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Value Investor
Wealth Building Opportunites for the Active Value Investor

December 8, 2021

Our comments this week are mostly questions. Day-to-day gyrations make sense on the surface. Yesterday, the market surged on news of China easing its monetary policy combined with a growing sense of relief that the Omicron variant is milder than previously understood. But in the wider context, the market’s position and trend makes less sense.

More Questions Than Answers
Our comments this week are mostly questions. Day-to-day gyrations make sense on the surface. Yesterday, the market surged on news of China easing its monetary policy combined with a growing sense of relief that the Omicron variant is milder than previously understood. But in the wider context, the market’s position and trend makes less sense.

Inflation is running at a 5% rate, or higher, yet interest rates are near zero for maturities as far away as a year. The market is implying that the Fed’s accelerated timeline for phasing out its aggressive bond-buying policy will have minimal effect on interest rates. The 10-year Treasury yield is a paltry 1.45%, leaving investors sharply underwater against a 5% inflation rate.

Questions: how is it possible for inflation to remain at 5% yet bond yields remain well below 2%? These two rates should converge, but when, and which rate will move more toward the other?

Nominal GDP growth is running at a 9.6% pace. Prior to the Covid era, nominal GDP was steady at around a 4% pace. This doubling of economic growth is probably why consumers feel flush with cash – they measure economic health by how many dollars they have in their pockets, not by some vague notion of “real” economic growth (at least over short-term periods).

Questions: how soon will nominal GDP growth taper to a more sustainable pace? What is that sustainable pace? If nominal GDP growth equals real growth plus inflation, how much will each component contribute when we reach sustainable growth?

The stock market has been propelled by a gusher of fiscal and monetary stimulus which includes near-zero interest rates, as well as by robust earnings growth. Fourth-quarter earnings growth for the S&P 500 companies is estimated to be 21%. Estimates for next year point to a 28% increase in earnings compared to pre-pandemic 2019. Earnings growth seems impervious to the Covid downcycle and remains remarkably robust, particularly considering that 2019 followed a period of already-fast growth.

Questions: how long can earnings growth, and levels, remain so strong? With the market priced at 21x next year’s earnings, what effect will rising interest rates, or slowing earnings growth, have on the market’s valuation?

We have few good answers to these questions. Mostly, we find that we learn a lot just by asking them. Our strategy is to remain fairly fully invested, but to rotate toward lower-valued stocks and keep some cash in reserve for less-favorable market conditions.

Share prices in the table reflect Tuesday (December 7) closing prices. Please note that prices in the discussion below are based on mid-day December 7 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.

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Today’s Portfolio Changes

Last Week’s Portfolio Changes

Growth/Income Portfolio
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, has a solid, investment-grade balance sheet, and trades at a sizeable discount to its peers.

On October 27, Bristol-Myers reported good third-quarter results, with revenues increasing 10% and earnings rising 23%. Sales from its “New product portfolio” are now about 3% of total sales and grew 53% from the second quarter, suggesting strong opportunities ahead. Bristol generated strong free cash flow of about $5 billion, reduced net debt by $3.1 billion, repurchased $500 million in stock and paid about $1 billion in dividends. Overall, we remain confident in Bristol’s revenue outlook. Please see prior notes for more details.

If Bristol can demonstrate at least the reasonable potential for merely stable revenues during its patent expiration period, which we believe will happen, the shares are remarkably undervalued. On a free cash flow yield basis, assuming an average of $15 billion/year, the shares trade at a 12% free cash flow yield.

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

BMY shares jumped 7% in the past week and have about 36% upside to our 78 price target. Valuation remains remarkably low at 7.3x estimated 2022 earnings, compared to 11x or better for its major peer companies. The stock’s 6.7x EV/EBITDA multiple is similarly cheap, compared to 9-10x or better for peers.

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.

On November 18, Cisco reported a mixed quarter. The company is attracting plenty of new business but its ability to produce goods and generate higher profits is being impeded by component shortages and shipping costs. Cisco reduced second-quarter guidance, but retained full-year guidance, as it addresses the issues. The balance sheet and cash flow were fine. Please see prior notes for more details.

Cisco will be presenting at several conferences in December. The Barclays Global Technology, Media and Telecommunications Conference presentation on December 8 will be given by board chair and CEO Chuck Robbins. It appears that all of Cisco’s presentations will be webcast live for all investors.

