Today’s note includes ratings changes, the podcast and the Catalyst Report. We publish the Catalyst Report on the Friday after each monthly issue of the Cabot Turnaround Letter.
We encourage you to take a look at the Catalyst Report – it is popular among many of our subscribers. This report lists all of the companies that had a major catalyst in May, including CEO changes, new activist involvement, emergence from bankruptcy, major acquisitions, and others. If for no other reason, it’s an interesting list of what is going on in the market from a company-level perspective, rather than a stock-price performance perspective like most of the media.
For stock-picking, the names provide a shopping list, of sorts. For names that have out-of-favor stocks, they can point to interesting turnaround candidates, which we highlight with a * on the report. Often enough, some of these names become Buy recommendations for the Cabot Turnaround Letter.
This was an earnings-free week – next week, on Wednesday, June, 3, Duluth Holdings (DLTH) reports earnings.
Ratings Changes
On Monday, May 24th, we moved Jeld-Wen Holdings (JELD) from Hold to Sell.
Thursday, May 27, 2021 Subscribers-Only Podcast
Covering recent news and analysis for our portfolio companies and other topics relevant to value investors.
Today’s podcast is about 11½ minutes and covers:
- Brief updates on:
- Royal Dutch Shell (RDS/B) – Dutch court ruling
- Holcim, Ltd (HCMLY) – Valuation compared to MartinMariettaMaterials, and a minor name change
- Biogen (BIIB) – major announcement on June 7 means next week is last chance to exit if you’re not comfortable with likely post-news downside risk.
- LambWeston (LW) – CFO retires, seems benign.
- Elsewhere in the Market:
- Can ExxonMobil and other oil majors “just say no” to alternative energy? Will we see an electricity producer be acquired?
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.
Catalyst Report
Activist activity stepped up in May, as did CEO turnover. Also, three companies emerged from bankruptcy. While the volatility in tech stocks, Bitcoin and SPACs dominates the headlines, these below-the-radar catalyst-driven companies offer worthwhile ideas that could provide strong returns regardless of the market environment. With proxy season winding down, activist activity may take a breather in June, although we anticipate steady mergers/acquisition news and CEO replacements.
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.
In addition to Garrett Motion (GTX) and Tidewater (TDW), which were discussed in the June 2021 Cabot Turnaround Letter, the following catalyst-driven stocks look interesting:
Perrigo (PRGO) $6.1 billion market cap – About 2½ years into the turnaround, the new-ish CEO’s efforts to sell its prescription business is on-track. The shares remain cheap.
Seven & I Holdings (SVNDY) $39.4 billion market cap – This Japanese retail conglomerate owns the valuable 7-Eleven business. Activist investor Value Act now holds a 4.4% stake and believes that a break-up would double the share price. The shares’ lackluster performance could use the help.
Danone S.A. (DANOY) $50.8 billion market cap– After the former CEO was ousted in March for chronic underperformance, the company lured respected executive Antoine de Saint-Affrique to turn around this consumer foods giant. Danone’s shares haven’t gone anywhere in 15 years.
Disclosure: The chief analyst of the Cabot Turnaround Letter personally holds shares of every Rated Recommendation. The chief analyst may purchase or sell securities discussed in the “Ratings Changes” 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 Friday update at any time.