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Cabot Money Club

Cabot Stock of the Month Issue: March 14, 2024

The markets saw mostly sideways action in the past month—the soothsayers are still debating when the Fed will begin reducing interest rates. Growth stocks held on to their leadership position, although value stocks are beginning to show life in 2024.

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The markets saw mostly sideways action in the past month—the soothsayers are still debating when the Fed will begin reducing interest rates.

Growth stocks held on to their leadership position, although value stocks are beginning to show life in 2024. Here’s how the gains stack up so far:

  • Large-cap growth: 8.66%
  • Midcap growth: 7.17%
  • Large-cap value: 5.65%
  • Small-cap growth: 5.36%
  • Midcap value: 4.67%
  • Small-cap value: -0.83%

Sector-wise, all sectors are in the black so far in 2024, with Communication Services (up 9.54%), Financial Services (+8.03%), and Technology (+7.73%) leading the way. The laggards are Consumer Discretionary (+0.84%), Utilities (+0.66%), and Real Estate (+0.27%).

The unemployment rate edged up to 3.9% from 3.7%, mostly due to people trying to get back into the workforce who didn’t immediately find jobs, according to economists. Yet, the employment picture looks pretty darn good, with 275,000 new non-farm jobs added, considerably higher than the 198,000 forecasted.


Mortgage rates edged down, just in time for the spring selling season. Construction remains healthy, with single-family housing starts advancing 4.7% in January. However, inventory is still historically low, so industry pundits are anxiously looking forward to the next few months to see if the housing resale market strengthens.

Here at Cabot, we’re still bullish, but the recent volatility has us keeping some cash in our pockets. It’s a great time to find undervalued companies (which still exist!), so that’s where I am focusing at the moment, like the stock I’m recommending this month.




Feature Recommendation

Baxter International (BAX): A Turnaround in Progress

Recommended by Bruce Kaser, Chief Analyst, Cabot Value Investor and Cabot Turnaround Letter

As I mentioned above, Value stocks are beginning to make some headway in 2024. With that in mind, I asked Cabot’s value expert, Bruce Kaser, for a turnaround idea that is trading at attractive levels. Here’s his recommendation:

Baxter International (BAX) is a large-cap producer of medical equipment and supplies.

“Founded in 1931, the company was the first commercial manufacturer of prepared intravenous solutions. A steady stream of innovations and acquisitions (including the $12.5 billion deal for Hillrom in 2021) built Baxter into a global equipment giant. The 1992 spin-off of Caremark, the 2015 spin-off of pharmaceutical maker Baxalta, the $4.3 billion sale of the biopharma products segment (2023), and other divestitures have helped shape today’s Baxter.

“The company’s shares have fallen nearly 60% from their 2021 price and now trade unchanged from their 2008 pre-global financial crisis price. A steady stream of weak guidance, driven by slowing sales growth and narrower margins from Covid and inflation pressures as well as disappointing results from its Hillrom business, has turned off growth investors.

“The kidney care segment was hurt by new weight-loss drugs which showed some efficacy in reducing kidney problems. Baxter’s elevated debt, notably from financing its Hillrom deal, weighs on the company’s cash flows and strategic flexibility.

“Baxter is seen as a lumbering, over-leveraged giant with near-zero revenue growth and uninspiring margins and its shares have completely unwound their multi-year surge and now trade at decade-long lows, as investors have become frustrated with the company’s lack of near-term growth.

“While Baxter has struggled recently, meaningful positive changes are underway that, when combined with the low valuation, offer contrarian investors a window of opportunity.

“Demand for its equipment and supplies looks likely to recover as healthcare providers are seeing increased use of in-patient and out-patient surgeries and other services. Humana’s recent earnings report clearly showed this inflection. An improved pace of product innovations should also help boost revenue growth for Baxter. While competition can be relentless, Baxter’s leading and embedded position with many customers, its proprietary technology and production processes, and its strengths in navigating the rigorous regulatory and reimbursement rules in the healthcare industry provide a reasonably sturdy competitive edge.

