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Value Investor
Wealth Building Opportunites for the Active Value Investor

Cabot Undervalued Stocks Advisor 520

Three of today’s featured companies seem most obviously ready to begin or continue run-ups in the coming days Yesterday’s earnings report made it clear that a fourth’s dividend is safe, with a current yield of 8.4%. Plus, energy stocks are acting well recently.

Cabot Undervalued Stocks Advisor 520

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Caution: Rough Seas Ahead
As the stock market recovers from the steep downturn in March, I’d like to stress that this downturn bears no resemblance to any previous stock market downturn. It wasn’t created by corporate excesses or a housing bubble or any specific financial problem. And while I had certainly warned investors, beginning in December 2019, that we were due for a normal correction, simply because the S&P 500 index had risen so rapidly beginning in late October, the eventual downturn had far more to do with the global virus pandemic than anything else.

More recently, I’ve been cautioning investors of these coming virus-related economic troubles, which I believe will play out for years to come. Many of you responded with kind words and similar worries. A few of you responded with hate mail. (As a reminder, I’m not your fairy godmother. It’s MY JOB to discuss the economic implications of global occurrences. If I’m going to pretend that everything’s okay, then you should fire me.)

I am more convinced than ever that the U.S. is in for rough seas ahead. Not just the stock market, but the whole country, its companies and its citizens. You will be hearing about bankruptcies among big businesses, small businesses and citizens on perhaps a daily basis. Already this week we learned that J. Crew has filed for bankruptcy.

As I’ve previously urged, reach out to your friends and relatives who own small businesses or who have lost jobs. Some of them will have tremendous difficulty staying afloat. They need people to share their concerns with, especially if they’re the family’s breadwinners who don’t want to worry their spouses and children.

As for investments, the stock market seems relatively calm and optimistic. Energy stocks are rebounding, and nobody has missed the opportunity to hop on that trend.

You may have read that Warren Buffett cashed in all of his shares of airline companies. This is a big deal … A VERY BIG DEAL. This is not the time to be buying low on airline stocks. Wait for the bad news to unfold. Their second-quarter earnings reports will probably bring significant news, at which time we can all reassess the industry’s outlook.

Send questions and comments to But please hold off on the hate mail unless you really and truly think that I’ve said something that’s very wrong vs. the stark reality that has been thrust upon us.

Portfolio Notes
Be sure to review the Bulletins from April 30, May 4 and 5 in which I mentioned news, rating changes and/or price action on airline stocks*, Adobe Systems (ADBE), Alexion Pharmaceuticals (ALXN), (AMZN), Apple Inc. (AAPL), Chevron (CVX)*, Dow Inc. (DOW), Exxon Mobil (XOM)*, LGI Homes (LGIH), Marathon Petroleum (MPC), Mercury General Group (MCY), MKS Instruments (MKSI), Royal Dutch Shell (RDS/A)**, Total SA (TOT), Tyson Foods (TSN), Universal Electronics (UEIC), and Voya Financial (VOYA).
*Not featured in any of my published portfolios.
**Featured in Cabot’s 10 Best Stocks to Buy and Hold for 2020.
***Featured in my March 18 webinar.

Quarterly Earnings Release Calendar
May 5 pm: Voya Financial (VOYA) – 1Q
May 6 am: Alexion Pharmaceuticals (ALXN) and General Motors (GM) – 1Q
May 7 am: Bristol-Myers Squibb (BMY) and Quanta Services (PWR) – 1Q
May 7 pm: Equitable Holdings (EQH), NV5 Global (NVEE) and Universal Electronics (UEIC) – 1Q
May 21 pm: Nvidia (NVDA) – 1Q
First half June: Adobe Systems (ADBE) and Broadcom (AVGO) – 2Q

Today’s Portfolio Changes
NVIDIA (NVDA) moves from Buy to Strong Buy.
Total S.A. (TOT) moves from Hold to Strong Buy.

