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Value Investor
Wealth Building Opportunites for the Active Value Investor

February 16, 2022

More color on our recent sale that generated a 40% gain since September and comments on other recommended stocks.

More Color on our Sale of ConocoPhillips (COP)
We recently received several questions from subscribers asking for more color behind our recent recommendation to sell ConocoPhillips (COP). At the time, oil prices were surging toward the mid-$90/barrel range and our call was looking suspect, if also perhaps wrong straight out of the gates. So, we thought it would be useful to all subscribers to share our answer:

“With my approach to investing, commodity-based companies are difficult, because the share prices are tied to commodity prices which are mighty hard to predict accurately. While global oil demand is a big number (~100 million barrels/day), the price can be sharply influenced by small (~500k barrels/day) imbalances. Assessing the supply/demand balance to this level of precision is impossible. The lack of outlook visibility for the key fundamental behind a commodity company’s value makes these stocks inherently higher risk compared to a normal company.

Commodity stocks are usually ‘marked to market’ in that they implicitly price in whatever the current commodity price is. So, I look for commodities that are out of favor but have an improving supply/demand outlook that should lift its price. Also, I pair this with commodity companies whose shares aren’t properly pricing in the current commodity price. This way, I can get more than full participation in any commodity price recovery while having relatively limited downside.

COP fit this description. I was a little late in recommending it, but it seemed like such an ‘obvious’ winner at the time that not recommending it would have been almost a dereliction of duty, as it were.

I take the mirror approach to selling. I tend to sell when the commodity price has recovered and the stocks fully price-in that recovery plus some. This is where COP is today, and why I moved it to sell.

That said, I find selling well to be harder than buying well, so I am usually ‘too early’ in my selling, particularly with commodity stocks. While historically, $90+ oil brings on more supply, this cycle may be a ‘super cycle’ in that demand could be robust for longer while supply remains constrained unlike any prior cycle. If so, I will have been terribly early, and wrong.

In the sister publication, Cabot Turnaround Letter, we have several oil stocks that still look attractive, and I am raising my price targets for these: Marathon Oil (MRO) and Shell plc (SHEL). This advisory accepts higher risks in pursuit of higher profits, relative to the Cabot Undervalued Stocks Advisor. Also, in general, I am keeping some exposure on the chance that the supply/demand picture is so imbalanced that oil prices rise to well over $100/barrel. It’s just that COP doesn’t quite fit the bill anymore.”

We hope this helps explain our thinking and provides some insight into our investing philosophy.

Share prices in the table reflect Tuesday (February 15) closing prices. Please note that prices in the discussion below are based on mid-day February 15 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

Upcoming Earnings Reports
Wednesday, February 16: Barrick (GOLD), Cisco Systems (CSCO)
Thursday, February 17: Organon (OGN)
Wednesday, February 23: Molson Coors (TAP)
Wednesday, March 2: Aviva plc (AVVIY)

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.

Bristol-Myers reported healthy 4th quarter results and reiterated its reasonably encouraging full-year 2022 guidance for flat revenues and 4% earnings per share growth. The core business appears likely to perform well even as sales of Revlimid (27% of total revenues) could slide by a quarter as the treatment loses patent protection. Sales rose 8% (ex-currency) and were in line with estimates, while adjusted earnings rose 25% and were 2% above estimates.

The company maintained its long-term 2-5% revenue growth and low to mid-40s operating margin targets, as well as its goal to generate $45-$50 billion in free cash flow from 2022-2024. If met, these results would be plenty strong enough to boost Bristol’s shares significantly. Bristol’s balance sheet remains sturdy.

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

BMY shares rose 3% in the past week and have about 15% upside to our 78 price target. Valuation remains low at 8.7x estimated 2022 earnings, compared to 11x or better for its major peer companies. The stock’s 7.9x EV/EBITDA multiple is similarly cheap, compared to 9-10x or better for peers.

Assuming an average of $15 billion/year in free cash flow, the shares trade at a 10% free cash flow yield.

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 3.2% 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.

