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Wall Street’s Best Stocks | October 5, 2021

Bearish sentiment has risen a bit last month, following the market’s up and down gyrations—mostly due to COVID-19 (although new cases finally seem to be slowing), as well as the continuing drama from Congress, who doesn’t appear to be able to agree on anything!

However, the economy is continuing on a strong bent. Durable goods manufacturing has risen, the unemployment rate remains healthy, and housing is strong. Building permits and housing starts—along with prices—continue to rise. There has been some abatement in the rate of pricing increases, which is a good sign. We are seeing a little more inventory, just not enough to put a big damper on prices as of yet.

It’s a mixed outlook for the markets right now—we’re seeing some major pullbacks in certain big names, but today’s action was very positive. We may continue to see some dips in the next few weeks, but overall, I’m optimistic that the economy is still strong. And as long as earnings continue to outperform, the markets should hold up nicely.

I’m looking forward to the colorful fall, which is already starting here in Tennessee. I wish you a pleasant autumn and hope you will email me with your thoughts and questions. I look forward to hearing from you.

Happy Investing!

State of the Markets | WSBS 1021

The broad markets see-sawed this past month but are showing new positive action as I write this. We’re probably due for some more volatility, but it shouldn’t be anything too worrisome. There is some resistance at this level, but the Dow Jones Industrial Average continues to trade above its 200-day moving average, which is favorable.

Dow Jones Industrial Average


S&P 500

Nasdaq Composite Index


Feature Recommendation | WSBS 1021

Our new pick, Evolent Health, was founded in 2011. The company provides healthcare IT technology, including provision of health care delivery and payment services, population health management, health plan and third-party administration, network performance and pharmacy benefit management, risk adjustment, analytics and performance improvement, and technology and electronic medical record integration.

Evolent operates through two segments: Services and True Health. The Services segment includes clinical and administrative solutions such as total cost of care management, specialty care management and comprehensive health plan administrative services. The True Health segment offers a physician-led health plan for employer-sponsored health coverage.

Evolent Health, Inc. was founded in 2011 and is headquartered in Arlington, Virginia.

The company serves a national base of leading payers and providers and is the first company to receive the National Committee for Quality Assurance’s Population Health Program Accreditation.

Medical technology was rapidly evolving until the arrival of COVID-19, which pushed it to almost-revolutionary stages. The global lockdown, travel, and hospital visitation limits have significantly boosted the opportunities for digital healthcare, including teleconsultation. Additionally, the rising number of pandemic patients has created a need for more data maintenance and storage, as well as analytic capabilities. Lastly, the emphasis on preventive care is also creating significant growth in the industry.

And with the advent of artificial intelligence, the internet of things and big data, the sky seems to be the limit for industry expansion.

According to Grandview Research, the global healthcare IT market size was valued at $74.2 billion in 2020 and is expected to grow at a compound annual growth rate (CAGR) of 10.7% over the next few years.

Right now, North America—Evolent’s marketplace—is the place to be for healthcare IT, now and for the near future. But the market is very fragmented, with most market share owned by these five companies:

  • GE Healthcare
  • Philips Healthcare
  • Siemens Healthcare
  • Cerner Corporation
  • Allscripts Healthcare Solutions Inc.

And that’s great news for Evolent! The company has added to its products by a few strategic acquisitions. In 2018, Evolent purchased New Century Health, a specialty care management company that focused primarily on cancer and cardiac care.

And last month, Evolent announced that it is acquiring Vital Decisions, a New Jersey-based telehealth company and a leading provider of technology-enabled advance care planning services. The price tag is $85 million, and the deal is expected to close by the end of this year.

For its second quarter, Evolent saw revenues grow 42.3%, to $222.1 million, driven by seven new partnerships. Adjusted EBITDA was $13.3 million.

Looking forward, Evolent raised its 2021 full-year revenue guidance range to $870M - $900M, which would reflect a very nice 30% growth rate. The company also increased its full-year adjusted EBITDA guidance range to $50-58M.

The company’s EPS was $0.02, which did improve from -$0.03 last year and outperformed the estimated -$0.06 analysts had expected.

For the last four quarters, the company has surpassed both consensus EPS and revenue estimates.

Evolent Quarterly Revenue - Last 9 Quarters

And while I love the revenue growth and how the company is getting closer to positive earnings, I really like this company as a takeover candidate.

