November 11, 2021

The markets have responded well to the compromises that Washington pols have neared on President Biden’s two spending plans. The Dow Jones Industrial Average is up more than 5% since our last issue.

The unemployment picture, of course, is helping, with October’s unemployment rate dropping from 4.8 to 4.6. As well, both the ADP and non-farm payrolls rose much faster than economists expected, meaning the economy is definitely moving forward. Housing prices—although still rising in some parts of the country—are beginning to stabilize. And the good news from the Mortgage Bankers Association that existing home prices should fall by 2.5% next year, should help the market for buyers improve.

All in all, excellent economic reports.

Market Views

The ISM Service Sector surged to the highest level in its 24-year history last month, due to the combination of strong consumer demand and supply chain disruptions. Longer delivery times are typically treated as a sign of robust demand, but in this instance supply chain bottlenecks are causing an upward distortion to this measure. In summary, further strength in the leading economic data continues to support a benefit of doubt approach, yet dysfunction across supply chains and the persistence of inflationary pressures must be monitored closely.
James Stack, InvesTech Research, investech.com, 800-955-8500, November 3, 2021

S&P 500 All-Time Highs
After about a six-week hiatus trading below a long-term channel that it traded within on most days, the S&P 500 Index impressively moved back into this channel last week. In response, the index carved out new all-time highs in the process.

A couple of positive catalysts surfaced, with the first being the Federal Reserve removing uncertainty with respect to when tapering would begin. A second was, coincidentally, a positive headline with respect to Pfizer (PFE) sharing that its Covid-19 pill reduced hospitalizations and deaths by 89%. I said coincidentally because it was positive headlines regarding potential Covid-19 vaccines on the immediate horizon that snapped equities out of a funk in mid-November 2020.

For the time being, traders can again use the rails of that channel to define potential support and resistance levels in the immediate term, unless and until these boundaries are no longer effectively defining short-term support and resistance areas. The top rail of this channel comes into the week at 4,766 and ends the week at 4,785. The bottom rail is at 4,634 today and will be just above 4,650 on Friday.
Bernie Schaeffer, Schaeffer’s Investment Research, SchaeffersResearch.com, 800-327-8833, November 8, 2021

Oil & Gas Attractive
Up until a few days ago, I believed the global movement to drastically curb greenhouse gas emissions was finally in a position to get its way. But now, many countries across the globe find themselves struggling to procure enough oil and gas to power their factories, heat their homes, and feed their internal combustion engines. As a result, they have doubts about the wisdom of curbing the global production of fossil fuels. This change in attitude regarding oil and gas production could be all we need to trigger a new wave of American exploration and production in our underutilized oil fields. The push for increased oil and gas production will fade once this latest crisis passes. The desire to cap global carbon emissions is not going away, and that’s probably a good idea in the long run. But right now, the world cannot live without oil and gas.
David C. Jennett, The Investment Letter, P.O. Box 6170, Holliston, MA 01746, 800-542-5018, October 21, 2021

Spotlight Stock

Park Hotels is the second-largest publicly traded lodging REIT in the U.S. And since it’s a REIT, you already know one of the reasons I like it: those dividend distributions
that come with every REIT. But there’s a catch to this one. Due to cash flow uncertainty during COVID (and the massive revenue loss caused by rolling lockdowns throughout 2020), the company suspended payment of its distributions temporarily. So, right now there’s no dividend. But when it comes back, it should be pretty close to what it had been in the past, which is $1.80 per share per year. And at today’s prices, that amounts to nearly a 10% yield!

When COVID hit last year, like many companies in its industry, Park was completely unprepared. It had a full staff and lots of debt it planned to service with excess cash flows. But when the world shut down and people holed up at home for a year, those cash flows dried up and the company was looking at a very ugly balance sheet situation. So, management made the difficult decision to suspend the dividend while they got things sorted out.

They also took a very proactive approach and promised to reduce debt by $300 million–$400 million over the course of 2020. And thanks to the sales of several properties throughout the year, they did even better and reduced that overall debt burden by $477 million.

Management also cut budgeted expenditures for the year down to only $40 million in maintenance projects. For a company that owns 56 hotels, that’s a pretty big budget reduction. And it’s helped the company break even at the corporate level in Q3.

But what’s better for us is that it should get Park to the point where overall cash flows turn positive this quarter. And that means there’ll be funding to get that dividend payment going again.

The company has a big concentration in Florida, one of the few states with zero remaining COVID restrictions and an increasingly popular leisure destination for Americans trying to escape for a while. It’s also got two hotels in Hawaii, a place that will be desperate to boost tourism as soon as it can. All of its hotels in Southern California are open just in time for the state to start relaxing restrictions. And all of its hotels in Boston, Washington D.C., and San Francisco are open just in time for the president to relax travel restrictions on 33 countries, including the European Union, China, Iran, South Africa, Brazil, and India.

Acquisition activity in the hotel sector is really starting to pick up. So far in 2021, the value of announced acquisitions is already three times that of all deals in 2020. And it’s big-name investors doing the acquiring. Hyatt Hotels (H) recently announced it is spending $2.7 billion to buy all of Apple Leisure Group from PE firm and institutional investor KKR (KKR). Another investment management company like KKR, Blackstone Inc. (BX), is buying the entire hotel and resort portfolio from Condor Hospitality Trust (CDOR).

And with a quality portfolio of properties in highly sought-after locations, Park Hotels could make a good candidate for a buyout at a premium.

There are several reasons to like Park Hotels. One is that nobody else likes the company right now. A second is that people like to travel and will be back at it soon. And a third is that there are some very smart investors starting to nibble at the sector in anticipation of a resurgence of revenues.

The company has a great management team that kept it running through the pandemic and used the opportunity to clean up the balance sheet and make the company much stronger financially.

I expect the dividend to be reinstated in the near future and am absolutely tickled
about the thought of locking in a potential 10% yield on cost.

