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Turnaround Letter
Out-of-Favor Stocks with Real Value

April 22, 2022

We included comments on earnings from one recommended company, news about other recommended stocks, and a possible delay in the publishing of the May edition of the Cabot Turnaround Letter. We move one of our recommendations to Sell as its share price has surpassed our price target.

This week I’m traveling overseas to London yet continue to watch our stocks and keep up with any news. Xerox (XRX) reported earnings this past week, so I’ve included some brief comments. While the May edition of the Cabot Turnaround Letter is scheduled to be published next Wednesday, I have contracted Covid – which may delay my return to the United States due to a safety certification process more rigorous than that for bubonic plague. If delayed, the monthly letter and Catalyst Report will be published as soon as practical. My apologies.

Earnings updates:
Xerox Holdings (XRX) – While the near-term outlook remains clouded, as office workers remain in partial work-from-home mode, we believe the company’s revenue and cash flow will recover. Investors underestimate Xerox’s value due to its zero-growth prospects, but the company’s hefty free cash flow has considerable value. The balance sheet is strong, new and capable leadership is working to drive shareholder value higher, and its generous dividend looks reliable.

Xerox reported an adjusted loss of $(0.12)/share, a sharp reversal from a profit of $0.22 a year ago and the consensus estimate for earnings of $0.12. Revenues fell 2.5% and largely in line with estimates. The huge miss on earnings and the generally dismal results dragged the shares down 16% on the day.

Underlying demand for Xerox’s products seems steady, even as supply chain issues apparently constrained the company’s ability to produce and deliver on equipment orders. Equipment sales fell 18% but were buttressed by sales of paper and other supplies. We watch equipment sales as they usually are a precursor for future paper and supply sales, so the sharp fall-off was discouraging.

Rising costs for labor, inputs and shipping weighed heaving on expenses. The company said it is implementing price increases, efficiency-boosting initiatives and other efforts to offset these higher costs and maintained its full-year revenue and earnings guidance. An important component of Xerox’s guidance is that workers continue to return to offices – a trend that is likely to continue but may not be as strong as Xerox needs.

Xerox was hit hard by the pandemic, which upset its cash generation powers to an extent that it may not fully recover. We are evaluating whether we need to trim our price target.

Ratings change:
Vistra Energy (VST) – Moving from Buy to Sell. The shares have crossed our 25 price target. While natural gas prices have surged, which benefits Vistra, energy markets have become exceptionally volatile, adding to the fundamental risks within the company. The risk/return trade-off is no longer favorable. The shares generated approximately a +56% total return since our initial recommendation about ten months ago.

Quick notes on recent news and analysis for other portfolio companies this past week are included below:

  • Comments on other recommended companies:
    • Kaman Corporation (KAMN) – announced a new $50 million share repurchase program.
    • Shell plc (SHEL) – is in discussions to sell its stake in a major Russian gas export operation to a Chinese state-run company.
    • Toshiba (TOSYY) – the company hired outside advisors to help solicit bids from investors.

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
Small capGannett CompanyGCIAug 20179.224.150.0%Buy (9)
Small capDuluth HoldingsDLTHFeb 20208.6811.920.0%Buy (20)
Small capDril-QuipDRQMay 202128.2832.420.0%Buy (44)
Small capZimVieZIMVApr 202223.0024.640.0%Buy (32)
Mid capMattelMATMay 201528.4322.830.0%Buy (38)
Mid capConduentCNDTFeb 201714.965.440.0%Buy (9)
Mid capAdient plcADNTOct 201839.7734.230.0%Buy (55)
Mid capLamb Weston HoldingsLWMay 202061.3668.571.4%Buy (85)
Mid capXerox HoldingsXRXDec 202021.9117.065.9%Buy (33)
Mid capIronwood PharmaceuticalsIRWDJan 202112.0212.130.0%Buy (19)
Mid capViatrisVTRSFeb 202117.4310.384.6%Buy (26)
Mid capVistra CorporationVSTJun 202116.6825.442.7%SELL
Mid capOrganon & Co.OGNJul 202130.1932.213.5%Buy (46)
Mid capMarathon OilMROSep 202112.0125.361.1%Buy (30)
Mid capTreeHouse FoodsTHSOct 202139.4334.360.0%Buy (60)
Mid capKaman CorporationKAMNNov 202137.4144.331.8%Buy (57)
Mid capThe Western Union Co.WUDec 202116.4019.204.9%Buy (25)
Mid capBrookfield ReBAMRJan 202261.3252.960.0%Buy (93)
Mid capPolarisPIIFeb 2022105.78103.970.0%Buy (160)
Mid capGoodyear Tire & RubberGTMar 202216.0113.190.0%Buy (24.50)
Large capGeneral ElectricGEJul 2007304.9689.610.4%Buy (160)
Large capShell plcSHELJan 201569.9555.553.5%Buy (60)
Large capNokia CorporationNOKMar 20158.025.181.8%Buy (12)
Large capMacy’sMJul 201633.6124.582.6%HOLD
Large capCredit Suisse Group AGCSJun 201714.487.203.6%Buy (24)
Large capToshiba CorporationTOSYYNov 201714.4920.753.1%Buy (28)
Large capHolcim Ltd.HCMLYApr 201810.929.884.5%Buy (16)
Large capNewell BrandsNWLJun 201824.7823.024.0%Buy (39)
Large capVodafone Group plcVODDec 201821.2416.586.2%Buy (32)
Large capKraft HeinzKHCJun 201928.6843.453.7%Buy (45)
Large capMolson CoorsTAPJul 201954.9654.412.8%Buy (69)
Large capBerkshire HathawayBRK.BApr 2020183.18339.060.0%HOLD
Large capWells Fargo & CompanyWFCJun 202027.2249.861.6%Buy (64)
Large capWestern Digital CorporationWDCOct 202038.4749.520.0%Buy (78)
Large capAltria GroupMOMar 202143.8055.936.4%Buy (66)
Large capElanco Animal HealthELANApr 202127.8525.360.0%Buy (44)
Large capWalgreens Boots AllianceWBAAug 202146.5345.934.2%Buy (70)

Please feel free to share your ideas and suggestions for the podcast with an email to either me at or to our friendly customer support team at Due to the time limit we may not be able to cover every topic each week, but we will work to cover as much as possible or respond by email.Market cap is as-of the Initial Recommendation date.
Current status indicates the rating and Price Target in ( ). Prices are closing prices as-of date indicated, except for those indicated by a "*", which are price as-of SELL recommendation date.

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.