Wall Street’s Best Digest 831

The markets are certainly keeping us on our toes! I really didn’t know what to expect when I began calculating the returns for this Mid-Year Top Picks issue. We’ve had so much volatility; a big disruption in March, as coronavirus took hold; and many sectors that just haven’t bounced back.

So, you can imagine my relief and joy when I totaled up our contributors’ gains for the first six months of the year!

Despite the ongoing devastation of COVID-19, our contributors have broken all of our records, averaging a gain of 16.41%, while the Dow fell 8.6%, the S&P 500 is down 1.2% and only the Nasdaq is in positive territory, with gains of 18.3%.

Even better, our Top 5 picks averaged 221.48%!

Mid-Year Top Picks Update 831

All I can say is WOW! Our contributors—despite the devastating COVID-19, with its accompanying record-breaking unemployment, and a tremendous market dive in March, have broken all our records! Our average return for our 2020 Top Picks—so far this year—is 16.41%. And our average return on our Top 5 Top Picks is 221.48%. That’s a far cry from the -1.2% that the S&P 500 lost and the -8.6% that the Dow Jones Industrial Average returned. And although our overall average fell a bit short of the Nasdaq’s historic 18.3% rise, our Top 5 handily knocked the socks off of that!

Congratulations to our contributors and especially to our big winners!

Joseph Cotton, editor of Cotton’s Technically Speaking, recommended our #1 pick— Inovio Pharmaceuticals, Inc., which gained 742.86%, saying:

“Inovio Pharmaceuticals, Inc. (INO) is a late-stage biotechnology company that focuses on the discovery, development and commercialization of DNA-based immunotherapies and vaccines to prevent and treat cancers and infectious diseases. Its partners and collaborators include Regeneron Pharmaceuticals, the National Institutes of Health, Genentech, and many more. We consider this a speculative stock. We bought the stock at $3.62 on December 26, 2019.” (Note that Joes’ actual return is better than ours, as we recorded the buy on the same date for all our stocks, the night before publication.)

Tesla, our second place winner, was chosen by Joseph Parnes, editor of The Shortex Market Letter. He commented, “Tesla’s Oct ’19 surprise profit and introduction of its “Cyber Truck” pickup truck is certainly a catalyst for Tesla. Fourth Quarter ’19 earnings to approximate $1.30/shr on revenue of $6.7B.

“Technical Picture: TSLA has been trading in death cross pattern since July ’19 in (190-260) range. Its reversal rocketed with an upped-gap (265-290) to exit the death cross with high volume. This ascension continued at (310-323) to (339-345) with a mini-correction. It is being boosted by short-covering to (351-368) with continued upped-gaps of (370-379) to (380-391) to an all-time high of 406.83. Volatile.

“BUYING RANGE: 375-406 | NEAR TERM OBJECTIVE: 456 | INTER MED OBJECTIVE: 501.”

Joe might have sold himself a little short there as Tesla recently traded at $1,544.65.

The Trade Desk, recommended by John Gardner of Equity Research & Portfolio Evaluation, Inc., was our third place winner. In his recommendation, he noted, “The Trade Desk provides a self-service platform for advertising buyers to purchase and manage data-driven ad campaigns. The Trade Desk uses artificial intelligence to give marketers a clearer picture of where their programmatic dollars actually go. Smart ad budgets are managed using The Trade Desk. The company helps big brands deliver a more insightful and relevant ad experience for consumers. The Trade Desk has been a big winner, and this growth stock will continue to deliver in 2020.”

John was right, and TTD gained 61.92%.

Tom Bishop, editor of BI Research, picked 4th place winner, Anavex Life Sciences Corp., saying, “AVXL is a bio-pharmaceutical company that amazingly few know about, but those who do are passionate about. Its lead drug is Anavex 2-73 (A2-73) is an orally available drug with a clean safety profile that gives every indication so far of being highly effective against Alzheimer’s disease.

“Proof of the pudding, 95% of those who have completed the current 1-year trial period are voluntarily continuing to take A2-73, and some (from the earlier Phase 2a trial) have continued for as long as 3-4 more years now. Sometimes, that speaks louder than the hard data.

“There are no guarantees on Wall Street, but I hope you will agree that the above at least stacks the odds in our favor.” I would now call this a Table Pounder.” I agree!

Horizon Therapeutics was recommended by Jeffrey Hirsch, editor of The Stock Trader’s Almanac. Jeffrey commented, “HZNP develops therapies for rare and rheumatic diseases. HZNP has rallied recently following a positive recommendation for its experimental eye drug from a Food and Drug Administration advisory committee. The committee voted 12-0 in favor of the FDA approving teprotumumab as a treatment for thyroid eye disease (TED), a rare autoimmune disorder.

“Our October screen indicated accelerating revenue and earnings growth with attractive valuations, flying below Wall Street’s radar. HZNP is up dramatically since our October 2019 recommendation, but this looks like just the beginning, based on HZNP’s developmental pipeline.” And he was right. Our 5th place winner returned 51.8% to investors.

I hope you’ll agree-these are phenomenal returns. And if the market continues displaying strength—in spite of the coronavirus—I think we’ll continue to see some great gains for the remainder of the year.

And with that in mind, let’s take a look at some updates on our Top Picks.

Top Picks – Growth 831

Tesla, Inc. (TSLA) | Daily Alert July 2
Tesla is the designer, developer, builder, and seller of electric cars (EV) in addition to energy and battery storage. The company offers its products through the network of Tesla stores, galleries and through the Internet globally.

Since January 2020 when I wrote about TSLA, it has currently been included in the S&P 500 Index. Belonging to such a prestigious benchmark normally required an accumulated profit over four consecutive quarters. Inclusion in the S&P 500 has been manifested by its performance from 403.42 to a high of 1,027.48.

TECHNICAL PICTURE

TSLA exited Death Cross pattern in Nov. ’19 (190-260). Reversal rocketed though Jan Feb ’20 (400-433) to (450-550) gapping up (600-700) to repeated upped gap (800-900) to intraday high of 900. Correction/retraction with market’s sell-off on March 16, 2020 to (300-400) area since it has ascended (400-550) gapped up (580-660) to (700-760) to (842-910) to high of 1,027.48.

Price as of Jan-20: 403.42

Price as of June-20: 1,027.48

RETURN: 1,547%

TODAY’S PRICE: $963.22*

52 week high: 1,027.48, 52 week low: 211.00

Market Cap: $179.05B, EPS: -0.81, Beta: 1.17

RECOMMENDATION

BUYING RANGE: 840-1,000

NEAR TERM OBJECTIVE: 1,350

INTER MED OBJECTIVE: 1,680

STOP LOSS: 740

*Price as of intraday 06/24/20
Joseph Parnes, Shortex Market Letter, shortex.com, 800-877-6555, June 26, 2020

The Walt Disney Company (DIS) | Daily Alert July 8

I picked The Walt Disney Company because of the firm’s new streaming service, Disney+. And that’s been a huge success, with more than 54 million subscribers globally, including more than a third of U.S. homes.

But what I didn’t count on was the pandemic, which shuttered all the company’s theme parks! Yes, these parks are now slowly reopening, but attendance will be far below normal as long as people are afraid to travel—and no one knows how long that will be—including management. So, the company has furloughed employees, cut executive salaries, and it’s forgoing the semi-annual cash dividend.

But earnings estimates are still not pretty, with analysts currently looking at an EPS drop of 77% this year. As for the stock, it bottomed with the market in March and rallied for a while, but the rally has stalled since early June, and thus I no longer recommend owning DIS.
Timothy Lutts, Cabot Stock of the Week, cabotwealth.com, 978-745-5532, July 7, 2020

2nd Opinion

*The Walt Disney Company (DIS)
When I recommended Disney as my top stock pick for 2020, the company was riding the momentum of its better-than-expected Disney+ launch, starting to reap the fruits of its new mega-deal with 21st Century Fox, and the stock was trading above its 50- and 200-day moving averages. What could go wrong?