We are adding Park Hotels & Resorts Inc. to the model portfolio with an initial buy limit of $22.50. The 12-month target will start at $35.
Jason Williams, The Wealth Advisory, angelpub.com, 877-303-4529, October 2021

Feature Article

As we emerge from the pandemic, the lodging sector is finding favor among investors. According to NAREIT, returns for Lodging REITs are 15.4% so far this year. And that’s good news, since they dropped 45.5% from February 21 to November 7, 2020, with a total decline of 23.6% for 2020.

As you can see from the following graph; occupancy is also improving, and is expected to continue to accelerate, at least until 2025.

Most of that improvement is due to a rise in leisure travel. And when business travel gets back to normal levels, occupancy should really take off. Research firm Green Street predicts that travel segment to get back to pre-pandemic levels by 2023.

And accompanying occupancy increases is RevPar (revenue per room) acceleration. Lodging Analytics Research & Consulting expects RevPAR for U.S. hotels to increase at a compounded annual growth rate of 16% from 2020 to 2025.

And that’s great news for our Spotlight Stock, Park Hotels & Resorts Inc. (PK). The company’s premium-branded hotels and resorts contain more than 33,000 rooms and are primarily located in prime city center and resort locations.

Park’s investment strategy is to focus on:

• Upscale & Luxury
• Premiere Urban and Resort
• Affiliation with Dominant Global Brands

As contributor Jason Williams reported, the REIT is geographically diversified, with markets including Hawaii, San Francisco, Orlando, New Orleans, Boston, Chicago, NYC, Denver, San Diego, Miami, Washington D.C., and Key West.

For its third quarter, pro-forma RevPAR was $105.48, an increase of 301.6% from the same period in 2020 and a decrease of 43.4% from the same period in 2019.

Pro-forma occupancy for Park’s 45 consolidated hotels open during the entirety of the third quarter was 58.0%. Net loss and net loss attributable to stockholders were $(82) million and $(86) million, respectively. Adjusted EBITDA was $77 million, an increase of 141% compared to the second quarter of 2021. And Adjusted FFO attributable to stockholders was $5 million, an improvement of 112.2% compared to the second quarter of 2021.

During the quarter, Park reopened the New York Hilton Midtown, increasing to 96% of total room count and leaving just two hotels in the portfolio suspended—Parc 55 San Francisco—a Hilton Hotel, and Hilton Short Hills.

The Lodging REIT industry is moving in the right direction, and while Park ‘s shares have risen about 75% in 2021, I think there’s lots more to come, and I’m looking for a nice boost when the dividend is reinstated.

Growth

The TJX Companies, Inc. (TJX) | Daily Alert October 14
Shares of The TJX Companies have sold off as part of the retailer group, weighed by concerns of COVID-related factory shutdowns in Asia disrupting supply chains and pressuring profit margins. With a strong balance sheet mitigating risks, the decline in this off-price apparel & home fashions retailer’s shares is a buying opportunity.

TJX is poised to gain market share and solidify its bargaining power with suppliers as other retailers close stores and consumer appetite for TJX’s offering grows.

TJX shares appeal to growth investors. They trade at 19.8X-forward EPS versus prospects for 30% EPS growth in 12 months. (Next earnings: ~ Nov. 16)
Sam Subramanian, PhD, AlphaProfit Sector Investors’ Newsletter, alphaprofit.com, 281-565-6963, October 2021

Ryanair Holdings plc (RYAAY) | Daily Alert October 25
It is extremely easy for any U.S. investor to buy individual foreign stocks via American Depositary Receipts. ADRs are securities that trade on U.S. exchanges and represent ownership in shares of foreign companies. Investors buy and sell ADRs just as they buy and sell U.S. stocks. ADRs are quoted in U.S. dollars and pay dividends in U.S. dollars. And those dividend payments, in many cases, receive the current preferential tax treatment afforded qualified dividends paid by U.S. companies.

Based in Ireland, Ryanair is Europe’s largest airline group, carrying 149 million guests (pre-Covid) on more than 2,500 daily flights from over 80 bases in 37 countries, primarily Europe.

I’ve never been a huge fan of investing in airline stocks. However, I made Ryanair an exception because of its low-cost approach and its play on increased mobility in Europe. The stock is roughly flat so far this year, but I expect these shares to benefit as travel and leisure restrictions loosen in Europe.
Charles B. Carlson, CFA, DRIP Investor, dripinvestor.com, 800-233-5922, October 2021

The Middleby Corporation (MIDD) | Daily Alert October 26
The Middleby Corporation is a leading manufacturer of commercial kitchen equipment, residential appliances, and systems for industrial processing, packaging, and baking.

The company boasts more than 100 brands across its three business segments and develops, manufactures, and distributes its products worldwide. The bulk of sales come from North America, though approximately one-third of sales come internationally with a presence in Europe, Asia, and Latin America.

We anticipate Middleby will grow organic revenue in the high-single to low-double digit range over the next several years versus pandemic-suppressed results. With acquisitions, we anticipate 14% topline growth.

Projecting 17% EPS growth and applying a high P/E of 28.5, we get a potential high price of 360. Applying a low P/E of 16.0 to trailing adjusted EPS of 6.86 yields a low price of 110. Therefore, we model an upside/downside ratio of 3.1 to 1 and a projected high total return of approximately 16% annually.
Doug Gerlach, InvestorAdvisoryService.com, 1-877-33-ICLUB, November 2021

*Rite Aid Corporation (RAD)
Last month’s sell-off created some new buying opportunities, and several are on the speculative side of the barbell. Investors should look at Rite Aid Corp., which is down 35% since June. Obviously, there is much more risk in this new recommendation, but we expect 50% upside in the next 12-18 months from current depressed levels. The company’s turnaround plan has been sidetracked, which is the reason the stock has plunged from the low thirties to the low teens.

