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

October 27, 2021

We’re watching with wonder how Tesla is now a $1 trillion company and that Elon Musk, by himself, is worth more than all of ExxonMobil. There is some poetic irony that the pioneer of electric vehicles and solar panels is outshining (no pun intended) the very icon he is working to replace. Tesla is a remarkably powerful one-trick pony that is only starting to develop its potential.

A Short Tale of One-Trick Ponies
We’re watching with wonder how Tesla is now a $1 trillion company and that Elon Musk, by himself, is worth more than all of ExxonMobil. There is some poetic irony that the pioneer of electric vehicles and solar panels is outshining (no pun intended) the very icon he is working to replace. Tesla is a remarkably powerful one-trick pony that is only starting to develop its potential.

We’re also watching with wonder as Facebook unravels – it is now on the losing end of the innovation spectrum. The company’s business model has a limited life as the trendiness of its one-trick pony Facebook platform is inevitably fading among its core youthful users. Its efforts to boost its user engagement, and thus revenues, with sketchy tactics that have been made public by the Wall Street Journal’s expose and testimony by a former employee, along with its long-ago purchases of Instagram and WhatsApp, were attempts to avoid its fate as a one-trick technology pony. But, they only served to delay its demise.

One-trick tech ponies can make stunningly successful investments as long as investors remain cognizant of the company’s position on the innovation curve and its valuation relative to that position. These companies will surge, peak, then fade as their pony is replaced by many lower-margin copycats and new innovations elsewhere. From an investment perspective, the market is overly focused on the distant and uncertain future with Tesla, and overly focused on the rearview mirror with Facebook.

While its future is exceptionally bright, Tesla’s stock valuation already discounts most of its coming prosperity. It is already worth perhaps twice the entire remaining auto industry. Surely it can’t garner a 70% implied share of all future industry profits, which its stock price implies? Its valuation has matched and then exceeded its position on the innovation curve.

Facebook’s value assumes that its bright past will continue. At nearly $1 trillion in market value, and with its shares down only 17% from their all-time high, the stock seems to imply only a modest fundamental deterioration. Yet its growth is slowing and will reverse, and its very wide 50% EBITDA margin is destined to shrink. While not elevated, its valuation at 13x EBITDA doesn’t recognize the company’s past-its-peak position on the one-trick pony curve. Facebook’s plans to develop a metaverse will probably be met with well-earned skepticism.

As contrarian, value-oriented investors, we’re avoiding both of these one-trick pony tech stocks.

We recently launched a new Earnings and Valuation table. This table will make it easier to see the trends in earnings estimates, and the P/E valuations, for all of the recommended companies. We welcome your feedback and suggestions for further improvements.

Share prices in the table reflect Tuesday (October 26) closing prices. Please note that prices in the discussion below are based on mid-day October 26 prices.

Note to new subscribers: You can find additional color on our thesis, recent earnings reports and other news on recommended companies in prior editions of the Cabot Undervalued Stocks Advisor, particularly the monthly edition, on the Cabot website.

Send questions and comments to

Today’s Portfolio Changes

Last Week’s Portfolio Changes

Upcoming earnings releases
October 27: Bristol-Myers Squibb (BMY)
October 27: Coca-Cola Company (KO)
October 27: General Motors (GM)
October 28: Merck (MRK)
October 28: Molson Coors Beverage Company (TAP)
November 2: ConocoPhillips (COP)
November 4: Barrick Gold (GOLD)

Bristol Myers Squibb Company (BMY) shares sell at a low valuation due to worries over patent expirations for Revlimid (starting in 2022) and Opdivo and Eliquis (starting in 2026). However, the company is working to replace the eventual revenue losses by developing its robust product pipeline while also acquiring new treatments (notably with its acquisitions of Celgene and MyoKardia), and by signing agreements with generics competitors to forestall their competitive entry. The likely worst-case scenario is flat revenues over the next 3-5 years. Bristol should continue to generate vast free cash flow, helped by a $2.5 billion cost-cutting program, and has a relatively modest debt level.

Bristol-Myers is expected to report third-quarter earnings of $1.92 (down a cent from a week ago).