“The company is also beginning negotiations to increase its prices to reflect its rising costs, which should help rebuild its profit margins. Baxter’s margins should also benefit from improved negotiation power as it shifts away from single-source suppliers for many of its products. At a minimum, it would appear that Baxter’s revenues and margins are well-positioned for better performance, leading to respectable and steadier earnings growth.

“An important catalyst is the upcoming spin-off of Baxter’s kidney care segment, Vantive. This business currently generates nearly 30% of the company’s total revenues, but its operating margin of around 7% is a significant drag relative to the other segments’ combined 18% margin. While the implied value of this segment took a hit with the obesity drug news, this discount is fully priced into Baxter’s shares. And it is not entirely clear yet how much, if any, net effect this will actually have on kidney treatment utilization.

“We currently have few details about Vantive’s EBITDA margin, proposed debt load and other metrics, but we anticipate that post-spin-off Baxter will have a much better financial profile. The company will provide further updates in its fourth-quarter earnings report and at an investor day leading up to the anticipated spin-off in July 2024.

“After the spin-off, Baxter will be the parent of a spin-off. We believe this side of the transaction offers contrarian investors an opportunity to buy an out-of-favor company that will have much better fundamentals, partly resulting from the separation.

“Baxter’s elevated $16.5 billion debt burden is already being cut. The sale of its BioPharma Solutions segment yielded $3.7 billion in cash proceeds, most of which will be applied to debt reduction. Management is focusing on boosting the company’s free cash flow, which should help maintain Baxter’s investment-grade credit rating.

“The leadership is well-regarded for its integrity and improvements to the company’s performance. Long gone are the scandals of the past.

“Baxter’s CEO, José E. Almeida, successfully led Covidien prior to its acquisition by Medtronic in 2015. Following an interim stint as an operating executive with private equity firm The Carlyle Group, he joined Baxter in late 2015 and has been Baxter’s CEO since January 2016. Alameida has made considerable progress in rebuilding Baxter into a faster-growing and more efficient organization. A new CFO, Joel Grade, recently joined from his CFO role at Sysco, the world’s largest food service provider. Grade brings valuable financial, strategic, and operating capabilities to Baxter.

“Our confidence in the Baxter thesis is bolstered by the large ownership stakes of three highly regarded value investment firms: Dodge & Cox (1.9% stake), Harris Associates (1.5%) and Pzena Investment Management (1.1%). We note that most of these positions were initiated in the past eight months at prices generally equal to or above the current price.

“Baxter shares trade at a modest 14.8x earnings and offer a 2.7% dividend yield.

Peers generally trade at valuations that are meaningfully above these multiples. The combination of the higher earnings, lower debt and other improvements should help drive the shares to our 60 price target.

“We recommend the purchase of Baxter International.”

Broyhill Asset Management recently had this to say about Baxter: “After levering up to buy Hillrom in 2021, every one of the company’s business segments hit a wall, as increasing costs drove operating margins below 14% in recent quarters from highs north of 18% just a few years ago. With shares trading at a trough multiple on depressed earnings, we see much room for upside surprises, and management is taking action to capitalize on the current dislocation. We see little risk to Baxter’s normalized earnings power, which should approach $5 per share over our forecast horizon. We expect the completion of the spin and upcoming capital markets day to provide catalysts for the stock.”

Baxter serves a variety of medical markets with an array of products, as shown here.

Hedge funds have begun to appreciate Baxter’s valuation, with three more funds picking up shares at the end of the fourth quarter, amounting to 44 hedge fund owners in the shares.

Baxter reported full-year results last month. The company’s revenues fell 2%, to $14.8 billion from a year ago, but its loss decreased by 97%, to $76.0 million (-$0.15 per share, down from $4.83 loss in FY 2022).