Rite Aid has a valuable national footprint that may be alluring to companies looking to expand. The biggest negative is its highly leveraged balance sheet, which will limit
management’s flexibility during difficult times.
Alan B. Lancz, The Lancz Letter, lanczglobal.com, 419-536-5200, October 15, 2021

Growth & Income

Toyota Motor Corporation (TM) | Daily Alert October 22
Toyota Motors announced a 5 for 1 split in Japan back in May. TM trades on the NYSE utilizing the mechanism of American Depositary Receipts (ADRs).

Mellon Bank of New York handles the ADRs for Toyota and put out an announcement on 9/3/21 that it was adjusting its ratio of TM common stock from 1 ADR to 2 ordinary shares to 1 ADR to 10 ordinary shares. In other words, traders in Japan would see a 5 for 1 split of TM’s shares, while traders in the USA would see no change at all in the price or number of ADRs in their account.

Toyota is the world’s second largest car company after Volkswagen. At the present time, Toyota is arguably the most advanced in the engineering and progress toward the switch to electric vehicles. I remind readers that it was Toyota that developed the Prius hybrid over 20 years ago, long before any other car company took seriously the move to electric vehicles.

And the good news is TM has solid numbers—good PE and price-to-book ratios, dependable dividend, very low Beta, etc. Toyota has almost all the characteristics I look for in 2 for 1 Index stocks. That Mellon chose not to reflect TM’s 5 to 1 split in Japan in its NYSE traded ADRs is no reason to ignore its potential for success in the 2 for 1 Index.
Neil Macneale, 2 for 1 Stock Split Newsletter, 2-for-1.com, 408-210-6881, October 2021

Loews Corporation (L) | Daily Alert October 27
You’ll recall that Loews is most often thought of as a hotel/hospitality company, but the Loews Corp. is actually a holding company that has insurance, energy, hospitality, and packaging industries. Some of its consolidated subsidiaries include CNA Financial (property and casualty insurance), Boardwalk Pipelines (transportation and storage of natural gas and liquids), Loews Hotels & Co. and Altium Packaging (rigid plastic packaging).

Like many companies, Loews struggled during the early part of the pandemic, but the company has recovered some this year. Q2 2021 showed net income of $754 million, or $2.86 per share, compared to a net loss of $835 million ($2.96 per share) for Q2 of 2020. Net income for the six months ended June 30, 2021 was $1 billion, or $3.82 per share, compared to a net loss of $1.5 billion ($5.16 per share) for the same period a year ago.

In the last 12 months, management has reduced shares outstanding by 8.262%.
David R. Fried, The Buyback Letter, buybackletter.com, 888-289-2225, October 20, 2021

Penske Automotive Group, Inc. (PAG) | Daily Alert November 2
We can take a fast money ride along with the genius of Roger Penske via the outstanding share price of Penske Automotive Group.

The company has 43 light-vehicle franchises in the United States (including in Puerto Rico), as well as 161 franchises overseas, primarily in the United Kingdom. The company is the second-largest U.S.-based dealership in terms of light-vehicle revenue and sells more than 35 brands, with 93% of retail automotive revenue coming from luxury and import names.

In its most recent quarter, PAG reported earnings per share (EPS) growth of an amazing 698%! That earnings growth last quarter, as well as its three-year annual growth rate of 18%, puts PAG in the top 5% of all stocks in terms of EPS growth

Technically speaking, PAG is now on the verge of a bullish cup-with-handle breakout at $113.00.

So, let’s buy Penske Automotive Group at market, with a protective stop set at $90.00.
Mark Skousen & Jim Woods, FMA Trader Alert, markskousen.com, Eagle Financial, 300 New Jersey Ave. NW, Suite 500, Washington, D.C. 20001, October 25, 2021

*United Parcel Service, Inc. (UPS)
52wk H. 220.24 52wk L. 154.76

Mkt Cap: $182.17B, EPS: 7.36, P/E: 28.44

Beta: 1.06, Div/Yld: 4.08(1.93%)

The package service provider reported Q3-21 earnings of $2.9B or 2.71/shr on revenue of $22.6B. The margin guidance increased by 13% against 12.7% previously targeted. Technical picture detoriated after the plunge (207-197) set in late July ’21. Sinking to low (178-181). Reversal jumped through 200-DMA with repeated upped-gap: 1st (183-187), 2nd (195-200), 3rd (198-203), 4th (203-214). In retraction for possible refilling of the 4th upped-gap

(203-214). Volatile.

BUYING RANGE: 202-217

NR TERM OBJ: 236

INTERMED OBJ: 251

STOP LOSS: 197
Joseph Parnes, Shortex Market Letter, shortex.com, 800-877-6555, November 4, 2021

Kaman Corporation (KAMN) | Daily Alert November 4
Kaman Corporation is a defense and aerospace company that produces highly engineered components, specialty fuzes (mechanical fuses) for missiles, and various assemblies. Today, about 52% of its sales, of which fuzes are more than half, are to the defense industry.

Organic sales in the second quarter grew 5.4% and profit margins showed strong expansion. The outlook for next year is for more commercial aerospace recovery and continued strength in the medical and industrial segments.

Kaman should generate positive free cash flow this year. Its balance sheet is sturdy and underleveraged with only $187 million in debt (about 2x EBITDA), and $98 million in cash.

Trading at a modest 9.8x next year’s EBITDA, and providing a 2.1% dividend yield, Kaman shares look attractive for patient investors.

We recommend the purchase of Kaman Corporation shares with a 57 price target.
Bruce Kaser, Cabot Turnaround Letter, cabotwealth.com, 978-745-5532, October 27, 2021

Entravision Communications Corporation (EVC) | Daily Alert November 9
A growing force in digital media, television, and radio, Entravision Communications has an expansive global footprint spanning more than 30 countries, including 16 in Latin America and eight in Asia. Entravision is the largest affiliate group of the Univision and UniMás networks.

In the U.S., the company serves 35 markets through 55 TV stations and 47 radio stations.

The stock earns impressive ranks for Momentum (97) and Performance (95). Aided by the acquisition of Cisneros Interaction, a fast-growing provider of online and mobile advertising in Latin America, the company’s digital business saw sales soar 424% in the June quarter. After the deal, digital is expected to represent roughly 75% of revenue.