According to Bloomberg, the company is planning to sell its Acceleron shares into Merck’s acquisition. There is an outside chance that several large hedge funds reject Merck’s deal as being undervalued, and could garner enough support for Merck to raise the price. We think a higher price is unlikely at best.

Separately, Bristol is said to be negotiating to acquire Aurinia Pharmaceuticals (AUPH), a biotech company specializing in kidney and autoimmune disorders. No deal has been announced and it may not happen. Aurinia has a current market cap of about $3.6 billion, as the shares have more than doubled on the rumors.

BMY shares rose 1% in the past week and have about 34% upside to our 78 price target.

The shares’ tumble seems to have stopped at around 57, likely stanched as the valuation at only 7x estimated 2023 earnings is cheap. Either we are completely wrong about the company’s fundamental strength, or the market must eventually recognize Bristol’s earnings stability and power. We believe the earning power, low valuation and 3.4% dividend yield that is well-covered by enormous free cash flow make a compelling story. BUY

Cisco Systems (CSCO) is facing revenue pressure as customers migrate to the cloud and thus need less of Cisco’s equipment and one-stop-shop services. Cisco’s prospects are starting to improve under a relatively new CEO, who is shifting Cisco toward a software and subscription model and is rolling out new products, helped by its strong reputation and entrenched position within its customers’ infrastructure. The company is highly profitable, generates vast cash flow (which it returns to shareholders through dividends and buybacks) and has a very strong balance sheet.

There was no significant company-specific news in the past week.

CSCO shares were flat in the past week and have about 7% upside to our 60 price target. The shares remain attractively valued, and offer a 2.6% dividend yield. We continue to like Cisco. BUY

Coca-Cola (KO) is best-known for its iconic soft drinks yet nearly 40% of its revenues come from non-soda beverages across the non-alcoholic spectrum. Its global distribution system reaches nearly every human on the planet. Coca-Cola’s longer-term picture looks bright but the shares remain undervalued due to concerns over the pandemic, the secular trend away from sugary sodas, and a tax dispute which could cost as much as $12 billion (likely worst-case scenario). The relatively new CEO James Quincey (2017) is reinvigorating the company by narrowing its over-sized brand portfolio, boosting its innovation and improving its efficiency, as well as improving its health and environmental image. Coca-Cola’s balance sheet is sturdy, and its growth investing, debt service and dividend are well-covered by free cash flow.

Coca-Cola is expected to report third-quarter earnings of $0.58/share.

KO shares were unchanged this past week and have about 18% upside to our 64 price target.

While the valuation is not statistically cheap, the shares remain undervalued given the company’s future earning power and valuable franchise. Also, the value of Coke’s partial ownership of a number of publicly traded companies (including Monster Beverage) is somewhat hidden on the balance sheet, yet is worth about $23 billion, or 9% of Coke’s market value. This $5/share value provides additional cushion supporting our 64 price target. KO shares offer an attractive 3.1% dividend yield. BUY

Dow Inc. (DOW) merged with DuPont to create DowDuPont, then split into three companies in 2019 based on product type. The new Dow is the world’s largest producer of ethylene/polyethylene, the most widely used plastics. Investors undervalue Dow’s hefty cash flows and sturdy balance sheet largely due to its uninspiring secular growth traits, its cyclicality and concern that management will squander its resources. The shares are driven by: 1) commodity plastics prices, which are often correlated with oil prices and global growth, along with competitors’ production volumes; 2) volume sold, largely driven by global economic conditions, and 3) ongoing efficiency improvements (a never-ending quest of all commodity companies). We see Dow as having more years of strong profits before capacity increases signal a cyclical peak, and expect the company to continue its strong dividend, reduce its pension and debt obligations, repurchase shares slowly and restrain its capital spending.

In Dow’s third quarter, revenues grew 53% from the pandemic-weakened quarter a year ago and were about 6% above the consensus estimate. Operating earnings of $2.75/share compared to $0.50/share a year ago and were about 7% above the consensus estimate. Sales growth and margin improvements were strong across the board compared to a year ago.

Compared to the prior period (the June quarter), sales were strong as well but the operating profit margin slipped by about a percentage point – mostly as recent conditions were incrementally more normal compared to the almost-ideal June quarter.

