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Cabot Undervalued Stocks Advisor Special Bulletin

Today’s special bulletin brings news on one of our stocks, followed by brief comments on additional portfolio stocks.

Today’s special bulletin brings news on GameStop (GME), followed by brief comments on additional portfolio stocks.

GameStop (GME – yield 6.1%) There was a variety of news about GameStop this week, and some ensuing share price volatility. Here’s the news, in the order that it occurred:

On February 28, Microsoft (MSFT) announced a new Xbox subscription service, called Game Pass, which offers gamers access to over 100 game titles for the price of $9.99 per month. Barron’s published a same-day commentary from Mizuho analyst San Phan:
“The new Xbox service, meanwhile doesn’t appear to feature many of the best new games out there. ‘We expect the industry’s top third-party publishers will not participate with their key titles in a subscription offering that may cannibalize sales of those games and/or devalue the perceived value of those games,’ Phan wrote. Games made by Activision Blizzard and Electronic Arts, for example, were ‘visibly absent.’ ”

Investors sold GME over worries that its physical gaming business will suffer further, driving the share price down 8%.

On March 1, Microsoft announced that its retail partners, including GameStop, will sell Xbox Game Pass in their stores. GameStop also sells Xbox hardware and software. Investors breathed a sigh of relief, and the share price immediately began to rebound.

In addition, GameStop increased its quarterly dividend by a penny, to $0.38 per share, on March 1. The ex-dividend date is March 10. GameStop repurchased approximately 27% of its stock in the last five years. The company is in good financial shape. If it were not, GameStop would not be spending money on stock buybacks and dividend increases.
EPS are still technically growing at GameStop, albeit slowly. That means the company has a successful and profitable plan in place to diversify its core business away from physical games.

I don’t have a date for full-year 2017 results (January year-end) as of yet. Despite the stock’s slow-growth scenario, it’s still undervalued. Hold.

Shares of BP plc (BP) and Exxon Mobil (XOM) appear to be moving in tandem—which is very common among industry peers—each beginning an upturn from a recent bottom. Again, I love these stocks for both dividends and capital gains. Buy BP and XOM now. Strong Buy.

Speaking of industry peers, Martin Marietta Materials (MLM) and Vulcan Materials (VMC) each exhibited shakeout chart patterns a week ago. Odds are strong that the rebound has begun. I don’t think investors will need to wait past springtime to see these stocks return to their January highs. Strong Buy.

Shares of Boise Cascade (BCC) look imminently ready to break out above 28.5 and rise toward longer-term price resistance at 32. Risk-tolerant investors should buy BCC now. Buy.

Dollar Tree (DLTR) reported full-year 2017 earnings (January year-end) that rose 31.25% vs. a year ago. Prospects remain strong for subsequent years’ EPS growth. The stock is slightly undervalued. The best-case scenario in the coming months is that DLTR could rise toward 90, where it traded in late November 2016. I’ll cover DLTR more extensively next week in the March issue of Cabot Undervalued Stocks Advisor. Buy.

Royal Caribbean (RCL) looks ripe for a breakout. Consider yourself warned. Haha! Strong Buy.