Four Cabot Benjamin Graham Value Investor companies reported quarterly financial results or other noteworthy news during the past week. I also include questions from subscribers along with my answers. Prices appearing after each stock symbol are the closing prices on Thursday, January 19, 2017.
The two indexes below list companies featured in the Cabot Value Model or in the Cabot Enterprising Model during the most recent four months so you can quickly find my recent write-ups for stocks appearing in the models.
My schedule for the next five weeks will be:
Monday, January 23, Wall Street’s Best Daily
Tuesday, January 24, Wall Street’s Best Daily
Friday, January 27, Weekly Update
Thursday, February 2, Cabot Value Model issue 271V
Friday, February 3, Weekly Update
Friday, February 10, No Weekly Update – MoneyShow in Orlando
Thursday, February 16, Cabot Enterprising Model issue 271E
Friday, February 17, Weekly Update
Friday, February 24, Weekly Update
Company Reports
Schlumberger (SLB 87.20) continues to recover. Sales fell 8% after declining 17% in the prior quarter. Schlumberger lost $0.15 per share in the fourth quarter compared to a larger loss of $0.81 per share a year ago. Restructuring charges, including asset write-downs, contributed to the latest loss. Stronger demand from North American hydraulic fracturing operators was offset by weak activity in South America. Management forecasts higher sales and earnings in 2017 based on a solid recovery in the oil industry during the next 12 to 24 months. Hold.
Skyworks Solutions (SWKS 78.46) reported lower sales and earnings, but beat expectations. Sales dipped 1% and EPS dropped 24% after sales declined 5% and EPS increased 11% in the previous quarter. Sales were driven by global demand for pervasive mobile connectivity and the Internet of Things. Management provided an upbeat outlook for 2017, which sent Skyworks’ stock price higher by 7.7%. Buy at 84.02 or below.
Taiwan Semiconductor ADR (TSM 29.63) posted excellent fourth-quarter results. Sales surged 32% and EPS jumped 42% from a year ago after increasing 23% and 26%, respectively, in the prior quarter respectively. The company will begin production of its new 10nm (nanometer) technology in the current quarter. Taiwan Semiconductor will likely dominate the new 10nm microprocessor market, taking more than 65% market share before the end of 2017. The new technology will add significant sales and earnings as 2017 moves forward. Hold.
UnitedHealth Group (UNH 158.70) beat sales and earnings forecasts. Sales climbed 9% and EPS soared 56% after increasing 12% and 23%, respectively, in the prior quarter. The large EPS gain was caused by UnitedHealth’s move in the fourth quarter of 2015 to set aside a reserve against expected losses on its ACA (Affordable Care Act) exchange business, which lowered year-ago results.
UnitedHealth’s enrollment in individual plans dropped sequentially in the fourth quarter of 2016, and the company is exiting most ACA marketplaces this year, improving its 2017 outlook. Management stated that the company is well prepared to meet any changes in the U.S. healthcare system brought about by the new Republican administration. Buy at 161.77 or below.
Questions and Answers
Q. For the stocks with dividends that you recommend, what are your thoughts regarding the dividends? Reinvest in the stock or take as cash? (from subscriber J.J.)
A. I highly recommend reinvesting your dividends in the stock. Your dividend-paying holdings will grow more rapidly.
Q. Is it time to sell some of my largest holding, Cognizant Technology, and look for other IT companies to take its place? (from subscriber B.B.)
A. I like Facebook (FB), Alliance Data Systems (ADS) and Synchronoss (SNCR) —in that order. Any or all of these three stocks would make a good addition to your portfolio.
Index of Latest Summaries
Recommendations featured in recent issues:
