybercrime is becoming a greater problem across the entire spectrum of the private and public domains should be addressed.

There are rumors swirling that the federal government was comprehensively hacked by overseas cyber criminals (allegedly from China and Russia), resulting in massive quantities of data on U.S. citizens being stolen from multiple departments. Since I have no way of confirming the truth or falsity of these rumors, I must refrain from presuming them to be true. But given the growing number of news articles spotlighting major attacks against governments, corporations and individuals from malicious actors overseas, it’s hard to completely discount them.

A recent overview of the problem was provided by TechRadar Pro, which noted that Chinese hackers have been targeting companies worldwide for the past year, and they’ve managed to compromise at least 75 organizations, with some reports suggesting the actual number of victims could be much bigger.

The article further stated that, according to research from cyber firm Sentinel Labs (which conducted its own in-house investigation of the broader problem after itself suffering a cyberattack), the attacks are linked to three China-related actor collectives: APT15 (AKA Ke3Chang or Nylon Typhoon), UNC5174 and APT41.

Sentinel Labs said most of the victims are operating in the critical infrastructure areas of manufacturing, government, finance, telecommunications and research sectors. “This led the researchers to conclude that the attackers were most likely positioning for potential conflict, either cyber-related, or military,” the TechRadar article concluded.

Earlier this week, NextGov/FCW reported that, according to two U.S. security agencies, data center giant Digital Realty and mass media titan Comcast were likely victims of the Chinese cyberespionage group known as Salt Typhoon. The article reported that the hacker group is “part of a broader syndicate of state-backed groups tied to different military and intelligence arms of China’s central government.”

Even more recently, it was reported across several mainstream news outlets that United Natural Foods, a distributor for grocery store chain Whole Foods and other grocers (including more than 30,000 customer locations), suffered a cyber incident that caused temporary disruptions in its operations. The company “proactively” shut down some of its systems as part of its response to the event, “temporarily impacted the company’s ability to fulfill and distribute customer orders,” according to an SEC filing.

This latest incident highlights the potential threat that cyberattacks pose to the nation’s critical supply chains. It also makes it easier to understand the extent to which cybersecurity stocks are outperforming of late.

In terms of turnaround within this industry, the only one I could find at present that remotely fits the bill is Allot (ALLT), a company that specializes in network intelligence and security solutions for service providers and enterprises. It has recently shifted its focus to cybersecurity with a Security-as-a-Service line of offerings.

The turnaround is advancing, however, as the firm has managed to secure major telecom clients and is now experiencing positive cash flow, suggesting it has reached an inflection point in its turnaround. However, the share price is still down 60% from its 2021 peak and there is still evidence of stagnation in other part of the business, so there’s still lots of room for improvement here. Overall, I think ALLT is a worthwhile opportunity for investors looking for a lower-priced opportunity with longer-term growth potential in the sector.

Company-specific turnarounds aside, the main takeaway from the cybersecurity sector strength is that there is likely more to the ongoing cyberthreat story than meets the eye. If the rumors concerning massive U.S. federal government data breaches turn out to be true, a number of industries stand to benefit from the subsequent leak plugging and recovery operations, including IT services and system integrators—think Accenture (ACN), Booz Allen Hamilton (BAH) and Science Applications International (SAIC)—as well as cloud computing and data backup providers, consulting and risk management firms and perhaps even defense contractors (especially if national security systems are compromised).

All told, cybersecurity is an area I think we need to be keeping a weathered eye on in the coming months.

Please know that while I don’t yet personally own shares of all Cabot Turnaround Letter recommended stocks, this will materially change in the coming weeks as I become fully integrated as your new chief analyst.

Please feel free to share your ideas and suggestions for the podcast and the letter with an email to either me at cdroke@cabotwealth.com or to our friendly customer support team at support@cabotwealth.com. 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.

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