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Wall Street’s Best Digest | April 15, 2021

Here is your April Wall Street’s Best Digest issue 840.

I love spring! You may not know this but I’m a Master Gardener, which means when the Bradford pears, Forsythia, and Redbud trees come into bloom, I am just a happy camper!

And this year, with the end of COVID almost in sight and the economy in recovery mode, I feel very optimistic. And as you can see from our Market Views and our Advisor Sentiment Barometer, our contributors are considerably bullish.

Our Spotlight Stock this month, exemplifies that optimism, as we are recommending one of the nation’s top home builders. Certainly, its shares have been driving upwards, but we feel there is much more room to grow.

In Growth, you’ll find a variety of ideas, from the airline, gaming, automobile, yacht, and online education sectors. In Growth & Income, our advisors offer recommendations from the shipping, restaurant, RV, and engineering industries.

Value stocks are finally finding their moments of sunshine, and here we like an aircraft manufacturer and an aerospace and defense contractor. Financial companies are also rebounding, like these asset manager, insurance, and banking businesses. In Healthcare, our contributors favor a technology and an animal healthcare company that is in the midst of a turnaround.

Our Technology offerings include an e-commerce and a semiconductor company. This month, you’ll also find several ideas in the Resources and Energy section. And in Low-Priced Stocks, we offer a couple more speculative companies, coming from the cannabis and marketing sectors.

In REITs and Preferred Stocks, our contributors find financial and self-storage interesting this month. And lastly, our Funds & ETFs section includes some income, small-cap value, and healthcare ideas.

Don’t forget to register for my monthly webinars, along with Kate Stalter, my partner on the Wall Street’s Best Stocks and Wall Street’s Best ETF newsletters. And we’ve begun sending out invitations for our August 17-19 Summit, entitled Smarter Investing, Greater Profits. You can register here.

Please don’t hesitate to send me your feedback and questions. My new email address is

Market Views 840

While this market loves being at new highs, the horizon isn’t all clear. The strong jobs data mean that the Fed will have a hard time justifying its current bond-buying levels, so, at some point, we expect the central bank to start dropping hints about “tapering” quantitative easing (QE). And for a market addicted to QE, this could cause abrupt selling.

Then there are the massive infrastructure proposals by President Biden, amounting to some $4 trillion over 10 years. And while direct spending in the economy by the government will help specific industries, that spending also will likely come with higher corporate tax rates and other higher taxes that will affect the investor class most.

Now, this is certainly something to watch down the road, but for now, we are in what the market considers to be a “Goldilocks zone” between just right fiscal stimulus, Federal Reserve accommodation, COVID-19/vaccine optimism and a still “orderly” rise in long-term Treasury bond yields. And until one or more of these ingredients get too hot or too cold, look for the bulls to keep living large at lofty heights.
Mark Skousen & Jim Woods, FMA Trader Alert,, Eagle Financial, 300 New Jersey Ave. NW, Suite 500, Washington, D.C. 20001April 12, 2021

Still Bullish for the Right Reason
We do not need to fear higher rates; we need only be sure they are rising for the right reason. Sooner or later—and my guess is it will be sooner—Wall Street will tire of the narrative that the Fed is creating runaway inflation.
When that happens, they will turn their gaze to the growing strength of the economy and the potential that holds for better-than-expected corporate profits. That is the classic formula for rising stock prices.

Those who position themselves for such a possibility will be the ones who benefit the most.
David C. Jennett, The Investment Letter, P.O. Box 6170, Holliston, MA 01746, 800-542-5018, March 17, 2021

Bullish, but Cautious
Over 90% of my technical indicators are bullish, but even if all 100% were bullish, it is important to remember: “By definition, all major bear markets begin at market tops.” This is why we use a ‘trust-but-verify’ approach. We only trust this market enough to have a bullish investment bias, but distrust this market enough to always have stops in place ... just in case.
Mike Turner, Turner Capital Investments,, 855-678-8200, April 21, 2021

Spotlight Stock 840

We like the outlook for homebuilders. The combination of short supply, cheap financing, and a year of pent-up demand has us excited about the prospects of Lennar despite some signs of trouble.

Yes, interest rates have risen. But mortgages remain much cheaper than historical norms, and rates could likely increase somewhat without triggering a decline in home demand.

Yes, home prices have risen, with the median new U.S. home topping $349,000 in February, up from $326,000 six months ago. But while today’s higher prices keep some buyers out of the market, that price trend reflects robust demand. Plus, the need for low- and mid-priced housing should help keep Lennar busy.

Most of Lennar’s houses (68%) fall in the step-up category, but 28% are entry-level. Yes, the shares seem more expensive after their 25% rally this year. But Lennar still earns a Quadrix® Value score of 92 and trades at nine times trailing earnings, 16% below its three-year norm.

In the February quarter, Lennar delivered 12,314 homes, up 19%, while accepting orders for 15,570, up 26%, with a dollar value of $6.5 billion, up 31%. Executive Chairman Stuart Miller said, “A combination of still low interest rates, strong personal savings rates during the pandemic, strong stimulus from the government, and solid household formation continue to drive demand, while the housing shortage driven by 10 years of production shortfall defi nes a constrained supply.”

Such insistent demand bolsters our faith in Lennar’s ability to exceed consensus targets, which call for sales growth of 21% and per-share-profit growth of 41% this year and sales growth of 6% and profi t growth of 2% next year. The company targets delivery of 62,000 to 64,000 homes with an average price of $400,000 in the current fiscal year, which ends in November, up from 52,925 and $394,000 in fi scal 2020.

Homebuilding accounted for 93% of Lennar’s revenue and 86% of its operating profit last year, while its financing business generated 4% of revenue and 14% of profits. The company also has a small multi-family business that doesn’t yet provide much profit.

On March 17, the company announced plans to spin off all or part of its noncore businesses to focus on homebuilding and financial-services operations. The shares jumped on the news.

Lennar has been able to more than offset higher costs with higher prices—net margins on home sales reached 16.6% in the quarter, up from 11.4% a year ago. Company wide, operating profit margins widened to a record 15.7% in the 12 months ended February, up from 11.7% a year earlier.