CSCO shares jumped 6% this past week and have about 3% upside to our 60 price target. The shares remain attractively valued, and offer a 2.6% dividend yield, so we are sticking with the name and rating for now. 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 oversized 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.

On October 27, Coca-Cola reported an encouraging quarter as more economies around the world are recovering from the pandemic. Revenues rose 16% and earnings rose 18%. Free cash flow was strong. Management raised their full-year revenue, earnings and free cash flow guidance, and expressed confidence in continued momentum through 2022. The Coca-Cola story remains on track. Please see prior notes for more details.

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

KO shares moved up 5% this past week. The shares have about 16% 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 3.0% 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.

On October 21, Dow reported good results, with revenues rising 53% and operating earnings rising by 450% from pandemic-weakened results a year ago. Further margin improvements seem unlikely given the near-ideal conditions previously in place. Dow generated an immense $2.5 billion in free cash flow. Please see prior notes for more details.

Industry conditions will likely be strong for a while. 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 5.1% dividend while waiting for more share buybacks, more balance sheet improvement, more profits and a higher valuation.

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

Dow shares were flat this past week and have 41% 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 segment sometime in the next five years.

On October 28, Merck reported strong third-quarter results, with revenues growing 19% and adjusted earnings increasing 26%. Management incrementally raised their fourth-quarter revenue and profit guidance but to levels that were slightly below the consensus estimate. Please see prior notes for more details.

Although clinical trial data is showing that Merck’s Covid treatment (molnupiravir) isn’t as effective as previously believed, the company is expanding production to meet what appears to be strong demand. Our view is that the stock assumes zero profit contribution from molnupiravir, which leaves some room for any favorable news although we are not expecting any.

Merck paused clinical trials for a new HIV preventative and treatment. This is another setback for Merck in what has been a difficult year. Brokerage firm Guggenheim downgraded MRK shares, essentially throwing in the towel despite the innocuous “neutral” rating, down from “buy.” Guggenheim’s concern is that Merck’s pantry of likely replacements for Keytruda is thin, with no new pipeline announcements coming next year.

Merck shares continue to slide, now trading at their late-2018 price and only about 15% above their March 2020 pandemic lows. Like Guggenheim, the broad market seems to have given up on Merck. We think this is nearsighted – investor expectations are very low yet the company won’t passively accept its assumed demise. The shares have about 37% upside to our 99 price target.

Merck produces generous free cash flow to fund its current dividend (now yielding 3.8%) as well as likely future dividend increases (the company recently raised its dividend by 6%), although its shift to a more acquisition-driven strategy will slow the pace of increases. BUY

Buy Low Opportunities Portfolio
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 re-open. 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, including issues in Brazil including its economic conditions, currency and the chances that a socialist might win next year’s Brazilian presidential elections will continue to move ARCO shares.

On November 10, Arcos reported very strong third-quarter results that were sharply higher than a year ago and well above consensus estimates. Conditions are normalizing across its markets. Arcos’ previously high debt ratio is now very reasonable. Despite the difficult currency and political conditions in Latin America, which appears to be more of an investor-deterrent than a customer-deterrent, Arcos is performing well “on the ground.” Please see prior notes for more details.

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

ARCO shares jumped 9% this past week, likely driven by news that the Omicron variant is milder than initially understood. The stock has about 40% 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 based on its plans for returning its excess capital to shareholders, including share repurchases and dividends. These distributions could be substantial. We also look for incremental shareholder-friendly pressure from highly regarded European activist investor Cevian Capital, which holds a 5.2% stake.

On November 11, Aviva’s revenue-only interim update showed good growth in the core business, suggesting a renewed relevance and competitiveness to its product offerings. Please see prior notes for more details.

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

Aviva shares rose 3% this past week. Insurance company stocks are sensitive to financial market gyrations (in both directions) they have leveraged balance sheets with their principal tangible assets being investments and securities. Aviva shares have about 34% 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%). 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 nearly zero debt net of cash. 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.

On November 4, Barrick reported reasonable third-quarter results. Revenue slipped 20% on lower gold volumes prices and adjusted EBITDA declined 25%. Barrick reiterated its full-year production guidance. Please see prior notes for more details.

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

This past week, commodity gold prices slipped fractionally to $1,788/ounce while the 10-year Treasury yield slipped to 1.45%. Bond yields ticked down even after better news on the Omicron variant. The U.S. Dollar Index, another driver of gold prices (the dollar and gold usually move in opposite directions) ticked up to 96.43. The index remains about 3% below its pre-Covid late-2019 level of about 99. Per-ounce gold prices seem rangebound between $1,700 and $1,900. The combined implication/sentiment of the level and trend of gold/yield/dollar is that the Fed’s tightening policy will slow U.S. economic growth and weigh incrementally on gold prices.