Coronavirus has essentially erased two of Disney’s greatest revenue sources: its booming film studio, which accounted for nearly 40% of the total U.S. box office in 2019; and its theme parks, which have been shuttered since March. With no movie theaters and no theme parks, Disney’s sales have taken a huge hit: second-quarter revenues, due out August 4, are expected to decline 38% year over year. Full-year 2020 sales are projected to slide a more modest 3.6%, but far less than the 17% top-line growth analysts were expecting.

Hence, the 20% drop in Disney stock through the first half of the year.

Can Mickey Mouse turn things around in the second half of 2020? Sure. Disney+ has been every bit the instant hit it appeared to be upon launch last November. And the company’s new majority stake in fellow streaming service Hulu, thanks to its 21st Century Fox deal, was well-timed. But as long as movie theaters remain closed and production studios in a holding pattern, the company’s ceiling will be limited—and so will the stock’s.

Chris Preston, www.cabotwealth.com, 978-745-5532, July 8, 2020

*Turning Point Brands, Inc. (TPB)

Turning Point Brands is a conservative way to invest in the high-potential marijuana sector—and what it does is perfectly legal in every state! That’s because none of Turning Point’s business is plant-touching—and because the core of the company is a very well managed legacy business in the tobacco industry. But Turning Point doesn’t sell cigarettes either! Instead, the company has a stable, profitable business in smokeless tobacco (snuff and chewing 4

tobacco) and rolling papers that supports a dividend of 0.8%. And in recent years Turning Point has been diversifying into the marijuana business, first by marketing vaping supplies and then by peddling CBD. First quarter results saw revenues of $90.7 million, down 1% from the year before, and EPS of $0.51, up 19% from the year before. The stock bottomed in March with the market and has been trending slowly and steadily higher since, and I still like it as a low-risk way to benefit from the growth of the marijuana industry.

Timothy Lutts, Cabot Stock of the Week, cabotwealth.com, 978-745-5532, July 7, 2020

Top Picks – Financials 831

First US Bancshares, Inc. (FUSB) | Daily Alert June 23
First US Bancshares, Inc. has 20 bank branches in Alabama, Tennessee, and Virginia. We continue to wait for it to fulfill its promise. While waiting, the company gives us a dividend that was increased by 50%, to $0.03 a quarter. That is far lower than the $0.27 it paid prior to the recession, but indications are the payout could increase further.

Revenues continue to ramp up, catalyzed by the takeover of The Peoples Bank, which helped to increase income by 180%. The capitalization ratios remain primo. Investors who buy will be purchasing a company at about half book.

The share count has remained flat at about six million shares, meaning that a further payout increase should not ding the bottom line very much. Insiders own about 6% and have recently increased their stake.

First US used to trade north of $33. It would not surprise to see this one move back to the $25 level, better than a triple from here. It could be a good tuck-in takeover at a significant premium for a player that wants to expand.
Benj Gallander, Contra the Heard Investment Letter, 416-410-4431 gall@pathcom.com, Contratheheard.com, June 19, 2020

Top Picks – Technology 831

Qorvo, Inc. (QRVO) | Daily Alert July 9
Qorvo was a name I was very excited about around year-end, because it had the story (leading components for 5G smartphones), numbers (huge Q3 earnings beat) and chart (gargantuan-volume breakout from a five-year base!) to tell us it was a leading glamour name of the bull move.

But the pandemic hit China first, which disrupted all sorts of chip-related firms, and of course the stock went over the falls even further during March. To its credit, QRVO has since come back and, like most things out there, looks poised for higher prices.

That said, we sold the stock from Cabot Growth Investor in February and I’m not overly interested in getting back in. That’s not because I’m negative on the stock. It probably goes higher, but we got in because we thought it could be a dynamic leader, but that doesn’t appear to be the case now.

Analysts see earnings down this year and up some next, but nothing to pound the table over. Long story short, QRVO looks OK, but we think there are better leading stocks to be in during the new reality.
Michael Cintolo, Cabot Top Ten Trader, cabotwealth.com, 978-745-5532, June 7, 2020

Top Picks – Healthcare 831

Inovio Pharmaceuticals, Inc. (INO) | Daily Alert July 6
Inovio Pharmaceuticals is a late stage biotechnology that focuses on the discovery, development and commercialization of DNA-based immunotherapies and vaccines to prevent and treat cancers and infectious diseases.

The company became a “Hot Stock” after it entered the fray to develop a Covid-19 vaccine. The company also just recently received a $71 Million contract to scale up manufacture of its CFLLECTRA 3PSP Smart Device for administering its Covid -19 DNA Vaccine directly into the skin.

The stock was up 932% in 6 months as of yesterday’s close. We sold our position on 6/29/20 at $28.32, for a gain of 832%, because we wanted to be sure to book those huge profits. The stock could double from here, but we’re not sure. Some “old timers” would rather have sold half of the position, and let the rest ride. But we chose to sell.

Joseph Cotton, Cotton’s Technically Speaking, cottonstocks.net, 727-289-4436, June 30, 2020

LeMaitre Vascular, Inc. (LMAT) | Daily Alert July 13
The human circulatory system is amazing. But it doesn’t always run smoothly. Roughly 3% of the living population suffer from some sort of peripheral vascular disease (PVD), which occurs when there are issues with blood vessels beyond the heart and brain.

When prevention, treatment and lifestyle changes aren’t enough, surgery may be required. When it is, over 50% of surgeons turn to solutions from LeMaitre Vascular, a Massachusetts-based medical device company with a market cap of $529 million.

LeMaitre offers implantable and disposable devices for 15 markets worth nearly $900 million altogether. The company holds either a #1 or #2 market share position in each one. With a systematic and measured growth strategy management sees potential to keep expanding in the $5 billion market for peripheral vascular solutions.

While there are occasional bumps in the road, LeMaitre’s growth profile is about as steady as you’ll find in a small cap medical device manufacturer. That’s largely because the company focuses precisely on what vascular surgeons need. It introduces new products through internal R&D and through acquisitions. LeMaitre has developed 22 products internally to date, with 13 having reached the market (six failed) and three still in development. LeMaitre has also completed 24 acquisitions over 23 years, with the latest, Artegraft, just completed on June 22.

The company typically delivers low double-digit revenue growth. Revenue grew by 11%, to $117 million in 2019 and should expand at about the same rate in 2019. Adjusted EPS was up 7% to $0.89.

The Covid-19 pandemic will have an impact in 2020 as procedure volumes will fall. But that impact is expected to be largely contained to 2020, when revenue is seen falling 15% to $100 million and adjusted EPS could decline 50% to $0.45.

Looking forward, LeMatire should get back on track in 2021 with revenue up 20% to $120 million and adjusted EPS up 73% to $0.78. The stock has retreated due to the pandemic and lowered near-term growth outlook, but for patient investors with a forward-looking perspective and a desire for a high-quality small cap MedTech stock, LeMaitre should be attractive at current prices.
Tyler Laundon, Cabot Small-Cap Confidential, cabotwealth.com, 978-745-5532, July 7, 2020

Walgreens Boots Alliance, Inc. (WBA) | Daily Alert July 15
Walgreens stock has not performed as we’d hoped through the first half of 2020. The company’s stock has generated total returns of -23.6% from the beginning of 2020 through June 19th, versus -3.1% for the S&P 500 ETF (SPY).

Walgreens was outperforming The S&P 500 by mid-March. Since that time, The S&P 500 has gone on to reach a near full recovery off of COVID-19 price decline lows, while Walgreens stock has yet to recover.