Lennar projects roughly flat margins over the next year. Some investors fear that Lennar can’t keep its margins high going foward, but we’re willing to give management some credit for past success.
Lennar is rated Buy and LongTerm Buy.
Richard Moroney, CFA, Dow Theory Forecasts,, 800-233-5922, March 29, 2021

Lennar Corporation (LEN)

52-Week Low/High: $ 38.51 - 106.24
Shares Outstanding: 275.76 million
Institutionally Owned: 94.99%
Market Capitalization: $32.313 billion
Dividend Yield: 0.95%

Why Lennar:

  • Robust demand
  • Double-digit growth
  • Low interest rates
  • Growing savings rates
  • Undervalued

Feature Article 840

As Richard Moroney of Dow Theory Forecasts and contributor of our Spotlight Stock said, housing demand is still going up, up, up!

And buyers are beginning to boost demand for larger and more pricey homes, which helps Lennar’s step-up focus.

As well, inventory, at just 4.8 months worth of current sales, continues to pad sellers’ pockets as lower supply=higher demand=rising prices. The Case-Shiller National Home Price Index in January was 11.2% higher than a year ago.

Pushing demand even higher is the interest rate picture, with mortgage rates some 50 basis points lower than they were at the beginning of this year.

30 year mortgage rates chart 1975-2021

The strengthening economy and rising GDP continue to make the homebuilding business attractive. According to the NAHB forecast, we should see more gains in 2021.

And that’s great news for Lennar! The company has beaten Wall Street’s earnings estimates eight quarters in a row, beating expectations by 23%. Current earnings forecasts have been rising steadily, up 17% in the past 30 days. $2.30 EPS on revenues of $5.78 billion for the quarter ending in May.

Lennar is one of the top three builders in 33 of its largest markets, delivering homes to several target sectors, including:

  • 40% — entry level homes
  • 50% — step-up homes
  • Second homes and active adults

LEN Geographic Diversification
Additionally, Lennar is invested in rental communities:

>7,000 apartments operational and stabilized

>12,000 apartments under construction or leasing

The company is also utilizing technology such as Internet consulting, online scheduling, virtual tours, an app, and Express Close, to make itself more efficient and to increase its bottom line. And the company has been reducing debt over the past few years, which should also enhance its profitability.

Growth 840

United Airlines Holdings, Inc. (UAL) | Daily Alert May 24
I wish to put some money into one last American firm that has not yet fully participated in the so-called reopening trade here in the U.S. Although the share price of United Airlines Holdings has doubled since it bottomed out last March, it remains well below pre-pandemic levels.

It is the only major U.S. airline that has failed to recover to new highs. I will add UAL to our portfolio this month, with the understanding that airline stocks do not fit my usual buy-and-hold approach. If these shares rally towards new highs, I will take my capital gain and find a long-term investment to take its place.
David C. Jennett, The Investment Letter, P.O. Box 6170, Holliston, MA 01746, 800-542-5018, March 17, 2021

International Game Technology PLC (IGT) | Daily Alert March 26
Following the sale of its Italian gaming business, International Game Technology will focus on its core business-to-business division and right-size its operations. Because the sale will eliminate high Italian taxes and reduce regulatory burdens, we expect IGT’s margins to improve.

Reflecting earnings beats in five of the past seven quarters (occasionally by triple digits), as well as EPS estimates that have been moving higher over the past 30 days, we are raising our 2021 EPS estimate to $1.00 from $0.95. For 2022, based on our expectations for continued above-consensus results, we are setting an EPS estimate of $1.32. Our long-term earnings growth rate forecast is 7%.

IGT shares are trading near their 52-week high and at an EV/EBITDA multiple of 9.8, above the average multiple of 8.0 prior to the 2015 merger with GTECH S.p.A. However, we believe that the current valuation inadequately reflects the company’s prospects for above-consensus results, as we expect recurring lottery revenue and growth in the gaming business to result in strong revenue and earnings over time. We are maintaining our BUY rating. Our long-term rating remains BUY. Our revised target price of 23, if achieved, offers investors the prospect of a 16% return.
Jim Kelleher, CFA, Argus Weekly Staff Report,, 212-425-7500, March 18, 2021

CarGurus, Inc. (CARG) | Daily Alert March 30
CarGurus, Inc. was founded in 2005 by Langley Steinert, also a cofounder of TripAdvisor.

CarGurus’ strategy is to provide the world’s most trusted and transparent automotive marketplace. The site has a wide variety of information for those researching, purchasing, or selling a vehicle, including test drive information, new and used vehicle listings, and financing.

For the most popular use of the site, consumers considering the purchase of used vehicles, the company applies a proprietary algorithm to each vehicle to generate a Deal Rating, one of: Great Deal, Good Deal, Fair Deal, High Priced, or Overpriced. The Deal Rating illustrates how competitive a listing is compared to similar vehicles sold in the same region in recent history. CarGurus’ Deal Rating is backed by the largest number of vehicle listings of any major U.S. online marketplace and dealer reviews by its 36.2 million average monthly U.S. unique visitors.

CarGurus generates revenue in two different segments. Marketplace, 88% of 2020’s total revenue of $552 million, represents subscriptions sold to dealers for vehicle listings. As of December 31, 2020, paying dealers numbered 23,934 in the U.S. and 6,697 in the United Kingdom. The other 12% of sales, Advertising and Other, consists primarily of display advertising revenue from auto manufacturers and other auto-related brand advertisers, and fees from partnerships with financing companies. About 6% of revenue comes from International, mainly the United Kingdom, but CarGurus plans to add other countries in the future.

As for earnings, the pandemic spurred management to seek efficiencies, particularly in its largest expense, sales, and marketing, which saw a 35% decline in 2020. This significant drop supports EPS growth of 84%, to $0.68.

For 2021, the company expects sales to recover as the rollout of COVID-19 vaccinations supports reopening economies. However, earnings are expected to stagnate as the company invests in brand advertising and expands its sales force to sign additional dealers.