Overall, a respectable report for Dow. Estimates for the next two years are ticking up 2-5% in response.

Higher revenues were generated from a 50% increase in pricing – perhaps not surprising given how relatively small improvements in demand plus tighter supply have an outsized effect on pricing. Volumes rose 2%, reflecting better demand yet were trimmed by supply chain constraints.

Dow generated an immense $2.3 billion in free cash flow in the quarter. About $1.2 billion went toward reducing the company’s debt – laudable in our view even though the balance sheet is healthy. Another $500 million was paid out in dividends. The company also continues to chip away at its pension obligations with cash contributions, and is building up inventory (sensible) that is consuming cash.

Industry conditions will likely be stronger for longer. Dow remains well-positioned to generate immense free cash flows over the next few years, even as the stock market cares little about cash but rather is focused on the incremental newsflow related to economic growth, energy prices and any industry capacity changes. In the meantime, Dow shareholders can collect a highly sustainable 4.7% dividend while waiting for more share buybacks, more balance sheet improvement, more profits and a higher valuation.

Dow shares were flat this past week and have 32% upside to our 78 price target. BUY

Merck (MRK) shares are undervalued as investors worry about Keytruda, a blockbuster oncology treatment (about 30% of revenues) which faces generic competition in late 2028. Also, its Januvia diabetes treatment may see generic competition next year, and like all pharmaceuticals it is at-risk from possible government price controls. Yet, Keytruda is an impressive franchise that is growing at a 20% rate and will produce solid cash flow for nearly seven more years, providing the company with considerable time to replace the potential revenue loss. Merck’s new CEO, previously the CFO, is accelerating Merck’s acquisition program, which adds return potential and risks to the story. The company is highly profitable and has a solid balance sheet. It spun off its Organon business in June and we think it will divest its animal health sometime in the next five years.

Merck is expected to report third-quarter earnings of $1.54/share.

According to Bloomberg, there is an outside chance that several large hedge funds reject Merck’s deal for Acceleron as being undervalued, and could garner enough support for Merck to raise the price. We think a higher price is unlikely at best.

Support for Merck’s Covid treatment seems to be gaining traction as France and Indonesia have placed initial orders. Merck’s near-term share price movements will likely be linked to newsflow surrounding this treatment as well as to shares of Moderna and other Covid vaccine makers.

Merck shares rose 3% this past week and have about 20% upside to our 99 price target. Valuation remains attractive, especially as earnings estimates continue to tick up.

We note that Keytruda’s patent expiration doesn’t happen until late 2028. If the company produces earnings close to these estimates and continues to provide evidence of solid post-Keytruda prospects, as we expect, the shares are considerably undervalued.

Merck produces generous free cash flow to fund its current dividend (now yielding 3.2%) as well as likely future dividend increases, although its shift to a more acquisition-driven strategy will slow the pace of increases. BUY

Otter Tail Corporation (OTTR) is a rare utility/industrial hybrid company. Its electric utility has a solid and high-quality franchise, while its industrial side includes manufacturing and plastics operations.

Earlier this month, we moved OTTR from HOLD to SELL as the stock reached (exceeded) our 57 price target and the risk/return became neutral. The cyclical surge in the manufacturing segment profits may have one more step-up but are probably capped afterwards, and may face pressure from rising costs. The OTTR investment generated a 24% total return since our initial recommendation about five months ago. SELL

Arcos Dorados (ARCO), which is Spanish for “golden arches,” is the world’s largest independent McDonald’s franchisee. Based in stable Uruguay and listed on the NYSE, the company produces about 72% of its revenues in Brazil, Mexico, Argentina and Chile. The shares are depressed as investors worry about the pandemic, as well as political/social unrest, inflation and currency devaluations. However, the company has a solid brand and high recurring demand and is well-positioned to benefit as local economies reopen. The leadership looks highly capable, led by the founder/chairman who owns a 38% stake, and has the experience to successfully navigate the complex local conditions. Debt is reasonable relative to post-recovery earnings, and the company is currently producing positive free cash flow.