Barrick shares fell 2% this past week and have about 44% 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.

Earnings estimates dipped, which appear to be due to some true-ups for the current gold price.

On its recurring $.09/quarter dividend, GOLD shares offer a reasonable 1.9% dividend yield. Barrick is paying an additional $0.42/share in special distributions this year (no clarity on 2022 special dividends), lifting the effective dividend yield to 4.2%. BUY

Citigroup (C) Citi is one of the world’s largest banks, with over $2.4 trillion in assets. The bank’s weak compliance and risk-management culture led to Citi’s disastrous and humiliating experience in the 2009 global financial crisis, which required an enormous government bailout. The successor CEO, Michael Corbat, navigated the bank through the post-crisis period to a position of reasonable stability. Unfinished, though, is the project to restore Citi to a highly-profitable banking company, which is the task of new CEO Jane Fraser.

Mark Mason, Chief Financial Officer of Citigroup, will present at the 2021 Goldman Sachs U.S. Financial Services Conference on Wednesday, December 8, 2021. The presentation is expected to begin at approximately 3 p.m. (Eastern) and will be webcast to investors.

Citi shares slipped 1% this past week and have about 35% upside to our 85 price target. The trimming of earnings estimates for 2023 appear to be driven by the recent flattening of the yield curve, which would imply lower net interest income for Citi.

Trading at 81% of tangible book value (compared to Wells Fargo at 135% and Bank of America at 206%) and 7.8x estimated 2022 earnings, Citi shares are among the cheapest in the banking sector – a major attraction as expectations are low. As the bank grinds along with its turnaround, the valuation should improve. Investors enjoy a 3.2% dividend yield and perhaps another 3% or more in annual accretion from the bank’s share repurchase program. 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.

On November 2, ConocoPhillips reported healthy third-quarter results as commodity prices surged. Conoco’s production remains unhedged, so changes in commodity prices flow through to profits. Conoco generated a large $2.8 billion in free cash flow, repurchased $1.2 billion in shares and reduced debt by $300 million.

Conoco announced that its 2022 capital spending budget will be $7.2 billion, which includes spending on the Permian (Texas) assets recently acquired from Royal Dutch Shell for $8.6 billion (net) cash. The company said it anticipates that this spending will provide perhaps 1-2% production growth – anything positive is favorable in our view as it would show that Conoco is able to sustain its asset base.

Also, the company announced a three-tier capital return program, which is mostly unchanged but adds a variable dividend. The first tier is the ordinary dividend (currently $0.84/quarter), described as sustainable even at the low end of the commodity price cycle. The second tier is share buybacks, determined by management’s discretion. The third (new) tier is the variable return of capital, or VROC, which is designed to provide an additional tool for returning capital to shareholders. Conoco is keeping its commitment to return at least 30% of cash flow from operations “during periods of higher prices.”

Conoco said it anticipated a cash return to shareholders of $7 billion in 2022 (up 16% from 2021), partly funded by $1 billion in cash proceeds from its sale of a stake in Canadian oil company Cenovus Energy (CVE). Conoco declared a $0.20/share VROC to be paid on January 14, 2022.

West Texas Intermediate crude is currently trading at $72.57/barrel, up 8% this past week, while natural gas in the United States is priced at $3.72, down about 18% from last week. Oil’s jump is driven by news that OPEC won’t accelerate its output, combined with the view that the Omicron variant is milder than originally understood, which should boost oil demand. Natural gas prices are falling sharply on updated expectations for a mild U.S. winter. Despite rising export volumes, natural gas prices are driven heavily by domestic demand, whereas oil is a truly global commodity. The recent fall-off/volatility in energy prices may serve as a “check the runner on third” situation – with oil and gas explorers possibly more reluctant to rush forward with new drilling. Counterintuitively, low or volatile energy prices would then have the effect of sustaining/elevating energy prices.

ConocoPhillips shares rose 7% this past week and have about 6% upside to our 80 price target. Recent earnings estimate trims reflect lower oil prices, but could easily rebound along with the higher oil price. Changes in estimates for commodity company earnings tend to lag changes in commodity prices by about a month or so. 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 straight-forward – 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.

