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Cabot Benjamin Graham Value Investor Weekly Update

This Weekly Update includes summaries for six Cabot Benjamin Graham Value Investor companies that reported quarterly financial results. On Monday, March 6, I’ll update the remaining stocks.

In this Weekly Update, I include summaries for six Cabot Benjamin Graham Value Investor companies that reported quarterly financial results. Today’s Update is a partial summary of the companies providing results during the week. You’ll receive another email from me on Monday, March 6, with updates on the remaining stocks.

Reports are for the quarter ended December 31, 2016 unless otherwise stated. Prices appearing after each stock symbol are the closing prices on Thursday, March 2, 2017.

My schedule for the next five weeks will be:

  • Thursday, March 9, Cabot Enterprising Model issue 272E
  • Friday, March 10, Weekly Update
  • Friday, March 17, Weekly Update
  • Tuesday, March 21, Wall Street’s Best Daily
  • Wednesday, March 22, Wall Street’s Best Daily
  • Friday, March 24, Weekly Update
  • Friday, March 31, Weekly Update
  • Thursday, April 6, Cabot Value Model issue 273V
  • Friday, April 7, Weekly Update

Company Reports

Activision Blizzard (ATVI 46.68) easily beat fourth-quarter estimates and raised the dividend. Sales surged 49% and EPS soared 57% after increasing 58% and 188% in the prior quarter. Activision’s purchase of King Digital, maker of Candy Crush games, proved to be highly profitable. Sales also received a boost from the May launch of the multiplayer shooting game, Overwatch, but the company’s biggest game and product line, Call of Duty, saw revenue fall 23% as its popularity began to fade.

Management provided a modest forecast for sales and earnings for the first quarter. The company’s board of directors increased the annual dividend to $0.30 from $0.26, payable to shareholders of record at the close of business on March 30. Activision’s rapid growth will likely continue during the remainder of 2017. Hold.

Allergan (AGN 244.96) produced improved results. Sales fell 8% but EPS gained 14% after declining 11% and 1% in the previous quarter. Allergan weathered lower sales on some drugs, offset by strong sales in the company’s top three selling drugs. Allergan has nine product launches planned in 2017. Management forecast strong sales and earnings in 2017.

Allergan PLC will buy Zeltiq Aesthetics, the maker of fat-reducing treatments, for $2.3 billion. The deal is scheduled to close in the second half of 2017 and will add noticeable sales and earnings in 2018. Hold.

Chicago Bridge & Iron (CBI 32.84) reported very weak results. Sales dropped 22% and EPS plummeted 46% after falling 16% and 22% in the previous quarter. The company’s customers continue to delay engineering and construction projects pending the outcome of new policies promoted by President Trump. Management forecast a substantial increase in new contracts in the second half of 2017. Exxon will begin new projects before the end of 2017, which bodes well for CBI’s energy division.

Chicago Bridge & Iron will divest its Capital Services business and use the sale proceeds to reduce debt. A stronger balance sheet will enable the company to bid for larger contracts in the future. A big increase in infrastructure projects could boost CBI’s sales and earnings in 2018 substantially. Buy at 37.34 or below.

Kroger (KR 30.67) recorded solid results. For the quarter ended January 28, sales rose 6% but EPS fell 7% after sales increased 6% and EPS declined 5% in the prior quarter. Sales received a boost from recent acquisitions but earnings were pressured by falling food prices and increased competition from Walmart and others. Management predicts sales and earnings increases of 5% in 2017, in-line with my estimates. Kroger’s stock price is undervalued. Hold.

Maiden Holdings (MHLD 16.00) reported good revenue and earnings results despite taking a substantial reserve charge. Revenue rose 6%. EPS advanced 41% to $0.45 per share before including the one-time $1.32 per share reserve charge for adverse development in commercial auto and general liability lines of business. Total premiums written increased 8.8% and net investment income advanced 10.9%. Maiden’s interest income from its bond holdings will receive a boost when interest rates rise in 2017. Hold.

Priceline Group (PCLN 1734.37) reported superb revenue and earnings. Revenue surged 17% and EPS climbed 31% after increasing 19% and 23% in the previous quarter. Travel bookings advanced 26%. Priceline continues to expand its supply base to provide customers with more hotel choices. Analysts expect similar results in 2017 even though management low-balled first quarter estimates. Hold.

J. Royden Ward has spent his entire career seeking strong investment returns for his clients while keeping risk low. In 1969, he developed a computerized model of stock selection based on formulas created by investment legend—and Warren Buffett mentor—Benjamin Graham, and since 2003, he’s been spreading his wisdom far and wide as chief analyst of Cabot Benjamin Graham Value Investor.