Macro issues will continue to move ARCO shares. We would like to see stability/strength in the Brazilian currency after its weakness since the pandemic. The pace of vaccinations in Brazil appears to be accelerating, which should boost economic results later this year, likely helping Arcos’ business. The political situation is edgier, as slow job growth increases the pressure on the president, Jair Bolsonaro, in advance of the October 2022 election. See additional comments in our September 1 letter.

There was no significant company-specific news in the past week.

ARCO shares ticked up 3% this past week. Despite the sharp 27% decline from their mid-summer peak, the shares are only 11% below our initial recommendation at $5.36 – reflecting the benefit of buying when expectations are low. The stock has about 57% upside to our 7.50 price target.

We remain steady in our conviction in the company’s recovery. The low share price offers a chance to add to or start new positions. BUY

Aviva, plc (AVVIY), based in London, is a major European company specializing in life insurance, savings and investment management products. Amanda Blanc was hired as the new CEO in July 2020 to revitalize Aviva’s laggard prospects. She divested operations around the world to re-focus the company on its core geographic markets (UK, Ireland, Canada), and is improving Aviva’s product competitiveness, rebuilding its financial strength and trimming its bloated costs. Aviva’s dividend has been reduced to a more predictable and sustainable level with a modest upward trajectory. Excess cash balances are being directed toward debt reduction and potentially sizeable special dividends and share repurchases.

Much of our interest in Aviva is in what it plans to do with its current and future excess capital, including the proceeds from its divestitures. So far, the company has recently raised its interim dividend by 5% to £0.0735/share (about $0.20 per ADS, as there are 2 underlying common shares per ADS, and the exchange rate is about $1.38) and will return at least £4 billion (about $5.5 billion) by 2H 2022, mostly through share buybacks. It will complete £750 million of the buybacks “immediately.” The balance of the divestiture proceeds will go toward debt paydown.

We anticipate that the company will pay a final (year-end) dividend of about twice its interim dividend, for a full-year total recurring dividend of about $0.61/ADS. On this, the shares would produce an annual dividend yield of about 5.5% – rather appealing in an era when AA-rated corporate bonds yield about 1.9%

There was no significant company-specific news in the past week.

Aviva shares were flat this past week and have about 27% upside to our 14 price target. BUY

Barrick Gold (GOLD), based in Toronto, is one of the world’s largest and highest-quality gold mining companies. About 50% of its production comes from North America, with the balance from Africa/Middle East (32%) and Latin America/Asia Pacific (18%). The market has little interest in Barrick shares. Yet, Barrick will continue to improve its operating performance (led by its new and highly capable CEO), generate strong free cash flow at current gold prices, and return much of that free cash flow to investors while making minor but sensible acquisitions. Also, Barrick shares offer optionality – if the unusual economic and fiscal conditions drive up the price of gold, Barrick’s shares will rise with it. Given their attractive valuation, the shares don’t need this second (optionality) point to work – it offers extra upside. Barrick’s balance sheet has more cash than debt. Major risks include the possibility of a decline in gold prices, production problems at its mines, a major acquisition and/or an expropriation of one or more of its mines.

There was no significant company-specific news in the past week.

Commodity gold prices rose 1% this week to $1,788/ounce while the 10-year Treasury yield continued to move up, now at 1.64%. The U.S. Dollar Index, another driver of gold prices (the dollar and gold usually move in opposite directions) is trading at 93.43, mostly unchanged in the past week. The index remains about 6% below its pre-Covid late-2019 level of about 99. Per-ounce gold prices seem range-bound between $1,700 and $1,900 for now.

The market continues to be impatient with gold stocks, in no small part due to rising interest rates. If interest rates keep rising, it certainly is possible that gold prices slip further. As Barrick’s shares are sensitive to gold prices, they will fall farther and faster, and have the possibility of dipping into the mid-teens. Investors not comfortable with this possibility should probably sell their Barrick shares.

Our view is to hang onto Barrick shares, wait until the momentum sellers clear out, then buy more. Fundamentally, the company is doing well and has solid leadership, quality mines and a very strong balance sheet. It might take a long time, but we remain confident that eventually the shares will hit the target price.

Not to get too far into the weeds, but if the U.S. economy stalls out (inevitable at some point), and if/when the stock market tumbles, it seems highly likely that the Fed will return to a zero-rate environment and the federal government will unleash another huge stimulus package. These would probably be an unmitigated positive for gold prices and for Barrick shares.