The company’s stock now looks incredibly undervalued. Walgreen’s dividend yield is above 4%. For comparison, prior to recent events, the only time Walgreens stock had a yield above 3% since the mid 1980’s, was a brief stretch in 2012.

And the company continues to perform reasonably well, given the circumstances. Sales grew 3.1% and adjusted earnings-per-share declined 7.2% in the company’s Q2 2020 for the 3 month period ending 2/29/20.

Walgreen’s stock is trading for a price-to-earnings ratio of ~8 using our expected fiscal 2020 adjusted earnings-per-share estimate of $5.50. This is far too low for a high quality Dividend Aristocrat with 44 consecutive years of dividend growth.

Disclosure: I am long WBA.
Ben Reynolds, Sure Dividend Newsletter, suredividend.com, support@suredividend.com, 800-531-0465, June 21, 2020

*2nd Opinion
Walgreens’ stock is doing badly despite the fact that drug stores were kept open during the virus period and sold lots of stuff besides drugs and healthcare goods. It still wasn’t enough to get the stock up. The stores are not very welcoming; they now have locked shelves which have to be opened by staff for you to buy what you want, even in east

Midtown (Manhattan). They are selling some groceries which is convenient but nothing fresh. The stock has lost a third of its value YTD. I think I am still negative.

Vivian Lewis, Global Investing, global-investing.com, 212-758-9480, June 19 and July 1, 2020

*Vertex Pharmaceuticals (VRTX)
Big investors are looking for rapid and reliable growth, and Vertex has remained one the market’s leaders since its breakout last October because of just that—the firm’s cystic fibrosis drugs (including its newer triple-combination regiment, called Trikafta) dominate the market, and Trikafta’s approval last year dramatically expanded the target market.

The result: Vertex’s earnings are expected to more than double from 2019 through 2021, and given that its supply chain is intact, and management actually hiked guidance after Q1 results blew away expectations, buyers see no reason to let up.

All that said, VRTX is more of a big, liquid leader rather than a dynamic shooting star—it’s not going to keep up with the fastest-moving names in the market. But so far, we’re fine with that, as shares remain in a two-steps-forward, one-step-back type of advance, hitting new highs in early July. We’re always keeping our eyes open for trouble, but at this point, VRTX’s path of least resistance remains up.
Michael Cintolo, Cabot Top Ten Trader, cabotwealth.com, 978-745-5532, July 7, 2020

Top Picks – Energy 831

EnLink Midstream, LLC (ENLC) | Daily Alert July 10

EnLink Midstream LLC focuses on providing midstream energy services in the U.S. The company is involved in the 1. Gathering, compressing, treating, processing, transporting, storing and selling natural gas; 2. Fractionating transporting, storing, and selling natural gas liquids; and 3. Gathering, transporting, stabilizing, storing, trans-loading, and selling crude oil and concentrate.

The company has about 11,000 miles of pipelines, 20 natural gas processing plants, 7 fractionators, barge and rail terminals, product storage facilities, brine disposal wells, and a crude oil trucking fleet.

Update: The stock is a casualty of the Oil Crisis, and reached a low of $.93 on March 18th. It rallied back up to $4.04 intraday on June 8th and faded from there. It has reduced the dividend to $.375 per year to conserve cash, which is a 16% dividend rate based on yesterday’s closing price of $2.30. We don’t see the stock moving appreciably higher until the oil crisis abates. The lack of demand for oil is one of the results of the coronavirus pandemic.

Closing Price 6/29/20 = $ 2.30

We didn’t own the stock, but if I owned it (and I’m a gambler), I’d hold it and double up if it goes back down to $1.10- which is where it was trading in April.

Joseph Cotton, Cotton’s Technically Speaking, cottonstocks.net, 727-289-4436, June 29 & July 9, 2020

Note from our contributor:
I just liquidated, on 7/09/20 at 10:50 AM, most all of my positions because the Market is selling off, and because I think I can buy them back cheaper in the not too distant future”.
Joseph Cotton, Cotton’s Technically Speaking, cottonstocks.net, 727-289-4436, June 29 & July 9, 2020

Enterprise Products Partners L.P. (EPD) | Daily Alert July 14

Master Limited Partnership (MLP) Enterprise Product Partners (EPD) is one of the largest midstream energy companies in the country with a vast portfolio of service assets connected to the heart of American energy production. It has $36 billion in annual revenues from an unparalleled reach in the industry with over 49,000 miles of oil and gas pipelines connected to every major US shale basin and 90% of American refiners east of the Rockies, and offers export facilities as well in the Gulf of Mexico.

The stock was recommended at the beginning of the year because it had a very stable business, of which more than 85% is fee-based and contracted and not very vulnerable to volatile commodity prices. It had a growing business, with many billions worth of new projects coming on line this year and next. And the stock was cheap, selling at more than 30% below the 2014 high, despite the fact that earnings had grown an average of 11% per year since 2014.

Then, Covid-19 hit.

Now it’s really, really cheap. The stock is down over 36% so far this year. The energy sector has been in the crosshairs of the lockdown. Demand for oil and gas crashed and prices followed suit. And the same time, a price war ignited with Russia and Saudi Arabia, which further hurt commodity prices. EPD has been dragged down along with this worst performing sector of the market.

Is EPD worth buying now? I believe it is for two primary reasons; it has a stable business and the current stratospheric 10.3% yielding distribution should be safe.

As I mentioned, EPD derives revenue primarily for the service of piping, processing and storing oil and gas. It makes money on the fact there will continue to be a lot of oil and gas sloshing around the country, as the U.S. is now the world’s number one producer of both oil and natural gas. While volumes have been disrupted, this company won’t take nearly the earnings hit during this recession as most energy companies. Distributable cash flow was only down 4.5% in the first quarter.

Energy will power this recovery, which is already underway in haste. Earnings for EPD will come back much faster than companies with more exposure to oil and gas prices. Plus, the midstream operator has many growth projects coming online in the near future.

Then there’s that huge distribution. Here’s why I think it’s safe. The company has raised the distribution every single year since its IPO in 1998, even through the financial crisis and the carnage in the industry for 2014 to 2016 when many of its peers slashed payouts. It also entered the year in what management described as the best financial shape ever with low debt and a strong cash position.

Enterprise has a peer low 60% payout ratio of distributable cash flow and 1.6 times distribution coverage. A rate of 1.2 times is considered solid and conservative in the industry. The company has also cut back on growth projects during the recession to preserve cash. It is highly unlikely that earnings will be negatively affected to the extent that they won’t easily cover the distribution, even for one quarter. But even if that were to happen, EPD has over $6 billion in cash from which to help pay $4.5 billion in annual distributions.

The stock is a great value with a massive 10.3% yield that should be quite safe. It’s difficult to say when the market will turn around and start rewarding this neglected stock. But you generate a huge income while you wait for the stock to appreciate over time.

Tom Hutchinson, Cabot Dividend Investor, cabotwealth.com, 978-745-5532, July 10, 2020

*Algonquin Power & Utilities Corp. (AQN)
I was positive on Algonquin Power and Utilities which was tipped by Max Deml of Oekoinvest with whom we trade ideas. He is in Vienna. It has more or less gone nowhere because electricity demand in the US and Canada where it operates was slashed by the coronavirus we didn’t anticipate.

At the end of March, it fell to a 52-week low of $9.53 (US; it is Canadian but quoted also on the Big Board). It is now $13.61 vs $14 at the start of the year. It is not only green in how it generates power—why Max picked it—but also in how it pays out. Its dividend yield is over 4%, the key appeal.

