Cabot Undervalued Stocks Advisor Weekly Update

THE LATEST ECONOMIC NOTES

The Federal Reserve is expected to lower interest rates this week, with a likely announcement on July 31. The stock market has fully priced in a rate reduction, which means if the Fed fails to lower rates, investors can expect the market to fall for a few days. I continue to believe that strength in the economy should prohibit the Fed from lowering the fed funds rate, but Chairman Powell is apparently planning to lower rates in order to maintain economic strength ... as if the economy needs his help.

Hmmm, I still don’t see how government interference won’t backfire. Powell’s “helpful” actions toward the economy remind me of Congress’ “helpful” past actions in mandating that Fannie Mae and Freddie Mac loan money to people with poor credit histories. The road to hell is paved with good intentions. Grab the popcorn!

Here are a few more bullish economic statistics that emerged last week:
• The Office of Highway Policy Information reported that the number of vehicle miles traveled throughout the U.S. increased 1.0% YTD through May vs. the prior year. (June numbers have not yet been reported.)
• The Equipment Leasing and Finance Association (ELFA) said that U.S. companies’ borrowing rose to $9.9 billion in June, up 9% from a year ago and also 9% from May 2019. ELFA reports on economic activity for the $1 trillion equipment finance sector.
• Second-quarter gross domestic product (GDP) grew at a 2.1% annual rate, above economists’ expectations. Barron’s went so far as to say this GDP number reflected the “best quarter of growth in a year.”

BE CAUTIOUS WITH L BRANDS (LB)

Please be aware that the famed CEO of L Brands (LB), Leslie Wexner, has close and very long-term ties to the recently-arrested Jeffrey Epstein. As we witnessed in the 2017-2018 #metoo social movement, in which at least 200 prominent men have lost their jobs after public allegations of sexual harassment, people who are perceived as guilty of or associated with crimes can fall quickly. When they are corporate CEOs, their companies’ stocks can also fall! There is always the chance, therefore, that shares of L Brands could suffer if news stories focus on Mr. Wexner.

If you’re an L Brands shareholder, you can protect your invested capital with stop-loss orders, options, or by selling shares.

Lastly, I’d like to reiterate my stance on major problems and scandals. People often assume that the bad news that’s initially publicized is the bulk of the bad news, and that the situation will not become worse. The situation always becomes worse. The bad news invariably continues to unfold. It is my belief that we will be repeating this conversation in the near future, as the Epstein crime scandal is revealed to involve additional well-known people. It doesn’t matter whether you believe my warning and it doesn’t matter whether the well-known people are guilty or innocent. They will be dragged through the mud either way.

I’m just making a simple prediction based on normal patterns of how scandals play out among famous people, companies and institutions. All you really have to do is formulate a game plan, so that you are prepared in case emerging bad news touches your stock portfolio.

Send questions and comments to Crista@CabotWealth.com.

PORTFOLIO NOTES
Be sure to review the Special Bulletin from July 25 in which I mentioned news, rating changes and/or price action on Alexion Pharmaceuticals (ALXN), CIT Group (CIT), Dow Inc. (DOW), Royal Caribbean Cruises (RCL), Southwest Airlines (LUV) and Total SA (TOT).

QUARTERLY EARNINGS RELEASE CALENDAR
July 30 pm: Apple (AAPL) – 3Q and Axis Capital (AXS) – 2Q
July 31 am: Baker Hughes, a GE Company (BHGE) and Carlyle Group (CG) – 2Q
July 31 pm: CF Industries (CF) and TiVo (TIVO) – 2Q
August 1 am: Corteva (CTVA) and Marathon Petroleum (MPC) – 2Q
August 6 am: Mosaic (MOS) – 2Q
August 6 pm: Supernus Pharmaceuticals (SUPN) and Voya Financial (VOYA) – 2Q
August 8 pm: Universal Electronics (UEIC) – 2Q

EARNINGS SEASON SCORECARD:
Big earnings beat: Alexion Pharmaceuticals (ALXN), Blackstone Group (BX) and CIT Group (CIT)
Earnings within 5% of consensus estimate: Alaska Air Group (ALK), Citigroup (C), Delta Air Lines (DAL), Dow Inc. (DOW), Royal Caribbean Cruises (RCL), Schlumberger NV (SLB), Southwest Airlines (LUV), Synchrony Financial (SYF) and Total SA (TOT).
(None of these companies reported earnings below the quarter’s consensus estimates.)