On October 28, Molson Coors reported reasonable third-quarter results, with revenues increasing 1% but adjusted EBITDA fell 11%, mostly due to higher input and marketing costs. The company is making incremental but slow progress with its turnaround. Management remains confident in its fourth-quarter outlook, reiterating its full-year revenue and earnings guidance. Please see prior notes for more details.

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

TAP shares rose 6% in the past week on favorable Omicron news. The shares have about 47% 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.

On November 11, Organon reported a mixed quarter as revenue fell 3% and adjusted earnings fell 30% (but was about 16% above the consensus estimate). Management reaffirmed its full-year 2021 revenue and earnings guidance but said that the EBITDA margin will be lower due to rising research costs. Please see prior notes for more details.

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

OGN shares ticked up 1% this past week and have about 56% upside to our 46 price target (using the same target as the Cabot Turnaround Letter). The sharp post-earnings decline leaves OGN shares about 4% above cost of $28.45. They continue to trade at a remarkably low valuation while offering an attractive 3.8% 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. Electric vehicles are an opportunity as they expand Sensata’s reachable market.

On October 26, Sensata reported a strong third quarter, as revenues rose 17% and adjusted earnings increased 32%. Fourth-quarter guidance was light, however, due to difficult auto industry conditions. Free cash flow was fine and the balance sheet remains sturdy and under-leveraged, so Sensata is resuming its share buyback program and will probably resume its dividend, as well as look for more acquisitions. Please see prior notes for more details.

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

ST shares jumped 7% this past week and have about 26% upside to our 75 price target. BUY

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 Added12/7/21Capital Gain/LossCurrent Dividend YieldPrice TargetRating
Bristol-Myers Squibb (BMY)04-01-2054.8257.134.2%3.4%78.00Buy
Cisco Systems (CSCO)11-18-2041.3258.0840.6%2.5%60.00Buy
Coca-Cola (KO)11-11-2053.5855.213.0%3.0%64.00Buy
Dow Inc (DOW) *04-01-1953.5054.862.5%5.1%78.00Buy
Merck (MRK)12-9-2083.4772.28-13.4%3.8%99.00Buy
Buy Low Opportunities Portfolio
Stock (Symbol)Date AddedPrice Added12/7/21Capital Gain/LossCurrent Dividend YieldPrice TargetRating
Arcos Dorados (ARCO)04-28-215.415.450.7%7.50Buy
Aviva (AVVIY)03-03-2110.7510.44-2.9%5.8%14.00Buy
Barrick Gold (GOLD)03-17-2121.1318.56-12.2%1.9%27.00Buy
Citigroup (C)11-23-2168.1062.90-7.6%3.2%85.00Buy
ConocoPhillips (COP)9-24-2165.0274.5714.7%2.5%80.00Buy
General Motors (GM)12-31-1936.6062.1969.9%-Sell
Molson Coors (TAP)08-05-2036.5346.6927.8%2.9%69.00Buy
Organon (OGN)06-07-2131.4229.31-6.7%3.8%46.00Buy
Sensata Technologies (ST)02-17-2158.5759.511.6%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
Change in
2022 Estimate
Change in
2023 Estimate
P/E 2022P/E 2023
BMY 57.50 7.83 8.140.0%0.0% 7.3 7.1
CSCO 57.98 3.42 3.680.0%0.0% 17.0 15.8
KO 55.26 2.44 2.600.0%0.0% 22.6 21.3
DOW 55.16 6.24 6.11-0.2%0.2% 8.8 9.0
MRK 72.03 7.24 7.17-0.1%-0.3% 9.9 10.0
Buy Low Opportunities Portfolio
Current 2022
EPS Estimate
Current 2023
EPS Estimate
Change in
2022 Estimate
Change in
2023 Estimate
P/E 2022P/E 2023
ARCO 5.38 0.30 0.370.0%0.0% 17.9 14.5
AVVIY 10.46 1.21 1.340.0%0.0% 8.7 7.8
GOLD 18.70 1.18 1.22-2.0%-2.5% 15.8 15.3
C 62.91 8.03 8.70-0.1%-2.7% 7.8 7.2
COP 75.29 7.84 6.50-0.1%-5.4% 9.6 11.6
TAP 47.02 4.16 4.43-0.2%0.0% 11.3 10.6
OGN 29.48 5.87 5.980.3%0.0% 5.0 4.9
ST 59.53 4.06 4.670.0%0.0% 14.7 12.7

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