AQN owns regulated and non-regulated utilities, producing electricity with renewable and clean power plants using hydro, wind, solar, and thermal energy. It also owns regulated utilities producing electric, natural gas, and water, and waste-removal.
Vivian Lewis, Global Investing, global-investing.com, 212-758-9480, June 19, 2020

*Chart Industries, Inc. (GTLS)
Chart Industries is a leading global manufacturer of highly engineered equipment used throughout the liquid gas supply chain in the production, transportation, storage and end-use of atmospheric, hydrocarbon (primarily natural gas, refined and chemical products) and industrial and life sciences gases. Chart has no direct peers, offering turnkey solutions with a much broader set of product offerings than other industry participants.

Chart reported strong first quarter results in April, delivering earnings considerably ahead of year-ago results and consensus estimates.

Chart’s valuation remains subdued at 15.7x estimated 2021 earnings and 9.7x estimated 2021 cash operating pro- fits. While the shares have bounced sharply off their March lows, they remain about 28% below their year-end close and look poised to continue their recovery.

Nancy’s Note: I’d like to welcome Bruce Kaser to these pages and to Cabot Wealth. Bruce has taken over the reins at Cabot Undervalued Stocks Advisor, as Crista Huff has left to start her own hedge fund (congratulations to her!) Bruce has more than 25 years of value investing experience managing institutional portfolios, mutual funds, and private client accounts.
Bruce Kaser, Cabot Undervalued Stocks Advisor, cabotwealth.com, 9787455532, July 1, 2020

Top Picks – Low-Priced Stocks 831

Predictive Technology Group, Inc. (PRED) | Daily Alert July 7
We remain committed towards Predictive Technology Group, even though the price of its shares have depreciated. The company is devoted to women’s health and is in the early stages of marketing its Endometriosis kit~ ARTguide. 200 million women across the world are impacted, and by 2030 the market will cross $4 billion. The company also has a test kit that deals with infertility issues~ FertilityDX (USA 12-13% women have issues becoming pregnant).

PRED operates the most sophisticated/qualified lab (CLIA) for the extraction of stem cells. The company also holds at least 42 patents related to its scientific research and development. PRED owns the largest (300,000) Genetic Library of DNA samples with serious maternal and neonatal disorders.

Recently PRED introduced a verified 95% Covid-19 IgM/IgG Rapid Antibody 15 minute test kit. Both Covid-19 test kit and the company’s Mesenchymal Stem cells are currently in the queue for FDA approval assigning their EUA stamp of approval.

We believe that the black cloud that has encompassed this cutting edge Bio Tech company is lifting and that it is on the launch pad as a “moon shot” that is easily worth 10-15X the currently depressed share price.

We believe investors that own PRED at higher levels should average down their share cost. During the past 36 years that this publication has been in print, it is in our opinion that PRED is an extraordinary investment opportunity at current levels.
Read more: https://cabotwealth.com/topics/wall-streets-best-investments/pred/
William Velmer, S.A. Advisory, saadvisory.com, 949-922-9986, June 30, 2020

*Element Global, Inc. (ELGL)
Element Global, Inc is speculative penny stock we believe in the near term will deliver exceptional returns for risk oriented investor types. Due to the Covid-19 “soft apocalypse” ELGL had little choice, but to slow down its

acquisition planned closings.

We believe speculative investors should review the company’s website, elementglobal.com for additional guidance concerning the vast possibilities that ELGL offers. We also believe that since this company is not fully reporting, other avenues are being considered for more qualified acceptance. Near term, we believe management will begin a massive news “dump” that will start to put the puzzle together for investors.

We rate ELGL with a strong, but speculative Buy rating with at least 10-15X appreciation potential during the next 12 months.
William Velmer, S.A. Advisory, saadvisory.com, 949-922-9986, June 30, 2020

Top Picks – Funds & ETFs 831

VanEck Vectors Gold Miners ETF (GDX) | Daily Alert July 1
We’ve gained 22% ($28.77- $35.19) since last January. The 52 week high is $37.49. Major gold stocks still look undervalued relative to gold. We feel the post-panic gold stock upswing has room to go higher. Gold miner earning’s growth should be strong, in the coming quarters. GDX holds the world’s biggest and best miners. It has $15.1 billion in net assets. Continue to expect fluctuations primarily based on virus news and world reactions. We continue to recommend GDX as a buy on dips, looking to higher profits.

Sean Christian, The Personal Capitalist, 9524 East 81st Street, Suite B #1715, Tulsa, OK 74133, June 28, 2020

Growth 831

Vail Resorts, Inc. (MTN) | Daily Alert June 18
There’s no denying that COVID-19 has devastated the U.S. travel industry. With a pandemic raging, folks just aren’t eager to get on a plane or take a vacation.

Airline passenger volumes have fallen by 85% so far this year, according to airline trade group Airlines for America. The number of available flights is down 72% systemwide.

It’s not just airlines that are suffering. The U.S. Travel Association estimates that leisure travel is down by more than 75%, eliminating 8 million jobs here in the U.S. and cutting as much as $1.2 trillion in lost economic output. To put that in perspective, the financial impact is nine times worse than 9/11.

Needless to say, travel industry stocks have been decimated since this global pandemic began.

Here’s what a lot of investors seem to lose sight of: This, too, shall pass. Just as the industry recovered after the devastating attacks on 9/11, this pandemic will end. Travelers will hit the open roads again. While it’s tough to predict when exactly that will happen, many travel-related companies have the financial resources to survive this slump and maybe even make some well-timed acquisitions.

One of those companies is Vail Resorts.

Vail operates 37 mountain resorts and regional ski areas around the world, allowing skiers to visit for the day or a week, or purchase annual season passes. Operating one of the largest networks of ski areas, Vail-owned resorts host millions of ski visitors every year.

At least that was true until this year.

The 2019-2020 ski season was understandably cut short when the resorts closed on March 15 in response to the pandemic. So, when Vail reported its fiscal third-quarter results last week, which covers what’s usually one of Vail’s busiest times of the year, the news was bad. It was not nearly as bad as a lot of folks thought it would be, though.

Vail’s revenue fell from $958 million in the year-earlier quarter to $694 million, which was no surprise. Actually, the drop wasn’t nearly as bad as the market expected. Net income totaled $152.5 million, less than half of the $292.1 million the company earned last year. Again, no huge surprise there. This quarter’s income works out to adjusted earnings per share of $4.29, well ahead of the consensus expectation of $2.96.

While Vail plans to be operational again for the North American summer season and the Australian ski season by the end of this month or early July, I suspect we’re still going to see a lingering drag on earnings. A big reason for that is Vail is taking care of its customers, offering credits to customers who bought its 2019-2020 Epic Pass. Those credits, ranging from 20% to 80% of the pass value depending on how many days were used, can be applied to Epic Pass purchases for the 2020-2021 season. The company is also offering free season pass insurance, which provides refunds in the event a resort closes or the passholder is injured, severely ill or losses their job.

There aren’t many companies that are that generous, and it will ultimately weigh on revenue and earnings. However, that generosity will win over a lot of customers and will likely win Vail more market share amongst winter sports enthusiasts.

When it comes to travel companies, Vail is uniquely able to survive this crisis.

The most obvious advantage is that skiing is an outdoor sport, allowing people to spread out. Sure, there are some chokepoints in the resort experience, such as lines for ski lifts and common areas such as restaurants, but social-distancing measures can be put in place to address those. Frankly, that’s why the fiscal third quarter wasn’t nearly as bad as it could have been.

The company is also cash-heavy, with more than $480 million on its balance sheet. That’s plenty of dry powder to see it through the next couple of quarters when business is certain to be slower than usual. It’s also plenty to work out deals to purchase additional properties that might not be weathering this business climate as well as Vail is.

I also believe Vail’s shares are attractive from a value perspective. Right now, it’s trading around $180, well down from its 52-week high of $255. Based on this latest earnings report, the current price implies the markets are expecting full-year earnings to be down by about a third compared to last year, which seems like a fair assumption to me. I actually don’t look for earnings to be down quite that much.

