On Tuesday, April 4, I wrote an article for Wall Street’s Best Daily, in which I made a compelling case for a vigorous revival for value stocks. I presented a simple screen to find contrarian situations where company sales and earnings are increasing, but the stock underperformed during the past year.
I ran the same screen a year ago and it resulted in remarkable gains. You can read my Wall Street’s Best Daily and access my list of 10 stocks that are poised to surge during the next 12 months. I hope you will tell your friends to read the article, too—it’s free!
None of our Cabot Benjamin Graham Value Investor companies reported quarterly financial results during the past week, but I have analyzed the automotive industry for you and present my advice here. I also include complete instructions on how to access the Top 275 Value Stock spreadsheet on Google Drive.
Also, in this Update, I present two indexes that 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:
Tuesday, April 11, Wall Street’s Best Daily
Thursday, April 13, Cabot Enterprising Model issue 273E
Friday, April 14, Weekly Update
Friday, April 21, Weekly Update
Friday, April 28, Weekly Update
Thursday, May 4, Cabot Value Model issue 273V
Friday, May 5, Weekly Update
Company Reports
Stocks in the automotive sector have weakened during the past few weeks, which is cause for concern. Sales of sedans, crossovers, SUVs and light trucks in the U.S. in the first quarter were down 1.5%. The decline is certainly small, but the reasons behind the decline could become troubling.
Americans have been leasing more and more vehicles as car prices climb. Leasing a car usually requires lower monthly payments than taking out a car loan and making monthly loan payments. Car leases are generally for three years, which means that leased cars go up for sale in just three years. This phenomenon is building a glut of used cars for sale and driving used car prices down.
The lower prices on three-year old vehicles coming off lease is beginning to put a dent in new car sales. Buyers now have a choice of buying attractively priced used cars or purchasing new cars with fancy price tags. To make matters worse, rising interest rates will increase the cost of leases and boost car loan payments for new buyers.
The auto industry could flourish again, though, if the U.S. economy picks up steam. If President Trump brings us tax cuts and infrastructure spending to stimulate the economy, demand for new and used cars could rebound.
My advice is to check your exposure to automotive-related companies. The following companies are on Buy or Hold in the Cabot Value or Cabot Enterprising Models:
LKQ Corp. (LKQ)
Magna International (MGA)
General Motors (GM)
Lear (LEA)
Nissan Motor (NSANY)
Penske Auto (PAG)
I suggest allocating no more than 10% of your portfolio to automotive companies. For example, if you own 20 stocks, include no more than two of the above listed stocks in your holdings. I have listed the six automotive stocks above from most favorable to least favorable. If you have too many automotive stocks, sell the least favorable stocks to reduce the possibility of an industry slump affecting your portfolio.
Questions and Answers
Q: I can’t find a Max Buy Price for WDC? Also, how can I get up-to-date changes on the top 275. I don’t see SDY on the 275 chart. (from subscriber L.H.)
A: Western Digital (WDC) was first recommended in the Cabot Enterprising Model on March 9. The March Max Buy Price is 78.47, and the April MBP of 84.24 appears in April’s Top 275 Cabot Value Model on page 12. The MBP is higher due to the company’s very strong fourth-quarter results and increasing sales and earnings estimates for 2017 and 2018.
I don’t include ETFs in the Top 275 because of a lack of data. The current Max Buy Price for SDY is 89.00 and the Min Sell Price is 114.75.
How to Access Top 275 On Google Drive
Below are the complete instructions on how to access April’s Top 275 on Google Drive. Instructions and access for the April Top 275 will be emailed to you by Monday April 10.
Cabot Benjamin Graham Value Investor Top 275 Stocks Worksheet (pages 9-12 of your issue) is available online through Google Drive. This is an optional feature that you may find useful, but is not a requirement of your subscription.
If you do not have a Google account, click https://accounts.google.com/ and follow the instructions to set up an account. (You can use the same email address that you use for your Cabot subscription). Once you are logged in, click on the link at the end of this email to access the spreadsheet.
When you first click on the link you will receive this message: We’re sorry, (your email address) does not have permission to access this spreadsheet. Please click on “request access to this document” and we will then allow you access. You should not have to request access in the future.