Last Week’s Portfolio Changes
Broadcom (AVGO) moved from Hold to Buy.
Dow Inc. (DOW) moved from Hold to Buy.
Equitable Holdings (EQH) moved from Buy to Strong Buy.
LGI Homes (LGIH) moved from Hold to Buy to Strong Buy.
Marathon Petroleum (MPC) moved from Buy to Strong Buy.
MKS Instruments (MKSI) moved from Buy to Hold.
NV5 Global (NVEE) moved from Hold to Strong Buy.
Tyson Foods (TSN) moved from Hold to Buy.
Universal Electronics (UEIC) moved from Hold to Buy.
Voya Financial (VOYA) moved from Hold to Buy.

Growth Portfolio

Growth Portfolio stocks have bullish charts, strong projected earnings growth, little or no dividends, low-to-moderate P/Es (price/earnings ratios) and low-to-moderate debt levels.

Featured Stock: LGI Homes (LGIH)
LGI Homes is the 10th-largest residential home builder in America. The company is currently building homes, primarily for first-time home buyers, in 19 U.S. states from coast-to-coast and the District of Columbia.

LGI Homes reported first-quarter diluted EPS of $1.67 vs. the consensus estimate of $1.23 yesterday, and $454.7 million revenue vs. the $432.4 million estimate. The company experienced a record-breaking 1,835 home closings in the first quarter. Comments from the earnings press release include:

“Despite the challenging environment we encountered at the end of the first quarter, our business was stronger in April than we had originally expected and we are seeing positive momentum in recent sales trends that leads us to believe the impact from the COVID-19 pandemic may be less severe than we had originally expected. We are building, selling and closing homes across the nation every day and our customers are telling us that they are more ready than ever to move out of densely populated living situations and into homes that offer more space and privacy. As a result, our outlook for the coming months is tempered, but positive.”

LGIH is a small-cap growth stock, and a good choice for growth investors and traders. The price chart is bullish, showing a potential near-term advance for the stock. At a share price of 66, there’s 44% upside as the stock retraces its all-time high of 95, where it traded in February. (When it does, be prepared to take profits.)

Be aware that a trend of small business closures resulting from the COVID-19 business lockdown could result in chronic unemployment that depresses the housing market, but that will probably take a few months to become apparent, and even longer to impact LGI Homes’ rapid corporate growth trajectory. Strong Buy.


Marathon Petroleum (MPC – yield 7.2%) is a leading integrated downstream energy company and the nation’s largest energy refiner, with 16 refineries, a majority interest in midstream company MPLX LP, 10,000 miles of oil pipelines, and product sales in 11,700 retail stores. Wall Street analysts have been forecasting a 2020 full-year loss of ($2.02) per share, followed by a 2021 profit of $2.52 per share. Those numbers will change in the coming week as analysts rework their forecasts based on first quarter results and corporate guidance. Share repurchases have been suspended, and the dividend payout remains intact. Refer to yesterday’s Bulletin for Marathon’s first-quarter results.

The market is warming up to energy stocks as global business lockdowns ease and the resulting commerce generates a recovering demand for oil. Marathon’s price chart is bullish, with the stock recently rising above the 50-day moving average. Traders and dividend investors should buy now. Strong Buy.


MKS Instruments (MKSI – yield 0.8%) is a 60-year-old global provider of instruments, subsystems and process control solutions that measure, monitor, deliver, analyze, power and control critical parameters of advanced manufacturing processes to improve process performance and productivity for their customers. Their primary served markets include the semiconductor, industrial technologies, life and health sciences, research and defense. MKS offers the largest breadth of products and services in their market, with 2200 patents and a sales presence in 100 countries. MKS Instruments was featured in the February 19 issue of Cabot Undervalued Stocks Advisor.

MKS Instruments reported a very strong first quarter last week. The company will host their annual meeting of shareholders online on May 11.

MKSI is an undervalued, small-cap growth stock, appropriate for growth investors and traders. I moved MKSI to a Hold recommendation last week, on a day when the stock fell from 108 to 100. It’s okay to jump back in if the stock trades down to about 92. Hold.