So, I’m taking advantage of the dip in Vail’s shares and will be adding it to the portfolio in the coming days.

Recommended Action: Buy Vail Resorts up to $200.

Ian Wyatt & Ben Shepherd, Ian Wyatt’s Million Dollar Portfolio, wyattresearch.com, June 11, 2020

*DraftKings Inc. (DKNG)
Shares of DraftKings—the leader in U.S. online sports betting—only recently began trading on Nasdaq. However, this “Power Buy” has already doubled in value. That’s despite the cancellation of most professional sports due to the pandemic. In fact, its share-price jump—even amid the lockdown—testifies to the strong demand for sports wagers. That demand will keep expanding in the long term as more and more U.S. states legalize sports gambling. The firm currently provides sports betting in the states of Colorado, Indiana, New Jersey, Iowa, New Hampshire, Pennsylvania, West Virginia, Mississippi, and New York. In the quarter ended March 31, 2020, DraftKings’ revenue jumped 30.0%,
to $88.5 million. The company lost $68.5 million, or $0.18 a share, in the latest quarter. That’s compared to a loss of $29.6 million, or $0.08.

Looking ahead, a resumption of big-league sports will spur further growth for DraftKings. What’s more, the four largest U.S. states by population—California, Texas, Florida, and New York—have yet to legalize online sports betting. State budget woes in the wake of COVID-19 emergency spending could accelerate legalization there.

DraftKings should remain the dominant player in the expanding U.S. sports-betting market. The company holds $600 million in cash to help it adapt to the coronavirus-affected sports landscape.

DraftKings is a Power Buy.
Patrick McKeough, Power Growth Investor, tsinetwork.ca, 888-292-0296, July, 2020

*United Rentals, Inc. (URI)
During the pandemic and resulting slowdown, many large and established companies have been cutting costs; you can imagine that heavy-machinery users are not likely to purchase new machinery until the economy stabilizes, but they are more likely to rent it. To the rescue comes United Rentals, top-ranked in its industry group and with strong brand recognition, to fill the need as construction activity resumes in parts of the country and President Trump pursues a $2 trillion infrastructure bill. URI stands to gain, as nearly 48% of its customers are nonresidential and 47% cover the industrials sector. With a market cap of $11 billion, URI has outperformed the S&P 500 by nearly 18% over the past 12 months. The first quarter saw lower rental volume due to stay-at-home orders and other end-market restrictions, but earnings and revenues grew on a year-over-year basis. In the last 12 months, management has reduced shares outstanding by 8.363%.
David R. Fried, The Buyback Letter, www.buybackletter.com, 888-289-2225, June 29, 2020

*Signet Jewelers Limited (SIG)
Strategy: Shareholder Yield
Guru: Meg Faber

Signet Jewelers is a retailer of diamond jewelry. The company’s segments include the Sterling Jewelers division’s stores which operate in the U.S., principally as Kay Jewelers, Kay Jewelers Outlet, Jared The Galleria Of Jewelry and Jared Vault; the Zale division stores (Zale Jewelry) and kiosks (Piercing Pagoda), located primarily in shopping malls across the United States, Canada and Puerto Rico; and the UK Jewelry division which operates stores in the United Kingdom, Republic of Ireland and Channel Islands. The Other segment includes the operations of subsidiaries involved in the purchasing and conversion of rough diamonds to polished stones.

NET PAYOUT YIELD: PASS
QUALITY AND DEBT: PASS
VALUATION: PASS
RELATIVE STRENGTH: PASS
SHAREHOLDER YIELD: PASS
John Reese, Validea Hot List Newsletter, validea.com, 877-439-0506, June 2020

*Columbia Sportswear Company (COLM)
Columbia Sportswear, with over $3 billion in revenues generated from 90 countries, produces the highly-recognizable Columbia brand outdoor and active lifestyle apparel and accessories, as well as SOREL, Mountain Hardware, and prAna products.

First-quarter sales fell 13% from a year ago, as 64% of sales are produced in the U.S., where its reliance on whole- sale distribution, and the longer lockdown periods relative to other countries, hurt results. However, the company is rapidly improving its online operations, both through its own websites and through third-party online retailers, which combined generate over 20% of sales.

Columbia’s balance sheet remains solid, with $707 million in cash and only $174 million in debt.

Columbia’s shares have declined 20% this year, and trade at the same price as they did in early 2018. Analysts’ earnings per share consensus estimates are $2.23 and $4.04 for 2020 and 2021, respectively. Buy.

Nancy’s Note: I’d like to welcome Bruce Kaser to these pages and to Cabot Wealth Network. Bruce has taken over the reins at Cabot Undervalued Stocks Advisor, as Crista Huff has left to start her own hedge fund (congratulations to her!) Bruce has more than 25 years of value investing experience managing institutional portfolios, mutual funds, and private client accounts.

*The Simply Good Foods Company (SMPL)
The Simply Good Foods Company dropped with the onset of COVID-19. Since then, the shares have regained 52%. They spiked last week on a great earnings report. The company’s revenues rose 54.2% to $215.1 million, handily beating consensus estimates by $7 million. It’s non-GAAP EPS, at $0.26, also beat analysts’ forecast by 11 cents. Going forward, the company is forecasting $790 million to $800 million in net sales and $145 million to $150 million in adjusted EBITDA for this year. Continue to hold.
Nancy Zambell, Wall Street’s Best Digest, cabotwealth.com, 978-745-5532, July 13, 2020

Growth & Income 831

Anthem, Inc. (ANTM) | Daily Alert June 24
Second-guessing such rallies is what good investors do. But those arguing that the market is ignoring reality are missing the plot. The next time you hear a pundit say the rally must be folly given the state of the economy, consider these points:

➤ The stock market is not the economy. The worst devastation from the lockdown has been seen in small stores and restaurants, not the bigger companies represented on the stock market.
➤ Investors look forward, but economic data and earnings reports show what has happened in the past. The stock market is discounting what is likely to happen over the next 20 or 30 years, and stocks tend to perform well when the economy is in recession.
➤ Stock prices reflect expectations for future earnings—and the discount rate used to discount those earnings. Partly because of the Federal Reserve’s massive efforts to add liquidity to the bond market, investors are discounting risky assets with a lower discount rate. The yield spread between high-yield corporate bonds and Treasury bonds has narrowed dramatically since mid-May, causing junk-bond prices to surge.
➤ The broad market is advancing. The S&P 1500 advance-decline line, a running total of advancing minus declining stocks, recently hit its highest level since March. So did advance-decline lines for stocks in the S&P Midcap 400 and S&P SmallCap 600.
➤ Cyclical stocks tied to efforts to reopen the economy have paced the market in recent weeks, suggesting investors see things getting back to normal. The market is no longer relying solely on tech stocks and defensive groups like consumer staples. Groups that tend to do well in the early stages of economic recovery, including small stocks, homebuilders, transportation, semiconductors, and machinery, have surged since mid-May.

Anthem is being added to the Buy and Long-Term Buy lists. Anthem has grown its medical membership 3% over the past year to 42.1 million, with 73% on commercial plans, 18% on Medicaid, 5% on Medicare, and 4% on plans for federal workers. Sales jumped 21% in the March quarter, following 16% growth in the December quarter.

Recent growth is benefiting from Anthem rolling out its own pharmacy benefit manager last year. At 13 times estimated 2020 earnings, the shares trade 31% below the median health insurance stock in the S&P 1500 Index. The stock earns an Overall rank of 98, with both sector-specific ranks also exceeding 95. Anthem was previously rated A (above average).
Richard Moroney, CFA, Dow Theory Forecasts, dowtheory.com, 800-233-5922, June 8, 2020

*ABM Industries Incorporated (ABM)
Fueled by the outbreak of Covid-19, ABM should benefit from increased demand for building cleaning and maintenance. The company cleans more than 4 million square feet of buildings each day.