TODAY’S PORTFOLIO CHANGES
Carlyle Group (CG) moves from Strong Buy to Hold.
Synchrony Financial (SYF) moves from Strong Buy to Hold.

LAST WEEK’S PORTFOLIO CHANGES
Commercials Metals (CMC) moved from Hold to Buy.
Royal Caribbean Cruises (RCL) moved from Buy to Strong Buy.
Total SA (TOT) moved from Buy to Strong Buy.

UPDATES ON GROWTH PORTFOLIO STOCKS

Adobe Systems (ADBE) is a software company that’s changing the world through digital experiences. Adobe is reimagining Customer Experience Management (CXM) with Adobe Experience Cloud, the industry’s only end-to-end solution for experience creation, marketing, advertising, analytics and commerce. Full-year consensus estimates point toward EPS increasing aggressively by 42.0% in 2019 and 24.8% in 2020 (November year end). The high P/E of 38.9 is the only reason that I am not giving ADBE a Strong Buy recommendation.

ADBE is a large-cap growth stock—a great stock for risk-tolerant growth investors and buy-and-hold equity portfolios. ADBE continues to reach new all-time highs. I expect an extended run-up, occasionally interrupted by pullbacks in the broader market. Buy.

CF Industries Holdings (CF – yield 2.5%) is one of the world’s largest producers of nitrogen products, serving customers on six continents. The company operates nine nitrogen production facilities in Canada, the U.K. and the U.S. CF Industries expects strong nitrogen demand through the current quarter, and to continue benefiting from low natural gas prices throughout 2019. The Henry Hub price of natural gas traded at $2.18 MMbtu late last week.

CF is an undervalued, mid-cap aggressive growth stock. CF is expected to report second-quarter EPS of $0.86 this Wednesday, July 31, within a range of $0.60-$1.15. Expect volatility. The stock began a new run-up in June, heading toward price resistance at 50 and 55. Buy CF now. Strong Buy.

CIT Group (CIT – yield 2.7%) operates both a bank holding company with $30 billion in consumer deposits and a financial holding company. CIT Group provides financing, leasing and advisory services to small and middle market businesses, consumer markets, and the real estate and railroad industries. (See the July 25 Special Bulletin for CIT Group’s second-quarter earnings recap.) The Equipment Leasing and Finance Association (ELFA) said that U.S. companies’ borrowing rose to $9.9 billion in June, up 9% from a year ago and also 9% from May 2019. ELFA reports economic activity for the $1 trillion equipment finance sector.

CIT is an undervalued growth stock with an attractive dividend yield. Wall Street expects EPS to increase 19.6% and 13.5% in 2019 and 2020. The P/E is 10.5. There’s about 8% short-term upside to 55, where CIT traded repeatedly in 2018. Buy CIT now. Strong Buy.

Marathon Petroleum (MPC – yield 3.8%) is a leading integrated downstream energy company and the nation’s largest energy refiner, with 16 refineries, majority interests in two midstream companies that will soon merge, 10,000 miles of oil pipelines and product sales in 11,700 retail stores. Marathon is expected to report second-quarter EPS of $1.37 on the morning of August 1, within a range of $1.22-$1.83, and $33.4 billion revenue, within a range of $28.4-$39.4 billion. MPC is a vastly undervalued stock. The stock is rising again, with medium-term price resistance at 65. Buy MPC now. Buy.

Sanmina Corp. (SANM) designs and manufactures optical, electronic and mechanical products for original equipment manufacturers (OEMs) primarily in the communications networks, cloud solutions, industrial, defense, medical and automotive industries.

