This week, we published the October edition of the Cabot Turnaround Letter, in which we discuss our new feature recommendation, TreeHouse Foods (THS), turnarounds in the Transportation industry, and five turnaround stocks under $11/share.
We also raised our price target for Signet Jewelers (SIG) from 80 to 94.
This week’s note includes The Catalyst Report. We encourage you to take a look at this – it is popular among many of our subscribers and unique on Wall Street. The report lists all of the companies that had a major catalyst in the past month, 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 the stock-price performance perspective taken by most of the media.
For stock picking, these 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 an asterisk (*) on the report. Often enough, some of these names become Buy recommendations for the Cabot Turnaround Letter.
Earnings updates:
None.
Ratings changes:
This week, with the October issue of the Cabot Turnaround Letter, we raised our price target on Signet Jewelers (SIG) from 80 to 94. The company continues its impressive turnaround, but while the share price has risen sharply, the valuation remains low as the higher price reflects higher earnings and cash build-up rather than multiple expansion.
Friday, October 1, 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 17½ minutes and covers:
- Brief updates on:
- TreeHouse Foods (THS) – featured in the October Cabot Turnaround Letter.
- LambWeston (LW) – low potato crop yields and other sources of pressure on LW shares.
- Wells Fargo (WFC) – Fed Chair Powell’s singling out of Wells Fargo looks political.
- Altria (MO) – loses patent infringement appeal on IQOS.
- Kraft Heinz (KHC) – announces CEO’s first deal since joining.
- Walgreens Boots Alliance (WBA) – two deals underway?
- Adient (ADNT) – completes its China transactions.
- Meredith Corp (MDP) – no word on IAC discussions.
- Macy’s (M) – shares hit 9% on weak news at competitors.
- Gannett (GCI) – refinancing is a positive, outweighs minor guide-down.
- Toshiba (TOSYY) – October 31 deadline for strategic plan is looming.
- Elsewhere in the Market:
- Uptick in federal defense spending.
- Final note:
- Elon Musk comments on China and the United States.
- Major League Baseball – four-way race for two wild card slots with only three games left in season.
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
Deal activity surged in September, with, interestingly, several being credibly rumored but without a definitive agreement. We can’t recall so many “leaked” deal stories in a single month. Buy-rated companies Meredith Corp (MDP), Royal Dutch Shell (RDS/B) and Walgreens Boots Alliance (WBA) were involved in or rumored to be involved in deals this month. Spin-off activity and CEO changes returned to life, as well.
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:
eHealth (EHTH) $1.1 billion market cap – This company is a leading private online health insurance marketplace, with a specialty in helping customers find Medicare and related insurance coverage. EHealth replaced its CFO mid-month, followed two days later by changing its CEO and its board chairman. The company’s shares rose nearly 10-fold in 2018-2020, only to collapse 70% recently. EHealth’s new leadership looks capable, but the tasks ahead are daunting.
Hertz Global Holdings (HTZZ) $18.5 billion market cap – After its near-miraculous exit from bankruptcy, in which shareholders received an exceptionally rare payout, Hertz is looking for a new CEO to help launch their new future.
ConocoPhillips (COP) $90.8 billion market cap – At $70 oil, the world’s largest E&P company is a cash flow machine, with its low costs and promises to return at least 30% of its cash from operations to shareholders while restraining its capital spending to 50% of cash from operations. Their deal to acquire Royal Dutch Shell’s Permian assets with cash adds to the gusher.
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.