As for the dealer wholesale auction market, CarGurus in January purchased a 51% stake in CarOffer, a Texas-based private company with an online wholesale auction website that allows dealers to inspect, bid, transact, and transport used vehicles.

Analysts are projecting CarGurus can grow earnings 21% per year. Five years of this growth and our selected high P/E of 35 could generate a stock price as high as 61. We use a low price of 14, the product of calendar year 2020 EPS of $0.68 and the average low P/E of 21. The upside/downside ratio is 3.5 to 1.

CarGurus is well capitalized with cash and investments of $290 million on December 31, 2020 and no debt other than operating leases.
Doug Gerlach,, 1-877-33-ICLUB, April 2021

MarineMax, Inc. (HZO) | Daily Alert March 31
Last week, the Internal Revenue Service (IRS) deposited around 90 million stimulus payments.

There is, of course, a wide range of things that people will be spending that extra cash on. But two big sectors that will see an influx are:

1) Consumer staples

2) Consumer discretionary

Consumer staples, of course, are companies that either produce or sell products that people buy on a regular basis. Consumer discretionary are those that are generally considered nonessential but are desirable if there is sufficient income. This includes fast-food restaurants, entertainment products and services, clothing and even automobiles.

These two sectors tend to do well over different parts of the economic cycle. But right now, we have a very divided economy. There are consumers that will use that stimulus for staple goods that they have been struggling to get. And we have consumers that have been more fortunate over the course of the pandemic and will consider this money as being “extra.”

Of course, I’m not saying that every company in each of these sectors will thrive. To investigate which ones you should consider, let’s use the Weiss Ratings stock screener.

When entering consumer discretionary into the sector search field, I found there were 30 “B”-rated stocks and 46 “B-”-rated stocks. That’s 76 companies with a “Buy” rating. MarineMax is one of the top three.

MarineMax, Inc. is headquartered in Clearwater, Florida, and is the nation’s largest recreational boat and yacht retailer.

MarineMax recently reported first-quarter results of fiscal year 2021. The company saw record December quarter revenue growth of 35%, and diluted EPS more than doubled.

Sounds like people are starting to part with their dollars and put them into outdoor recreation. Shares are up 486% over the past year and up 109% over the past six months.

This is just one potential way to cash in on the stimulus trend.
Mike Larson, Weiss Stock Ratings Heat Maps,; phone: 1-877-934-7778, March 25, 2021

*Perdoceo Education Corporation (PRDO)
P/E Growth: Peter Lynch

Perdoceo Education Corporation, formerly Career Education Corporation, offers education to students in a range of career-oriented disciplines through online, on-ground and hybrid learning programs. Its American InterContinental University (AIU) and Colorado Technical University (CTU) provide degree programs through the master’s or doctoral level as well as associate and bachelor’s levels. The company operates through four segments: CTU, AIU, Culinary Arts and Transitional Group. Its University group consists of AIU and CTU, which serve students online with career-focused degree programs. Its Career Colleges Group consists of Culinary Arts and Transitional Group segments. The Culinary Arts segment includes Le Cordon Bleu institutions in North America (LCB), which offer hands-on educational programs in the career-oriented disciplines of culinary arts and patisserie and baking in the commercial-grade kitchens of Le Cordon Bleu.

This methodology would consider PRDO a “fast-grower.”

John Reese, Validea Hot List Newsletter,, 877-439-0506, April 2021

Growth & Income 840

Atlas Corp. (ATCO) | Daily Alert March 23
Atlas Corp. (ATCO) shares in their first week in the Explorer portfolio moved in line with the market to settle at 14.5. Shares were up 6.9% yesterday. The company charters a fleet of 118 containerships.

The pandemic has led to distorted trade flows and a worldwide container shortage crisis. Demand for these shipping containers is surging while supply is frozen, so shipping rates are skyrocketing. Making matters worse is that the global container fleet is shrinking and, you guessed it, containers are largely manufactured in China.

We can take advantage of this situation with Vancouver-based Atlas Corporation, which operates as an independent manager of containerships. Atlas posted in its last reported quarter operating margins of 40% with revenue increasing for the quarter, year over year, 36.6% and earnings growing 96.6%. I view ATCO as a trading position with a target price of 20. BUY A HALF
Carl Delfeld, Cabot Global Stocks Explorer,, 978-745-5532, March 11, 2021
Restaurant Brands International Inc. (QSR) | Daily Alert April 1
Burger King parent Restaurant Brands International Inc. has been in rally mode since its last earnings report in mid-February—breaching the $56-58 region, which was home to major lows back in 2016 and 2018, as well as the $59 level, which is a 61.8% Fibonacci retracement of the stock’s 2018 peak through its 2020 trough.

There’s plenty of pessimism surrounding QSR, despite this positive price action, which could push the equity higher as these bearish bets begin to unwind. For one, the equity’s 10-day put/call open interest ratio of 1.90 at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). This ratio stands higher than 74% of readings from the past year, suggesting this penchant for bearish bets is unusual.

And while short interest makes up just 2.8% of QSR’s float, it would take almost a week for bears to cover their positions, which could lead to a potential short squeeze situation. The security could benefit from a round of analyst upgrades and/or price-target hikes, too. Of the 17 in coverage, seven still call the fast food stock a “hold,” while the 12-month consensus price target of $66.92 is a slim 2.9% premium to Friday’s close.

This looks like an excellent time to get in on QSR’s next move with options too. The security’s Schaeffer’s Volatility Index (SVI) of 27% stands in the lowest percentile of its annual range, implying options traders are pricing in extremely low volatility expectations for the equity at the moment. We should also note that our recommended call option has a leverage ratio of 7.9 and will double in a 12.4% rise in the underlying equity.
Bernie Schaeffer, Schaeffer’s Investment Research,, 800-327-8833, March 24, 2021

*Winnebago Industries, Inc. (WGO)
52wk H. 87.53 52wk L. 28.50

Mkt Cap: $2.68B, EPS: 4.63, P/E: 17.22, Beta: 2.05

DIV/YLD: 0.48(0.61%)

The maker/marketer of recreational vehicles (RVs) for use in an outdoor recreation activities as well as motor homes: self-propelled mobile dwellings. The upbeat F/Y Q2-21. Reported earnings of $69.1M, or $2.04/shr vs. 5c/shr Y-O-Y on revenue of $939.9M up 34% Y.O.Y. In ascending pattern since Nov ’20 advancing from the low of 47.5 to high of 87.53. with mini correction/retraction to primary support (69-73).