Just in the past few days, rumor has it (via Bloomberg) that Walgreens Boots Alliance is thinking about making a play for Evolent. No one has confirmed it, and even if this suitor doesn’t materialize, I think Evolent is a likely target.

Its stock is cheap; the company is growing rapidly; and the pandemic is boosting industry growth that should enhance Evolent’s top and bottom lines.

Evolent Health, Inc. (EVH)
52-Week Low/High: $9.44 - 31.88
Shares Outstanding: 87.27M
Institutionally Owned: 98.11%
Market Capitalization: $2.752B
Dividend yield: n/a
Why Evolent?
  • Takeover candidate
  • Forming great partnerships
  • Strategic acquisitions
  • Undervalued

Top Institutional Holders

HoldersSharesDate Reported% OutValue
Vanguard Group, Inc. (The)14,315,56030-Mar-219.03%198,843,128
Blackrock Inc.13,233,45830-Mar-218.35%183,812,731
Impax Asset Management Group Plc12,096,84830-Mar-217.63%168,025,218
Nuance Investments, LLC8,826,34330-Mar-215.57%122,597,904
Price (T.Rowe) Associates Inc7,976,76530-Mar-215.03%110,797,265
Franklin Resources, Inc.7,277,18430-Mar-214.59%101,080,085
Dimensional Fund Advisors LP5,763,17830-Mar-213.64%80,050,542
Eaton Vance Management5,088,63130-Mar-213.21%70,681,084
Gamco Investors Inc4,150,78130-Mar-212.62%57,654,348
State Street Corporation3,287,14330-Mar-212.07%45,658,416

Source: Yahoo! Finance

Technical Analysis
The shares of Evolent are up an astonishing 241% so far this year and have outperformed the industry. But I think they have lots more room to grow, especially if the Walgreens acquisition rumors turn out to be true. There’s some resistance around 33 and support around 29.50.


Price Target: $41

Stop Loss: $27.50

Sector Round-Up | WSBS 1021

Sector Roundup - 100421 - one month

Although the markets have pulled back recently, there are three sectors that outshone the others so far in 2021. They are Energy (up 37.44%), Financial Services (up 27.31%), and Real Estate (up 21.58%). The laggards are Consumer Staples (up 2.06%), Utilities (up 1.88%), and Materials (up 9.28%).

Our pick this month is an aggressive growth strategy, both internally, and as a takeover candidate.

Flows for 09/24/2021 - 09/30/2021

Top 10 Creations (All ETFs)
TickerFund Name

Net Flows

VTIVanguard Total Stock Market ETF1,289.24
TQQQProShares UltraPro QQQ1,147.14
XLFFinancial Select Sector SPDR Fund887.85
XLEEnergy Select Sector SPDR Fund740.70
PDPInvesco DWA Momentum ETF585.09
IJRiShares Core S&P Small-Cap ETF550.24
IWFiShares Russell 1000 Growth ETF485.35
MTUMiShares MSCI USA Momentum Factor ETF456.35
IWMiShares Russell 2000 ETF452.00
SOXLDirexion Daily Semiconductor Bull 3X Shares392.73
Top 10 Redemptions (All ETFs)
TickerFund Name

Net Flows

IVViShares Core S&P 500 ETF-4,446.86
QQQInvesco QQQ Trust-2,567.88
SPYSPDR S&P 500 ETF Trust-1,312.40
ARKKARK Innovation ETF-693.82
XLVHealth Care Select Sector SPDR Fund-680.80
EMBiShares JP Morgan USD Emerging Markets Bond ETF-512.24
SPYGSPDR Portfolio S&P 500 Growth Fund-392.91
SHViShares Short Treasury Bond ETF-374.48
VGTVanguard Information Technology ETF-243.37
XLUUtilities Select Sector SPDR Fund-187.97


Portfolio Updates | WSBS 1021

Conservative Stocks
As a conservative investor, you are less willing to accept market swings and significant changes in the value of your portfolio in the short or long term. Capital preservation is your primary goal, and you may plan on using the principal from your investments in the near term, preferably as a steady income stream. The average level of return you expect to see is 5%-10%, annually.

The Coca-Cola Company (KO)
After its very good second-quarter report, KO is looking forward to another good quarter. The company is forecast to post EPS of $0.58 on revenues of $9.79 billion.