Sanmina reported third quarter adjusted EPS of $0.82 yesterday afternoon, at the top of previous company guidance ($0.72-$0.82), when the market was expecting $0.77. The company is focused on cost controls, efficiencies and leveraging their operating model. Both operating income and operating margin rose significantly vs. a year ago. Revenue of $2.027 billion came in slightly above the guidance range of $1.925-$2.025 billion. The company expects fourth quarter EPS within a range of $0.73-$0.83, on target with the current consensus estimate of $0.78, and revenue ranging from $1.9-$2.0 billion.

Recent analyst estimates point toward annual earnings growth of 49.3% and 8.2% in 2019 and 2020. (Those estimates have been gradually rising all year.) However, Sanmina management does not project future results beyond the current quarter, so the 2020 number is essentially a conservative guess. The company’s trend of growing revenue and profits currently seems sustainable.

SANM is a small-cap growth stock. When the share price surpasses short-term resistance near 35, I expect the stock to rise to a range of 39-43, where it traded in 2017. Expect volatility. Buy.

Southwest Airlines (LUV – yield 1.4%) is the largest U.S. domestic air carrier, transporting over 120 million customers annually to over 100 locations in the U.S., Central America and the Caribbean. The grounding of Southwest’s Boeing Max 737 jets currently extends through January 5, 2020.

Refer to the July 25 Special Bulletin in which Southwest reported record second-quarter revenues and profits. I’ll have an updated earnings outlook next week. LUV has a Buy recommendation, rather than Strong Buy, due to the slow 2019 EPS growth rate. Nevertheless, barring a downturn in the broader market, I expect LUV to rise to price resistance at 58 in the near term, where it will still be undervalued. Buy LUV now. Buy.

Supernus Pharmaceuticals (SUPN) focuses on the development and commercialization of products for the treatment of central nervous system diseases and psychiatric disorders, including epilepsy and migraine. Supernus has five pipeline products, in various phases of clinical trials, which aim to treat ADHD, impulsive aggression, bipolar disorder, depression and severe epilepsy. Three of those pipeline drugs are expected to launch in 2020, 2021 and 2023.

SUPN is an undervalued small-cap growth stock. Supernus is expected to report second-quarter EPS of $0.58 on the afternoon of August 6, within a range of $0.51-$0.66, and $108.2 million revenue, within a range of $101-$113 million. Political proposals regarding pharmaceutical pricing continue to cause stock volatility. At a share price of 32.4, there’s 29% upside to short-term resistance at 42, making SUPN suitable for both growth investors and traders. Buy SUPN now. Buy.

Voya Financial (VOYA – yield 0.1%) is a retirement, investment and insurance company serving millions of individuals and 49,000 institutional customers in the United States. Voya has $547 billion in total assets under management and administration. Voya was featured in the July issue of Cabot Undervalued Stocks Advisor.

CEO Rodney O. Martin, Jr. recently stated, “We intend to increase our common stock dividend to a yield of at least 1% and we expect to do so beginning in the third quarter of 2019.” Investors should expect that announcement at the end of July, at which time the share price could begin another run-up as institutional investors who focus on dividend stocks will be able to buy VOYA. Voya is expected to report second-quarter EPS of $1.45 on the afternoon of August 6, within a range of $1.17-$1.62

VOYA is an undervalued growth stock. VOYA began reaching new all-time highs in late June, and the price chart remains bullish. I expect the pending dividend announcement and the second-quarter earnings release to bring additional capital gains. Buy VOYA now. Strong Buy.

UPDATES ON GROWTH & INCOME PORTFOLIO STOCKS

Blackstone Group Inc. (BX – yield 4.2%*) is the world’s largest and most diversified alternative asset manager with $545.5 billion in client assets. The company deploys capital into private equity, lower-rated credit instruments, public debt and equity, real assets, secondary funds and real estate, all on a global basis. The London Stock Exchange (LSE) is in talks to buy financial data firm Refinitiv for $27 billion. Blackstone Group and two other investors bought a 55% stake in Thomson Reuters’ Financial and Risk unit on October 1, 2018, which was then renamed Refinitiv. Blackstone stands to make over 100% profit on their brief investment in Refinitiv. The price chart remains bullish and the stock continues to climb. Buy.
*The payout varies each quarter with the total of the last four announced payouts equaling $2.07 and yielding 4.2%.