Reversal to challenge upper head resistance (83-85).




Joseph Parnes, Shortex Market Letter,, 800-877-6555, April 8, 2021

Primoris Services Corporation (PRIM)| Daily Alert April 8
A leading engineering and construction contractor, Primoris Services has ample upside. Its implied upside ranges from 10% to 82%, with an average of 48%. While hitting that figure could prove challenging, shares appear capable of advancing 30% over the next 18 months.

At 13 times estimated 2021 earnings, the stock offers a 42% discount to industry peers.

Primoris stands to benefit from a potentially massive infrastructure spending initiative. Analysts are increasingly optimistic about Primoris. The consensus calls for earnings per share to climb 10% in 2021, up from an expected decline of 5% just 60 days ago. A steady stream of project wins should sustain growth.

Last month, the company was awarded a contract valued at more than $220 million for a solar project in the Southwest. It also received a $35 million contract for roadwork in Texas.

Primoris is a Best Buy.
Richard J. Moroney, CFA, Upside,, 800-233-5922, April 2021

Value 840

CAE (CAE, CAE.TO) | Daily Alert March 22
The company generates value for investors as a leading maker of flight simulators for commercial and military aircraft. It also operates pilot-training schools in over 35 countries and makes mannequins and other medical-simulators for training health professionals.

Due to COVID-19’s impact on air travel volumes, many airlines cut their orders for new flight simulators. As a result, CAE suspended its $0.11-a-share quarterly dividend with the June 2020 payment.

The company is now buying the military training operations of U.S.-based L3Harris Technologies Inc. (New York symol LHX). This business makes simulators for military aircraft, unmanned drones and submarines. It also provides flight training services to the U.S. Air Force.

CAE will pay $1.1 billion U.S. for these businesses when it completes the purchase, likely in the second half of 2021.

The purchase will help cut the company’s exposure to the commercial airline business, which has suffered in the past year due to COVID-19 travel restrictions. However, the rollout of new vaccines should help boost air travel volumes in 2021. That would let the company resume regular dividend payments.

CAE’s TSI Dividend Sustainability Rating remains Average. The stock is a buy for long-term gains.
Patrick McKeough, Dividend Advisor,, 888-292-0296, March 12, 2021

*Northrop Grumman Corporation (NOC)
Northrop Grumman is a $54 billion market cap aerospace and defense business. The company reports under four segments: Aeronautics Systems (aircraft and UAVs); Mission Systems (radars, sensors and systems for surveillance and targeting); Defense Systems (information technology, sustainment and modernization, directed energy, tactical weapons); and Space Systems (missile defense, space systems, hypersonics, and space launchers).

We expect more than $35 billion in revenue this year.

The company won $52.9B in contracts in 2020 with a book-to-bill ratio of 1.4 and total backlog increased 25% to $81.0B at year end. Northrop Grumman is selling its IT Services business for $3.4B, which will be used for share buybacks and retiring debt. The company issued 2021 guidance of between $35.1B and $35.5B in sales and between $23.15 and $23.65 in earnings-per-share.

We expect Northrop Grumman to generate earnings-per-share of $23.40 in 2021. Based on this, the stock is currently trading at a price-to-earnings ratio (P/E) of 13.8.

Our fair value estimate is a P/E of 15.0, which means expansion of the P/E multiple could add 1.7% per year to annual returns. When combined with the 8.0% expected growth rate and 1.8% dividend yield, total return potential comes to 11.4% per year over the next five years.
Ben Reynolds, Bob Ciura, Josh Arnold, & Eli Inkrot, Sure Dividend Newsletter,,, 800-531-0465, April 2021

Financials 840

KKR & Co. Inc. (KKR) | Daily Alert April 2
KKR & Co., formerly Kohlberg Kravis Roberts Co., is a leading global alternative asset manager. The firm manages multiple alternative asset classes including private equity, energy, infrastructure, real estate, credit, as well as hedge funds through strategic partners. It generates revenues from management fees, performance income and investment income with a global reach on five continents.

A booming economy and rising interest rates are a great environment for financial companies. The rest of this year should be very good for the sector. But KKR is also the best player in a massive growth trend in the wealth management industry. Alternative investment is a longer-term trend.

These investments are growing like crazy. Global alternative asset investments have grown from $6.4 trillion in 2012 to about $14 trillion in 2020. It is estimated that alternative assets worldwide will continue to grow to more than $21 trillion by 2025.

I consider KKR to be the best of its peers in the sector. It has blown away the return of its competitors over the past five years, averaging an annual return of 35.86% over the last five years and 36% over the last three. And there are good reasons to believe the outperformance will continue.

KKR had an all-time record fundraising year in 2020, bringing in $44 billion in assets under management for the year. A record $12.5 billion was deployed, or invested, in the fourth quarter. And the firm still has plenty of dry powder going forward.

KKR also made a huge $4.4 billion investment in Global Atlantic Financial Group (GA), a huge player in the insurance industry. The firm’s growth rates have been even more impressive than KKR’s over the past five years and the acquisition could be a needle-mover going forward.

Despite the recent stellar performance, KKR still sells at a price/earnings ratio of less than 14 times. That’s well below the five-year average and less than half of the current S&P 500 price earnings ratio.

The stock has moved sideways for the last six weeks after a big surge and could be consolidating ahead of another move higher in the weeks ahead.
Tom Hutchinson, Cabot Dividend Investor,, 978-745-5532, March 24, 2021
*Fidelity National Financial, Inc. (FNF)
Clever Fidelity National Financial continues to be impressive. Earnings grow nicely and steadily. FNF earned $1.89 in 2015 and this year it should earn well over $4.00+ (good gains!!). FNF has a stellar balance sheet, a market cap of more than $11 billion, about $3 billion in debt, and about the same in cash ($2.7 billion).

