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Turnaround Letter
Out-of-Favor Stocks with Real Value

May 26, 2023

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This week’s note includes our comments on earnings from Kohl’s (KSS). Macy’s (M) and Duluth Holdings’ (DLTH) report on June 1. Please note that the monthly edition of the Cabot Turnaround Letter will be published on Wednesday, May 31, and the Catalyst Report will be published on Friday, June 2.

Ratings Changes:

On Wednesday, we moved shares of Ironwood Pharmaceuticals (IRWD) from Buy to Sell following news of its deal to acquire Vectiv Bio Holding AG (VECT) for about $1.0 billion, net, in an all-cash transaction.

Earnings Updates:

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.

The company reported a decent quarter, with earnings that were much better than dour investor expectations, driving the shares higher in a tough day for the stock market. Margins expanded, the balance sheet (debt and inventory) incrementally improved, free cash flow was half the size of the year-ago outflow, and management reiterated its full-year outlook. The quarter is an encouraging start to Kingsbury’s turnaround efforts.

In the quarter, revenues fell 3% and comp.-store sales fell 4% but were in-line with estimates. Adjusted earnings of $0.13/share rose 18% from a year ago and were sharply higher than estimates for a loss of $(0.44). Adjusted EBITDA of $286 million rose 1% from a year ago but was 30% above estimates.

Friday, May 26, 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:

  • Comments on earnings from recommended companies
  • Comments on other recommended stocks
    • Walgreens Boots Alliance (WBA) – More bad news.
  • Elsewhere in the market:
    • Interesting memo from Howard Marks, head of Oaktree Capital.
    • How the Hollywood writers’ strike is a gift to streaming companies.

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

Market CapRecommendationSymbolRec.
Price at
Rating and Price Target
Small capGannett CompanyGCIAug 20179.22 2.16 - Buy (9)
Small capDuluth HoldingsDLTHFeb 20208.68 5.91 - Buy (20)
Small capDril-QuipDRQMay 202128.28 24.23 - Buy (44)
Mid capMattelMATMay 201528.43 18.25 - Buy (38)
Mid capAdient plcADNTOct 201839.77 34.77 - Buy (55)
Mid capXerox HoldingsXRXDec 202021.91 14.317.0%Buy (33)
Mid capIronwood PharmaceuticalsIRWDJan 202112.02 10.81 - SELL
Mid capViatrisVTRSFeb 202117.43 9.035.3%Buy (26)
Mid capTreeHouse FoodsTHSOct 202139.43 48.96 - Buy (60)
Mid capKaman CorporationKAMNNov 202137.41 22.373.6%Buy (57)
Mid capThe Western Union Co.WUDec 202116.40 11.798.0%Buy (25)
Mid capBrookfield ReBNREJan 202261.32 30.831.8%Buy (93)
Mid capPolarisPIIFeb 2022105.78 104.82 - Buy (160)
Mid capGoodyear Tire & RubberGTMar 202216.01 13.83 - Buy (24.50)
Mid capM/I HomesMHOMay 202244.28 69.55 - SELL
Mid capJanus Henderson GroupJHGJun 202227.17 25.556.1%Buy (67)
Mid capESAB CorpESABJul 202245.64 58.791.6%Buy (68)
Mid capSix Flags EntertainmentSIXDec 202222.60 25.41 - Buy (35)
Mid capKohl’s CorporationKSSMar 202332.43 20.729.7%Buy (50)
Mid capFirst Horizon CorpFHNApr 202316.76 11.095.4%Buy (24)
Mid capFrontier Group HoldingsULCCApr 20239.49 7.88 - Buy (15)
Large capGeneral ElectricGEJul 2007304.96 100.980.3%Buy (160)
Large capNokia CorporationNOKMar 20158.02 3.942.3%Buy (12)
Large capMacy’sMJul 201633.61 15.184.4%Buy (25)
Large capToshiba CorporationTOSYYNov 201714.49 15.896.5%Buy (28)
Large capHolcim Ltd.HCMLYApr 201810.92 12.443.5%Buy (16)
Large capNewell BrandsNWLJun 201824.78 8.713.2%Buy (39)
Large capVodafone Group plcVODDec 201821.24 10.2010.0%Buy (32)
Large capMolson CoorsTAPJul 201954.96 60.912.5%Buy (69)
Large capBerkshire HathawayBRK.BApr 2020183.18 320.20 - HOLD
Large capWells Fargo & CompanyWFCJun 202027.22 40.872.9%Buy (64)
Large capWestern Digital CorporationWDCOct 202038.47 37.23 - Buy (78)
Large capElanco Animal HealthELANApr 202127.85 8.40 - Buy (44)
Large capWalgreens Boots AllianceWBAAug 202146.53 30.796.2%Buy (70)
Large capVolkswagen AGVWAGYAug 202219.76 15.865.8%Buy (70)
Large capWarner Bros DiscoveryWBDSep 202213.13 11.66 - Buy (20)
Large capCapital One FinancialCOFNov 202296.25 99.492.4%Buy (150)
Large capBayer AGBAYRYFeb 202315.41 14.493.7%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.