Cisco is rumored to be in talks to buy software company Splunk (SPLK), a $2.5 billion revenues tech company that helps businesses analyze and secure their data. A deal would be huge – Splunk’s market cap is nearly $19 billion and would require perhaps a 25% premium or more. It would be by far Cisco’s largest acquisition. While strategically the deal might make sense, as it would help Cisco move more decisively into software, it would reinforce our concern that the company is “buying growth” rather than generating it with its own products. In tech, buying growth, particularly in such large chunks, has a mixed history at best.

Cisco would not be buying a cheap company – Splunk trades at about 7x revenues and has not yet produced a positive operating profit. Revenue growth isn’t lights-out either at an estimated 18% for this year.

By regularly making acquisitions, Cisco is replacing internally generated research with acquired research. A dollar spent on research is expensed so it reduces profits, but a dollar spent on acquisitions isn’t expensed. This strategy artificially boosts the company’s profits and suppresses its valuation multiple. We estimate that Cisco makes $3-4 billion in acquisitions/year – if treated as an expense these costs would reduce the company’s roughly $20 billion in EBITDA by 15-20%.

Cisco reports on Wednesday morning after this letter goes to print, so we will wait for the update prior to any possible rating changes. The company is expected to report adjusted profits of $0.81/share.

CSCO shares slipped 2% in the past week and have 22% upside to our 66 price target. The dividend yield is an attractive 2.7%. BUY

The Coca-Cola Company (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.

On February 10, Coca-Cola reported strong fourth-quarter results and a favorable 2022 outlook. Revenues of $9.5 billion rose 10% from a year ago and were about 7% above estimates. Adjusted earnings of $0.45/share fell 5% but were 10% above estimates.

For 2022, the company guided to 7-8% organic revenue growth, driven by higher volumes, favorable mix changes and incrementally higher pricing. Earnings per share growth was guided to +5-6%, which would be about $2.45/share – which excludes the effects of currency changes and acquisitions/divestitures. We think the company is being conservative with guidance. And, as long as Coke generates strong free cash flow and produces solid revenue growth, most investors won’t care about lackluster earnings per share growth.

Demand for Coca-Cola’s products is recovering nicely as markets around the world emerge from the pandemic. In the quarter, unit case volume, which measures demand by end-customers, rose 9%. Concentrate volume, which measures the volumes sold to bottlers and other distributors (which determines Coke’s revenues) fell 1% but was held back by 6 percentage points due to fewer days in the quarter compared to a year ago and due to shipment timing. However, pricing and product mix was impressively strong at +10%. Coke clearly has some pricing power. Profits were held back by elevated marketing spending.

The company’s strategy of emphasizing its more dominant brands while trimming its roster of niche brands and offshoots, boosting the effectiveness of its marketing (including the notable consolidation of its global marketing under a single marketing firm), and expanding with new, large-scale beverages, is working.

Free cash flow for the year was $11.3 billion, up from $8.7 billion a year ago. Coke is converting about 90% of its earnings into cash flow. Net debt was reduced about $2 billion, or 6%, from a year ago. Management guided to $10.5 billion of free cash flow generation in 2022, but was coy about share repurchases although they reiterated their firm commitment to raising the dividend. Coke will also generate additional cash from the sale of its stakes in various bottlers. We wonder to what extent they are hoarding cash in advance of a possibly huge tax payment related to the IRS dispute.

KO shares slipped 1% in the past week and have about 5% 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 8% of Coke’s market value. This $5/share value provides additional cushion supporting our 64 price target. KO shares offer an attractive 2.7% 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.

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 4.5% dividend yield while waiting for more share buybacks, more balance sheet improvement, more profits and a higher valuation.

On January 27, Dow reported a strong quarter. Revenues grew 34% and were about 1% above consensus estimates, while earnings grew sharply compared to a weak year-ago result and were slightly above consensus estimates. Dow guided for a strong first quarter, with adjusted EBITDA to increase about 20%, which would be significantly above the consensus estimate. Higher prices, up 39%, drove the strong results, as volumes fell. Operating expenses rose only moderately. Dow’s free cash flow – a key part of our thesis – was impressively strong at $2.1 billion, bringing the full-year free cash flow to $5.7 billion. This full-year total is equivalent to 13% of Dow’s market cap of $42 billion.