FNF is acquisitive too, as it just bought another insurance company that should be earnings-accretive right from the get-go. FNF has been smarter than most by embracing technology and moving heavily into the digital age. FNF has been very well run, I see no change in that. I am going to move my buy up to 44. FNF sells for a cheap 8 times earnings and sports strong free-cash-flow.
Bob Howard, Positive Patterns, P.O. Box 310, Turners, MO 65765, 417-887-4486, April 2, 2021

Fulton Financial Corporation (FULT)| Daily Alert April 14
Fulton Financial Corporation is a financial holding company that operates through six banking subsidiaries, primarily located in Pennsylvania, Delaware, Maryland, New Jersey, and Virginia.

FULT is expected to consolidate its six subsidiary banks into a single subsidiary bank to reorient its business model away from geographical boundaries towards customer segments. As a result, centralized risk management and better targeted services will likely improve operating efficiency.

Fulton’s loan portfolio is largely concentrated in commercial and multifamily real estate, residential mortgage, home equity, and construction and development. FULT has paid uninterrupted dividends since 1983.

Fulton Financial April 2021

Kelley Wright, IQ Trends,,, 866.927.5250, First April 2021

Healthcare 840

Change Healthcare Inc. (CHNG)| Daily Alert April 9
Change Healthcare is the leading independent provider of health care IT services, offering software and analytics solutions in support of provider network management, payments and other administrative healthcare functions that aim to enhance clinical decision-making and improve quality of care.

The company announced in January that it had agreed to combine with Optum, a technology-focused division of UnitedHealth Group, in a transaction whereby CHNG holders would receive $25.75 per share in cash.

Of course, we think the antitrust risks are well discounted, given the current 16% spread between the market and merger prices. Moreover, we are attracted to Change’s competitive position should the union not be consummated, and note the AHA’s comment, “The types of services offered by OptumInsight and Change are a must have for health care providers to navigate byzantine insurance reimbursement and ensure accurate and timely payment.”

CHNG trades at 15 and 13 times the respective fiscal 2022 and 2023 consensus EPS estimates.
John Buckingham, The Prudent Speculator,, 877-817-4394, April 2, 2021

Elanco Animal Health Incorporated (ELAN)| Daily Alert April 12
Elanco is one of the world’s largest animal health companies, with estimated 2021 revenues of $4.6 billion. It offers a broad range of products, including the Soresto and Advantage flea and tick collars, prescription treatments for various pet diseases and ailments, and farm animal nutritional enzymes, vaccines, antibiotics, and other treatments. About 55% of its sales are produced outside of the United States.

Elanco’s underperformance has not gone unnoticed or unchallenged. Activist investor Sachem Head (with an estimated $3.5 billion in assets) holds a 5.9% ownership stake and recently received a board seat. Also joining the board is the former Zoetis CFO and a former Zoetis board member who were instrumental in that company’s activist-driven turnaround. These oversight changes are likely to bring significant improvements in Elanco’s pace of innovation and revenue growth, along with wider profit margins.

Improved profitability would add to the company’s already-healthy free cash flow. Management has committed to directing much of this cash toward reducing its net debt to below 3x EBITDA by the end of 2023.

Supporting the overall Elanco story is the healthy tailwind of secular growth and recession-resistant demand for pet care products. Pet ownership continues to increase as does spending per pet, with these trends likely to continue into the foreseeable future. This growth provides plenty of opportunities for Elanco to participate.

ELAN shares already discount considerable risk. On consensus 2022 estimates, which include only moderate improvements in its profits, ELAN shares trade at a reasonable 15.8x EBITDA. This compares to 22.4x for Zoetis and 12.1x for the weaker Phibro Animal Health company. Our 44 price target for ELAN is based on the shares reaching a modest 19x multiple.

The changes at Elanco look poised to produce a much more valuable company, with considerable opportunity for shareholders.

We recommend the purchase of Elanco Animal Health shares with a 44 price target.
Bruce Kaser, Cabot Turnaround Letter,, 978-745-5532, March 31, 2021

Technology 840

Shopify Inc. (SHOP, SHOP.TO) | Daily Alert March 19
Ottawa-based Shopify is a leading global commerce company that provides trusted tools to start, grow, market, and manage a retail businesses. Many of Shopify’s 1.7 million retail businesses are small ‘mom and pop’ shops. Even so, Shopify’s platform and services also landed larger businesses such as Heinz, Allbirds, Gymshark, and Staples Canada.

One positive aspect of Shopify is that it is well-diversified. The company offers its platform and services in more than 175 countries. Shopify’s retailers sell a wide variety of products. This reduces its business risk.

Financially, Shopify’s cash and marketable securities total $6.4 billion. This greatly exceeds its lease liabilities of $155 million and senior convertible notes of $758 million.

Shopify’s high valuation kept us out of the stock until now. The stock is still costly. Then again, it’s down by more than a fifth since peaking at 1,800.58 a share. Shopify is now a buy for potential long-term gains if you can accept some share price risk and you need no dividends.
Mark Johnson, MPL Communications, Inc. Reproduced by permission of The Investment Reporter,, 800-804-8846, March 12, 2021
ASML Holding N.V. (ASML) | Daily Alert April 7
In January, Taiwan Semiconductor Manufacturing Co. Ltd. (TSM), the world’s leading chip contractor by sales, announced plans to spend $28 billion on new facilities. The entire industry is awash in capital chasing new semiconductor equipment.

And that means opportunity. Enter ASML Holding N.V. (ASML).

ASML Holdings makes the advanced lithography systems used to print circuit boards onto silicon wafers. The Dutch semiconductor equipment company controls 90% of that market. This includes all of the big customers like Intel, TSM and Samsung. The windfall in spending at the big-chip makers is great news … yet that only tells half of the story.

The other part is the democratization of chip design. As companies like Apple begin to design chips to meet the needs of specific applications, this will mean more customers for ASML and better pricing power.