Baxter’s board just announced a dividend of $0.29 per share payable on April 1.

This company is very undervalued and should the turnaround progress as expected, investors can look forward to some nice appreciation. In the meantime, the dividend will provide some handy cash flow. Buy

Baxter International Inc. (BAX)

52-Week Low/High: $31.01-52.01

Shares Outstanding: 507.83 million

Institutionally Owned: 92.72%

Market Capitalization: $22.23 billion

Dividend Yield: 2.7%

Why Baxter:

1. Coming spin-off will add to the

to the company’s cash flow

and help reduce debt

2. Attractive dividend

3. Undervalued

4. A great turnaround candidate

About the Analyst: Bruce Kaser, Chief Analyst, Cabot Value Investor and Cabot Turnaround Letter

Bruce Kaser has more than 25 years of value investing experience in managing institutional portfolios, mutual funds, and private client accounts. He has led three successful investment platform turnarounds, co-founded an investment management firm, and was principal of a $3 billion (AUM) employee-owned investment management company.

Previously, he led the event-driven small/midcap strategy for Ironwood Investment Management and was Senior Portfolio Manager with RBC Global Asset Management, where he co-managed the $1 billion value/core equity platform for over a decade. He earned his MBA degree in finance and international business from the University of Chicago and earned a Bachelor of Science in finance, with honors, from Miami University (Ohio).

Bruce has a great track record of finding undervalued companies poised for a turnaround. And while the broad markets have been going gangbusters since last November, there are still plenty of undervalued companies that have not yet rallied. Consequently, I turned to our value expert to find out his current thoughts on the markets and his portfolios. Here’s our interview:

Nancy: Bruce, you have had some sterling winners in both your Growth & Income and Buy Low Opportunities Portfolios in your Cabot Value Investor newsletter. Would you please share a few of your favorite and most successful criteria or tests that you use to analyze stocks?

Bruce: Two notable stocks are Gates Industrial Corp, plc (GTES) and Allison Transmission Holdings (ALSN). Both are industrial companies that have a relatively limited menu of specialized products that are critical to their customers. Both are leading producers within their niche. These traits, combined with their respect for the need to innovate, provide them with wide profit margins which they convert into sizeable free cash flow. Debt is relatively modest at the two companies. Importantly, we like the capabilities and shareholder-friendly mindset of the management teams. Also, our entry prices were attractive as the stocks were out of favor.

We still have a Buy rating on GTES but recently sold ALSN for an 82% profit (compared to a 22% return for the S&P 500, during our roughly two-year holding period).

Nancy: Growth stocks ruled the world last year, but value stocks seem to be making a comeback. How do you see value stocks faring in 2024?

Bruce: Value investors focus on stocks that are significantly underpriced. Markets were never as efficient as academics have claimed, and they have become even more inefficient since the start of the pandemic. Investors have become heavily focused on mega-cap tech stocks as well as momentum strategies, but this focus has led to a large number of stocks becoming mispriced. So, the environment for buyers of underpriced stocks is better than we’ve seen in years.

Nancy: With the economy seeming to be on stronger ground these days, do you see any particular sectors that are still in need of a turnaround? If so, what events would need to occur to incite your interest in specific companies in those sectors?

Bruce: I focus mostly on sectors where I can understand the companies, rather than on those which may or may not benefit from macro trends. And each sector is populated with so many companies which have different business models, managements and other traits that generalizing is difficult.

That being said, many energy producers have shares that are undervalued, with free cash flow yields approaching 15-20%. Much of this cash is being returned to investors through dividends and buybacks, such that a company might return the equivalent of its current market value over the next five to seven years.

The industrial sector always has turnaround candidates, as end markets shift, old strategies no longer work and as managements take their eyes off the ball. Our focus also includes the consumer sectors, which tend to be ripe with understandable turnaround opportunities. We see a few turnaround candidates in the technology, healthcare, and financial sectors but these groups tend to have complicating issues like rapid obsolescence risks, government payor risks and leverage risks which require us to be very selective.