Even as Dow is investing heavily in a wide range of new growth, efficiency, decarbonization and other initiatives, it is also returning much of the cash flow to investors either directly through dividends and buybacks or indirectly by reducing the company’s pension and debt liabilities.

Is this pace of cash flow production sustainable? The results and guidance are generally supportive of our “stronger for longer” view. Dow shares remain inexpensive. The stock price is rising but so are earnings and cash flow estimates, such that the already-low valuation multiples aren’t increasing. Holding back Dow shares are concerns about the sustainability of the current price and volume trends later in 2022 and into 2023 and beyond. We continue to keep our 78 price target and watch the dividends and internal cash flow build up while we wait.

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

Dow shares rose 1% in the past week and have 26% 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 last June and we think it will divest its animal health segment sometime in the next five years.

On February 3, Merck reported reasonably good fourth-quarter results that were better than estimates and provided encouraging full-year 2022 guidance. The core business is performing well, with Keytruda sales rising 16% and Gardasil sales jumping 50%, but investors remain unconvinced about Merck’s ability to replace the eventual loss of Keytruda and other products that face generic competition in coming years, despite a reasonably convincing pipeline discussion on the conference call. Overall sales rose 23% and adjusted earnings rose 84%. Merck did not disclose balance sheet or cash flow data, so we will wait for the 10Q in a few weeks.

The Merck story continues to require considerable patience but remains on track.

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

Merck shares rose 1% in the past week and have about 27% upside to our 99 price target.

Merck reiterated its strong to its dividend (3.6% yield) which it backs up with generous free cash flow, 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 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, including issues in Brazil including its economic conditions (in particular, inflation, running at a 10.4% rate), currency and the chances that a socialist might win next year’s Brazilian presidential elections will continue to move ARCO shares. Brazil is one of the most Covid-vaccinated countries in the world, which reduces pandemic-related demand risks.

On January 26, the company released strong preliminary fourth-quarter results. Same-store sales compared to two years ago (pre-pandemic) rose 24% and Adjusted EBITDA rose above the prior quarterly record which was set in the fourth quarter of 2019. The company has a reasonably aggressive new store opening plan – an encouraging indicator of its confidence in its future. There was no transcript or other details from Arcos’ recent presentation at the Credit Suisse 2022 Latin America Investment Conference, but there was likely no incremental news, either. Arco reports full results on March 16.

ARCO shares rose 2% in the past week and trade at their post-pandemic high. The shares have about 7% upside to our 7.50 price target. We remain steady in our conviction in the company’s recovery. 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.

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

Aviva shares slipped 2% in the 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 19% upside to our 14 price target. The dividend, which produces a generous 5.2% yield, looks fully sustainable. 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.

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

Over the past week, commodity gold rose 1% to $1,852/ounce. Per-ounce gold prices remain rangebound between $1,700 and $1,900. The 10-year Treasury yield rose to 2.05%, reverting back to its pre-pandemic level in late 2019, suggesting that yields could rise a lot more given the 7.5% inflation rate (compared to maybe 2% in late 2019).

The U.S. Dollar Index, another driver of gold prices (the dollar and gold usually move in opposite directions), ticked up to 96.00. The index remains about 3% below its pre-Covid late-2019 level of about 99.

Barrick shares rose 4% this past week and have about 31% 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 1.7% dividend yield. Barrick paid an additional $0.42/share in special distributions last year (no clarity on 2022 special dividends), lifting the effective dividend yield to 3.8%. 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.

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

Citi shares were flat over the past week and have about 27% upside to our 85 price target. The valuation remains attractive at 85% of tangible book value and 8.8x estimated 2022 earnings. Our set of peer banks currently trade at an average of 2.0x tangible book value and 12.7x 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 continue to lift.