NV5 Global (NVEE) is a leading provider of professional and technical engineering and consulting solutions for public and private sector clients in the infrastructure, construction, real estate, and environmental markets. NV5 is expected to report $0.86 first-quarter EPS and $161.2 million revenue on the afternoon of May 7. Full-year profits are expected to grow 29% and 10% in 2020 and 2021, respectively. NVEE is an undervalued micro-cap growth stock, appropriate for risk-tolerant growth investors and traders. There’s upside resistance near 55. Strong Buy.


Quanta Services (PWR – yield 0.6%) is a leading specialty infrastructure solutions provider serving the utility, energy and communication industries. Their infrastructure projects have meaningful exposure to highly predictable, largely non-discretionary spending across multiple end-markets, including 65% of revenue coming from regulated utility customers. The company achieved record annual revenues, operating income and backlog in 2019, and is pursuing a multi-year goal of increasing margins. Quanta Services was featured in the December monthly issue of Cabot Undervalued Stocks Advisor.

PWR is an undervalued, mid-cap growth stock. Quanta is expected to report first quarter EPS of $0.46 and $2.7 billion revenue on the morning of May 7. Full-year earnings estimates have slowly declined due to the pandemic. Analysts now expect EPS to grow 7.5% and 10.6% EPS growth in 2020 and 2021. The 2020 P/E is 9.7. The stock is resting after a recent run-up. Hold.


Tyson Foods (TSN – yield 2.9%) is the largest U.S. food company, with operations in 20 countries, and a recognized leader in protein with leading brands including Tyson, Jimmy Dean, Hillshire Farm, Ball Park, Wright, Aidells, ibp and State Fair. Management is focused on the growing global need for protein, and fulfilling that need in a sustainable and environmentally conscious manner. The company is expected to deliver record revenues and moderate earnings growth this year. Tyson Foods was featured in the January and April issues of Cabot Undervalued Stocks Advisor.

TSN is an undervalued stock, attractive for growth investors and dividend investors. The stock pulled back this week, and may be establishing price support at 55. I expect continued upside in 2020, interspersed with pullbacks as we experience volatility in the broader market. Buy.


Universal Electronics (UEIC) is a manufacturer and world leader of wireless and voice remote control products, software and audio-video accessories for the smart home, with over 400 patents and a strong pipeline of new products in the areas of safety and security, climate control and lighting. Clients include every major electronic and telecommunication company: AT&T, Cox, Dish, Comcast, Samsung, LG, Sony, Liberty, Daikin, Sky and more. Universal Electronics was featured in the February monthly issue and the February 26 issue of Cabot Undervalued Stocks Advisor.

The company is expected to report first-quarter EPS of $0.83 and $168.2 million revenue on the afternoon of May 7. UEIC is a volatile, undervalued, micro-cap growth stock, appropriate for risk-tolerant investors and traders. The stock rose past upside price resistance at 40 in late April, briefly touched 42, then came back down towards 40 as the broader market weakened. Small-cap stocks have been gaining momentum in recent weeks. Buy UEIC now, as its pullback will likely be brief. Buy.


Voya Financial (VOYA – yield 1.4%) is a U.S. retirement, investment and insurance company serving 13.8 million individual and institutional customers. Voya has $603 billion in total assets under management and administration. VOYA is a mid-cap growth stock. The company has “a substantial level of excess capital,” as per a major investment bank’s comments in April. Voya will host their annual meeting of stockholders on May 21.

Voya is expected to report first-quarter EPS of $0.88 and $212.2 million revenue on the afternoon of May 5. Analysts expect full-year EPS to grow 24% and 40% per year in 2020 and 2021, and the 2020 P/E is 10.2. VOYA is appropriate for aggressive growth investors. The stock just rose above its 50-day moving average, and the price chart appears primed for a launch upward. A good earnings report could be the catalyst for a new run-up.Buy.


Growth & Income Portfolio

Growth & Income Portfolio stocks have bullish charts, good projected earnings growth, dividends of 1.5% and higher, low-to-moderate P/Es (price/earnings ratios), and low-to-moderate debt levels.