Citigroup (C – yield 2.8%) is a global financial company that serves consumers, businesses, governments and institutions in 98 countries. In July, Citigroup raised the quarterly dividend from 45 cents to 51 cents per share. Citigroup is an undervalued, large-cap growth & income stock. Wall Street expects EPS to grow 12.8% and 13.2% in 2019 and 2020. The P/E is currently 9.6. (Citigroup has much better 2020 earnings growth prospects than Bank of America, Goldman Sachs, Morgan Stanley and Wells Fargo.) The stock is rising, with price resistance at 77 that dates back to January 2018. Strong Buy.

Commercial Metals Company (CMC – yield 2.6%) is a recycler and manufacturer of steel and metal products, including rebar and fence posts. Commercial Metals derives 60% of revenue from rebar products. The company is outperforming its synergy targets from rebar assets acquired from Gerdau S.A. Demand remains positive driven by continued strength in non-residential construction activity.

Wall Street now expects full-year EPS to increase 36.2% and 7.9% in fiscal 2019 and 2020 (August year end); and the 2020 P/E is 8.2. I will remove CMC from the Growth & Income Portfolio if the 2020 earnings growth rate does not improve by the time of the fourth-quarter earnings release. The stock appears capable of breaking past price resistance at 18, at which time it could easily climb to 20. Buy.

Corteva Inc. (CTVA – yield 1.8%) spun off from DowDuPont (DWDP) on June 3. Corteva (pronounced kor-TEH-vuh) is an agricultural sciences company, providing farmers with seeds and crop protection products, enabling them to maximize yield and profitability. I am in possession of a Letter to Shareholders from Corteva that addresses its post-spinoff cost basis, with corresponding cost basis for DuPont de neMours (DD). I received the letter from Corteva Investor Relations, via email, and I can forward that email to you upon your request. Corteva was featured in the July issue of Cabot Undervalued Stocks Advisor.

CTVA is a mid-cap growth & income stock, appropriate for risk-tolerant investors. Corteva is expected to report second-quarter EPS of $1.02 on the morning of August 1, within a range of $0.45-$1.37, and $5.6 billion revenue, within a range of $5.1-$6.4 billion. Expect volatility**. The share price has fluctuated between 24-30 since the stock began trading. Buy.

Dow Inc. (DOW – yield 5.8%) is the materials science division of the former DowDuPont (DWDP) that began trading as a separate company on April 2, 2019. Refer to the July 25 Special Bulletin for comments pertaining to Dow’s second-quarter results. DOW is an undervalued growth & income stock. The company is expected to achieve EPS of $4.26 and $5.18 in 2019 and 2020. The 2020 EPS growth rate is 21.6% and the corresponding P/E is low at 9.3. I love the earnings growth, value and dividend components of DOW, and the stock is low within its trading range. All types of stock investors (except perhaps short-term traders) stand to profit from new purchases of DOW. Strong Buy.

Guess?, Inc. (GES – yield 2.7%) is a global apparel manufacturer, selling their products through wholesale, retail, ecommerce and licensing agreements. Wall Street expects EPS to grow of 27.6% and 15.2% in fiscal 2020 and 2021 (January year end). The 2020 P/E is low at 13.4. GES offers the best earnings growth & value opportunity of any U.S.-based apparel retailer. The share price has been marching upward for six weeks, and appears capable of continuing that trend. Traders, growth investors and growth & income investors should buy GES now. Strong Buy.

Royal Caribbean Cruises (RCL – yield 2.4%) is a cruise vacation company that delivers travelers to desirable and exotic destinations on all seven continents. The company operates a total of 63 ships, with 13 on order, under the brand names Royal Caribbean International, Celebrity Cruises, Azamara Club Cruises and Silversea Cruises, and partnerships with German and Spanish cruise companies. Refer to the July 25 Special Bulletin for comments pertaining to Royal Caribbean’s strong second-quarter results.