Only one analyst offers estimates for Entravision. Full-year 2021 earnings per share are expected to be $0.45, unchanged from last year. Buoyed by acquisitions, revenue is expected to more than double to $734 million.

Entravision is being initiated as a Buy

Nancy’s Note: I also initiated coverage of EVC in my Wall Street’s Best Stock issue 921, September 7, 2021.
Richard J. Moroney, CFA, Upside, upsidestocks.com, 800-233-5922, November 2021

*GATX Corporation (GATX)
GATX Corp is the leading global railcar lessor. The company owns railcar fleets in North America, Europe, and Asia. Globally, GATX owns and manages a fleet of tank containers. Jointly with Rolls-Royce, GATX owns one of the largest aircraft spare engine lease portfolios in the world.

GATX engages in both full-service and net leasing of railcars. In a full-service lease, a GATX-owned mark is applied to the car, and GATX maintains the railcar and pays for any required property insurance and property taxes. In a net lease, the lessee applies its mark to the car, and the lessee pays for any required property insurance and property taxes. Often, on a net-leased car, there is no evidence of GATX ownership, although some net lease cars carry a GATX logo. GATX has paid uninterrupted dividends since 1971.
Kelley Wright, IQ Trends, iqtrends.com, info@iqtrends.com, 866.927.5250, First-November 2021

Value

Campbell Soup Company (CPB) | Daily Alert October 15
Conservative-Growth Payer Portfolio, Dividend Sustainability Rating: Above Average.

Under its new strategic plan, which began in 2018, Campbell sold most of its international and refrigerated-foods businesses. That let it focus on canned soups, pasta and V8 vegetable juices. Campbell also kept its snack food operations. They were significantly expanded in March 2018 when the company paid $6.1 billion for snack-foods maker Snyder’s-Lance. Snacks now account for half of its sales.

In its fiscal 2021 fourth quarter, ended August 1, 2021, Campbell’s sales fell 11.1%, to $1.87 billion from a year earlier. Earnings before one-time items in the quarter fell 13.0%, to $167 million, or $0.55 a share. Rising prices for ingredients and packaging hurt earnings in the latest quarter. In response, Campbell plans to raise its selling prices.

The company will probably earn $2.77 a share in fiscal 2022. The stock trades at an attractive 15.2 times the midpoint of that range. Campbell Soup is a buy.
Patrick McKeough, Dividend Advisor, tsinetwork.ca, 888-292-0296, October 2021

Financials

OneMain Holdings, Inc. (OMF) | Daily Alert November 5
OneMain Holdings is a financial company that provides loans and insurance products to “near prime” customers. OneMain holds a greater than 20% market share of the near-prime lending sector.

A recent presentation noted that the near-prime credit card market of $427 billion dwarfs the $81 billion for near-prime personal loans. A successful credit card product could be a massive boost for the OneMain results. A pilot launch of two credit card offerings started in the third quarter.

The falloff for 2020 is understandable, and the company has come back strong in 2021. The Wall Street analysts estimate the company will earn $4.61 per share for the second half of 2021. A $2.20 to $2.50 quarterly run rate seems very feasible going forward.

OneMain has been a superior dividend-paying stock. The company pays a combination of a regular quarterly dividends and a bonus dividend in the first and third quarters.

The bonus dividends have been significant. The two bonus dividends for 2021 have been $3.50 per share each. A total of $13.50 per share of special dividends was earned by investors for the three years 2019 through 2021.

Barring a severe economic recession, the odds are good that OneMain will continue to grow its business—and its profits. With most of the profits shared with investors in the form of special dividends, I view OneMain as an attractive income stock, and an excellent addition to the Dividend Hunter portfolio.
Tim Plaehn, The Dividend Hunter, yn345.isrefer.com/go/cabmdpc/cab/, November 2021

Discover Financial Services (DFS) | Daily Alert November 10
We look for revenues at Discover Financial Services to rebound 8% in 2021, and to rise more modestly in 2022.

An $879 million reserve release in 1Q was driven by reduced credit losses and an improved economic outlook, while modest provisions of $135 million in 2Q and $185 million in 3Q reflected continued low charge-offs.

Discover reported 3Q21 earnings of $3.54 per share, up from $2.45 a year earlier and above the consensus of $3.53. Net revenues rose 2.3%. Net charge-offs fell to a record low level in 3Q21, although we expect a modest increase going forward.

Based on the improving credit quality outlook, we are raising our 2021 EPS estimate to $17.34 from $15.89. We are also raising our 2022 forecast to $12.96 from $12.02, with the decline from 2021 reflecting the absence of an equity investment gain and the sizeable reserve releases that have boosted earnings this year.

We also see brighter long-term prospects for Discover as more spending moves online and to credit cards.

Our target price of $145 implies a multiple of 11-times our revised EPS estimate for 2022. We note the shares have nearly doubled over the past year, which we attribute to the vastly improved credit outlook.
Jim Kelleher, CFA, Argus Weekly Staff Report, argusresearch.com, 212-425-7500, November 3, 2021

*JPMorgan Chase & Co. (JPM)
JP Morgan reported earnings of $3.74 per share vs. $3 per share estimates by analysts. Also, revenue was $30.44 billion vs. 29.8 billion estimates.

The nation’s largest bank said that it’s starting to get worried about the inflation, warning that the hot pace of price increases could last through 2022. Dimon pointed out that “we prepare for probabilities and eventualities and one of those probabilities is that inflation might go higher than people think.” We (PC) have been saying the same thing for some time and it’s now beginning to happen. The Bureau of Labor Statistics reported that prices rose by 5.4% on a year-over-year basis in September, the fastest pace of growth since 2008.
Sean Christian, The Personal Capitalist, 9524 East 81st Street, Suite B #1715, Tulsa, OK 74133, October 15, 2021

*Royal Bank of Canada (RY, RY.TO)
Royal Bank currently pays a quarterly dividend of $1.08 per share ($4.32 annually). It could easily raise its payout by 10%, which is not out of line given its rise in profits. In the latest quarter, the bank reported net income of $4.3 billion, up $1.1 billion (34%). Earnings per share were $2.97, up 35%.