And just in case you didn’t know, Coca-Cola is one of Warren Buffett’s long-time favorite stocks. It accounts for 8% of his Berkshire Hathaway holdings. Hold

Sun Life Financial Inc. (SLF)
Estimates are also moving higher for SLF, with EPS for 2021 and 2022 forecast at $4.77 and $5.15. Shares look undervalued to me. Buy

Mueller Water Products, Inc. (MWA)
Insiders are piling into the shares of Mueller Water Products. Shares are trading at a very attractive level. Buy

TC Energy Corporation (TRP)
We’re seeing nice movement in the shares of TRP. Canadian oil production is still gaining momentum. And since new pipelines need regulatory approval, those already in place like TRP’s are in the right place at the right time. Hold

Moderate Stocks
As a moderate investor, you seek longer-term investment gains. You are comfortable with some swings in your portfolio’s performance, but generally seek to invest in more conservative stocks that build wealth over a substantial period of time. The average level of return you expect to see is 10%-25% annually.

National Storage Affiliates Trust (NSA)
National Storage Affiliates is the smallest self-storage REIT, so it has lots of opportunities to expand. The REIT currently has interest or ownership in 844 properties, 667 of which are wholly owned, 379 of which are managed by its participating regional operators (PROs), and 177 which are jointly owned. Shares are still climbing. Hold

Spirit Realty Capital, Inc. (SRC)
This REIT is also gathering strength. Estimates are rising, with next quarter’s EPS expected to come in at $0.80 and for full-year 2021 at $3.24. Third-quarter earnings are due to be released on November 2, 2021. Hold

Aggressive Stocks
As an aggressive investor, you primarily seek capital appreciation and are open to more risk. Swings in the market, whether short term or long term, do not impact your investment decisions and you have confidence that volatility is necessary to achieve the high return on investment you are looking for. You typically expect a 25%+ return, annually, though you do not need your principal investment immediately.

OneMain Holdings, Inc. (OMF)
This personal installment-loan company will release third-quarter results on October 20, 2021. Earnings estimates are $2.29 per share on revenues of $880.67 million. OMF has 2.2 million customers and more than 1,400 branches in 44 states. The shares are trading at a P/E ratio of 5.47. If you do not own the stock right now, I’m going to put it back on a Buy rating.

Primoris Services Corporation (PRIM)
We’re still waiting on the infrastructure bill to be passed by Congress. I’m optimistic! And once the monies become available, I believe we will see some positive movement in PRIM.

In fact, a recent report from Oxford Economics, PwC noted that “worldwide capital expenditures on infrastructure like power generation, oil drilling and refining, and transportation are apt to reach a full-year tally of $9 trillion in 2025.” Furthermore, the U.S. Energy Information Administration reports that “a great deal of that spending will be on new power transmission lines alone, which has nearly quadrupled between 2000 and 2019, with more such spending growth on the way.” And that will be great for Primoris.

In other news, Primoris Services declared a dividend of $0.06 per share, payable on the 15th of October. Buy

Textainer Group Holdings Limited (TGH)
Estimates are rising for TGH, with next quarter’s EPS expected to be $1.22 on $191.61 million. These shares are up nicely. Continue to Hold.

ETFs & Mutual Funds
Our funds and ETFs are doing well, although First Trust Dow Jones Global Select Dividend Index Fund (FGD) is slightly in the red. I’m keeping my eye on it; but I’m placing it back on Hold for now.

I want to take some money off the table from the Vanguard Dividend Appreciation Index (VIG), which is up 49%. Let’s Sell One-Half.

Two ETFs that are still good buys are Invesco Aerospace & Defense (PPA) and Invesco S&P Global Water Index (CGW). Buy