Citigroup investors enjoy a 3.0% dividend yield and perhaps another 3% or more in annual accretion from the bank’s share repurchase program. BUY

ConocoPhillips (COP) is the world’s largest independent E&P company. We recently moved COP from a Buy to Hold and then Hold to Sell. The company is well-managed, has strong oil and natural gas assets and a healthy balance sheet. Conoco generates considerable free cash flow at current commodity prices, of which it is returning much to shareholders. However, the risk/return trade-off was no longer favorable following the sharp run-up in the share price. The COP recommendation produced a 41% total return since our original Buy recommendation last September. SELL

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.

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

TAP shares rose 3% in the past week and have about 39% 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 8.5x estimated 2022 results, still among the lowest valuations in the consumer staples group and below other brewing companies. The 2.7% dividend only adds to the appeal. 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 rose 4% in the past week and have about 31% 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 while offering an attractive 3.2% 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 February 1, Sensata reported reasonable fourth-quarter results but forward guidance was below the consensus estimates so the stock was moderately weak on the news. Adjusted earnings rose 2% and were about 7% above the consensus estimate. Revenues rose 3% but fell 1% after adjusting for acquisitions and currency effects. The revenues were about 2% above the consensus.

Revenues were held back by weak production at automakers but helped by more content per vehicle as well as growth in industrial demand and from acquisitions. The profit margin contracted modestly due to higher labor and input costs along with higher “mega-trend” investments in electrification and other technologies that will help Sensata participate in faster-growing secular trends.

Full-year 2022 guidance was below the consensus but was reasonably encouraging: 8% revenue growth excluding acquisitions and 8% earnings per share growth (although consensus was for 15% earnings growth). Guidance was subdued partly due to an anticipated sluggish 7% growth in global auto production weighed down by China. Sensata continues to generate sizeable free cash flow, has a strong balance sheet and announced a new $500 million share repurchase program – a good move in our view as the shares are undervalued.

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

ST shares rose 3% in the past week and have about 29% 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 Added2/15/22Capital Gain/LossCurrent Dividend YieldPrice TargetRating
Bristol-Myers Squibb (BMY)04-01-2054.8267.7723.6%3.2%78.00Buy
Cisco Systems (CSCO)11-18-2041.3254.2731.3%2.7%66.00Buy
Coca-Cola (KO)11-11-2053.5860.9113.7%2.7%64.00Buy
Dow Inc (DOW) *04-01-1953.5061.8615.6%4.5%78.00Buy
Merck (MRK)12-9-2083.4777.81-6.8%3.5%99.00Buy
Buy Low Opportunities Portfolio
Stock (Symbol)Date AddedPrice Added2/15/22Capital Gain/LossCurrent Dividend YieldPrice TargetRating
Arcos Dorados (ARCO)04-28-215.417.0530.3%7.50Buy
Aviva (AVVIY)03-03-2110.7511.8210.0%5.2%14.00Buy
Barrick Gold (GOLD)03-17-2121.1320.68-2.1%1.7%27.00Buy
Citigroup (C)11-23-2168.1067.00-1.6%3.0%85.00Buy
ConocoPhillips (COP)9-24-2165.0291.0740.1%2.0%NASell
Molson Coors (TAP)08-05-2036.5349.5235.6%2.7%69.00Buy
Organon (OGN)06-07-2131.4235.2212.1%3.2%46.00Buy
Sensata Technologies (ST)02-17-2158.5758.600.1%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 67.55 7.79 8.29-0.3%0.1% 8.7 8.1
CSCO 54.03 3.42 3.690.0%0.0% 15.8 14.6
KO 61.14 2.46 2.641.2%1.1% 24.9 23.2
DOW 61.85 6.69 6.48-0.3%-0.3% 9.2 9.5
MRK 77.67 7.34 7.250.0%0.0% 10.6 10.7
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 6.98 0.30 0.390.0%2.6% 23.3 17.9
AVVIY 11.81 1.22 1.400.0%2.0% 9.7 8.4
GOLD 20.63 1.08 1.17-0.7%2.8% 19.1 17.7
C 67.07 7.65 8.45-1.2%-0.2% 8.8 7.9
TAP 49.80 4.04 4.32-0.7%-0.2% 12.3 11.5
OGN 35.01 5.83 5.98-0.2%0.2% 6.0 5.9
ST 58.26 3.99 4.61-0.2%0.0% 14.6 12.6

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