Bank dividend increases are almost a sure thing once the OSFI ban is lifted, and hikes in excess of 10% would not be a surprise after a freeze of this length. Anyone looking for dividend growth should start here.
Gordon Pape, Income Investor, buildingwealth.ca, 1-888-287-8229, October 28, 2021

Healthcare

*Bristol-Myers Squibb Company (BMY)
Bristol Myers Squibb Company is a global biopharmaceutical company with over $46 billion in revenues. In recent years it has divested several major businesses to focus on high-value pharmaceuticals.

The shares are attractive for two reasons. First, low expectations (low valuation) minimize the downside risk should the anticipated weak fundamentals actually arrive, yet if the fundamental reality is stronger than feared the shares offer considerable upside potential. BMY shares trade at only 7.5x estimated 2022 earnings, well-below major peers that typically trade at 12x or higher. On EV/EBITDA, Bristol’s shares trade at a modest 6.7x, a sharp discount to major peers that trade around 9-10x or higher. The BMY valuation implies a dour profit outlook.

Second, acknowledging the patent expirations that will arrive this decade, Bristol is reducing its fundamental risk through a multi-pronged revenue-and-profit-replacement strategy. Bristol has a robust pipeline of internally developed treatments that offer potentially sizeable new revenues. Additionally, its acquisitions of Celgene and MyoKardia, and possibly future acquisitions, provide new growth potential that complements Bristol’s research expertise. And, Bristol has signed agreements with several generics competitors that could extend its patent window. These agreements reflect the strong underlying demand for its “key three” products, such that the primary issue is pricing, not volumes.

Overall, BMY shares look poised to provide a solid total return to investors with limited downside risk – an attractive prospect in an expensive stock market.
Timothy Lutts, Cabot Stock of the Week, cabotwealth.com, 978-745-5532, November 1, 2021

2nd Opinion
*Bristol-Myers Squibb Company (BMY)
Bristol’s stock has essentially been in free fall for the past two months! While it is certainly possible that the stock could remain in free fall for a bit longer (and perhaps trade all the way back into the $40s as part of the current move; at least that’s what the chartists would say), I am taking advantage of the pullback to add a few shares to our still somewhat underweighted positions. BMY remains a strong buy under $55 and a buy under $75.
Nate Pile, Nate’s Notes, NotWallStreet.com, 707-433-7903, October 2021

*DLH Holdings Corp. (DLHC)
DLH Holdings serves the very critical needs of America’s armed services veterans though an array of federal government contracts. The company’s technology-enabled solutions address case management, physical and behavioral health examinations, and medical administration services. It also provides a range of human services and solutions, such as monitoring and evaluation, electronic medical records migration, data collection and management, and nutritional and social health assessments.

The scale of the operations it serves for the federal government can be a barrier to entry for competitors, and its long-term relationships and ongoing long-term contracts provide a stable base for continuing revenues. Acquisitions have boosted results and created a platform for future growth.

In the third quarter ended June 30, 2021, revenue increased to $61.6 million in fiscal 2021 from $51.5 million in fiscal 2020, a gain of 19.6%.

We are projecting revenue growth of 15% and EPS growth of 18% on average through fiscal 2025.

With an estimated high P/E of 26.5 and EPS of $1.44, a future high price of $38 results. On the downside, if the stock falls to a P/E of 14.4 and EPS stall at the TTM level of $0.63, a low price of $9 is our floor. This results in a potential total annual return of 22.0% and an upside/downside ratio of 4.8-to-1.
Doug Gerlach, Smallcapinformer.com, 1-877-33-ICLUB, November 2021

Technology

The Descartes Systems Group Inc (DSG.TO, DSGX) | Daily Alert October 19
Descartes provides on-demand, software-as-a-service solutions focused on improving the productivity, performance, and security of logistics intensive businesses.

For Descartes’ second quarter, revenue was up 25% to $104.6 million. For the first half of the 2022 fiscal year, revenues were $203.4 million, up 21% from a year ago. Net income for the quarter was $23.2 million ($0.27 a share) compared to $10.5 million ($0.12 a share) last year.

On May 7, Descartes bought Portrix Logistics Software GmbH, a provider of multimodal rate management solutions for logistics services providers. On July 8, the company acquired GreenMile, LLC, a provider of cloud based mobile route execution solutions for food, beverage, and broader distribution verticals.

Descartes is a company in the right place at the right time as the economic impact of the pandemic has played havoc with international trade and transportation, increasing demand for its services. The stock recently hit an all-time high of $111 before retreating to the current level.
Gordon Pape, Internet Wealth Builder, buildingwealth.ca, 1-888-287-8229, October 4, 2021

NetApp, Inc. (NTAP) | Daily Alert November 1
You might remember NetApp as Network Appliance, one of the darlings of the tech boom of the late 1990s. Today’s version of the company still focuses on storage and data management. But while NetApp started out as a hardware play, software drives the bus in today’s economy.

NetApp generates more than 99% of its revenue in the hybrid cloud, a digital infrastructure that involves both private and public networks. Quince Market Insights projects the $50 billion hybrid cloud market will expand at an annualized rate of 18% for the next seven years, growth that boosts our confidence in NetApp’s future.

In the July quarter, the company grew sales 12% to $1.46 billion, topping the consensus by 2%. Per-share profits rose 58% to $1.15, a positive surprise of 21%. Analysts now project sales growth of 9% and profit growth of 23% this year

At 20 times trailing earnings, NetApp trades 12% below its five-year average valuation. The stock looks expensive relative to the tech-hardware group, but we could make a solid argument that NetApp belongs in the far pricier software group. NetApp trades 48% below the software group’s median P/E.
Richard Moroney, CFA, Dow Theory Forecasts, dowtheory.com, 800-233-5922, October 11, 2021

*Motorola Solutions, Inc. (MSI)
I probably haven’t had a Motorola phone in a decade, but when I hear Motorola, my brain goes straight to the Motorola RAZR circa 2004. Motorola phones are now made by Lenovo, and Motorola Solutions has gone back to its foundations: mobile radio communications.