RCL is an undervalued, large-cap growth & income stock. I’ll have an updated earnings outlook next week. Watch for an annual dividend increase that will likely be announced in early September. The stock appears to have begun a recovery from recent lows. At a price of 114, there’s 14% upside to price resistance at 130. After the second-quarter earnings release, three investment firms changed their price targets to a range of 130-159. Buy RCL now. Strong Buy.

Schlumberger NV (SLB – yield 5.1%) is the world’s largest oilfield service company. Wall Street expects EPS to fall 4.9% in 2019, and then to increase 35.1% in 2020. The 2020 P/E is 18.7. The stock has recently been moving in tandem with oil prices, although the SLB price chart shows more overall strength than those of West Texas crude ($WTIC) or Brent ($BRENT). SLB could surpass its July peak of 41 in the coming weeks. Buy.

Total S.A. (TOT – yield 5.5%) is a French multinational integrated energy company operating in over 130 countries. CEO Patrick Pouyanne expects to achieve higher refining margins in relation to new low-sulfur fuel rules being imposed by the International Maritime Organization, and to achieve immediate free cash flow from their $8.8 billion acquisition of African assets from Anadarko. Refer to the July 25 Special Bulletin for comments pertaining to Total’s second-quarter results.

TOT is an undervalued, large-cap growth & income stock with a large dividend yield. I’ll have an updated earnings outlook next week. The stock is trading between 53-58. All types of stock investors (except perhaps short-term traders) stand to profit from new purchases of TOT. Strong Buy.

UPDATES ON BUY LOW OPPORTUNITIES PORTFOLIO STOCKS

Abercrombie & Fitch (ANF – yield 4.4%) is a specialty retailer of Abercrombie & Fitch, abercrombie kids and Hollister brand apparel and accessories for men, women and kids. The company operates 857 stores globally. The company remains on track toward its multi-year goals of improving revenue, profits, expense-control, data analytics and global store expansion. June industry-wide retail performance came in distinctly higher than forecasted, and July retail apparel store traffic is showing strength. I therefore expect upside earnings surprises among apparel retailers as they report second-quarter results. (Most apparel companies operate on a January fiscal year.)

ANF is a small/micro-cap stock. Analysts expect EPS to fall 19% in 2019, then to rise 56% in 2020 (January year end). The 2020 P/E is 12.5. The stock is rebounding, along with other apparel stocks, from a rapid drop in May. I expect continued near-term capital gains. Buy ANF now, and expect volatility. Buy.

Alaska Air Group (ALK – yield 2.2%) is a low-cost passenger airline. Alaska Airlines and its regional partners fly 46 million guests a year to more than 115 destinations with an average of 1,300 daily flights across the United States and to Mexico, Canada and Costa Rica. Alaska Air does not operate any Boeing 737 Max jets.

On July 25, Alaska Air Group reported second-quarter non-GAAP eps of $2.17, at the top of the estimated range, vs. the consensus estimate of $2.13. Revenue was $2.288 billion vs. the $2.28 billion consensus estimate. Pre-tax margin of 15% came in 300 basis points (3 percentage points) higher than a year ago. The company repurchased $25 million of stock during the first half of 2019, and repaid $140 million of debt during the second quarter. Alaska Air Group has repaid a total of $1.2 billion towards the $2.0 billion that was borrowed for the Virgin America acquisition.

ALK is a mid-cap stock with a $7.8 billion market capitalization. ALK has upside price resistance at 74, 80 and 95. There’s plenty of room for traders, growth stock investors and growth & income investors to potentially make good profit in both the short term and the long term. Buy ALK now. Strong Buy.

Alexion Pharmaceuticals (ALXN) is a biopharmaceutical company that researches and manufactures treatments of severe and rare health disorders. Current marketable drugs include Soliris, Strensiq and Kanuma. The company is focused on the development of pipeline products that will fuel continued long-term profit and revenue growth. Refer to the July 25 Special Bulletin to learn about Alexion’s big second-quarter earnings beat, when they also raised full-year earnings guidance. (I’ll have updated earnings estimates next week.)

On July 26, Europe’s Committee for Medicinal Products for Human Use (CHMP) issued a positive opinion to extend the current marketing authorization of SOLIRIS® to include the treatment of neuromyelitis optica spectrum disorder (NMOSD) in certain adult patients. In the drug trial, after 48 weeks, 98% of the patients were relapse-free, compared to 63% in the placebo group. The European Commission will issue a final decision in September.

