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Value Investor
Wealth Building Opportunites for the Active Value Investor

February 9, 2022

Earnings reports from two recommended companies were mildly encouraging. There was very little news on other recommended companies. We note our recent Sell recommendation that produced a 41% return since our September 2021 Buy recommendation. We also comment on an emerging macro concept useful for value investors.

The Great “Unwind?”
We can’t help noticing how many of the pandemic’s effects on stocks and interest rates are being completely unwound.

Each day, it seems like yet another pandemic beneficiary stock returns to its pre-pandemic price. After its epic collapse, Meta Platforms (formerly known as Facebook, still using the “FB” symbol) trades at about $217, right in line with its February 2020 price. At $119, Paypal (PYPL) has collapsed to just below its $123 price in February 2020. There are many others, including pandemic icon Netflix (NFLX) – these two are the most notable examples from just last week.

The benchmark 10-year U.S. Treasury yield rose to 1.96%, unwinding its collapse to 0.56% in July 2020 to return to its December 2019 yield.

Other indicators, like commodity prices, corporate earnings, major stock market indices and various economic indicators (including GDP, personal income and inflation) remain well-above their pre-pandemic levels. The pandemic was an out-of-the-blue shock that radically altered the behavior and expectations of every person and institution. But eventually, the world will settle down and revert to more normal behavior and expectations. While we don’t anticipate that every indicator will fully unwind, we have not likely seen the end of the effects of rising interest rates and slower government stimulus spending.

Some things will be permanently altered, others won’t. Our approach to investing is deeply rooted in company-specific opportunities. But we find this macro “Great Unwind” concept helpful as we wonder whether earnings estimates for some otherwise interesting (and newly discounted) stocks are still overly optimistic.

Share prices in the table reflect Tuesday (February 8) closing prices. Please note that prices in the discussion below are based on mid-day February 8 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
ConocoPhillips (COP) – Move from Hold to Sell.
ConocoPhillips (COP) – Move from Buy to Hold.

Upcoming Earnings Reports
Thursday, February 10: Coca-Cola Company (KO)
Wednesday, February 16: Barrick (GOLD), Cisco Systems (CSCO)
Thursday, February 17: Organon (OGN)
Wednesday, February 23: Molson Coors (TAP)

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 a 4% earnings per share growth. The core business appears likely to perform well even as sales of Revlimid (27% of Bristol’s total revenues) could slide by a quarter as the treatment loses patent protection.

In the quarter, sales of $12.0 billion rose 8% (ex-currency) from a year ago and were in line with estimates. Adjusted earnings of $1.83/share rose 25% from a year ago and were 2% above the $1.80 consensus estimate. Revlimid sales grew 1%, Eliquis sales rose 18% and Opdivo sales rose 11%.

The adjusted operating margin of 39.0% rose from 34.5% a year ago due to higher gross profits and lower overhead spending.

For the full year, results for the base business were encouraging. Sales grew 9% while operating profits grew 14%, driven by subdued expense growth. The operating margin of 42.8% improved from 41.0% and was in line with Bristol’s target of “low to mid 40s.”

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 Merck’s shares significantly.

From here, the Bristol story hinges on its ability to continue to boost sales of its patented products while adding new products either from internal development or acquisition. The company has the balance sheet and cash flow to make acquisitions, but appears to be disciplined in its potential purchases. Whether this discipline continues remains to be seen, however.

Bristol’s balance sheet remains sturdy with its $45 billion of debt (down 11% from a year ago) partly offset by $17 billion in cash. The company reminded investors of its new $15 billion share buyback program, of which $5 billion will be completed in the first quarter. The board remains committed to growing the dividend even as it pays down more debt.

BMY shares rose 1% in the past week and have about 19% upside to our 78 price target. Valuation remains low at 8.4x estimated 2022 earnings, compared to 11x or better for its major peer companies. The stock’s 8.1x 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 3.3% 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 20% 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 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.

There was no significant company-specific news in the past week. Coca-Cola is expected to report earnings of $0.41/share on February 10.

KO shares rose 3% in the past week and have about 3% upside to our 64 price target. Even though the stock is just below the price target, the earnings report is tomorrow so we will wait to change our rating on the company.

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 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 4.6% 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.

Dow shares slipped 2% in the past week and have 28% 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 and full-year 2022 guidance. The core business is performing well, 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. The Merck story continues to require considerable patience.

Sales of $13.5 billion rose 23% from a year ago and were about 2% above estimates. Operating expenses rose 2%, helping boost profits. Also, the tax rate was artificially low, helping earnings but won’t be repeated in the future. Adjusted earnings of $1.80/share rose 84% from a year ago and were sharply higher than the consensus estimate of $1.52/share. Full-year 2022 guidance is for revenue growth of 12% and EPS growth of 20%. The guidance was generally in line with prior consensus estimates.

In the quarter, adjusted for currency changes, Keytruda revenues grew 16% and Junavia revenues grew 6%. Sales of Gardasil, the market-dominating vaccine that is Merck’s #2 product in terms of revenues behind Keytruda, grew 50% as doctors’ offices reopened. Molnupiravir produced $952 million in revenues, whereas it had zero sales a year ago, and by itself generated 9% revenue growth for all of Merck. Without Molnupiravir, total sales would have grown 15% – still an impressive pace.