We look for catalysts, particularly a change in management, that can turn a struggling company into a much more valuable one. When we see a weakened company with an out-of-favor stock get new leadership, we get excited about the potential turnaround.

Nancy: In recent issues of both your Cabot Value Investor and Cabot Turnaround Letter, you wrote about the attractiveness of spin-offs. Will you please explain the perceived benefits to investors from both the original company and the spun-off business?

Bruce: Spin-offs occur when a company carves out one of its businesses and then distributes shares of that business to investors. Companies do these because investors undervalue their prospects as whole companies. A subsidiary may be too small to be recognized, its strategy and capital requirements may not fit with its parent’s “core” strategy, or its lagging performance may be a drag on the overall company’s results. This kind of radical surgery often creates a mispriced stock, usually in the spun-off company.

The original company should see higher revenue growth and wider profit margins after the lagging business is removed from the mix, and thus its share valuation should go up.

What can make the spun-off stock attractive is sizeable artificial selling pressure immediately following the spin-off. The more a spun-off company is different from its parent, the higher the selling pressure as institutional investors have lower interest in keeping their shares. These differences can include being in a different industry or sector and having a much smaller market cap. The ideal spin-off company would be highly profitable, have a sturdy business, carry minimal debt, and be led by exceptional management. The spun-off business now has full control of its destiny, which should mean more focused management and better capital allocation, which eventually should produce healthy growth and a higher stock price.

Spin-off quality varies widely. Some spin-offs represent the unceremonious dumping of a bad business with weak prospects. Investors may want to avoid these spin-offs. Some, on the other hand, are hidden gems that the parent company reluctantly releases. The quality of management, the initial debt load and the resilience and compatibility of the product/service offering are useful indicators of where on the quality spectrum a specific spun-off company sits.

Nancy: Your portfolios are widely diversified. Do you intentionally look for sectors that diversify your holdings and then search for likely stock candidates, or do you start with the stocks themselves, and then try to select the candidates that would diversify your portfolios?

Bruce: I look for the stocks first. If a stock doesn’t offer attractive return prospects, it not only adds no value to the portfolio; it actually detracts from the value.

Rather than focus on diversification, per se, I focus on risk management. With turnaround investing, managing, and controlling risk is critical to success.

The most important part of risk management is to buy stocks that are priced with a wide margin for safety, such that if I am wrong the shares won’t collapse. Closely related, I tend to avoid highly levered companies. If my downside is somewhat contained, the upside usually takes care of itself.

Diversification plays a role in risk management in two ways. First, I avoid too much emphasis on any single industry group. For example, while retailers are an evergreen source of turnarounds, I don’t want too many retailer stocks. So, I create an ever-higher bar for each incremental new retailer stock. Fortunately, there are enough turnaround candidates across a wide range of industries and sectors that I don’t need to worry much about this diversification constraint.

The second role of diversification is in the number of names in the portfolio. I generally want to hold at least 25 stocks. This spreads risk across enough names such that an unlikely disaster in any single stock won’t debilitate the entire portfolio.

Nancy: What are the three to five most critical challenges to growth of the stocks in your portfolio right now?

Bruce: The biggest challenge is that not every turnaround works, so a few of our companies are struggling more than we anticipated, which of course keeps the pressure on their share prices.

Another challenge is that so many investors are chasing fast returns in tech stocks and Bitcoin that their interest in my slower-moving stocks is modest. Any near-term “not-great” news can send shares of these stocks sharply lower, even if the turnaround is making good long-term progress.

Related to this are the large market caps of the tech winners. Upward moves in Nvidia or Microsoft are enough to pull the entire S&P 500 index up with them. If these stocks had small weights in the index, that index would be easier to outperform in any given quarter. Over a full market cycle, a turnaround strategy should outperform, but not during a bullish upcycle in mega-cap tech stocks.