The company reported in January that sales rose to 14 billion euros in 2020, up 18% year-over-year. Gross margins expanded to 48.6%, up from 44.7% in 2019. And profits shot up to $3.6 billion, a gain of 38%.

The semiconductor world is changing. It’s hard to say if it will all work out for Intel, but other players in the industry will certainly benefit. Intel has a mountain of problems that a pile of money will not fix. That said, it’s the beginning of a spending spree for the equipment needed to make those new chips.

Savvy investors should consider buying ASML, a company with a new monopoly in lithography systems.
Jon Markman, Pivotal Point,, 1-800-291-8545, March 24, 2021

Resources & Energy 840

B2Gold Corp. (BTG) | Daily Alert April 5
Commodities—oil, silver, copper, and aluminum—have all recovered this year. The one exception is gold. Its reputation as the ideal inflation hedge has been tarnished in the past few months.

B2Gold paid its quarterly dividend of 4 cents per share last month, but it hasn’t helped the stock. It is still down 19% for the year. We continue to recommend it as a deeply undervalued stock, selling for less than eight times earnings, with strong fundamentals and a profit margin of 39%.

Miners have been hit by a strong dollar and competition from Bitcoin.

However, the fundamentals for B2Gold couldn’t be stronger. It has reported record annual gold production for 12 years straight, producing more than 1 million ounces last year, with more to come. Revenues jumped 54% to $1.8 billion, while earnings more than doubled to 59 cents per share. B2Gold also doubled its dividend to 4 cents a share to become the highest-yielding mining stock in the world with a 3%+ yield.

Wall Street analysts now have a price target of $8.35 for the stock during the next 12 months. If gold turns around, B2Gold could nearly double in a year! That’s why we continue to hold it.
Mark Skousen & Jim Woods, Forecasts & Strategies,, Eagle Financial, 300 New Jersey Ave. NW, Suite 500, Washington, D.C. 20001, March 26, 2021
Vistra Corp. (VST) | Daily Alert March 25
In 2007, in the largest LBO in history, TPG, KKR, and Goldman Sachs teamed up to buy TXU for $45bn ($8.3bn in equity and $36.7bn in debt).

By 2014, TXU had to file Chapter 11 due to its crushing debt load. Vistra is the post-reorg equity of TXU Corporation.

Vistra is one of the largest power producers (nuclear, coal, and natural gas) and retail energy providers in the U.S.

Vistra took a big hit when it announced a $900mn to $1.3bn adverse impact due to Texas’ recent winter storm. Since the announcement, Vistra has lost $2.9bn in market cap, which seems like an overreaction given the company has plenty of liquidity.

Management agrees and has been buying stock in the open market.
Richard Howe, CFA, The Stock Spin-off Investing Newsletter,, 617-750-7454, March 18, 2021

*National Fuel Gas Company (NFG)
The natural gas price spikes during the great Texas freeze will force new scrutiny of supply chains from wellhead to burner tip. One energy company that won’t have to: Aggressive Holding National Fuel Gas, which operates everything from regulated distribution utilities to oil and gas wells.
Company earnings are affected by energy prices. But by combining conservative hedging practices (80% of remaining 2021 output) with stable cash flows from distribution utilities and pipelines (45% EBITDA), National Fuel has been able to grow dividends every year since the 1970s. That includes a solid 2.3% boost in pandemic afflicted 2020.

Infrastructure upgrades and modest customer additions fuel reliable growth at the utilities, which serve roughly 750,000 customers in mostly small town and rural areas of New York and Pennsylvania. Rate mechanisms minimize sales volatility from year to year. And pipelines and storage revenue is largely locked in under regulation by the Federal Energy Regulatory Commission.

Earnings from utilities and pipelines alone are enough to sustain low single digit annual dividend growth going forward. But results from gas gathering (15% of EBITDA) and E&P (40%) have also been exceptionally steady over the years, thanks to consistently conservative financial and commodity price management.

Deleveraging and earnings growth will accelerate if gas prices avoid another relapse this year, which appears increasingly likely with associated gas volumes from shale reduced. National Fuel Gas is a buy up to 52.
Roger Conrad, Conrad’s Utility Investor,, 888-960-2759, March 2021

*Pioneer Natural Resources Company (PXD)
Our strategy for playing the producers is to adopt “barbell” approach. The barbell consists of producers with the lowest breakeven costs and cleanest balance sheets one side and more troubled names with the potential to show dramatic financial improvement with commodity prices at current, healthy levels on the other side.
On the company’s recent quarterly earnings call, management provided some additional granularity on its framework for producing free cash flow over the next few years. Simply put, PXD estimates its maintenance cash flow—the amount of cash needed to maintain current production and meet all expenses in 2021—at $2 billion. And the company needs WTI oil prices of just $29/bbl to produce $2 billion in operating cash flow this year—that’s the lowest breakeven production cost of any shale-focused exploration & production (E&P) company in our coverage universe.

At $33/bbl, PXD generates enough operating cash flow to meet maintenance capital spending needs and cover its base dividend, which PXD recently raised to $0.56/quarter ($2.24 annually). And, at a WTI price of $55 bbl, PXD estimates that it would generate around $2 billion in free cash flow above and beyond what’s needed to cover that base dividend.

However, this free cash flow guidance is even better than it looks because that $2 billion in free cash flow excludes between $400 and $700 million in discretionary “growth” CAPEX annually that management has set aside to increase production by as much as 5% annually should market conditions warrant such an increase.

Add all this together, and you have an equation for around $4.6 billion in total cash flow for 2021 at $55/bbl WTI oil prices and around $2.6 billion in free cash flow once we subtract the $2.0 billion in maintenance capital spending. Since PXD estimates it produces $2 billion in cash flow at $29/bbl and about $4.6 billion at $55, it stands to reason that (very) roughly, each $1/bbl increase in average WTI prices over the course of a year works out to $100 million in incremental annual free cash flow.

Using a $60/bbl average oil price and putting a long-term growth rate of 1% annually on PXD’s free cash flow boosts the discounted net present value calculation to about $217.50, more than 35% above the current quote.

