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Turnaround Letter
Out-of-Favor Stocks with Real Value

March 31, 2023

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This week, we comment on earnings from Walgreens Boots Alliance (WBA).

We also include the Catalyst Report and a summary of the April 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.

This month’s edition of the Cabot Turnaround Letter focuses exclusively on the banking industry. Given the recent turmoil and the second- and third-largest bank failures in U.S. history, we examine the question on the minds of value and contrarian investors: is it time to jump back into bank stocks? We explore ways to think about the risk of a global financial market meltdown and what it is about banking that makes periodic crises unavoidable. We touch upon opacity as a contributor to the current stresses. To answer the question in the title, “Is It Time to Jump Back In”, if one has no interest or capacity to accept an unfavorable outcome like a total loss, the answer is No. For risk-tolerant investors, the answer is Yes, although we have a cautious bias.

We discuss several banks among the hundreds that trade publicly, including recommended stocks Wells Fargo & Company (WFC) and Capital One Financial (COF), as well as Citigroup (C), Comerica (CMA), First Republic Bank (FRC), KeyCorp (KEY) and PacWest (PACW). Citigroup is currently a Buy recommendation in the Cabot Undervalued Stocks Advisor.

Our feature recommendation this month, First Horizon Corp. (FHN), is a plain bank that offers an appealing way to exploit the bank stock sell-off: merger arbitrage. The bank has an agreed-upon all-cash deal for $25/share to sell to highly capable Canadian bank TD Bank Group. Regulatory delays have led investors to fear a deal collapse, producing a 43% arbitrage spread. We think the risk/reward is highly attractive.

Earnings Updates

Walgreens Boots Alliance (WBA) – Once a retail pharmacy powerhouse, Walgreens faces hefty secular challenges from an overbuilt and mature store base, with customers who have plenty of alternatives to visiting its often poorly run and expensively priced stores. And, pricing pressure from private and government payors is squeezing its prescription profit margin. Walgreens is concentrating on the United States market where it is developing its stores into a healthcare network, led by the much-needed fresh perspective from the new CEO. At the time of our recommendation, the company’s shares were bargain-priced even as Walgreens was in solid financial condition and produced large and stable profits and cash flow.

The company reported acceptable fiscal second-quarter 2023 results that indicated some strategic progress with its transformation but did not increase our confidence that the core operations are becoming more profitable nor that the new healthcare operations will be profitable enough to justify the costs. Walgreens will likely continue to offload non-core operations to fund its new strategy and its dividend (which remains uncovered by free cash flow). The results earn our Walgreens Buy rating some extra time as we further evaluate the company’s strategy and execution. Walgreens maintained its full-year profit guidance. The share valuation remains reasonable at 6.8x EBITDA and 7.3x earnings. No change to our Buy rating.

In the quarter, sales rose 3.3% (+4.5% ex-currency) and were about 4% above estimates. Adjusted earnings of $1.16/share fell 27% from a year ago but were about 5% above estimates.

U.S. retail revenues were essentially flat compared to a year ago but adjusted profits fell 33%. Most of the profit decline was due to the strong Covid-driven results a year ago. International sales (which includes Boots U.K. and the German wholesale business) rose 9% and adjusted profits scrubbed of gains and one-offs rose 30%. In our view, the U.S. operations are the core of the company, while the International operations are future divestitures for raising cash. The company harvested $3.6 billion in cash proceeds from various divestitures year-to-date.

Revenues tripled in the U.S. Healthcare segment, which houses Walgreens’ hoped-for future, but this growth is mostly due to acquisitions, although sales grew 30% ex-acquisitions. U.S. Healthcare revenues are only about 5% of total company revenues. The Segment’s adjusted EBITDA losses deepened to $(109) million from $(61) million a year ago.

Friday, March 31, 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 11½ minutes and covers:

  • Earnings updates
  • Comments on other recommended companies
    • Macy’s (M) – CEO Gennette retiring in a year.
    • Kohl’s (KSS) – New CEO buys $2 million in shares.
    • Berkshire Hathaway (BRK.B) – Continues to buy Occidental Petroleum shares and now has a nearly 24% stake.
    • TreeHouse Foods (THS) – The analyst at UBS raises their price target to 60, matching exactly our price target.
  • Elsewhere in the markets
    • Banks and bank stocks are full of unusual contradictions.
    • Shares of Charles Schwab (SCHW) are under pressure. We explain why we think the company will be fine.
  • Final note
    • Our NCAA March Madness brackets.

