Please ensure Javascript is enabled for purposes of website accessibility
Value Investor
Wealth Building Opportunites for the Active Value Investor

Cabot Undervalued Stocks Advisor Special Bulletin

Crista is making several rating changes today.

Today’s news: Baker Hughes, a GE Co. (BHGE) moves from Hold to Buy; BB&T Corp. (BBT) and Regions Financial (RF) are now Retired from the Growth & Income Portfolio; Supernus Pharmaceuticals (SUPN) moves from Hold to Buy.

Baker Hughes, a GE co. (BHGE – yield 3.0%) is an undervalued aggressive growth stock within the oilfield services industry. The market was surprised and pleased with competitor Schlumberger’s (SLB) earnings release on January 18, which served as a catalyst for industrywide share price breakouts. I’m moving BHGE from Hold to Buy, now that constructive price action is commencing. The first resistance point will be 27, at which time I would expect a brief pullback before the stock can advance further. Buy.

BB&T Corp. (BBT – yield 3.3%) reported fourth quarter results last week. Adjusted diluted EPS of $1.05 pleased the market, reflecting strong loan growth, lower expenses, and increases in deposits and net interest margin. Four investment firms promptly raised their price targets on the stock. The company repurchased $375MM of stock during the fourth quarter, and plans to repurchase $425 million of stock during the first quarter of 2019.

Full-year 2018 profits came in a bit higher than expected, up 45.2%, and the 2019 consensus EPS estimate was revised downward to reflect 7.4% growth. The 2019 P/E is 11.3, and the stock is now fairly valued. I’m therefore moving BBT from Buy to Retired. Retired.*

Regions Financial Corp. (RF – yield 3.6%) reported fourth quarter EPS of $0.37 vs. the consensus estimate of $0.38, and repurchased $370 million of stock. Full-year 2018 EPS rose 42.6%. Unfortunately, the 2019 EPS number reflects just 2.6% growth – not high enough to remain in the portfolio. I’m therefore moving RF from Hold to Retired. Retired.*

Supernus Pharmaceuticals (SUPN) appears capable of blowing right past short-term resistance at 38, in which case it could rise to 42 before stopping. I’m moving SUPN from Hold to Buy. Expect volatility. Buy.

(*As a reminder, Retired means I’m removing the stock from the portfolio, but there’s no great harm if you decide to keep the stock and collect the dividend. Sell means that I don’t think anybody should own the stock, due to at least one major problem.)