IMPORTANT: Make a copy of the worksheet and save it in your own Google Drive.
You must use your own copy of the BGV Top 275 worksheet to get updated prices, to sort on columns, and to make any other changes.
Five Simple Steps to Create Your Copy
- Click “File” found just under the Google Drive logo at the top left of the worksheet.
- Choose “Make a copy..."A dialog box called “Copy Document?” will open.
- Type in a document name meaningful to you or use the document name created for you.
- Leave the check box called “Share it with the same people?” unchecked. (Checking this box means that your copy of the Top 275 will be shared with other Cabot Benjamin Graham Value Investor subscribers!)
- Press the “OK” button. Your copy of the Top 275 will then display.
Features of the Google Drive Top 275
Your Google Drive Top 275 Value Stocks will show all the data found in the Top 275 Value Stocks in the tables on pages 9 to 12 in the Cabot Benjamin Graham Value Investor issue. Your Google Drive Top 275 Value Stocks spreadsheet includes additional columns, too, for a total of 31.
Additional worksheets are also found in your Google Drive Top 275 Value Stocks. “Sold History,” the third worksheet, shows the sold stocks and each stock’s history. A column called “Analysis” shows which analysis was used to select the stock, from the former Modern Value and Classic Value stocks, or from the Enterprising Model stocks: A-List Dividends, Low P/BV Ratio, Graham-Buffett, Low PEG Ratio, NCAV and Canadian.
The second worksheet “Open History” shows model stocks which are stocks recommended to be bought or held and their history. A column called “Analysis” shows which analysis was used to select the stock, from the former Modern Value and Classic Value stocks, or from the Enterprising Model stocks: A-List Dividends, Low P/BV Ratio, Graham-Buffett, Low PEG Ratio, NCAV and Canadian.
In the Roy’s Opinion column, the following explains the meaning of the opinions:
- Buy-V: The stock is one of Roy’s Buy recommendations in the conservative Cabot Benjamin Graham Value Model.
- Buy-E: The stock is one of Roy’s Buy recommendations in the moderate risk Cabot Benjamin Graham Enterprising Model.
- Hold-V and Hold-E: The stock has been recommended in one of the two Models, but has transitioned out of its Model. It should be kept or held until an alert to sell is sent.
- Sell: The stock has been recommended to be sold.
- Potential Buy: The stock is not being followed, but is undervalued. You may research it and determine if it is a buy for you.
- Neutral: The stock is an undervalued stock found in Roy’s universe of stocks. It could become a Buy or could be dropped out of the Top 275 Value Stocks.
Please note: Enterprising Model Buy-rated stocks are recommended to be bought at their current price rather than at or below a Max Buy Price.
Max Buy Prices are used for the stocks in the Value Model.
Six columns, Q through V, show ratings. For columns Q through U, the best rating is 5.00. Column V’s best rating is 10.00.
Seven Real-Time Features
The first real-time feature is a “Current Price” function. The function is a Google Finance formula located in the cells in the Current Price column. The price of each stock is automatically updated approximately every minute, with the usual 20-minute time delay. No action is needed on your part to get updated prices!
The other six real-time features display simultaneously when the prices update. As the prices change, you can observe the corresponding changes in the “Price to Current EPS” column, the “Dividend Yield” column, the “P/BV Ratio” column, the “PEG Ratio + Dividend Yield” column, the “Percent Change” column and the “Appreciation Potential” column.
Column Sorting
Press on the “Filter” icon on the far right of the tool button bar, and drop-down arrows will appear in each column. Press on a drop-down arrow at the top of any column to sort information in that column. For example, to sort by ticker, press on the drop-down arrow in the “Symbol” column, then select “Sort sheet A to Z.” Your Google Drive Top 275 Value Stocks will then be sorted in alpha-order by ticker.
Add to Your Stocks
You may follow your own stocks on the “My Stocks” worksheet, the fourth worksheet in your Google Drive Top Value Stocks. Just add the ticker symbol of your stock in column C, “Ticker Symbol.” In column E, copy the formula from the previous cell to the cell in the same row as your ticker. Your ticker’s price will be updated automatically and you can filter your stocks in the same manner as you can for the Top 275 Value Stocks.
Index of Latest Summaries – Recommendations featured in recent issues.
