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Cabot Benjamin Graham Value Investor Weekly Update

Nine Cabot Benjamin Graham Value Investor companies reported quarterly financial results or other noteworthy news.

Nine of my Benjamin Graham companies reported quarterly financial results or other noteworthy news. Prices appearing after each stock symbol are the closing prices on Thursday, June 2. Reports are for the quarter ended March 31, 2016 unless otherwise noted. Sales and earnings increases and decreases are based on year ago comparisons.

In addition, I include two Indexes. These list companies featured in the Cabot Value Model or in the Cabot Enterprising Model during the most recent four months. The Indexes identify the companies and indicate when my summaries of the companies were published. Reading the list alphabetically by company name, you can quickly find my recent write-ups for stocks appearing in the models.

My next Weekly Update will be sent to you on Friday, June 10, 2016. My schedule for the next four weeks will be:

* Thursday, June 9, Cabot Enterprising Model issue 263E
* Friday, June 10, Weekly Update
* Friday, June 17, No Weekly Update - Canada Conference
* Friday, June 24, Weekly Update
* Tuesday, June 28, Cabot Wealth Advisory
* Thursday, June 30, Cabot Value Model issue 264V
* Friday, July 1, Weekly Update
* Thursday, July 7, Cabot Enterprising Model issue 264E
* Friday, July 8, Weekly Update

Company Reports

Aetna (AET 120.03) is on track to successfully complete its $37 billion purchase of Humana in the second half of 2016. The company raised $13 billion in a recent debt offering, and in addition, has secured substantial loans from banks. Buy at 117.65 or below.

Bristow Group (BRS 12.76) reported poor results, as expected. Revenue fell 17% after declining 8% in the prior quarter. Bristow produced an EPS deficit of $0.72 compared to profit of 0.43 last quarter. The current deficit was caused by write-downs associated with restructuring expenses and goodwill and intangible asset impairment charges amounting to $0.78 per share. Bristow sold several of its helicopters during the recent quarter, and expects to sell 22 more helicopters during the next few quarters.

Bristow’s balance sheet remains strong, and cash flow remained positive. The decline in revenue from oil and natural gas clients was partially offset by revenue from the start-up of BRS’s U.K. search and rescue contract, which contributed 17% of revenue. The $2.5 billion contract will provide a boost to the company’s results during the next several quarters, as well. In addition, Bristow’s venture into unmanned aerial vehicles (drones) is being well-received by customers. Hold.

Disney, Walt (DIS 98.72) endured a miss at the box office when the company’s new film, Alice Through the Looking Glass, grossed only $34 million--about half the amount expected. The news had little impact on Disney’s stock price. Buy at 99.34 or below.

Eaton Vance (EV 36.43) reported mixed results for the quarter ended April 30. Revenue declined 8% and EPS dropped 17% after decreases of 7% and 23% in the prior quarter. Assets under management grew 2% to $319 billion from a year ago, reflecting net inflows of $15.9 billion and securities market declines of $8.3 billion.

Stock market volatility and added costs incurred in Eaton Vance’s introduction of NextShares hurt results. Revenue and earnings should rebound during the second half of 2016. Hold.

General Motors (GM 30.26) U.S. sales plunged 18% in May as low gasoline prices took a bite out of sedan sales, parts problems emerged and the automaker intentionally cut its reliance on low-margin sales to fleet customers. A recent earthquake in Japan caused a temporary parts shortage. GM sold 49% fewer vehicles to rental car companies in May. Buy at 31.78 or below.

Oracle (ORCL 38.66) shares dipped after a former employee filed a whistleblower lawsuit in federal court against Oracle regarding accounting practices at its cloud computing business. I expect the legal action will have a negligible impact on the company or its stock.

In addition, Oracle lost a $9 billion lawsuit in legal action against Google. Oracle claimed Google stole Oracle’s Java programming language to create Google’s Android operating system. Oracle will appeal the verdict. Hold.

Royal Bank of Canada (RY.TO 79.62) reported solid results for the quarter ended April 30. Revenue advanced 8% and EPS gained 1%. In the prior quarter, revenue increased 15% and EPS declined 4%. Wealth management net income soared 42% from a year ago, reflecting the purchase of California-based City National Bank.

Royal Bank sustained credit losses due to low oil prices resulting in loan defaults, but the losses were within the bank’s expectations. Stronger consumer spending, solid employment levels, and low interest rates are buoying both home and auto sales, which helped to offset the weakness caused by low oil prices. Hold.

Starbucks (SBUX 54.62) announced it will introduce nitro cold brew coffee in stores, to capitalize on the explosive growth in iced coffee drinks. The company expects cold coffee sales to double in the next three years. Starbucks will add the nitrogen-infused coffee in more than 500 stores this summer. The effort will provide a noticeable lift to the company’s summer sales. Buy at 56.10 or below.

Ulta Salon (ULTA 237.06) reported exceptional results for the quarter ended April 30. Sales jumped 24% and EPS surged 39% after increasing 21% and 27% in the previous quarter. Same salon sales increased 7.7%, and e-commerce sales soared 39%. Ulta opened 13 new stores, bringing its total to 786 stores.

Management raised its sales and earnings guidance for the remainder of 2016. The recent spike in Ulta’s stock price caused its P/E to rise to a lofty 43.8. I advise waiting for a pullback to my Max Buy Price. Buy at 227.57 or below.
Index of Latest Summaries – Recommendations featured in recent issues.
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