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Value Investor
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Cabot Undervalued Stocks Advisor Special Bulletin

Crista is adding a new stock to the Buy Low Opportunities Portfolio

Today’s News: SYNNEX Corp. (SNX) joins the Buy Low Opportunities Portfolio, two days in advance of an earnings release and a likely dividend increase; D.R. Horton (DHI) moves from Hold to Buy; additional near-term trading opportunities.

D.R. Horton (DHI – yield 1.6%*) – In today’s Weekly Update, I wrote, “The price chart is tentatively improving. The stock might rise past 38 soon.” The stock appears capable of a run-up now, the occasional down day notwithstanding. I’m moving DHI from Hold to Buy now. There’s some price resistance at 42. Buy.

SYNNEX Corp. (SNX – yield 1.7%) is a leading global business process services company within the industrials sectors, operating in over 40 countries. SYNNEX provides a comprehensive range of distribution, logistics and integration services for the technology industry, offering outsourced services focused on customer engagement to a broad range of enterprises.

The company is currently digesting a $2.8 billion acquisition of Convergys (CVG) that closed in October 2018. SYNNNEX management will present at the 21st Annual Needham Growth Conference on January 15.

SYNNEX will report fourth-quarter results on the afternoon of January 10 (November year end). Last month, SYNNEX pre-announced fourth-quarter results, expecting EPS within a range of $3.20-$3.30, above analysts’ consensus EPS estimate of $3.00. The current consensus estimate has since risen to $3.12, meaning that if SYNNEX reports a number as indicated between $3.20 and $3.30, that will constitute an earnings beat that might push the share price upward.

Additionally, SYNNEX raised the quarter’s revenue estimate to a range of $5.5-$5.6 billion vs. the previous analysts’ estimate of $5.34 billion. The current consensus revenue estimate is $5.5 billion.

From the December 10 press release:
“Excellent execution in both of our business segments and stable market conditions led to our very strong performance,” stated Dennis Polk, President and Chief Executive Officer of SYNNEX Corporation. “Our Technology Solutions division saw solid results across the board while our Concentrix business is executing to plan on the integration of Convergys, with excellent performance from the underlying businesses. We are delighted that results for the fourth quarter of 2018 will exceed our expectations.”

With six analysts contributing to consensus earnings estimates, Wall Street expects full-year 2018 EPS to rise 15.9% to $10.27, followed by a 13.1% increase in 2019 to $11.62. The P/E is quite low at 7.1.

The company has increased its dividend payout within a range of 25%-60% in each of the last three years. Notably, the most recent announcement of an increase came on January 9, 2018, and it’s therefore probable that the company could announce another increase this week when they report fourth-quarter results.

SYNNEX authorized a $300 million share repurchase in 2017 and has thus far repurchased $56 million of stock through their recent third quarter.

SNX is a small-cap stock with a $4.2 billion market capitalization—almost big enough to count as a mid-cap stock.

As with so many U.S. stocks, the share price fell tremendously in 2018. It bottomed in early October, and promptly spent three months trading steadily between 73 and 84. You’ll be hard-pressed to find many stocks like SNX with stable trading patterns right now.

SNX has resided on my “waiting in the wings” Buy List for several months. The reason that I’m adding SNX to the Buy Low Opportunities Portfolio today is that the stock appears immediately ready to rise past 84 and begin a sustainable run-up. There’s some price resistance at 95 and again at 115. Buy SNX now. Strong Buy.



Cabot Undervalued Stocks Advisor is generally focused on growth stocks with low valuations. I’m very willing to wait for the market to recognize their values. Thus, I don’t sell during down markets unless the fundamentals fall apart. (Fundamentals do occasionally fall apart—but those instances rarely have anything to do with stock market corrections.)

Nevertheless, stock price charts can sometimes offer clear trading opportunities, and I know that some of my subscribers are very interested in trading. In that light, here are some trading suggestions for those of you who might like to jump in and out of stocks during this volatile market. These trading suggestions are for stock traders, not for longer-term investors! And speaking of volatility, please expect the major market averages to continue having big price swings—both up and down—because markets generally need to trade sideways for a while before they can truly recover.

DowDuPont (DWDP – yield 2.8%*) – In today’s Weekly Update, I wrote, “Presuming that the worst of the market correction is behind us, the stock will likely trade between 51 and 60 in the coming weeks.” I think the stock’s heading to 59. Traders: don’t get greedy. Put in a sell order today at 59 … not 59.90. Buy.

Guess?, Inc. (GES – yield 4.1%*) – In today’s Weekly Update, I wrote, “The stock is most likely to trade between 19.5 and 24 in the coming months.” The stock is moving quickly toward price resistance at 23.5. Traders: don’t get greedy. Put in a sell order today at 23.5. Strong Buy.

KLX Energy Services (KLXE) – In today’s Weekly Update, I wrote, “The share price appears capable of rising past 25 very soon and heading toward price resistance at 30.” That run-up may have begun yesterday afternoon. Traders: put in a sell order at 29.70. Hold.

Marathon Petroleum (MPC – yield 3.0%*) – In today’s Weekly Update, I wrote, “Presuming that the worst of the market correction is behind us, the stock will likely trade between 57 and 65 in the coming weeks. I’ll give MPC a Buy recommendation when a more solid trading pattern emerges.” Traders take note: We’re approaching 65. Hold.

Tivo (TIVO – yield 6.8%*) looks like it’s going to blow right past 10.5 and head to price resistance at 12. (As always, I’m holding this stock for a potential M&A announcement.) Strong Buy.

*None of these stocks has an ex-dividend date in January.