Featured Stock: Total S.A. (TOT – yield 8.4%)
Total is a French multinational integrated energy company that produces and markets fuels, natural gas and low-carbon electricity, operating in over 130 countries. On May 5 (yesterday), Total reported first-quarter net income of $1.78 billion, handily beating the $1.6 billion consensus estimate. As with all energy companies, Total has been hard hit by the global business lockdowns that dramatically reduced demand for energy products. Fortunately, the company’s success in maintaining low debt levels and a low price-per-barrel of oil have helped Total rise above their peers regarding their degree of financial solvency. Total has chosen to maintain their quarterly dividend payout at the year-ago level of 66 Euros, a slight reduction from the more recent 68 Euros. The company is reducing capital expenditures and operating expenses, and considering selling infrastructure assets and/or real estate based on liquidity needs. Debt levels increased during the quarter, but do not reflect a problematic situation.

In separate news, Reuters reported, “‘Occidental officially told us that we cannot acquire the Algeria assets,’ the French company’s CEO Patrick Pouyanne told analysts during a conference call after its first quarter 2020 results.” Algeria blocked the transaction, which was part of a previous $8.8 billion agreement that helped facilitate Occidental’s acquisition of Anadarko Petroleum.

The most recent consensus estimates reflected full-year EPS of $0.99 and $2.38 in 2020 and 2021. Those numbers will be updated in the coming weeks.

I’m moving TOT from Hold to a Strong Buy recommendation, now that it’s clear that they’re faring relatively well during these difficult economic times. TOT is appropriate for growth & income investors. The stock has traded between 32-40 since its late-March rebound from its recent low of 24. The stock reacted well to the earnings report. A breakout above 40 could carry TOT to additional price resistance at 47. Strong Buy.


Bristol-Myers Squibb Company (BMY – yield 2.9%) is a biopharmaceutical company with a mission to discover, develop and deliver innovative medicines that help patients prevail over serious diseases. Bristol-Myers purchased Celgene for $74 billion in November 2019. The merged company markets a long list of pharmaceuticals, including Revlimid, Eliquis and Opdivo, to treat cardiovascular, oncology and immunological diseases. The company expects revenue and profit growth to come from four areas: sales volume increases from current products, development and launch of new medicines, life cycle management and synergies from the Celgene acquisition. Bristol-Myers was featured in the April issue of Cabot Undervalued Stocks Advisor.

The company is expected to report first-quarter EPS of $1.49 and $10.0 billion revenue on the morning of May 7. The company is expected to increase full-year EPS by 31% and 20% in 2020 and 2021, and the 2020 P/E is 9.7. Bristol-Myers’ financial priorities include debt repayment, investment in innovation, share repurchases and annual dividend increases. I would expect earnings growth to slow in subsequent years as the company digests the Celgene merger and business grows at a more normal pace.

BMY is appropriate for growth investors and income investors. At a share price of 61.5, BMY is up 34% from its March lows, with 9% upside to its February peak at 67. Hold.


Broadcom (AVGO – yield 4.9%) is a global technology leader that designs, develops and supplies semiconductor and infrastructure software solutions that serve the world’s most successful companies. CFO Tom Krause expects to both continue paying the dividend and paying down debt in 2020 (none of which is maturing this year), even under poor economic conditions. Share buybacks and M&A activity are now on the back burner. Broadcom was featured in the December 17 and January issues of Cabot Undervalued Stocks Advisor.

AVGO is an undervalued growth & income stock. Profits are expected to grow 1.3% and 10.1% in 2020 and 20212, and the 2020 P/E is 12.3. There’s some price resistance at 290, and again at 320. Buy AVGO now. Buy.


Dow Inc. (DOW – yield 8.3%) is a commodity chemicals company with manufacturing facilities in 31 countries. Results are impacted in tandem with rising and falling oil prices. Full-year profits are expected to decline in 2020, then rise again in 2021. Dow reported on-target first-quarter 2020 results last week. After repurchasing $125 million of stock during the first quarter, Dow has now suspended share repurchases during the second quarter as a result of the economic lockdown’s effect on business. The stock’s dividend remains intact. DOW shares have been ratcheting upward since mid-March. The next upswing could carry DOW to about 42.5. Buy DOW now. Buy.