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Portfolio Updates

Tom Hutchinson, Chief Analyst of Cabot Dividend Investor, recently updated his thoughts on Qualcomm Inc. (QCOM), saying, “After a year where it underperformed the technology sector, QCOM is moving higher again. It’s up 60% since late October and 19% YTD. Semiconductors and AI stocks have gotten hot, and the strength may last a while longer. Qualcomm is secretly one of the best semiconductor and AI stocks to own. It had been held back by cyclicality, both in semiconductors and smartphones. But the negative cycle is coming to an end. Qualcomm is also introducing new AI chips for PCs and smartphones that could be big sellers this year. It’s an AI beneficiary that is just now coming into the spotlight. BUY”

Qualcomm, already a leader in technology included in most mobile phones, has a widely diversified portfolio of hardware for 5G and Wi-Fi antennas, smart cars, and cameras, and now is building its AI business, specifically providing enhanced AI processing performance for mobile phones.

The company recently announced it was increasing its quarterly dividend by five cents, to $0.85 per share. Continue to buy.

Bruce Kaser also shared his latest views on Citigroup (C), noting, “Citi shares rose 2% in the past week and have 51% upside to our 85 price target. The shares have rebounded 45% since touching their 3-year low last October, reinforcing the importance for investors to focus on valuation and fundamentals rather than the share price.

“The stock remains attractive as it trades at about 65% of tangible book value of $86.19. The dividend offers investors a 3.8% yield. BUY”

Citigroup recently reported that its underwriting deals have seen an uptick in business, a hopeful sign. At the same time, the company announced a layoff of 286 New York City-based employees, effective in May. This is the beginning of Citi’s plan to reduce positions by 20,000 by 2026, following its plan for greater efficiency, simplifying its organization, and cost-cutting to boost the bank’s bottom line. Continue to buy.

Michael Brush, Chief Analyst of Cabot Cannabis Investor reported that “Curaleaf (CURLF) relocated its Curaleaf Phoenix Airport dispensary to a newly renovated retail location. The Curaleaf Phoenix Airport store is the closest dispensary to 44th St., a major road to the Sky Harbor Airport. Curaleaf has a price/sales ratio of 2.64. BUY”

The company recently announced that its revenues in the fourth quarter of 2023 rose 4%, to a record $345 million and adjusted EBITDA of $83 million, a 490 basis point improvement year over year, and a net loss of $0.08 per share. Since this is a speculative stock and the industry is rife with regulatory issues, I prefer to hold our shares for now. Continue to Hold.

Tyler Laundon, Chief Analyst for Cabot Early Opportunities and Cabot Small-Cap Confidential, updated his view on TransMedics Group (TMDX), saying, “TransMedics Group reported fourth-quarter revenue beating guidance, first quarter of profitability and good work on the TransMedics Aviation business (35% of OCS transplants done in the quarter used Aviation). TransMedics is totally disrupting the market. And from what I can tell, doing it in a way that is good for organ donation centers, good for patients and good for the company and its shareholders. Not saying the prices don’t seem high, but that’s the way it’s ‘always’ been. At least the company is adding value throughout the process. Considering moving to buy but would like dust to settle around this Gosar thing first. HOLD A QUARTER”

For the company’s fourth quarter, EPS was $0.12, beating estimates by $0.16. Revenue crushed it, jumping 158.6% year over year to $81.2 million, surpassing estimates by $12.7 million. Continue to Hold.