Of course, these calculations are rough and involve considerable uncertainty regarding the outlook for commodity prices. However, it also illustrates that while the stock has surged, it’s not overpriced. We’re boosting our buy under price on Pioneer Natural Resources from 130 to 155 as of this issue and continue to recommend buying on any dips below that price.
Elliott H. Gue and Roger S. Conrad, Energy Income Advisor,, 888-960-2759, April 1, 2021

*Second Opinion on Pioneer
In a somewhat rare display of enthusiasm over an acquisition, Pioneer (PXD) recently rose $5.78 on Friday to $164.60 following its announcement after the close on Thursday of its acquisition of privately held DoublePoint Energy (DPE). The DoublePoint acquisition was labeled highly accretive including to free cash flow per share, including $175 million of expected annual synergies and also that the acquisition was expected to enable an even larger variable dividend per share.

The company gets 97,000 high quality and remarkably contiguous net acres in the best part of the Permian, bringing the combined company to over 1 million net acres. DoublePoint also brings with it production of 100,000 boepd (barrels of oil equivalent per day). DoublePoint has been growing production by 30% per year, currently using 7 rigs. The acquisition (and the Parsley acquisition earlier this year) will bring the combined companies’ oil mix to over 70%, the oiliest in the Permian, totaling about 580,000 barrels of oil production per day.

The shares remain a Buy for potential appreciation and especially the 5-7% dividend.
Tom Bishop, BI Research,, April 3, 2021

Low-Priced Stocks 840

OrganiGram Holdings Inc. (OGI) | Daily Alert April 6
There are plenty of reasons to own cannabis stocks, like OrganiGram Holdings. First, not only is OGI technically oversold, but a subsidiary of British American Tobacco also just invested $176.6 million in the company. Two, more states have legalized the use of cannabis, and far more Americans now approve of its use. In addition, after pulling back from $6.50 to about $2.54, the OGI stock appears to have caught strong support. From here, I’d like to see it challenge its prior high, near-term.
British American Tobacco bought a nearly 20% stake in OrganiGram Holdings for $176.6 million. The two will work to create a “Center of Excellence” and develop CBD-based products. Better, according to a press release from OrganiGram, the deal will help strengthen its research and development, and help it to raise capital for investment in U.S. and international markets.

Helping, we could soon see efforts to legalize it at the federal level. Senate Majority Leader Chuck Schumer hopes to end the current prohibition of cannabis this year. All as more Americans approve of legalization. In fact, according to a 2020 Gallup poll, support for legalization is now up to 68%.
Ian Cooper, The Cheap Investor,, March 27, 2021

*SPAR Group, Inc. (SGRP)
SPAR Group provides merchandising and marketing services worldwide.The company currently operates in 10 countries and is expanding internationally to capitalize on growing global demand. It primarily offers syndicated services such as product reordering, product placement and maintenance services.

SGRP has an outstanding long-term sales trend that is likely to resume as the global economy normalizes.

Despite weakened international revenues, financials have remained rock solid. SGRP’s balance sheet has greatly improved since our previous recommendation, and cash is up to $16 million.
Although SGRP is trading above book value, it has an appealing valuation relative to its competitors. The company has a price/earnings (P/E) ratio of 10.8, showing steady earnings growth and a severe undervaluation relative to the industry average of 55.

The most obvious sign of its undervaluation is its price/sales (P/S) ratio of 0.15. This is 99% below the industry average of 1.9 and the index average of 4.3.

We are optimistic about its domestic growth and new leadership. As long as international sales do not slump, SGRP is on track to be a great winner yet again.
Faris Sleem, The Bowser Report,, 757-877-5979, April 2021

REITs & Preferred Stocks 840

Brighthouse Financial, Inc. (BHFAO) | Daily Alert March 18
Brighthouse Financial, Inc.; 6.75% Fixed Rate, Non-Cumulative Perpetual; Par $25.00; Annual Cash Dividend $1.6875; Current Indicated Yield 6.26%; Call Date 06/25/25 at $25.00; Yield to Call 4.74%; Pay Cycle 3e; Ratings, Moody’s Ba1, S&P BBB-; CUSIP 10922N509;

Brighthouse Financial, Inc. (BHF) is a major U.S. provider of annuities and life insurance. The company is one of the nation’s largest life insurers. BHF was created by MetLife (MET) in August 2017 in line with MET’s business objective of separating a substantial portion of its U.S. retail life and annuity business from the main company.

BHF has strong insurance subsidiary claims-paying ratings, namely, Moody’s, S&P, Fitch, and A.M. Best ratings of A+, A3, A, and A, respectively. The company’s 6.75% fixed rate preferred is callable at par, on or anytime following the 06/25/25 call date.

BHF reported 4Q 2020 adjusted net income of $272.0 million or $3.03 per share, easily beating analysts’ $2.73 estimates. Moreover, adjusted net income advanced 23.2% from a year earlier. Adjusted operating revenues of $2.54 billion also topped expectations, helped by continued solid sales growth in the annuities and life businesses.

Dividends on this preferred issue are qualified and taxed at the 15%-20% rate. This investment is suitable for low- to medium-risk taxable portfolios. Despite the Ba1 preferred rating by Moody’s, we are positively disposed, given the ‘A’ category claims paying ratings at BHF’s insurance subsidiaries.

Buy at 27.75 or lower for a 6.08% current yield and 3.99% yield to call.
Martin Fridson, CFA, Income Securities Investor,, 800-472-2680, March 2021

*Global Partners LP (GLP-PB)
Global Partners 9.50% Series B (GLP-B) operates and/or supplies 1,500+ gasoline stations and 270+ convenience stores and also offers crude oil, gasoline, and propane storage and logistics services to customers in the Northeastern states. These preferreds, although not creditrated, are cumulative, meaning the Global remains on the hook for any missed dividends.

The market yield is 9.3% and the yield to its 5/1/26 call date is 9.1%. The only downside is that Global reports its dividends using K-1 tax forms, which are more complicated than the standard 1099 forms. However, the 9%+ yields might make it worth the trouble.
Harry Domash, Dividend Detective,, 866-632-1593, April 5, 2021

*Life Storage, Inc. (LSI)
Life Storage Inc. (LSI), a January 3 for 2 split, is the 6th largest self-storage REIT, owning over 600 storage facilities and operating an additional 300+ facilities, owned by others, in 30 U.S. states and Ontario, Canada.