Buy Low Opportunities Portfolio

Buy Low Opportunities Portfolio stocks appear capable of a big rebound from recent lows. They have strong projected earnings growth; low-to-moderate price/earnings ratios (P/Es); no dividend requirement and low-to-moderate debt levels. Investors should expect volatility as the stock market alternately embraces the companies’ current successes and remains wary of the stocks’ recent downturns.

Featured Stock: Apple Inc. (AAPL – yield 1.1%)
Apple launched a new MacBook Pro with modified keyboards this week. The updated version also features faster performance and double the storage of its predecessor. MacBooks account for 9% of the company’s total revenue.

Apple reported second-quarter 2020 results last week (September year end). The company posted quarterly revenue of $58.3 billion vs. the $54.5 billion consensus estimate. Diluted earnings per share of $2.55 far surpassed the $2.26 estimate. The quarter’s successes also included all-time record revenue in Services and a quarterly revenue record for Wearables. Apple is planning a new 5G iPhone launch later this year.

Apple announced a quarterly dividend increase of 6.5%, from 77 cents to 82 cents. The company repurchased $18.6 billion of stock during the quarter, with $40 billion remaining in their previous repurchase authorization; and they announced a new $50 billion share repurchase authorization.

The most recent consensus estimates project EPS rising 3.4% and 19.7% in 2020 and 2021. I expect those numbers to change again next week, after analysts have had more time to review the quarter’s results and rework their numbers.

I think the AAPL price chart looks great. There’s 10% upside as AAPL rises toward its February high near 330. Growth investors should buy now. Buy.


Alexion Pharmaceuticals (ALXN) is a biopharmaceutical company that researches and manufactures treatments of severe and rare health disorders. Current marketable drugs include Soliris, Ultomiris, Strensiq and Kanuma. The company is focused on three goals: converting patients from Soliris to Ultomiris, expanding indications for Ultomiris, and diversifying their portfolio to fuel continued long-term profit and revenue growth. On May 1, a European Union medicinal committee recommended marketing authorization for Ultomiris for the treatment of certain aHus patients under certain conditions. (Read more in the press release.) Yesterday, Alexion agreed to pay $1.41 billion to acquire Portola Pharmaceuticals (PTLA). Portola markets a treatment that reverses the effects of blood thinning drugs Eliquis and Xarelto in cases of life-threatening or uncontrolled bleeding.

Alexion is expected to report first-quarter EPS of $2.71 and $1.4 billion revenue this morning, May 6. Full-year 2021 earnings estimates rose last week. Analysts now expect EPS to increase 5% and 8% in 2020 and 2021, and the 2020 P/E is 9.0. The stock fell upon news of this week’s Portola acquisition, and will probably settle down around 95. Hold.


Baker Hughes Company (BKR – yield 5.1%) offers products, services and digital solutions to the international oil and gas community. Share prices of energy-related companies are rising alongside a rebound in oil prices and the gradual reopening of global economies in the wake of the virus pandemic. The current run-up will likely carry BKR to short-term price resistance at 17. Hold.


General Motors (GM) – GM’s 2020 new vehicle launches, expense reductions, returns of capital, their commitment to an all-electric future and the development of their autonomous unit, GM Cruise, were driving bullish sentiment on Wall Street ... until the coronavirus epidemic traveled the globe. Now that the virus has shut down GM’s ability to manufacture and sell autos, the company must necessarily revamp financial plans with an eye toward maintaining solvency. Thus, investors who were looking forward to various industry innovations are going to have to put those hopes on the back burner while GM and their peers shift into survival mode. One of the company’s more obvious financial decisions was last week’s suspension of the dividend payout. I know that there are people who will say that GM (and their peers in corporate America) “have plenty of money” and that they eliminated the dividend due to “greed,” but there’s no way that a blue-chip company like GM would eliminate their dividend unless they were desperately working toward shoring up the balance sheet. After all, during an economic crisis, paying for salaries, benefits, debt obligations and automobile components are all more important than paying dividends to shareholders. GM was featured in the December 31, 2019 issue and the February issue of Cabot Undervalued Stocks Advisor.

