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Value Investor
Wealth Building Opportunites for the Active Value Investor

Cabot Undervalued Stocks Advisor Special Bulletin

Two stocks move from Strong Buy to Hold and there is bullish price action another.

Today’s news: ConocoPhillips (COP) and KLX Inc. (KLXI) each move from Strong Buy to Hold; bullish price action on ConocoPhillips (COP), KLX Inc. (KLXI) and Skechers (SKX).

ConocoPhillips (COP – yield 1.8%), a global energy exploration and production company, broke out from its 2018 trading range this week, and is now actively climbing. Consensus estimates point toward EPS growth of 363% and 5.4% in 2018 and 2019. (Profits were small in 2017, and they’re more normal this year.) I don’t want to hold COP in 2019 unless the earnings growth projection ramps up well into the mid-teens—which could happen after the upcoming earnings season. But if that doesn’t happen, I’ll be selling COP after the current run-up, in favor of a stock with better multi-year earnings growth expectations. Therefore, I’m moving COP from Strong Buy to Hold today. Hold.

KLX Inc. (KLXI), a company in the aerospace and energy service industries, broke out from its one-month trading range this week to new all-time highs. The stock is only slightly undervalued based on my normal measurements, although it’s also been considering “strategic alternatives” – meaning that there might be a takeover offer or a spinoff in the near future. The shareholder value of potential M&A activity could easily exceed my normal valuation measurements. I’m moving KLXI from Strong Buy to Hold, and will leave it there until we receive definitive news about M&A activity. Hold.

Skechers USA Inc. (SKX), a footwear company, broke out from its 2018 trading range this week. Nobody has missed the run-up in the share price. I currently plan to hold SKX until it retraces its high of 53 from 2015. Buy SKX now. Strong Buy.