These are communication systems used every day by both enterprise and public safety customers. Motorola Solutions has over 13,000 networks used by its 100,000 customers spread out over 100 countries. And most of these systems are considered mission critical—meaning a disruption would cause an entire operation or business to halt.

Last week, MSI saw its rating upgraded from a “B” to a “B+” due to an increase in earnings before interest and taxes (EBIT), earnings per share (EPS) and total revenue. The company hasn’t seen an “A-” rating since the end of 2019 but it’s back up at the top of the “B” range. And I think this is one you should keep an eye on.
Kelly Green, Weiss Ratings, Weiss Ratings, 1-877-934-7778, weissratings.com, October 28, 2021

*NortonLifeLock Inc. (NLOK)
NortonLifeLock (TSINetwork Rating: Average) has two main businesses: Norton computer antivirus software; and LifeLock identity-theft protection.

The company has now agreed to buy European cybersecurity firm Avast plc for $8 billion. Avast has 435 million active users and its 2020 revenue was roughly $893 million.

Meantime, NortonLifeLock continues to attract new customers as more people working from home spurs a jump in cyber-attacks. It, in fact, closed its fiscal 2022 first quarter, ended July 2, 2021, with 23.1 million customers.

Excluding one-time items earnings rose 31.9%, to $248 million from $188 million; per-share earnings climbed 35.5%, to $0.42 from $0.31, on fewer shares outstanding.

The company continues to spend a high 10% of its revenue on research. Those costs depress its current earnings but will help it compete in its rapidly changing industry.

As well, the stock is attractively priced at 15.2 times the company’s forecast fiscal 2022 earnings of $1.71 a share. The $0.50 dividend yields 1.9%.

NortonLifeLock is a buy.
Patrick McKeough, Wall Street Stock Forecaster, tsinetwork.ca, 888-292-0296, November 2021

*Broadcom Inc. (AVGO)
Broadcom is a leader in the semiconductor and software industries. The company offers a wide range of products and services to the networking, broadband, wireless communications, data storage and industrial sectors. Apple (rated “B”) is a well-known customer of Broadcom’s, accounting for around 15% of sales last year.

There’s a lot to like about Broadcom’s results. Unsurprisingly, given the current strength in the tech sector, revenue rose 16% to $6.8 billion in Q3. Meanwhile, adjusted profit jumped 28% to $3.1 billion, or $6.96 per share. CEO Hock Tan sounded confident about fourth-quarter results, too, citing strength in cloud computing, 5G and broadband-related businesses.

Broadcom pays out $3.60 per share in quarterly dividends. That’s more than double the S&P 500—and 80 basis points more than Texas Instruments.

Our Weiss Ratings system graded AVGO a “Buy” since February. Sub-readings on growth, efficiency and solvency are all in excellent territory, too.

Buy a 2.5% position in Broadcom Inc. (Nasdaq: AVGO, Rated “B”) shares at the market.
Mike Larson, Safe Money Report, 1-877-934-7778, weissratings.com, October 2021

Low-Priced Stocks

Else Nutrition Holdings Inc. (BABYF) | Daily Alert October 21
Else Nutrition Holdings is a young, Israeli-based, plant-based food and nutritional company aimed at babies and toddlers. Trading at a market value of only $195 MM, this stock is speculative, but it has a number of characteristics that could be framed as conservative.

I’m also impressed by its growth trajectory, huge markets, top executives with experience at companies such as Abbott and Mead Johnson, and strong scientific and advisory boards. It has already secured patents in key markets, which are estimated at $80 billion and growing at a 4-5% clip.

Another reason I think there is upside in the stock is the discovery potential. Institutional investors have a very small proportion of issued stock and management owns 41% so they are plenty motivated.

In addition, I’m impressed with the marketing and distribution efforts thus far. Finally, Else may expand the brand to cereal, post-toddler nutrition and nutritional drinks. It’s a good story so let’s begin with incrementally building a half position. BUY A HALF
Carl Delfeld, Cabot Explorer, cabotwealth.com, 978-745-5532, October 7, 2021

*HIVE Blockchain Technologies Ltd. (HIVE)
Cryptocurrency miner, HIVE Blockchain, which runs green energy-powered data facilities in Canada, Sweden, and Ireland, is likely to run higher with Bitcoin.

In its most recent earnings report, the company reported gross revenue of $37.2 million from mining—a massive 466% jump year over year. Net income came in at $18.6 million from $1.8 million year over year.

Over the last few months, HIVE received approval from NASDAQ to list its common shares. That should give it far more exposure to millions of investors.

The company recently achieved its target of 1 Exashash per second, or EX/s of the Bitcoin mining hashrate. From here, the company wants to achieve 3 EX/s by the end of 2022. It also has 1,845 Bitcoin miners deployed in Quebec and New Brunswick.

The miners tend to run with Bitcoin, which is expected to explode higher. Fundstrat Global Advisors’ Tom Lee, for example, says Bitcoin could run to $100,000 this year. Fidelity’s director of global macro, Jurrien Timmer, as noted by Yahoo Finance, says Bitcoin could hit $100,000 by 2023.
Ian Cooper, The Cheap Investor, support@thecheapinvestor.com, November 2021

*Evolving Systems, Inc. (EVOL)
Evolving Systems offers acquisition and activation solutions that increase new subscriber enrollments through multiple channels. Additionally, the company offers various solutions to improve brand engagement.

Evolving Systems reported revenue of $7 million in the second quarter, up 10% from the same period last year. Net income is slowly returning to historical levels, and trailing twelve-month (TTM) EBITDA has increased to $2.8 million. Overall, Evolving Systems’ bottomline results are well into a turnaround, but the stock trades at ju
st a fraction of its old share price, which was in the $5 range prior to 2018.