Wall Street is concerned is that the European Commission will open the door to Soliris being subject to biosimilar competition in Europe. The decision will be announced on September 5, and potential drug competition is expected to take at least three years to materialize. The stock has fallen to the bottom of a very wide trading range, so be cautious. The weakness seems overblown in light of the excellent earnings report, and the fact that eight investment firms updated their price targets last week to a range of 136-177. Strong Buy.

Apple Inc. (AAPL – yield 1.5%) is a manufacturer and provider of many popular technology devices and services, including the iPhone, iPad, Mac, App Store, Apple Care, iCloud and more. Five new services will roll out in the coming months: Apple News+, Apple TV+, Apple TV Channels, Apple Arcade and Apple Card. The Apple Card, a credit card partnership with Goldman Sachs (GS), is now scheduled to launch in the first half of August.

Apple is expected to report third-quarter EPS of $2.10 on the afternoon of July 30 (September year end), within a range of $1.79-$2.20, and $53.4 billion revenue, within a range of $52.5-$54.2 billion. Five investment firms raised their ratings and/or price targets on AAPL during the second half of July. I frankly don’t think they’d stick their necks out like that, right before the earnings report, unless they strongly expected both good quarterly results and a positive market reaction.

Apple announced an agreement to buy Intel’s smartphone modem business for $1 billion. The purchase, which is targeted to close in the fourth quarter, includes 2,200 Intel employees, along with intellectual property, equipment and leases. In other news, the U.S. has denied Apple’s request for tariff exemption on 15 parts, including some used for the Mac Pro.

AAPL is a great stock for a high quality, buy-and-hold equity portfolio. The price chart is showing strength. A good earnings report could easily push AAPL to 220. There’s additional price resistance at 230, where the stock last traded in October 2018. Buy AAPL now. Strong Buy.

Axis Capital Holdings Ltd. (AXS – yield 2.6%) is an A+-rated global provider of specialty lines insurance and treaty reinsurance with shareholders’ equity of $5.3 billion and locations in Bermuda, the United States, Europe, Singapore, Middle East, Canada and Latin America. Axis is expected to report second-quarter EPS of $1.34 tomorrow afternoon, July 30, within a range of $1.15-$1.60, and $1.1 billion revenue, within a range of $945 million-$1.2 billion. Expect volatility.

AXS is a small-cap stock that’s traveling directly toward its previous all-time high of 66, where it briefly traded in March 2017. I will very likely sell AXS near 66, as it will have met the portfolio objectives. Hold.

Baker Hughes, a GE Co. (BHGE – yield 3.0%) offers products, services and digital solutions to the international oil and gas community. Baker Hughes’s Turbomachinery and Process Solutions business stands to benefit from the liquefied natural gas (LNG) industry’s pipeline of over $200 billion in projects between 2019-2025, doubling the recent pace of annual capital spending. The number of U.S. rigs drilling for crude oil and natural gas fell by eight last week to a total of 946, down 102 vs. a year ago. The Canadian rig count rose by nine last week to 127, while the international rig count grew by 12 in June to 1,138. Baker Hughes is expected to report second-quarter EPS of $0.19 this Wednesday morning, July 31, within a range of $0.15-$0.23.

BHGE is an undervalued, mid-cap aggressive growth stock. Wall Street expects EPS to increase 51% and 56% in 2019 and 2020. The P/E remains low in comparison to earnings growth at 24.6. The earnings report could send the stock anywhere between 21-28. Buy BHGE now. Strong Buy.

Designer Brands Inc. (DBI – yield 5.5%) operates DSW Warehouse and The Shoe Company stores with over 1,000 locations in 44 U.S. states and Canada, and Camuto Group. DSW was the #1 omnichannel retailer in the U.S. in 2017 and 2018, and has delivered 27 consecutive years of sales growth. Designer Brands was featured in the July issue of Cabot Undervalued Stocks Advisor. DBI is an undervalued growth stock with a hefty dividend yield. Expected EPS growth rates are 15.1% and 14.1% in 2019 and 2020. The current P/E is moderate at 9.4. Expect volatility. The stock has traded quietly between 17-19 since late May. At some point, the market is going to embrace this wildly successful company. Until then, investors can buy low and lock in the big dividend yield. Strong Buy.

