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.
Earnings updates:
None.
Ratings changes:
Macy’s (M) – Moving from Buy to Hold. The shares are trading above our 18 price target. The fundamentals and valuation are reasonable but not good enough to warrant a price target increase or a Sell. We are inclined to hold this stock through earnings, which we anticipate will be reported at the end of August.
Duluth Holdings (DLTH) is trading above our price target, so we are putting this stock under review. Signet Jewelers (SIG) remains fundamentally strong and the valuation is still attractive, although the stock is trading very close to our price target.
Friday, July 2, 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 10 minutes and covers:
- Brief updates on:
- Organon & Company (OGN) – New Buy recommendation in this month’s issue of the Cabot Turnaround Letter.
- Nokia (NOK) – Has reached parity with its 5G chipsets after falling well behind the competition.
- General Motors (GM) – Honda will be making its own EVs for the North American market after GM launches Honda’s first two.
- Berkshire Hathaway (BRK.B) – CNBC is featuring Buffett and Munger in the Wealth of Wisdom series.
- Wells Fargo & Company (WFC) – Raising their dividend and launching an $18 billion share buyback program in wake of passing Fed stress test.
- Elsewhere in the Market:
- All asset prices seem to be going up.
- Final note:
- Krispy Kreme (DNUT) returns to public ownership.
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
As we anticipated, the volume of activist activity took a breather in June, although there were more than a few changes in CEOs. Cabot Turnaround Letter and the related Cabot Undervalued Stocks Advisory stocks were involved in several catalysts: activists are winning major changes at Toshiba (TOSYY), Organon’s (OGN) spin-off is very interesting, activist Cevian took a 5% stake in Aviva (AVVIY), and Tyson Foods’ (TSN) CEO departs after less than a year (we recently sold this stock prior to his departure when the shares reached our price target).
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:
Salvatore Ferragamo (SFRGY) $3.8 billion market cap– This iconic Italian luxury brand has struggled as fancy business attire loses its appeal. Marco Gobbetti is leaving Burberry Group to run Ferragamo – his value is reflected in the 9% drop in Burberry’s shares on the news. Ferragamo needs major help and Gobbetti may be the one to provide it.
Bank of Marin Bancorp (BMRC) $409 million market cap – This small banking company in the San Francisco area is struggling and changed its president but investors aren’t buying it. There seems to be more to this story than meets the eye.
Hertz Global Holdings (HTZZ) $1.4 billion market cap – Despite Hertz’s collapse a year ago, the meme investors were right, as shareholders were winners in a remarkable turn of fundamentals. Hertz is now free of Chapter 11, with $5.9 billion in fresh capital, 80% less debt and a new board of directors.
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.