The company is expected to report first-quarter EPS of $0.33 and $31.1 billion revenue on the morning of May 6. Full-year earnings projections continue to decline. Wall Street is now projecting EPS of $0.96 and $3.89 in 2020 and 2021. The stock has traded between 21-24 for four weeks. Hold.


Mercury General Group (MCY – yield 6.7%) operates as Mercury Insurance, the leading independent agency writer of automobile and home insurance in California, with total assets over $4.5 billion. Mercury also writes automobile, home and/or other lines of insurance, including business and mechanical breakdown insurance, in 10 additional U.S. states. The company is faring well during the global virus pandemic because fewer driving miles result in fewer car accidents and lower expenses to the insurance company. As such, the first quarter’s combined ratio, a profitability measure, came in at 95.9%, better than the year-ago quarter’s 97.3%. Mercury General Group was featured in the April issue of Cabot Undervalued Stocks Advisor.

MCY is an undervalued small-cap stock with an unusually large dividend yield. The company is expected to deliver EPS of $3.61 and $3.45 in 2020 and 2021. Those numbers will vary a bit by next week, after analysts adjust projections subsequent to this week’s first-quarter earnings report. The price chart was turning bullish last week, then the broader market turned downward, and now MCY has fallen further without any apparent bad news. Hold off any additional purchases until the stock settles down. Hold.


Special Situation & MOVIE STAR PORTFOLIO

This is a portfolio for capital gain opportunities that do not conveniently fit into the other three portfolios. These stocks will often be glamorous companies, which I call “movie star stocks,” that investors love to own and follow, such as, Apple Inc. and Walt Disney Co. These movie star stocks currently have relatively low prices or valuations in comparison to their trading histories.

Featured Stock: NVIDIA (NVDA – yield 0.2%)
NVIDIA (NVDA – yield 0.2%) is the pioneer and leading designer of graphics processing unit (GPU)-accelerated computing, which then ignited modern artificial intelligence (AI). Target markets include gaming, professional visualization, data center, and autonomous driving. In April, NVIDIA completed the $6.9 billion acquisition of Mellanox Technologies Ltd., an early innovator in high-performance interconnect technology, routinely used in supercomputers and hyperscale data centers. The acquisition, which adds to NVIDIA’s data center and artificial intelligence business, is expected to immediately add to NVIDIA’s gross margins and EPS. This week, NVIDIA announced the acquisition of Cumulus Networks, which complements their recent Mellanox acquisition. Cumulus Networks is an open network software provider of Linux-based operating systems. NVIDIA was also featured in the March issue of Cabot Undervalued Stocks Advisor.

The company beat earnings expectations in each of the last five years and also in the last five quarters, which translates into investor confidence that NVIDIA tends to under-promise and over-deliver. The company is managing its cash flow quite well, maintaining low debt levels and aiming to repurchase $2 billion of its shares once the Mellanox transaction is completed.

NVDA is a high-P/E, aggressive growth stock, appropriate for growth investors and traders. Earnings estimates came down a bit from their peaks in early March. Wall Street now expects EPS to grow 31.1% and 20.3% in fiscal 2021 and 2022 (January year end). I’m moving NVDA from Buy to a Strong Buy recommendation because the stock appears capable of rising past the February all-time high near 315 quite soon, barring a disruption in the broader market. Strong Buy.


Adobe Systems (ADBE) is a software company that’s changing the world as an innovative leader in digital media and digital marketing. ADBE is a large-cap growth stock, appropriate for long-term growth investors and traders. Earnings estimates have barely changed in recent months reflecting the consistency provided by the steady income associated with a subscription-based business. Management is focused on improving operating margins. Analysts expect EPS to increase by 24% and 15% in 2020 and 2021, respectively. The 2020 P/E is 37. On April 24, an insider bought $1.5 million of ADBE shares. ADBE is actively rising toward its February all-time high near 385. Buy.