ABM boasts an excellent track record for managing Wall Street expectations, having topped consensus profit estimates in 17 of the last 20 quarters. For 2020, the consensus calls for per-share earnings of $1.94, down 5% but above the consensus of $1.61 a month ago. For 2021, per-share earnings are expected to increase 14% on 4% higher sales.

The stock, sporting a Quadrix® Earnings Estimates score of 91, is being started as a Buy.

Richard J. Moroney, CFA, Upside, upsidestocks.com, 800-233-5922, July 6, 2020

*Hanesbrands Inc. (HBI)
Hanesbrands (HBI) designs, manufactures, and sells innerwear and activewear apparel worldwide.

The stock trades at discounted valuations to historical averages on ratios of price to sales, earnings, cash flow, book value, and enterprise value to EBITDA. It has a yield north of 5.5%, and free cash flow per share of $2.23 is nearly four times the $0.60 in annual dividends.

The company is due to report quarterly results at the end of July, and the next dividend will not be until August.
John Dobosz, Forbes Dividend Investor, newsletters.forbes.com, 212-367-3388, June 26, 2020

Financials 831

ServisFirst Bancshares, Inc. (SFBS) | Daily Alert June 30
ServisFirst Bancshares, founded in 2005, is a regional bank headquartered in Birmingham, Alabama. The company has offices in Alabama, Georgia, Tennessee, South Carolina, and Florida. Total assets are more than $9 billion and have grown at a compound annual rate of 28% since fiscal 2005.

ServisFirst has a number of attractions. First, the company’s service region in the Southeast should show above-average population growth. Second, the loan portfolio is quite diverse, with fairly limited exposure to sectors especially hurt by the coronavirus. Indeed, hotel loans account for less than 2% of outstanding loans. Restaurants comprise less than 3%. And oil and gas loans are less than 1%. Third, the firm’s track record of growth has been impressive.

Total deposits have grown at a compound annual rate of 28% since fiscal 2005. Per-share earnings have increased at a 24% compound annual rate since fiscal 2006. And tangible book value—an important metric for banks—has grown at a compound annual rate of 18% since fiscal 2005.

Banking stocks have been fairly sluggish this year as investors worry about the weakened economy’s impact on business and the low interest rate environment affecting banks’ net interest margins. ServisFirst has felt some pressure but has performed better than a lot of banks. The stock’s performance over the last 12 months has been better than the S&P 500—a noteworthy accomplishment for a bank stock.

The firm has increased its dividend every year since going public in 2014, with a nearly 17% increase at the beginning of 2020. Trading at a 13% discount to its 52-week high of nearly $41 per share, I don’t expect ServisFirst to be among the leaders should the market’s recent upside action continue. However, I do expect these shares to continue to be among the leaders of the banking sector and view the stock’s long-term total-return potential as solid.

Minimum initial investment in the company’s direct-purchase plan is $250. Alternatively, you may authorize a minimum of five monthly automatic deductions of $50 each from your bank account to fund your initial investment. Subsequent minimum additional purchase amounts are $50. There is no enrollment fee. Optional cash purchase fees are $5 ($2.50 if made with automatic monthly investment) plus $0.05 per share. There is no fee to reinvest dividends. Batch order sales are $15 plus $0.12 per share. Market and limit order sales are $25 plus $0.12 per share. The plan administrator is Computershare. For enrollment information call (800) 368-5948 or visit www.computershare.com.
Charles B. Carlson, CFA, DRIP Investor, dripinvestor.com, 800-233-5922, July 2020

Essent Group Ltd. (ESNT) | Daily Alert June 22
Essent Group reported a strong first quarter ended March 31, 2020. EPS was $1.52, up 16.9% compared to $1.30 for the quarter ended March 31, 2019. Revenues were up 14.1% to $228.8 million. Insurance in force as of March 31, 2020 was $165.6 billion, compared to $143.2 billion as of March 31, 2019. New insurance written for the quarter was $13.5 billion, compared to $11.0 billion in Q1 2019. Net premiums earned for the quarter were $206.5 million, compared to $177.8 million in the year-ago quarter. Finally, the expense ratio for the quarter was 20.3%, compared to 23.1% in the first quarter of 2019.

In its quarterly conference call, Mark Anthony Casale, CEO and Chairman, remarked, “As COVID-19 takes its toll on unemployment, we believe that defaults will increase during the second quarter and have a significant impact on our operating earnings.”

There is still much uncertainty about how severely the mortgage industry will be affected by the pandemic. Federal stimulus may help affected homeowners, and other programs may forestall foreclosures. As Casale commented, “One of the metrics that we are following is the percentage of mortgages and forbearance being reported by Black Knight [a provider of real estate analytics]. Most recently, they reported that 8% of the loans are in forbearance and estimate that this rate could hit 10% to 15% by June 30, which is consistent with our view.”

Management emphasizes that 90% of its book is covered by reinsurance and its capital and liquidity remain strong. The company does expect the costs of private mortgage insurance (PMI) to increase industrywide.

In late May, the company announced that it was offering 12 million shares in a secondary stock offering. Essent expects to raise $382.4 million from the offering, which will be used to pay down debt and for general corporate purposes. At the end of the first quarter, Essent borrowed $200 million from the revolving component of its credit facility. In addition to this, Essent had $225 million of term debt outstanding at March 31, 2020 and maintained $75 million of undrawn capacity under the revolving component of its credit facility.

In one bit of good news, after trading closes on June 1, 2020, Essent Group will join the S&P Mid-Cap 400 Index. Based on EPS reaching $5.69 in 2021 and growing at a 12.0% annualized rate after that, a five-year average annual growth rate of 7.1% is indicated starting from 2019’s EPS of $5.66. Essent Group ($33.05) is a buy up to $39.
Doug Gerlach, Smallcapinformer.com, 1-877-33-ICLUB, June 2020

Healthcare 831

Inari Medical, Inc. (NARI) | Daily Alert June 26
We initiate coverage with a BUY rating and $60 price target on NARI.

Founded to address the high, unmet market need posed by venous disease, Inari Medical is in the early stages of disrupting and redefining the treatment of venous clot. Inari, behind its purpose-built, venous-focused technologies, is helping fuel the ongoing paradigm shift in intervention, expanding mechanical intervention into a greater percentage of the target patient population.

The firm’s ClotTriever, indicated for the treatment of DVT, as well as the firm’s FlowTriever, indicated for the treatment of PE, are designed to mechanically remove clot from the venous system without the use of thrombolytics (tPA), a positive both from a patient safety perspective (lower bleeding risk) as well as an economic standpoint (reduced LOS). Not only are the clinically demonstrated safety and efficacy of Inari’s platforms helping displace anticoagulation as the longstanding standard of care, but they are also enabling Inari to capture share from catheter-based mechanical thrombectomy devices which in many cases require adjunctive use of Iytics (tPA).

We model a ~$3B total target addressable market in the US today, encompassing both DVT and PE. We expect NARI to deliver strong, top-line growth for multiple years; we model (COVID-impacted) sales growth of 48 in 2020E, accelerating to 69 in 2021E, and remaining solid at 36 in 2022E. Our $60 price target is based on a 21.9x 2020E EV/sales multiple – in line with the high-growth med-tech comp group (+25 forward 2yr revenue CAGR), applied to our 2021E.

We ascribe a $60 price target, based on an in-line multiple with the high-growth (>25 fwd. 2-yr CAGR) med-tech comp group. We apply a 21.9x EV/sales multiple, in-line with the median high-growth 2020 EV/sales comp group multiple, to our 2021E sales estimate of $127M to arrive at our $60 price target.

