With this note, we combine our regular Friday afternoon Members-Only Podcast with any earnings updates. By combining these, you will receive the same research, perspective and analysis as always yet in one easy-to-read email.
As today is the first Friday after the monthly Cabot Turnaround Letter is published, we are also including the Catalyst Report.
We hope you find the combined format more convenient. Please let me know what you think and how this works for you.
One major change we want you to see upfront: we are moving Amplify Energy (AMPY) to a SELL. We discuss why in the podcast, and below.
Friday, October 2, 2020 Members-Only Podcast
Covering recent news and analysis for our portfolio companies and other topics relevant to value investors.
Today’s podcast is about 13 minutes and covers:
- Recent issue of the Cabot Turnaround Letter:
- Poultry companies
- Beneficiaries if the economy fully reopens in the next two years
- Feature name: Western Digital Corporation (WDC)
- Brief updates on:
- Toshiba (TOSYY) and the delay in the Kioxia IPO (formerly Toshiba Memory)
- Impact on Western Digital (WDC) of Micron Technology’s recent earnings
- Amplify Energy (AMPY) - Move to SELL. We have lost patience as a return to $37 oil prices will further pressure its finances, likely resulting in a dilutive equity offering.
- Peabody Energy (BTU)’s disappointing joint venture news
- BorgWarner (BWA) – completed their acquisition of Delphi Automotive
- Adient (ADNT) – sold their fabric operations for $175 million
- Volkswagen (VWAGY) – maybe selling Bugatti and other ultra-high-end brands?
- General Motors (GM) – Nikola discussions continue, sold credit card operations for $2.5 billion, encouraging September car sales.
- Elsewhere in the market:
- President Trump diagnosed with coronavirus
- An ETF of SPACs – sign of investor optimism
- Final note
You can listen to the latest podcast here, toward the bottom of the webpage.
Please feel free to share your ideas and suggestions for the podcast with an email to either me at bruce@cabotwealth.com or to our friendly customer support team at support@cabotwealth.com. 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.
Earnings reports by Cabot Turnaround Letter recommended companies:
None this past week
Catalyst Report
This month was a bit quiet on the catalyst front. Activists continue with new campaigns but many marginal players have either stepped away or vanished. Two notable companies filed for bankruptcy – they won’t be the last in this unusual year.
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 so on. 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 a much-needed positive change to out-of-favor companies.
One highly-effective way to use this tool is to 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 also access the last Catalyst report here, toward the lower right side of the webpage..
PVH Corporation (PVH) $4.2 billion market cap – This apparel company owns brands including Tommy Hilfiger and Calvin Klein. PVH has struggled but the young-and-rising Stefan Larsson was named CEO in a planned succession. If successful, he could reinvigorate these older brands and PVH’s lagging share price.
DXC Technology (DXC) $4.5 billion market cap – Under the new leadership of Mike Salvino (since September 2019), the company continues make meaningful changes to its leadership team (bringing in several capable new executives). It is also selling off non-core assets. This company has considerable potential.
Seaboard Corporation (SEB) $3.3 billion market cap – Mentioned in our recent monthly letter, this firm is very much out of favor, partly as its commodity food businesses have struggled recently. Even so, this old-school company is high-quality and well-run. The unexpected change in CEOs may herald more stability (good) or possible portfolio changes (better).