Tom Hutchinson also reported on Brookfield Infrastructure Partners (BIP), commenting, “The inflationary and rising interest rate environment beat up the utility sector over the past couple of years and BIP wasn’t spared. But it is unlikely that rates will continue to move higher. Meanwhile, BIP has some of the most defensive revenues possible. It’s also been expanding into cell towers, data centers and foundries as it is estimated the world needs to invest $1 trillion in digital infrastructure in the next decade. Despite the lousy stock performance, Brookfield continues to deliver strong results. Funds from operations grew 10% for 2023. This stock had blown away S&P returns for every measurable period prior to the past two years. It will rise again. (This security generates a K1 form at tax time). BUY”

Analysts expect Brookfield’s earnings to grow 12.5% this year. The company’s dividend yield is currently 5.39%. Continue to Buy.

Bruce Kaser reported that there wasn’t any significant news on NOV, Inc (NOV), but reiterated that the shares are trading 46% less than his 25 price target.

Nov’s board of directors announced a $0.05 dividend to be paid March 28. Continue to Buy.

Carl Delfeld, Chief Analyst of Cabot Explorer, reviewed International Business Machines (IBM), noting, “The company had a good week as its share price approaches 200, fueled by rising demand for its hybrid cloud and artificial intelligence solutions and cloud data platforms. Buy a Half”

IBM continues growing its reputation in AI and its Watsonx platform deploys models that also track compliance, risk management, and governance issues. We are holding some excellent gains in the shares, but I feel IBM has much further to go. So, if you have not bought in yet, you may consider adding a few shares here. For existing shareholders, let’s ride the wave for a while. New shareholders, continue to Buy; existing shareholders, please Hold.

Gates Industrial Corp, plc (GTES) was updated by Bruce Kaser, saying, “The company reported a decent quarter, but 2024 revenue guidance was shy of analyst estimates. Adjusted earnings of $0.39/share rose 56% and were 39% above the consensus estimate of $0.28/share. Revenues fell 5% excluding currency effects but were in line with estimates. Guidance for 2024 is for basically a repeat of 2023 for revenues, margins, and free cash flow.

“Fourth-quarter revenues were weak as end-market demand has generally been sluggish but steady. Adjusted EBITDA of $186 million increased 12% and was 10% above estimates. The EBITDA margin expanded by 2.9 percentage points, as better execution helped boost margins in both segments.

“Gates continues to perform well, with steady-enough revenues bolstered by expanding margins and healthy free cash flow ($165 million in 4Q and $410 million for 2023) that is being used intelligently to repay debt and repurchase shares. One risk is that management decides to deploy its renewed balance sheet strength into an acquisition. We would hope that any deal would be at an attractive price and be readily integrated into Gates’ existing operations. The company’s new $100 million (3% of market cap) share buyback program suggests that management will lean toward returning cash to shareholders.

“Gates’ balance sheet continues to improve. Net debt declined by $140 million in the quarter and by $160 million for the full year, despite Gates repurchasing $250 million of its shares. The share count is 6% below a year ago.

“Gates shares rose 3% in the past week and have 7% upside to our 16 price target. Similar to Citi’s shares, Gates’ shares have surged 40% since October. BUY”

Earnings have been growing at Gates Industrial over the last four quarters, and we are sitting on some nice gains. I’m considering taking some of our profits off the table. If so, I will issue an Alert, so please stay tuned to your email. For now, let’s change our rating to Hold.

Tom Hutchinson has changed his rating on UnitedHealth Group Inc. (UNH), from BUY to HOLD, noting, “This is the only healthcare stock in the portfolio that isn’t killing it. UNH has gone nowhere in the last two years. It had been moving higher but then plunged 9% in the last two weeks. It’s because of a cyber-attack on its Change Healthcare unit that is threatening the security of patient information. The hack is also disrupting functions like discharges and prescriptions. It’s sending ripples through the industry as hospitals are struggling with payrolls and delayed approval for patient services. Although these issues will likely prove temporary, the disruption is still ongoing, and the extent of the damage is still unknown. UNH is downgraded to HOLD until there is more clarity on this bizarre issue. HOLD”

The market expects it will be several months before UNH will fully recover from the cyberattack from hacking group BlackCat, also called ALPHV. Its Change Healthcare unit processes some 50% of medical claims in the U.S. for around 900,000 physicians, 33,000 pharmacies, 5,500 hospitals and 600 laboratories.