William J. Plovanie and Cecilia Furlong, Canaccord Genuity Research, canaccordgenuity.com, June 19, 2020

*Edwards Lifesciences Corporation (EDW)
One of the market sectors that is performing very well is healthcare, and it happens that Edwards Lifesciences Corp. (EW) executed a 3 for 1 split on the first of this month. EW is not scored particularly well by the 2 for 1 ranking algorithm, primarily because of its valuation numbers which are far higher than typical for a 2 for 1 stock. However, the company is quite profitable and in a business that should continue to prosper in good times and bad.

EW’s stock price is less volatile than the market average.

The overriding consideration here is that Edwards Lifesciences’ split is such a standout in an environment seemingly so hostile to stock splits. If ever there was a signal that a Board of Directors is optimistic about their company’s future prospects, this is it! And it’s a 3 for 1 split to boot.
Neil Macneale, 2 for 1 Stock Split Newsletter, 2-for-1.com, 408-210-6881, June 12, 2020

Technology 831

SEI Investments Company (SEIC) | Daily Alert June 25
SEI Investments is a leading global provider of technology-driven investment processing, investment management and investment operations solutions that help corporations, financial institutions, financial advisors, and ultra-high net worth families create and manage wealth. As of March 31, 2020, SEI Investments managed, advised, or administered $920.2 billion in hedge, private equity, mutual fund and pooled or separately managed assets, including $283.4 billion in assets under management and $632.3 billion in client assets under administration.

While working toward a PhD at the Wharton School, Alfred West developed the first computer-based commercial credit simulator to train bank loan officers. Enthusiastic adoption of the innovative product by bankers led West to forgo his educational pursuits in 1968 to launch Simulated Environments, Inc. By 1970, West’s simulators were used by 50 of the top 55 banks.

The company soon launched an automated bank trust system, which ran over a network of phone lines to streamline labor-intensive portfolio accounting functions. In 1972, the firm reincorporated as SEI Corporation and began automating the back offices of trust departments throughout the country using a then novel recurring revenue business model. West took SEI public in 1981 and branched out into investment advisory and money management.

Today, SEI Investments delivers comprehensive investment platforms, services, and infrastructure through its 3,820 employees serving more than 11,300 clients globally, including 11 of the top 20 banks and 45 of the top 100 investment managers.

In 2019, SEI’s revenues topped $1.6 billion, of which 90% was recurring. SEI Investments operates through five business segments: Private Banks, Investment Advisors, Institutional Investors, Investment Managers, and Investments in New Businesses. In addition, SEI holds a 39% minority interest in LSV Asset Management, a value equity manager with $80 billion in assets under management. SEI’s Private Banks business provides investment-processing outsourcing services. In 2019, Private Banks contributed 28% of SEI’s revenues generating operating margins of 6%.

In 2019, the Investment Advisor segment contributed 24% of SEI’s revenues with operating margins of 48%. The Institutional Investors segment provides outsourcing services for chief investment officers of retirement plans, endowments, and foundations. In 2019, this segment contributed 20% of total company revenues with operating margins of 52%. SEI’s Investment Managers business provides operations outsourcing platforms to mutual funds, banks, family offices, hedge funds and private equity firms. During 2019, the Investment Manager business contributed 27% to SEI’s revenues with operating margins of 36%. SEI’s Investments in New Businesses (less than 1% of total revenues) includes IT services, business ventures on the cutting edge of fintech, private wealth management and R&D efforts to connect all of SEI platforms, a firm growth driver dubbed One SEI.

With its business model focused on recurring revenue from assets under management and administration, SEI generates highly profitable operations. Net profit margins and return on shareholders’ equity have averaged over 27% and 28%, respectively, during the last five years.

SEI is committed to long-term shareholder value creation through strong financial performance, dividends and share repurchases. SEI generates robust free cash flows, which have totaled about $2.3 billion over the last five years. SEI has paid dividends for 32 years. The dividend has increased for the past 13 years, compounding at an 8% annual rate during the last five years. SEI has also repurchased nearly $1.6 billion of its stock during the last five years.

First quarter sales increased 3% to $415 million with operating income increasing 6% to $110 million and net income declining 4% to $109 million due to a loss on investments. During the quarter, SEI returned $183 million to shareholders through dividends of $52 million and share repurchases of $131 million at an average cost of $52.37 per share. SEI ended the quarter with $747 million in cash and no long-term debt on its pristine balance sheet.

SEI Investments is a HI-quality company with a proven business model, profitable growth, robust free cash flows and a strong balance sheet which should position the firm well to weather the COVID-19 crisis. Investors should consider banking on SEI Investments for attractive long-term investment returns. Buy.
Ingrid R. Hendershot, Hendershot Investments, hendershotinvestments.com, 703-361-6130, June 2020

Square, Inc. (SQ) | Daily Alert June 29
Mark uses Square to process the sales of his books, and Jim is going to employ the platform in his online store at Way of the Renaissance Man.

The reason why Square’s services have become so popular with online sellers is that the software makes it exceedingly easy for anyone to use, be they individuals like us, or major corporations.

The company also has seen big upside from its Cash App, a consumer digital money-transfer service that competes with services such as Venmo and Zelle. Jim uses all of these services, but he has found the Cash App to be the easiest and most convenient to use. Oh, and just so you know, the company isn’t some fly-by-night operation in the digital space. Square’s CEO also happens to be Twitter CEO and founder Jack Dorsey.

SQ has proven itself a winner, both on the earnings front and the technical front. The company boasts a three-year earnings per share annualized growth rate of 75%, a metric that has helped loft the company into the highest rated stock in Investor’s Business Daily’s Finance/Credit Card Payment Services industry group.

Technically, SQ shares have been a juggernaut since the COVID-19 selling in March and have been up some 175% since its March 20 nadir. Over the past 12 months, its shares are up nearly 44%, a performance that’s outpaced some 96% of all other public companies over that same period.

One look at SQ’s chart allows us to note that, despite the big gains, the shares are not overextended at just above $104. In fact, we’ve been looking for a breakout like the one we’ve seen today to jump on this permanent wave. Now is the time to do just that.

So, let’s buy Square, Inc. at market, with a protective stop set at $83.25.

For those who are willing to take a bigger bet, buy the SQ Sept. $110.00 call options (SQ200918C00110000) at market. The call options last traded for $9.05 and expire on Sept. 18.

Mark Skousen & Jim Woods, FMA Trader Alert, markskousen.com, Eagle Financial, 300 New Jersey Ave. NW, Suite 500, Washington, D.C. 20001, June 22, 2020

Preferred Stocks & REITs 831

*AT&T Inc. (T-PA)
AT&T Inc.; 5.00% Fixed Rate, Cumulative Perpetual; Par $25.00; Annual Cash Dividend $1.25; Current Annualized Yield 4.93%; Call Date 12/12/24; Yield to Call 4.64%; Pay Cycle 2b; Ratings, Moody’s Ba1, S&P BB+; CUSIP 00206R508;

AT&T Inc. is a global leader in telecommunications, technology, media, and entertainment.

The company reported 1Q 2020 net income of $4.58 billion or $0.63 per share. Adjusted for special items, however, AT&T reported $0.89 per share, topping analysts’ $0.85 estimates. Revenues were challenged by the COVID-19 pandemic, as advertising sales fell sharply, hit by the postponement of live sports events such as March Madness.

This preferred is cumulative, with qualified dividends taxed at the 15%-20% rate. It is suitable for medium-risk taxable portfolios. Buy up to $26.25 for a 4.75% current yield and a 3.80% yield to call.
Martin Fridson, CFA, Income Securities Investor, isinewsletter.com, 800-472-2680, July 2020

*Alexandria Real Estate Equities, Inc. (ARE)
Alexandria is a REIT that owns, operates, and develops lab space for life science research in primary U.S. markets that include Boston, Maryland, New York, San Diego, The Research Triangle, San Francisco, and Seattle.