Animal Health revenues grew 8%. This segment seems undervalued within Merck, and we anticipate that at some point Merck will sell it to either Elanco, Zoetis or another competitor that specializes in this field.

Merck’s gross margin slipped modestly due to Molnupiravir’s lower profitability. Overhead expenses were flattish, which indicates that Merck is keeping control of its administrative costs. Research and development spending rose 11% to help bolster its new product efforts. We think this is a good use of resources as Merck works to offset anticipated lost revenues when Keytruda and other treatments go off-patent. The adjusted operating profit margin of 35.4% compared to 26.9% a year ago. Year-ago results were weak due to pandemic-related revenue and cost disruptions.

For the full year, sales ex-currency grew 16%, or about 6% excluding a large contribution from Molnupiravir. Adjusted earnings per share of $6.02 grew 32%. The adjusted operating margin of 36.4% improved from 32.7% a year ago. Overall, a good year, but helped by a weak comparison. Merck is targeting an operating margin of over 43% by 2025. This is a somewhat aggressive goal. For perspective, if Merck hypothetically reached this goal in 2022, its profits would be about 16% higher than currently anticipated.

Merck did not disclose balance sheet or cash flow data, so we will wait for the 10Q in a few weeks.

Overall, the Merck story remains on track but continues to require immense patience.

Merck shares fell 6% in the past week and have about 29% upside to our 99 price target.

Merck reiterated its strong commitment 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 10.1% 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 were flat in the past week and remain at their high since before the pandemic. The shares have about 10% 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 (U.K., 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 rose 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 16% upside to our 14 price target. The dividend, which produces a generous 5% 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 $1,828/ounce. Per-ounce gold prices remain range-bound between $1,700 and $1,900. The 10-year Treasury yield rose to 1.96%, reverting back to its pre-pandemic level in late 2019, suggesting that yields could rise a lot more given the 7% inflation rate (compared to maybe 2% in late 2019). The next CPI data release is on February 10.

The U.S. Dollar Index, another driver of gold prices (the dollar and gold usually move in opposite directions), ticked down to 95.59. 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 37% 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 1.8% 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 3.9%. 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 rose 1% over the past week and have about 26% upside to our 85 price target. The valuation remains attractive at 85% of tangible book value and 8.7x 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. Last week, we 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 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.

TAP shares rose 1% in the past week and have about 41% 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 8.2x estimated 2022 results, still among the lowest valuations in the consumer staples group and below other brewing companies. The 2.8% 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 2% in the past week and have about 36% 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 3.3% 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 were 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.

ST shares fell 1% in the past week and have about 33% 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 Added2/8/22Capital Gain/LossCurrent Dividend YieldPrice TargetRating
Bristol-Myers Squibb (BMY)04-01-2054.8265.8920.2%3.3%78.00Buy
Cisco Systems (CSCO)11-18-2041.3255.3433.9%2.6%66.00Buy
Coca-Cola (KO)11-11-2053.5862.0015.7%2.6%64.00Buy
Dow Inc (DOW) *04-01-1953.5061.0914.2%4.6%78.00Buy
Merck (MRK)12-9-2083.4776.91-7.9%3.6%99.00Buy
Buy Low Opportunities Portfolio
Stock (Symbol)Date AddedPrice Added2/8/22Capital Gain/LossCurrent Dividend YieldPrice TargetRating
Arcos Dorados (ARCO)04-28-215.416.8426.4%7.50Buy
Aviva (AVVIY)03-03-2110.7512.0712.3%5.1%14.00Buy
Barrick Gold (GOLD)03-17-2121.1319.82-6.2%1.8%27.00Buy
Citigroup (C)11-23-2168.1067.12-1.4%3.0%85.00Buy
ConocoPhillips (COP)9-24-2165.0291.0740.1%2.0%NASell
Molson Coors (TAP)08-05-2036.5348.4032.5%2.8%69.00Buy
Organon (OGN)06-07-2131.4233.757.4%3.3%46.00Buy
Sensata Technologies (ST)02-17-2158.5756.63-3.3%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 65.78 7.81 8.280.0%0.6% 8.4 7.9
CSCO 55.14 3.42 3.690.0%0.0% 16.1 14.9
KO 62.08 2.43 2.610.0%0.4% 25.5 23.8
DOW 60.74 6.71 6.50-0.7%0.8% 9.1 9.3
MRK 76.63 7.34 7.250.7%0.0% 10.4 10.6
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 6.82 0.30 0.380.0%0.0% 22.7 17.9
AVVIY 12.07 1.22 1.380.0%2.0% 9.9 8.8
GOLD 19.77 1.09 1.14-3.5%-2.1% 18.2 17.4
C 67.22 7.74 8.470.0%0.0% 8.7 7.9
TAP 48.79 4.07 4.330.0%0.0% 12.0 11.3
OGN 33.77 5.84 5.97-0.3%-0.5% 5.8 5.7
ST 56.52 4.00 4.61-0.2%-1.9% 14.1 12.3

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