LSI’s 93% occupancy rate is higher than its peers and supports an impressive cash flow, in addition to the fees earned from its operation of the third-party owned facilities. Steady growth, a good balance sheet, a safe and growing dividend, and a very low Beta are all numbers to my liking. Another factor, relating to storage REITs in general, is the steady appreciation of their real estate. Thus, there is often hidden value not shown on the balance sheet. Life Storage, Inc. looks like a good long-term growth prospect and will add some diversity to the 2 for 1 Index.
Neil Macneale, 2 for 1 Stock Split Newsletter,, 408-210-6881, March 2021

Funds & ETFs 840

iShares Select Dividend ETF (DVY)| Daily Alert March 29
Dividends are important to our portfolio’s performance. iShares Select Dividend ETF is up 25% from the 91.82 used in our report last November.

Generally, dividend stocks do better and create solid capital gains. As an investing rule, dividend stocks increase a portfolio’s performance big time.

This fund is highly diversified and targets stocks that have a high dividend payout. Our yield to cost is 8.2%.
Sean Christian, The Personal Capitalist, 9524 East 81st Street, Suite B #1715, Tulsa, OK 74133, March 15, 2021
*T. Rowe Price Small-Cap Value Fund (PRSVX)
Our fund selection system has dictated some name changes and we anticipate a continued shift of a portion of our assets from the growth stocks that performed so well to value plays that work better in a higher interest rate environment. Buy T. Rowe Price Small-Cap Value Fund.
Brian W. Kelly, Moneyletter,, 800-890-9670, April 2021

*Fidelity Strategic Dividend & Income Fund (FSDIX)
Classified in our Scorecard as a Specialty fund, Strategic Dividend & Income holds several varieties of higher-yielding equities. Its neutral mix consists of large-cap, dividend-paying common stocks (50%), as well as preferred stocks (20%). REITs and convertibles make up the rest at 15% apiece. From a style perspective, it is always a large-cap value fund.

Beyond its diversification, SDI’s strategically-engineered mix of stocks is geared to achieve what Fidelity calls “reasonable income”—or generating income in excess of the S&P 500. While that certainly serves our purpose well, the fund also moderates portfolio risk—at 0.76, its relative volatility is about three-quarter’s as much as the S&P.
Jack Bowers, John M. Boyd and John Bonnanzio, Fidelity Monitor & Insight,, 800-397-3094, April 2021

Invesco DWA Healthcare Momentum ETF (PTH)| Daily Alert April 14
Invesco DWA Healthcare Momentum Portfolio ETF has been a stellar performer in recent years and has consistently had Morningstar’s highest ratings of 4 and 5 stars over various periods during the last 10 years.

The secret to the strong performance of PTH is its focus on relative strength—the measurement of a security’s performance in a given sector over time as compared to the performance of all other securities in that sector.

Many of PTH holdings are involved in developing COVID vaccines and much more.
Gray Cardiff, Sound Advice,, 800-825-7007, March 31, 2021

Updates 840

SELL Zynga Inc. (ZNGA) | Daily Alert April 6
Updated from WSBD 829, May 21, 2020
We’re taking some winners off the table. Sell Zynga.
Ian Cooper, The Cheap Investor,, March 27, 2021

*SELL Volkswagen AG (VWAGY)
Updated from WSBD 794, June 21, 2017
With its price surge to over 43, we moved Volkswagen AG (VWAGY) to a SELL.

While we appreciate Volkswagen’s progress and potential, the shares discount a prosperous future that may not arrive for at least a decade, and even then it may not be quite so golden due to intense competition and other hurdles.
Bruce Kaser, Cabot Turnaround Letter,, 978-745-5532,March 31, 2021

*SELL Booz Allen Hamilton Holding Corporation (BAH)
Updated from WSBD 830, June 18, 2020
Long-Term Buy List. The stock has struggled to recover ground lost after its messy

December-quarter report. Not helping matters, analyst profit estimates for the March and June quarters dipped after management warned of potentially choppy sales. Sell
Richard Moroney, CFA, Dow Theory Forecasts,, 800-233-5922, April 2021

*SELL Vanguard Growth Index Fund ETF Shares (VUG)
Updated from WSBD 826, February 20, 2020
Our fund selection system has dictated some name changes and we anticipate a continued shift of a portion of our assets from the growth stocks that performed so well to value plays that work better in a higher interest rate environment. Sell
Brian W. Kelly, Moneyletter,, 800-890-9670, April 2021

*SELL HALF Altria Group, Inc. (MO)
Updated from WSBD 830, June 18, 2020
Altria stock has performed well lately, after abysmal performance for the prior four years. The stock has since stopped moving higher and has been consolidating around the low 50s per share range for the past couple weeks.

The recent surge could wind up being MO’s shining moment for the year from which it pulls back, or it could trend still higher from this level on the strength of the dividend and the market’s underestimation of Altria’s ability to offset down-trending smoking sales with other sources. I don’t know. So, we’ll cut it down the middle and sell half and hold onto half. Sell Half
Tom Hutchinson, Cabot Dividend Investor,, 978-745-5532, April 7, 2021

*SELL UMB Financial Corporation (UMBF)
Updated from WSBD 826, February 20, 2020
We believe UMB Financial will have a difficult time replicating its recent solid growth.

With potentially stagnating growth ahead coupled with UMB Financial’s recent runup in share price, we believe UMB Financial currently has expected total returns of -3.1% annually over the next five years.

As a result, we recommend investors sell UMB Financial now and lock in solid gains on this recommendation. Sell
Ben Reynolds, Bob Ciura, Josh Arnold, & Eli Inkrot, Sure Dividend Newsletter,,, 800-531-0465, April 2021

Investment Index 840

WSBD 840 Index

WSBD 840 Funds

The next Wall Street’s Best Digest issue will be published on May 20, 2021.