Given secular trends, we expect life sciences to grow at a high rate, and we like that Alexandria is the premier name in the space. ARE has 28.8 million square feet of operating space with occupancy at 95%+, with an additional 12.7 million square feet under construction as well as planned development and redevelopment projects. We see ARE’s base of tenants as defensive and expect both public and private capital to continue to flow into biomedical research, while we note that over 60 of its tenants are currently focused on COVID-19 testing, treatment, and prevention pro- grams.

We were encouraged that ARE announced that it had collected 98.4% of recent rents, and that at the end of Q1, it had its lowest receivables balance since 2012. Alexandria is well capitalized and has a strong backlog of development opportunities to support future growth.
John Buckingham, The Prudent Speculator, www.theprudentspeculator.com, 877-817-4394, July 2, 2020

Funds & ETFs 831

Matthews China Small Companies Fund (MCSMX) | Daily Alert June 19
At first glance, it may seem counterintuitive to be investing in Chinese small cap firms amidst ongoing reverberations of the Covid-19 pandemic and the US-China trade war. After all, China, where the virus originated, seems an unlikely place to invest today and smaller firms might seem to be the riskiest spot to buy. But it appears that many of these smaller firms are better situated to thrive and prosper than many of the nation’s largest companies.

Tiffany Hsiao, lead portfolio manager of Matthews China Small Companies, contends that smaller firms are arguably stronger financially than large firms which often rely on government loans. “They were capital-starved when they were growing up, so they had to generate their own cash flows. They don’t go out and spend two years building a building before getting their first cent. The customer better pay first,” she recently told The New York Times. She added that the best investments tend to thrive in industries that have grown with China’s middle class, such as consumer products and health care.

Across its stable of funds, Matthews Asia emphasizes an investment approach that is focused on developing deep insights into a geographic target region through fundamental research and identifying the most attractive long-term investment opportunities. Managers and analysts conduct in-depth, on-the-ground fundamental research and objective analysis to identify the most compelling opportunities while minimizing downside risk. Matthews says that this active approach allows them to drill down into lesser-known and less-followed businesses to identify opportunities that may not be readily visible to others.

This in-depth look includes the assessment of financial strength, resource allocation decisions, incentive structures, and more. Corporate governance plays a large role in the due diligence process. An appraisal of management quality includes how well management articulates and executes its long-term vision, as well as the ability of the company to grow sales and profits with attractive returns over the long term. Matthews meets with company management, makes trips to production facilities and warehouses, and often engages with employees, customers, supply chain partners, and competitors.

Manager Tiffany Hsiao states that she and the team are focused on “finding innovative and capital-efficient small companies that are relatively insulated from macroeconomic uncertainties. We . . . seek companies with sustainable, quality earning streams, strong cash flows, and good balance sheets that can weather uncertain economic conditions. We believe sectors such as industrial automation, consumer, health care, and technology are among the most attractive from a secular growth perspective.”

She told Barron’s, “We stress-test every company through all types of scenarios,” noting in a nation as big as China, “something will always go wrong,” whether it’s a virus, natural disaster, or something else. “We want the highest return on capital possible. To do that, we tilt toward asset-light companies that don’t have much balance sheet risk.”

Hsiao notes that the fund is heaviest in health care and technology. In health care, half of the fund’s allocation “pertains to basic stuff like vaccines,” she told Barron’s, plus areas including medical waste and health care infrastructure. The other half is focused on human DNA, especially in treating critical-illness diseases such as cancer.

In technology, the fund is a big investor in software, for example, China Youzon, which Hsiao explains is the Chinese equivalent of Shopify, which helps small businesses transition to selling online. It also has holdings in the digital economy, for example, online education. The fund’s largest holding, Silergy, is also one of its strongest recent performers, with a one-year gain of 263%. Silergy, the largest analog semiconductor company in China, expects to grow revenues between 20% and 30%. The firm’s chairman has noted that the company’s business areas are those the government wants to accelerate, including 5G infrastructure, health care equipment, and data centers.

Matthews China Small Companies has had an overall admirable investment performance. It ranks in the top 2% of its peer group for the trailing one-, three-, and five-year periods, as well as in 2020 to date, with a 37.0% gain.

Brian W. Kelly, Moneyletter, moneyletter.com, 800-890-9670, June 202

*U.S. Global GO GOLD and Precious Metal Miners ETF (GOAU)
Investors are piling into precious metals because of coronavirus uncertainty, the suspect economic recovery, global trade friction, the upcoming U.S. presidential election, unprecedented central bank money printing and widespread civil unrest.

U.S. Global GO GOLD and Precious Metal Miners ETF is a unique precious metals ETF. Instead of investing in traditional gold miners, it instead invests in mining stocks on a royalty basis.

Royalty companies invest a fixed amount into a specific gold or silver mine exchange for the rights to purchase whatever gold and/or silver that is pulled out of the ground at predetermined, below market price. Royalty companies do not have operational or development costs as a typical a miner does. Its only major risks are an unproductive mine or a drop in the price of gold.

Buy U.S. Global GO GOLD and Precious Metal Miners ETF (Rated “C”) at the market.
Tony Sagami, Weiss Ultimate Portfolio, 1-877-934-7778, weissratings.com, July 2, 2020

Updates 831

*SELL 1/3 DocuSign, Inc. (DOCU)
Updated from WSBI 822, October 16, 2019

We’re going to sell one-third of our remaining position in DocuSign, which has had an amazing run but broke badly today. We don’t think the stock has hit an ultimate top, but it’s prudent to lighten our position, taking another round of partial profits. SELL ONE-THIRD OF DOCU.
Michael Cintolo, Cabot Growth Investor, cabotwealth.com, 978-745-5532, June 29, 2020

*SELL (Retire): Alexion Pharmaceuticals, Inc. (ALXN)
Updated from WSBI 821, September 18, 2019

I’m Retiring Alexion Pharmaceuticals from the Buy Low Opportunities Portfolio today. Alexion is a successful company, but the earnings growth prospects are not strong enough to maintain a position in the portfolio. Retired.
Crista Huff, Cabot Undervalued Stocks Advisor, cabotwealth.com, 9787455532, June 17, 2020

SELL BJ’s Restaurants, Inc. (BJRI) | Daily Alert Month June 22
Updated from WSBI 820, August 7, 2019

BJ’s Restaurants reported financial results for its 2020 first quarter ended Tuesday, March 31, 2020. As expected, total revenues decreased 12.4% to $254.6 million, even though total restaurant operating weeks increased approximately 3.2%, Same-restaurant sales declined 15.5% for the whole quarter, though same-store sales had been on an uptrend for the first eight weeks of the quarter, increasing 1.5%. Comparable restaurant sales for the last five weeks of the quarter declined 40.4%. The company posted a per-share loss of $0.22 in the quarter.

By early May, BJ’s reported that a quarter of its restaurants had reopened, and noted that its larger dining rooms gave it more flexibility to accommodate social distancing regulations. Off-premise sales were promoted via changes in its mobile app, along with menu changes to feature offerings for families and parties.

BJ’s closed on a $70 million common stock sale and has $134 million of cash and cash equivalents on hand. The company remains optimistic that it will be able to grow the number of restaurants from 209 to 425 over the next years.

In our earnings model, we are concerned that BJ’s may not see its EPS return to 2019 level ($2.20) for a very long time. Analysts expect a loss of $1.53 for FY 2020 and EPS of $1.22 in FY 2021. While BJ’s may be better positioned than some casual dining establishments to weather the COVID-19 storm, recovery may take too long to justify remaining invested in its stock right now. As a result, BJ’s Restaurants is being discontinued from coverage.
Doug Gerlach, Smallcapinformer.com, 1-877-33-ICLUB, June 2020

Investment Index 831