ADBE-050520’s (AMZN) innovations and forays into new industries are seriously disrupting established global businesses, including freight companies, retailers, entertainment and technology companies. The company is experiencing growth in Amazon Web Services (AWS), Prime membership, Prime Video viewer hours, revenue and free cash flow. Grocery deliveries are bringing more profit to the company as quarantined citizens access this convenient service, while lower fuel prices are additionally easing transportation costs. was featured in the April issue of Cabot Undervalued Stocks Advisor.

Subsequent to last week’s first-quarter earnings report, full-year consensus estimates came up a fraction, now reflecting 22% and 42% EPS growth in 2020 and 2021. (Be prepared for those numbers to adjust again next week. It takes up to two weeks for analysts to reassess corporate outlooks after earnings releases.) The 2020 P/E is high at about 82. The company expects to spend all of their projected second-quarter profit – approximately $4 billion – on COVID-related expenses. The company hired 175,000 new employees to meet a surge in demand, and also increased hourly and overtime wages.

AMZN rose to a new all-time high near 2,500 in April, and is now trading sideways. It’s okay to buy low right now, but I’d personally wait for the share price to show some more stability. Hold.


Equitable Holdings (EQH – yield 4.0%) owns two principal franchises: Equitable Life Insurance Co. and a majority stake in AllianceBernstein Holdings L.P. (AB), an investment management firm. Equitable Holdings was featured in the February issue of Cabot Undervalued Stocks Advisor.

Wall Street expects Equitable to report first-quarter EPS of $1.12 and $3.3 billion revenue on the afternoon of May 7. Full-year earnings estimates rose last week on the heels of strong quarterly results from AllianceBernstein. Profits are now expected to fall 10% in 2020, then rise 12% in 2021. With a price/earnings ratio of 3.9, Equitable shares are incredibly undervalued. EQH is appropriate for dividend investors, growth investors and traders. Strong Buy.


Netflix (NFLX) is the world’s leading streaming entertainment service with over 167 million paid memberships in over 190 countries. Viewers can enjoy unlimited access to TV series, documentaries and feature films across a wide variety of genres and languages, all without commercial interruptions. The company is experiencing rapid international subscription growth and creating original foreign language content for international markets. Netflix was featured in the January 22 issue of Cabot Undervalued Stocks Advisor.

The first-quarter earnings release featured outstanding subscriber growth and a rising operating margin that’s enhancing earnings per share. Wall Street now expects full-year profits to grow 56% and 34% in 2020 and 2021. NFLX is a high-P/E growth stock, appropriate for long-term investors. The stock is pulling back now after rising to a new all-time high near 440 in April. Hold.


VanEck Vectors Oil Refiners ETF (CRAK) seeks to replicate as closely as possible, before fees and expenses, the price and yield performance of the MVIS Global Oil Refiners Index (MVCRAKTR). The International Maritime Organization is mandating the use of either scrubbers or low-sulfur diesel fuels for the world’s 39,000 ships and tankers, beginning in January 2020. The purpose of the mandate is to minimize sulfur oxide (SOx) emissions into the atmosphere, and the mandate is nicknamed IMO 2020. Oil refining companies are expected to profit from the demand for low-sulfur diesel fuel. Read more here: IMO 2020: The Big Shipping Shake-Up.

In addition to the aforementioned changes to shipping rules, the energy industry has been greatly depressed due to the coronavirus lockdowns that have halted much global commerce. As a result, the lack of demand for oil products has harmed oil prices, corporate balance sheets and share prices of oil-related companies. At this point, oil prices and energy stocks are on the rebound, and CRAK is up 50% from its March lows. There’s some price resistance at about 25-26. Buy CRAK now. Buy.


Strong Buy and Buy – This stock meets most of my fundamental investment criteria.
Hold – Do not add to your position in this stock until a particular issue is resolved.
Retired – This stock has been removed from the portfolio for a specific reason, yet remains an attractive holding for long-term investors who would rather minimize portfolio turnover.
Sell – This stock has a problem that increases portfolio risk. Sell it.

The next Cabot Undervalued Stocks Advisor issue will be published on June 4, 2020.

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