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

March was a busier month for catalysts, featuring several high-profile banking deals. Also, several CEO changes are now underway, including at recommended names Viatris (VTRS) and Macy’s (M).

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:


UBS Group AG (UBS) $70.5 billion market cap – This bank acquired Credit Suisse in a shotgun wedding that should close by year-end. UBS gets plenty of Swiss Bank backstopping and it brought back Sergio Ermotti to lead the charge. Investors are highly skeptical, so the valuation offers investors a real, albeit risky, value.



First Citizens BancShares (FCNCA) $13.2 billion market cap – This family-run bank rose from obscurity to become one of the nation’s top 15 banks by assets when it acquired the core operations of Silicon Valley Bank. Few analysts cover First Citizens but that may change soon given its size.



Calavo Growers (CVGW) $477 million market cap – Calavo is a California-based grower of avocados that has struggled during the industry’s downturn. The prior CEO was supposed to right the ship, but that effort wasn’t successful. Now, the since-retired CEO who ran the company from 1999 -2020 has returned for a three-year stint. Maybe this time it will work. The shares are depressed, leaving sizeable upside potential, but success is by no means guaranteed.

Market CapRecommendationSymbolRec.
Price at
Rating and Price Target
Small capGannett CompanyGCIAug 20179.22 1.82 - Buy (9)
Small capDuluth HoldingsDLTHFeb 20208.68 6.34 - Buy (20)
Small capDril-QuipDRQMay 202128.28 28.34 - Buy (44)
Mid capMattelMATMay 201528.43 17.84 - Buy (38)
Mid capAdient plcADNTOct 201839.77 40.35 - Buy (55)
Mid capXerox HoldingsXRXDec 202021.91 14.846.7%Buy (33)
Mid capIronwood PharmaceuticalsIRWDJan 202112.02 10.42 - Buy (19)
Mid capViatrisVTRSFeb 202117.43 9.565.0%Buy (26)
Mid capTreeHouse FoodsTHSOct 202139.43 49.87 - Buy (60)
Mid capKaman CorporationKAMNNov 202137.41 22.293.6%Buy (57)
Mid capThe Western Union Co.WUDec 202116.40 11.048.5%Buy (25)
Mid capBrookfield ReBNREJan 202261.32 32.101.7%Buy (93)
Mid capPolarisPIIFeb 2022105.78 108.32 - Buy (160)
Mid capGoodyear Tire & RubberGTMar 202216.01 10.68 - Buy (24.50)
Mid capM/I HomesMHOMay 202244.28 61.49 - Buy (67)
Mid capJanus Henderson GroupJHGJun 202227.17 25.896.0%Buy (67)
Mid capESAB CorpESABJul 202245.64 58.39 - Buy (68)
Mid capSix Flags EntertainmentSIXDec 202222.60 25.44 - Buy (35)
Mid capKohl’s CorporationKSSMar 202332.43 22.888.7%Buy (50)
Mid capFirst Horizon CorpFHNApr 202316.76 17.413.4%Buy (24)
Large capGeneral ElectricGEJul 2007304.96 94.050.3%Buy (160)
Large capNokia CorporationNOKMar 20158.02 4.841.9%Buy (12)
Large capMacy’sMJul 201633.61 16.983.9%Buy (25)
Large capToshiba CorporationTOSYYNov 201714.49 16.776.2%Buy (28)
Large capHolcim Ltd.HCMLYApr 201810.92 12.743.5%Buy (16)
Large capNewell BrandsNWLJun 201824.78 12.047.6%Buy (39)
Large capVodafone Group plcVODDec 201821.24 11.049.2%Buy (32)
Large capMolson CoorsTAPJul 201954.96 51.692.9%Buy (69)
Large capBerkshire HathawayBRK.BApr 2020183.18 305.08 - HOLD
Large capWells Fargo & CompanyWFCJun 202027.22 37.383.2%Buy (64)
Large capWestern Digital CorporationWDCOct 202038.47 37.28 - Buy (78)
Large capElanco Animal HealthELANApr 202127.85 9.09 - Buy (44)
Large capWalgreens Boots AllianceWBAAug 202146.53 34.635.5%Buy (70)
Large capVolkswagen AGVWAGYAug 202219.76 17.195.4%Buy (70)
Large capWarner Bros DiscoveryWBDSep 202213.13 14.85 - Buy (20)
Large capCapital One FinancialCOFNov 202296.25 94.182.5%Buy (150)
Large capBayer AGBAYRYFeb 202315.41 15.863.4%Buy (24)

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.