There was no significant company-specific news in the past week.

Barrick shares rose 1% this past week and have about 39% upside to our 27 price target. The price target is based on 7.5x estimated steady-state EBITDA and a modest premium to our estimate of $25/share of net asset value.

On its recurring $.09/quarter dividend, GOLD shares offer a reasonable 1.9% dividend yield. Barrick will pay an additional $0.42/share in special distributions this year (no clarity on 2022 special dividends), lifting the effective dividend yield to 4.0%. BUY

ConocoPhillips (COP), based in Houston, Texas, is the world’s largest independent E&P company, with about two-thirds of its production in the United States. Conoco’s shares are depressed, as investors avoid climate-unfriendly companies, have low interest in exposure to volatile and unpredictable oil and gas prices, worry that company management will lose its new-found capital spending discipline, and are concerned that OPEC+ will reopen their spigots, sending oil prices tumbling.

We see resilient oil prices, as demand remains strong, alternatives aren’t yet plentiful enough, supply growth is restrained as shareholders prioritize cash flow rather than capital spending, and as majors seek to reduce their carbon footprint. We like Conoco’s low valuation, investment-grade balance sheet, strong free cash flow, and public commitment to limiting its capital spending to 50% of its annual cash flow. The shares offer a respectable base-level dividend to shareholders that appears rock-solid.

West Texas Intermediate crude is currently trading at $84.48/barrel, up 1% this past week, while natural gas in the United States is priced at $5.68, up 12% from last week. At these prices, we anticipate considerable profits from Conoco, and the consensus earnings estimate for next year jumped 7% this past week as analysts update their commodity price assumptions. Goldman Sachs and other brokerage firms are assuming that companies will beat these higher estimates, and they probably are right.

However, we expect more volatility in commodity prices, particularly as hedge funds and other speculators have boosted their bets recently. We continue to believe that prices are headed up, but near-term sentiment changes will create more volatility in both directions due to the higher participation by short-term traders.

In the Cabot Stock of the Week newsletter, Tim moved COP to a short-term sell. We’re keeping our Buy rating for now as there is likely more upside but recognize the impressive 19% gain since our recommendation only a month ago and that some investors would be fine with locking in the profit.

There was no significant company-specific news in the past week.

ConocoPhillips shares rose 3% this past week and have about 3% upside to our 80 price target. On its recurring $.46/quarter dividend, COP shares offer a 2.4% dividend yield. BUY

General Motors (GM) is making immense progress with its years-long turnaround. It is perhaps 90% of the way through its gas-powered vehicle turnaround, and is well-positioned but in the early stages of its electric vehicle (EV) development. GM Financial will likely continue to be a sizeable profit generator. GM is fully charged for both today’s environment and the EV world of the future, although the underlying value of its emerging EV business is unclear.

The shares reflect conservative but reasonably strong gas-powered vehicle profits but assign essentially no value to the EV operations. This near-zero-value almost certainly is wrong but the EV operations have no sales or profits so the valuation is by definition speculative at this point.

GM is resuming production at its closed plants, and as of November 1 will have all plants reopened and operating. The company is expected to report third-quarter earnings of $0.76/share.

GM shares rose 2% this past week and have 19% upside to our 69 price target.

The valuation remains attractive. The P/E multiple is helpful, but not a precise measure of GM’s value, as it has numerous valuable assets that generate no earnings (like its Cruise unit, which is developing self-driving cars and produces a loss), its nascent battery operations, and its other businesses with a complex reporting structure, nor does it factor in GM’s high but unearning cash balance which offsets its interest-bearing debt. However, it is useful as a rule-of-thumb metric, and provides some indication of the direction of earnings estimates, and so we will continue its use here. BUY

Molson Coors Beverage Company (TAP) is one of the world’s largest beverage companies, producing the highly recognized Coors, Molson, Miller and Blue Moon brands as well as numerous local, craft and specialty beers. About two-thirds of its revenues come from the United States, where it holds a 24% market share. Investors worry about Molson Coors’ lack of revenue growth due to its relatively limited offerings of fast-growing hard seltzers and other trendier beverages. Our thesis for this company is straightforward – a reasonably stable company whose shares sell at an overly-discounted price. Its revenues are resilient, it produces generous cash flow and is reducing its debt. A new CEO is helping improve its operating efficiency and expand carefully into more growthier products. The company recently reinstated its dividend.