The primary catalyst for the company is the necessity for customer retention. Depending on the industry, it costs 5 to 25 times more to acquire a new customer rather than retain an existing one. This will drive demand over time and prevent any sudden weakness in top-line results.

Insiders and institutions own 26% and 22% of the outstanding shares, espectively. This is reassuring for investors and increases the likeliness of institutional accumulation.

EVOL is expanding into new markets and has outstanding fundamentals.
Faris Sleem, The Bowser Report, thebowserreport.com, 757-877-5979, October 2021

Preferred Stocks & High Yield

The Charles Schwab Corporation (SCHW-PJ) | Daily Alert October 18
Charles Schwab Corp. (The); 4.45% Fixed Rate, Non-Cumulative, Series J Perpetual; Par $25.00; Annual Cash Dividend $1.1125; Current Indicated Yield 4.25%; Call Date 06/01/26 at $25.00; Yield to Call 3.34%; Pay Cycle 3b; Ratings, Moody’s Baa2, S&P BBB; CUSIP 808513865

Charles Schwab Corp. (SCHW) is a leading financial institution, providing investment services throughout the nation. SCHW offers wealth and asset management, securities brokerage, cash management, research, and financial advisory services. The company services individuals and institutional clients through its Investor Services and Advisory Services platforms. The Investor Services segment offers retail and banking services, retirement plan solutions, and corporate brokerage services. The Advisor Services segment provides custodial, trading, support services, and retirement business services.

As of 06/01/21, SCHW serviced $7.57 trillion client assets up 84% from a year ago and had a record 32.3 million in active brokerage accounts.
SCHW’s 4.45% preferred issue is fixed rate and callable on 06/01/21, or on any dividend payment date thereafter, at par plus any declared and unpaid dividends. The firm reported adjusted net income of $1.48 billion or $0.70 per share, for the 2Q 2021 period ended 06/36/21. Bottom-line results more than doubled from a year earlier on exceptionally strong revenue growth. Adjusted net income topped analysts’ estimates by a penny. Net revenue of $4.53 billion jumped 85% from a year ago. Earnings and revenue benefited from strong market conditions across most areas, including strong client transaction activity.

Dividend distributions on this preferred issue are qualified and taxed at the 15-20% rate. This investment is suitable for low-risk taxable portfolios. Buy at $27.00 or lower for a 4.12% yield and a 2.63% yield to call.
Martin Fridson, CFA, Income Securities Investor, isinewsletter.com, 800-472-2680, October 2021

South Jersey Industries, Inc. (SJI) | Daily Alert October 20
South Jersey Industries is an energy company that engages in the purchase, transmission, and sale of natural gas. It operates about 150 miles of main lines, nearly 7,000 miles of distribution lines, and serves more than 400,000 customers in New Jersey. The company also owns a small solar business and has oil, gas, and mineral rights in the Marcellus Shale in Pennsylvania.

For its second quarter, total revenue was up 20.0% to $311.8 million, while economic earnings equaled $2.0 million or $0.02 per share.

South Jersey reaffirmed its outlook for $1.55 to $1.65 in economic earnings-per-share

We currently expect 3% earnings-per-share growth in the coming years, mostly through organic revenue and earnings growth from the regulated utility. The non-regulated business offers growth potential, but it is quite small and increases earnings volatility. Total return potential of 14.6% per year stems from the yield, 3% growth rate and the possibility of a 7.8% valuation tailwind.
Ben Reynolds, Josh Arnold & Eli Inkrot, Sure Retirement Newsletter, suredividend.com, ben@suredividend.com, October 2021

Compass Diversified (CODI) | Daily Alert October 28
Compass Diversified is a holding company that invests in niche middle-market businesses, a segment historically reserved for traditional private equity. It owns ten companies, six in branded consumer businesses and four niche industrial companies.

Compass targets what is referred to as middle-market companies in the $200 million to $600 million range.

Compass was classified as a Master Limited Partnership but recently simplified to a regular corporation. The September 1st conversion should be a catalyst for the stock in the near term.

The current $0.36 quarterly payout translates to $1.44 per year. The dividend is well-supported by a strong balance sheet and very reasonable for the industry’s 55% to 65% payout ratio.

The stock should get a near-term bump not only from the strong economy, which tends to benefit smaller companies disproportionately, but the simplification should provide an additional tailwind. This is also a great company over the longer term.

It’s a great time in the economic cycle for this type of company. And Compass is a better way to go than any of the BDCs both in terms of overall strategy and its stock return history.
Tom Hutchinson, Cabot Dividend Investor, cabotwealth.com, 978-745-5532, October 13, 2021

Extra Space Storage Inc. (EXR) | Daily Alert November 3
Self-storage REIT ExtraSpace Storage is raking in cash as people load up on consumer goods. ExtraSpace’s yield is already 100% more than the average S&P 500 stock pays, but the REIT has boosted its payout a phenomenal 792% in the last decade. In other words, if you bought back then, you’d be raking in an incredible 22.4% yield on your original buy now.

EXR’s Recurring Revenue Drives Explosive Payout (and Price) Growth

ExtraSpace can easily keep this roll going, with its high 97% occupancy rate and its dividend accounting for a reasonable 76% of forecast 2021 FFO. Plus, management expects the REIT’s FFO to surge 24% this year.

The kicker: the stock is perfectly positioned to gain as supply chain kinks get worked out, giving consumers more products to buy—and store.
Brett Owens, Contrarian Outlook, BNK Invest Inc., 500 North Broadway, Suite 265, Jericho, NY 11753 USA, 516-620-4294, October 26, 2021

Intel Corporation (INTC) | Daily Alert November 8
Santa Clara, Calif-based Intel presented a mixed report on Thursday, with earnings topping analysts’ estimates and revenue falling slightly short. Intel got clobbered because it conceded what most analysts were already expecting—that gross margins would be lower than expected due to supply-chain constraints.

