Three Cabot Benjamin Graham Value Investor companies reported quarterly financial results or other noteworthy news. Prices appearing after each stock symbol are the closing prices on Thursday, June 30. Reports are for the quarter ended May 31, 2016. Sales and earnings increases and decreases are based on year-ago comparisons. I also include some interesting questions from subscribers with my responses.
In addition, I present two indexes that l list companies featured in the Cabot Value Model or in the Cabot Enterprising Model during the most recent four months. The indexes indicate when my summaries of the companies were published so 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, July 8, 2016. My schedule for the next five weeks will be:
* Thursday, July 7, Cabot Enterprising Model issue 264E
* Friday, July 8, Weekly Update
* Friday, July 15, Weekly Update
* Thursday, July 21, Cabot Wealth Advisory
* Friday, July 22, Weekly Update
* Thursday, July 28, Cabot Value Model issue 265V
* Friday, July 29, Weekly Update
* Thursday, August 4, Cabot Enterprising Model issue 265E
* Friday, August 5, Weekly Update
Company Reports
Bristow Group (BRS 11.41) shares continue to nosedive. Much of the company’s revenue is derived from the United Kingdom and could be affected by Britain’s decision to exit the European Union. However, Bristow’s contract with the U.K. to take over all search and rescue missions will run until 2025. The company’s contract’s with oil drillers to supply helicopter taxi service to oil rigs in the North Sea will likely show signs of rebounding in 2017 if oil prices continue to rise. Also, Bristow’s venture into drone safety inspections at offshore oil rigs is starting to take off. The recent selloff in BRS shares is unwarranted. Hold.
NIKE ‘B’ (NKE 55.20) reported soft results for the quarter ended May 31, 2016, as expected. Sales climbed 6% and EPS were flat after increasing 8% and 22% respectively in the prior quarter. Excess inventory in the U.S. hindered sales temporarily. The European Soccer Championships and the Olympics in Brazil will bolster NIKE’s results in the next couple of quarters. New orders rose 8%, which is encouraging. Buy at 53.17 or below.
Penske Automotive (PAG 31.46) has also seen its shares go into reverse. Penske relies on the United Kingdom for about one-third of its sales, but the company incurs most of its costs in the U.K. in sterling, which will mute potential foreign exchange losses. Furthermore, Penske’s service and parts business tends to perform well during economic downturns as people hold onto their cars longer. Hold.
Questions and Answers
Q. The crew needs the captain on line on 6/24 help us all. (from subscriber C.P.)
A. This too shall pass. Investor emotions ran especially high after “Brexit” because investors were confident that the U.K. would vote to stay in the EU. Investor fears are beginning to ebb, and I expect the worst might be over. There will be the usual good news and bad news announcements that will send stock markets up and down during the next few weeks, but I think the current market offers some excellent buying opportunities. This is still a “buy the dips” market.
Q. I have never been invested in a bear market. There’s a possibility one is forming right now and I want to know if you ever recommend selling value stocks since they’re already a bargain. (from subscriber C.W.)
A. I believe you have made excellent choices, although I am a bit concerned about GILD and SWKS. Both of these companies have solid long-term outlooks, but sales and earnings will likely decline during the next few quarters. You might want to consider selling GILD and SWKS and replacing them with AT&T (T 43.21) and AbbVie (61.91), or any of my other Buy-rated stocks in the Value and Enterprising Models.
Q. Within the past week, Tim Lutts expressed concern about car sales companies LAD, PAG, etc. He thinks car sales will drop over the next five to 10 yrs. Shall we sell PAG? (from subscriber M.B.)
A. Penske (PAG 31.46) Max Buy Price 40.89; Min Sell Price 61.92; is getting hit hard today because the company operates more than 100 dealerships in the U.K. Car and light truck sales in the U.S. haven’t started to drop yet, because the average age of cars on the road is high. Americans will continue to buy newer cars and pickup trucks during the next year or two. Cars on the road in Europe, including the U.K., are also old and need replacement.
I expect car sales to slow in the U.K. and Europe, though, because consumers’ confidence will take a hit, and they will delay new purchases when possible. I will continue to hold Penske because its stock price is very low, but if you are looking to lighten up on some of your holdings, Penske might be a good place to start.
Index of Latest Summaries – Recommendations featured in recent issues.