There was no significant company-specific news in the past week. MolsonCoors is expected to report third-quarter earnings of $1.54/share.

TAP shares slipped 3% in the past week and have about 58% upside to our 69 price target. The stock remains cheap, particularly on an EV/EBITDA basis, or enterprise value/cash operating profits, where it trades at 8.0x estimated 2022 results, still among the lowest valuations in the consumer staples group and below other brewing companies. BUY

Organon & Company (OGN) was recently spun off from Merck. It specializes in patented women’s healthcare products and biosimilars, and also has a portfolio of mostly off-patent treatments. Organon will produce better internal growth with some boost through smart yet modest-sized acquisitions. It may eventually divest its Established Brands segment. The management and board appear capable, the company produces robust free cash flow, has modestly elevated debt and will pay a reasonable dividend. Investors have ignored the company, but we believe that Organon will produce at least stable and large free cash flows with a reasonable potential for growth. At our initial recommendation, the stock traded at a highly attractive 4x earnings.

There was no significant company-specific news in the past week.

OGN shares jumped 5% this past week and have about 24% upside to our 46 price target (using the same target as the Cabot Turnaround Letter). The shares continue to trade at a remarkably low valuation and offer an attractive 3.0% dividend yield. BUY

Sensata Technologies (ST) is a $3.8 billion (revenues) producer of nearly 47,000 highly engineered sensors used by automotive (60% of revenues), heavy vehicle, industrial and aerospace customers. About two-thirds of its revenues are generated outside of the United States, with China producing about 21%. Investors undervalue Sensata’s durable franchise. Its sensors are typically critical components that generally produce high profit margins. As the sensors’ reliability is vital to safely and performance, customers are reluctant to switch to another supplier that may have lower prices but also lower or unproven quality. Sensata has an arguably under-leveraged balance sheet and generates healthy free cash flow. The relatively new CEO will likely continue to expand the company’s growth potential through acquisitions.

Once a threat, electric vehicles are now an opportunity, as the company’s expanded product offering (largely acquired) allows it to sell more content into an EV than it can into an internal combustion engine vehicle. Risks include a possible automotive cycle slowdown, chip supply issues, geopolitical issues with China, currency and over-paying/weak integration related to its acquisitions.

Sensata reported a strong third quarter, with revenues rising 21% (17% net of the effects of acquisitions and divestitures) and adjusted earnings increasing 32% to $0.87/share. Revenues were about 2% above the consensus estimate while earnings were 5% above the estimate. However, the company’s fourth-quarter guidance was light – revenues are now expected to be about 3% below the consensus while adjusted earnings per share are expected about 9% below. The mixed news left investors with an unclear near-term direction. We retain our Buy rating as the longer-term outlook remains encouraging.

In the quarter, most metrics were healthy. Revenues were impressively strong considering that the company’s end-markets were mixed – heavy vehicle off-road was strong (up 31%), automotive was weak (down 22%) and aerospace/other was slow (up 3%). Sensata outgrew the market in each of these segments. Gross margins and operating margins also expanded in the two major divisions: Performance Sensing and Sensing Solutions. Sensata attributed much of its strong quarter to good supply chain management, particularly regarding chips.

Corporate expenses increased as Sensata continues to spend on its “Megatrends” projects that offer longer-term growth in attractive yet still emerging product categories. Free cash flow is fine (a sizeable inventory increase drained some cash) and the balance sheet is sturdy and underleveraged, so the company is resuming its share buyback program and will probably resume its dividend, as well as also look for more acquisitions.

The company continues to develop its electrification capabilities. It is working to move up the value chain from supplying components for electric cars and trucks to building subsystems of batteries and eventually to full energy storage solutions for all types of vehicles. Compared to gas-powered vehicles, Sensata said their EV-based orders have 20% more per-vehicle content.

The problem for the fourth quarter is that the company sees little improvement in tight automotive industry conditions, weighing on sales. Also, they suspect that customers have built up extra inventory of Sensata components, which buoyed third-quarter sales but will probably be worked down, reducing fourth-quarter and 2022 sales.