Intel plans to develop U.S.-based chip foundries to offset a dependence fabricators in Taiwan, which may be a long-term benefit toward product self-sufficiency, especially if China keeps on rattling sabers and eventually flexes more muscle in Taipei. Intel has an ex-dividend date on November 4 for a payout of $0.3475 per share.

Last week’s buy limit is now a market order to get into the stock by Wednesday so that you earn the dividend. Lending credence to the case that Intel is a good value: $3 million of stock purchases last week by the CEO and four members of the board of directors.
John Dobosz, Forbes Dividend Investor, newsletters.forbes.com, 212-367-3388, October 23 & 30, 2021

TotalEnergies SE (TTE)
Headquartered in France, Total is an integrated oil and gas company that has not shied away from taking meaningful strides to incorporate renewable energies into its mix, even changing the corporate name and ticker. Surging fossil fuel prices contributed mightily to strong oil and gas production in the latest quarter, pushing net income up more than fivefold (to $4.8 billion) versus the comparable quarter a year ago.

While the core fossil fuel business is still very competitive with relatively low production costs, we continue to like that the company is utilizing hefty legacy-business cash flow to fund investments in solar and wind, as well as battery storage.

This “greener” energy name trades for less than 8 times fiscal 2022 EPS estimates, with a net dividend yield of 5.0%.
John Buckingham, The Prudent Speculator, theprudentspeculator.com, 877-817-4394, November 2, 2021

Special Situation: Special Dividend

Laureate Education, Inc. (LAUR) | Daily Alert October 29
Laureate Education will pay $7.01-per-share in special dividends. This generates a 40% yield on Laureate’s share price today. The special dividend will be paid after November 1 to most investors. You have until the close of trading on October 29 to buy Laureate share and collect its high-yield special dividend.

Laureate provides for-profit higher education programs and services to students through licensed universities.

Its recently closed Walden University sale added $1.5 billion to the cash coffers. Laureate will use the proceeds to retire long-term debt, fund a $500-million share buyback, and pay the special dividend. Laureate will be left debt-free and cash-rich once all is said and done.

For the second quarter of 2021, Laureate reported $327.6 million in revenue for the markets it retains. This is a $23.7 million, or an 8%, increase compared to the second quarter of 2020. Operating income posted at $57.7 million, compared to $29.1 million in the second quarter of 2020, a $28.6-million improvement.

Tax efficiency is another possible draw of Laureate’s special dividend. A large percentage of the special dividend will likely be recognized as a return of capital. This means a large portion of the distribution could be tax free. (This prospect of a tax-free return is worth heeding if you are buying the shares in a retirement account, such as an IRA. If taxes are a consideration, consult your tax advisor.)

Recommended Action
Dividend-Income Investors:
Buy Laureate Education (NASDAQ: LAUR) shares. That said, you have until the close of trading on October 29 to buy the shares to collect the $7.01-per-share special dividend and open a dividend-income trade.

Capital-Gains Investors:
WAIT until November 1, the ex-dividend date, and buy Laureate Education (LAUR) shares. The best buy price for a capital-gains trade frequently occurs on the ex-dividend date.
Ian Wyatt & Stephen Mauzy, Dividend Confidential, wyattresearch.com, October 13, 2021

Funds & ETFs

*Global X Copper Miners ETF (COPX)
It’s starting to dawn on the “GREENS” that to be (what they call!) “GREEN,” you sure need a lot of metals from the good earth. And copper is going to go higher even though the price is at all-time highs already—in my opinion. In fact, the copper chart is starting to suggest that we will see a good economy ahead. I would buy COPX up to $40, and this is best for an IRA because it’s a cyclical trade. The next 3-5 years should be pleasing for COPX owners.
Bob Howard, Positive Patterns, P.O. Box 310, Turners, MO 65765, 417-887-4486, November 3, 2021

Updates

SELL ViacomCBS Inc. (VIAC) | Daily Alert November 8
Updated from WSBD 830, June 18, 2020

ViacomCBS fell sharply on heavy volume below its 10% trailing stops, and not with any publicly available news that came out about its business conditions. The company reports earnings next week. Perhaps somebody had a look at what will be announced and thought it would be smart to sell before the exits get crowded. VIAC already trades below its 200-day and 50-day moving averages.
John Dobosz, Forbes Dividend Investor, newsletters.forbes.com, 212-367-3388, October 30, 2021

*SELL HALF Energy Fuels (UUUU)
Updated from WSBD 843, July 8, 2021

I am recommending that you sell half your position in Energy Fuels. We’ve tripled or better here, depending on your own exact timing. It is my concern that the maniacs like Interior Sec. Haaland out to wreck America’s critical metals independence have just created an environment where Energy Fuels could shortly face legal action to shut down its White Mesa Mill; or at least, to stall any restart of uranium production.
Chris Temple, The National Investor, nationalinvestor.com, 224-308-2587, October 29, 2021

*SELL (some) Balchem Corporation (BCPC)
Updated from WSBD 815, March 13, 2019

Balchem Corporation is up a whopping 50% just this year so the amazing performance continues here for this classy small-cap. If you own this, I would do some selling. BCPC sells for 56 times earnings. So, sell some now, take some profits and keep the rest.
Bob Howard, Positive Patterns, P.O. Box 310, Turners, MO 65765, 417-887-4486, November 3, 2021

*SELL Kansas City Southern (KSU)
Updated from WSBD 809, September 19, 2018

Kansas City Southern has to jump through a bunch of hoops to get the CP/KSU merger approved. Will they say yes or no? I would lean more toward NO right now as the Biden administration is working hard to prove it is no friend to capitalism and is taking a hard look at many deals. Just know that if it turns this deal down, KSU is a $200-210 stock. If I owned it now, I would sell it.
Bob Howard, Positive Patterns, P.O. Box 310, Turners, MO 65765, 417-887-4486, November 3, 2021

Investment Index

The next Wall Street’s Best Digest issue will be published on December 9, 2021.