The Mosaic Company (MOS – yield 0.8%) is the world’s largest producer of finished phosphate and potash, supplying crop nutrients and animal feed ingredients via production facilities in the U.S., Canada, South America and the Asia-Pacific region. Their mission is to help the world grow the food it needs. Mosaic is expected to report second-quarter EPS of $0.30 on the morning of August 6, within a range of $0.24-$0.35, and $2.4 billion revenue, within a range of $2.2-$2.5 billion. The stock could easily trade anywhere between 22-28 in reaction to the earnings release. Buy.

Synchrony Financial (SYF – yield 2.4%) is a consumer finance company with 80.3 million active customer accounts. Synchrony partners with retailers to offer private label credit cards, and also offers consumer banking services and loans. Investors are encouraged to review Synchrony’s second-quarter earnings presentation. The company officially raised the quarterly dividend payout from $0.21 to $0.22 per share.

SYF is an undervalued, mid-cap growth & income stock. Wall Street now expects EPS to grow 13.6% and 9.6% in 2019 and 2020. The 2019 P/E is 8.6. Subsequent to the recent second quarter earnings release, four investment firms raised their target prices on SYF to a range of 37-40. The price chart remains bullish as SYF approaches longer-term price resistance near 39. I’m moving SYF from Strong Buy to a Hold recommendation, and will likely remove the stock from the Buy Low Opportunities Portfolio quite soon, as it achieves its price objective. Hold.

TiVo Corp. (TIVO – yield 4.3%) will spin off its Product business from its Intellectual Property Licensing business in a tax-free transaction to shareholders during the first half of 2020. Dave Shull joined the company as President and CEO on May 31, and promptly raised revenue and earnings guidance for full-year 2019. TiVo will announce second-quarter results this Wednesday afternoon, July 31.

I continue to believe that TiVo offers excellent technology to the communications industry. Approximately 22 million subscriber households around the world use TiVo’s advanced television experiences. Nevertheless, I plan to remove the stock from the Buy Low Opportunities Portfolio. Investors should continue paring back their positions in this micro-cap stock. Hold.

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. The company will report second-quarter results on the afternoon of August 8. The full-year 2019 consensus earnings estimate projects 31.0% growth, and the P/E is low in comparison at 13.6.

UEIC is an undervalued micro-cap growth stock with very little analyst coverage, appropriate for risk-tolerant investors and traders. The stock has been trading relatively flat, with less and less volatility, for many weeks. An eventual breakout past 45, where UEIC traded in August 2018 and May 2019, could carry the stock to price resistance at 55, a potential 31% gain from the recent 42 share price. Buy UEIC now. Expect volatility. Strong Buy.

UPDATES ON SPECIAL SITUATION STOCKS

Carlyle Group LP (CG – yield 5.1%) manages $221 billion, divided among real assets, corporate private equity, investment solutions and global credit. Carlyle Group will announce second-quarter results this Wednesday morning, July 31. At that time, the company will likely announce a decision regarding whether they will convert from a limited partnership to a corporation. A “yes” decision will likely cause a jump in the share price. A “no” decision or a delayed decision will likely cause the share price to fall. The stock rose each day last week. I’m moving CG from Strong Buy to a Hold recommendation now. Hold.
*The payout varies each quarter with the total of the last four announced payouts equaling $1.26 and yielding 5.0%.

**Earnings projections for companies that have recently undergone major M&A activity (including post-merger companies, post-spinoff companies and IPOs) are relatively tentative until the companies have reported several quarters of earnings results. At that time, analysts can develop projections based on actual corporate results. They can also get a better feel for the reliability of corporate statements regarding the business outlook. (Some CEOs would naturally be conservative when estimating business trends to analysts, while others would be overly optimistic, and yet others perhaps devious or oblivious!)