As a side note, there probably is a decent amount of chip stockpiling throughout the entire supply chain, along with double- and triple-ordering. When the chip shortage begins to ease, we anticipate a drop in pricing and volumes as customers work off this extra inventory. Part of this demand taper will be offset by continued strong demand in the auto industry as vehicle inventories are sharply below healthy levels, requiring above-trend car production to restore balance.

Fourth-quarter earnings will be weaker due to the lower revenue guidance, higher component costs and a heavier penalty from the strong dollar which makes overseas profits less valuable in dollar terms. The company’s 2022 outlook remains unchanged.

ST shares fell 2% this past week and have about 35% upside to our 75 price target. BUY

Note for stock table: For stocks rated Sell, the current price is the sell date price.

Disclosure:The chief analyst of the Cabot Undervalued Stocks Advisor personally holds shares of every recommended security, except for “New Buy” recommendations. The chief analyst may purchase or sell recommended securities but not before the fourth day after any changes in recommendation ratings has been emailed to subscribers. “New Buy” recommendations will be purchased by the chief analyst as soon as practical following the fourth day after the newsletter issue has been emailed to subscribers.

Growth/Income Portfolio
Stock (Symbol)Date AddedPrice Added10/26/21Capital Gain/LossCurrent Dividend YieldPrice TargetRating
Bristol-Myers Squibb (BMY)04-01-2054.8258.246.2%3.4%78.00Buy
Cisco Systems (CSCO)11-18-2041.3255.8135.1%2.6%60.00Buy
Coca-Cola (KO)11-11-2053.5854.471.7%3.0%64.00Buy
Dow Inc (DOW) *04-01-1953.5058.719.7%4.8%78.00Buy
Merck (MRK)12-9-2083.4782.25-1.5%3.2%99.00Buy
Otter Tail Corporaton (OTTR)5-25-2147.1057.7522.6%2.7%57.00Sell
Buy Low Opportunities Portfolio
Stock (Symbol)Date AddedPrice Added10/26/21Capital Gain/LossCurrent Dividend YieldPrice TargetRating
Arcos Dorados (ARCO)04-28-215.414.77-11.8%7.50Buy
Aviva (AVVIY)03-03-2110.7510.951.9%5.4%14.00Buy
Barrick Gold (GOLD)03-17-2121.1319.43-8.0%1.9%27.00Buy
ConocoPhillips (COP)9-24-2165.0277.0318.5%2.4%80.00Buy
General Motors (GM)12-31-1936.6057.3756.7%69.00Buy
Molson Coors (TAP)08-05-2036.5343.5519.2%69.00Buy
Organon (OGN)06-07-2131.4236.7116.8%46.00Buy
Sensata Technologies (ST)02-17-2158.5756.12-4.2%75.00Buy

*Note: DOW price is based on April 1, 2019 closing price following spin-off from DWDP.

Buy – This stock is worth buying.
Strong Buy – This stock offers an unusually favorable risk/reward trade-off, often one that has been rated as a Buy yet the market has sold aggressively for temporary reasons. We recommend adding to existing positions.
Hold – The shares are worth keeping but the risk/return trade-off is not favorable enough for more buying nor unfavorable enough to warrant selling.
Sell – This stock is approaching or has reached our price target, its value has become permanently impaired or changes in its risk or other traits warrant a sale.

Note for stock table: For stocks rated Sell, the current price is the sell date price.

CUSA Valuation and Earnings
Growth/Income Portfolio
Current 2022
EPS Estimate
Current 2023
EPS Estimate
Prior 2022
EPS Estimate
Prior 2023
EPS Estimate
Change in
2022 Estimate
Change in
2023 Estimate
P/E 2022P/E 2023
Buy Low Opportunities Portfolio
Current 2022
EPS Estimate
Current 2023
EPS Estimate
Prior 2022
EPS Estimate
Prior 2023
EPS Estimate
Change in
2022 Estimate
Change in
2023 Estimate
P/E 2022P/E 2023

Current price is yesterday’s mid-day price.
CSCO: Estimates are for fiscal years ending in July