It’s a shame since UNH posted revenue of $371.6 billion, up 15% from FY 2022, with net income of $22.4 billion (up 11% from FY 2022). Wall Street expects the company will increase revenue by 7.1% on average over the next three years, higher than the 6.7% predicted for the industry.

I agree with Tom; the disruption may take a while to work out. Hold for now.

Carl Delfeld also reported on Exscientia (EXAI), noting, “Exscientia is using AI to develop new medicines and is attracting high-quality partners. Exscientia stock is trading way off its high at 5.42. It went public at 22 a share so the company has about $500 million in cash on the books—a big number for a company with a market capitalization of just $677 million. Finally, keep in mind that this is an attractive speculative stock which may have a bumpy ride. It is a young company that is not and will not be profitable next year. Buy a Half”

The shares of EXAI stock took a hit recently when the company fired its CEO Andrew Hopkins due to inappropriate relationships. The firm’s Chief Science Officer, Dave Hallett, is the interim CEO. Shares have gained a bit, but remain in a pullback position, actually making the stock more attractive.

The British biotechnology company is backed by Bill Gates. Continue to Buy on this weakness.

Our newest stock, Novo Nordisk (NVO), was updated by Mike Cintolo, Chief Analyst of Cabot Growth Stocks and Cabot Top Ten Trader, commenting, “Eli Lilly (LLY) and NVO have hacked around with the market over the past couple of weeks but look fine overall. They even digested news that a small biotech released great trial results for its own weight-loss offering. We’re not chasing them here, but a bit more weakness would be tempting.”

Novo reported results from a phase 1 clinical trial of its experimental obesity drug amycretin, noting that “participants in the study who took amycretin achieved an average weight loss of 13.1% after 12 weeks.” That was more than double the average weight loss from the clinical tests of Wegovy. And Wegovy is administered by a shot, whereas amycretin is a pill, which could really pump up sales for Novo Nordisk. Buy on pullbacks.


Price on
Loss %
RatingRisk Tolerance
Baxter InternationalBAXNEW--42.58--%BuyA
Brookfield Infrastructure Partners L.P.BIP5/11/2335.2329.92-15.07%BuyM
Citigroup, Inc.C10/14/2243.6157.8532.65%BuyM
Curaleaf Holdings Inc.CURLF11/11/226.074.03-33.55%HoldA
ExscientiaEXAI12/14/235.786.5413.15%Buy a HalfA
Gates Industrial Corporation plcGTES10/13/2311.1517.4156.14%HoldM
International Business Machines CorporationIBM7/13/23134.22196.5546.44%HoldM
NOV, Inc.NOV6/8/2315.8318.4916.80%BuyM
Novo Nordisk A/SNVO2/8/24118.07133.613.15%BuyA
QUALCOMM IncorporatedQCOM7/15/22143.76169.5117.92%BuyM
TransMedics Group, Inc.TMDX4/13/2370.4283.6918.84%HoldA
UnitedHealth Group IncorporatedUNH11/9/23537.7488.76-9.10%HoldM

*Aggressive (A), Moderate (M), Conservative (C)

ETF Strategies

The majority of our ETFs are firmly in the black. Only Global X Lithium & Battery Tech ETF (LIT) and iShares Global Financials ETF (IXG) currently have losses. I want to continue holding LIT, as I think it is a long-term play. And I would continue to Buy IXG, as the Financials are just beginning to gain momentum.

We have some very nice gains in Communication Services Select Sector SPDR Fund (XLC), so let’s take some profits off the table, by selling one-half of our shares, then let the remainder ride. Sell one-half.

Our Watch List has two names remaining. I’m waiting on a bit of a pullback, and then am planning to add these two ETFs to our portfolio:

GX U.S. Infrastructure Development ETF (PAVE)
Vanguard Small-Cap Growth Index Fund (VBK)

Global Trends Are Boosting the Medical Device Business

The global medical device marketplace is valued at $595 billion, and according to AlphaSense, is expected to grow 6.1% up to 2030, due to:

  • Continued rise in digital therapeutics (software-based devices) and at-home diagnostics.
  • Growing use of biometric devices and wearable technology, forecast to reach $161 billion by 2033, a CAGR of 6% compared to 2023.
  • Expiration of Public Health Emergency, which granted expedited approval during COVID, but is now requiring companies to come into regulatory compliance.
  • EU marketplace opportunities as the EU has delayed updating its strict medical device regulations (MDRs), breathing a bit of life into those markets.
  • Increased speed to market.
  • Greater emphasis on inclusivity/access.
  • Greater focus on sustainability and ESG. The supply chain emissions, single-use devices, and consumables from medical devices are some of the main contributors to the greenhouse gas emissions in the healthcare industry, currently amounting to some 4.6% of total emissions.
  • Generative AI opportunities.

The following graphic illustrates the segmentation of the medical devices market:


Baxter is positioned to benefit from the growth in the medical devices market, as its products address several of the fastest-growing markets:

Screenshot 2024-03-12 at 9.41.43 AM.png

With growth forecast for the industry worldwide, the shares of Baxter look undervalued at this level. However, the turnaround may take some time, so I’m going to label these shares Aggressive.


CompanySymbolRisk Tolerance*RecommendationDate
Price on
Loss %
Adaptive Growth Opportunities ETFAGOXMBuy6/8/2322.64525.8113.98%
ALPS Medical Breakthroughs ETFSBIOABuy6/27/2228.4435.8626.09%
Communication Services Select Sector SPDR FundXLCASell a Half2/9/2356.3780.4942.79%
Dynamic Semiconductors Invesco ETFPSIABuy6/8/2343.0454.4426.49%
Financial Select Sector SPDR FundXLFABuy2/9/2336.66541.1112.12%
First Trust North American Energy Infrastructure FundEMLPCBuy9/16/2227.7428.964.40%
First Trust Water ETFFIWMBuy9/16/2276.7499.7429.97%
Global X Lithium & Battery Tech ETFLITAHold9/16/2272.29546.65-35.47%
Innovator Ibd Breakout Opportunities ETFBOUTABuy7/13/2332.7235.538.60%
Invesco Dow Jones Industrial Average Dividend ETFDJDCBuy4/8/2246.3547.622.74%
iShares Core S&P 500IVVMBuy2/8/22452.82519.5114.73%
iShares Russell Top 200 ETFIWLABuy10/13/23105.21125.5319.31%
iShares US EnergyIYECBuy2/8/2236.1747.431.05%
iShares Global FinancialIXGCBuy2/8/2284.7884.90.14%
O’s Russell Smallcap Qlty Divd ETFOUSMCBuy1/11/2438.70541.416.99%
US Healthcare Ishares ETFIYHMBuy11/11/2251.4461.4619.48%
U.S. Medical Devices Ishares ETFIHIABuy7/13/2356.5258.112.81%
Vanguard Dividend Appreciation ETFVIGCBuy12/9/22155.52180.6816.18%
Vanguard U.S. Momentum Factor ETFVFMOMBuy11/11/22119.765148.5624.04%

*Aggressive (A), Moderate (M), Conservative (C)
**Purchase price reflects a 3-for-1 stock split

The next Cabot Money Club Stock of the Month issue will be

published on April 11, 2024.

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Nancy Zambell has spent 30 years educating and helping individual investors navigate the minefields of the financial industry. She has created and/or written numerous investment publications, including UnDiscovered Stocks, UnTapped Opportunities, and Nancy Zambell’s Buried Treasures under $10. Nancy has worked with for many years as an editor and interviewer for their on-site video studios.