We’ll let all our other funds and ETFs ride for now. Hold

Current Portfolio | WSBS 1021

Wall Street’s Best Stocks Portfolio
Conservative StocksSymbolDate
Price on
Div Freq.Gain/
Loss %
The Coca-Cola CompanyKO2/2/2141.9052.991.26Quarterly29%Hold
Mueller Water Products, Inc.MWA8/3/2114.9315.470.06Quarterly4%Buy
Sun Life Financial Inc.SLF6/2/2154.0852.960.44Quarterly-1%Buy
TC Energy CorporationTRP2/2/2142.7349.162.09Quarterly20%Hold
Moderate StocksSymbolDate
Price on
Div Freq.Gain/
Loss %
National Storage Affiliates TrustNSA2/2/2127.3952.931.14Quarterly97%Hold
Spirit Realty CapitalSRC2/2/2142.2747.731.89Quarterly17%Hold
The Toronto-Dominion BankTD2/2/2140.8267.611.26Quarterly69%Hold
Aggressive StocksSymbolDate
Price on
Div Freq.Gain/
Loss %
Entravision Communications CorporationEVC9/7/217.457.350.03Quarterly-1%Buy
OneMain Holdings, Inc.OMF2/2/2129.4957.218.85Quarterly124%Buy
Primoris ServicesPRIM3/2/2134.9825.110.18Quarterly-28%Buy
Textainer Group HoldingsTGH4/1/2128.7734.440.0020%Hold
Price on
Div Freq.Gain/
Loss %
Cohen & Steers REIT and Preferred IncomeRNP2/2/2123.3425.901.12Monthly16%Hold
Consumer Discretionary Select Sector SPDRXLY2/2/21116.94179.370.79Quarterly54%Hold
First Trust Dow Jones Global Select
Dividend Index Fund
Invesco Aerospace & Defense ETFPPA4/1/2172.8772.590.11Quarterly0%Buy
Invesco S&P Global Water Index ETFCGW6/2/2154.0355.780.00Yearly3%Buy
SPDR S&P 500 ETF TrustSPY2/2/21218.25428.644.08Quarterly98%Hold
Vanguard Dividend Appreciation IndexVIG2/2/21105.13153.741.89Quarterly48%Sell a Half
Mutual FundsSymbolDate
Price on
Div Freq.Gain/
Loss %
Artisan Mid Cap Fund Investor ClassARTMX2/2/2137.2953.660.00Yearly44%Hold
Fidelity BalancedFBALX2/2/2123.8831.540.12Quarterly33%Hold
Sold Positions
Date SoldPrice
Div Freq.Dividends
Loss %
cbdMD, Inc.YCBD2/2/213/31/
Clean Ener-gy Fuels Corp.CLNE2/2/213/2/212.6313.660.00419%
Conagra Brands, Inc.CAG2/2/218/3/2129.8733.33Quarterly0.5914%
Investors Bancorp, Inc.ISBC7/6/218/3/2113.9013.72Quarterly0.140%
Orange S.A.ORAN5/4/217/7/2112.6111.16Semi Annually0.00-12%
Unilever PLCUL2/2/215/3/2142.8459.12Quarterly0.0038%
Date SoldPrice
Div Freq.Dividends
Loss %
Technology Select Sector SPDRXLK2/2/213/2/2142.01133.88Quarterly0.00219%
Mutual FundsSymbolDate
Date SoldPrice
Div Freq.Dividends
Loss %
T. Rowe Price Blue Chip GrowthTRBCX2/2/214/1/202190.40169.55Yearly0.0088%
Needham Small Cap Growth Retail ClassNESGX2/2/215/5/202114.6127.28Yearly0.0087%
Fidelity Select Industrials PortfolioFCYIX3/2/216/2/2137.9537.66Quarterly0.731%
Cohen & Steers Infrastructure Fund, IncUTF2/2/216/24/2137.9527.85Monthly0.62-25%

The More You Know | WSBS 1021

As the economy has been recovering, corporations are cash-flow positive from the rise in earnings. Right now, non-financial companies hold $2.6 trillion in cash, or about 5% of their total assets. So, what do they do with that excess cash? They have several options, including:

  • Expand their business
  • Pay dividends
  • Buy back shares

At some point, most companies manage to undertake all three of these strategies. In today’s marketplace especially, we are seeing increases in dividend payouts as well as rising stock buybacks.

Some analysts love dividends; others favor buybacks. But many investment pros like both. I’m in that category. Look, anything that adds value to shareholders’ wealth is good in my book.

And both dividends and buybacks do that. Take a look at this chart from Bloomberg. It illustrates this concept. Dividend and buyback stocks started outperforming the S&P 500 in early 2021.


Why Should a Shareholder Care?
Dividends are essentially a profit-sharing plan. You know (for the most part) when they will be paid. And dividends have amounted to about 41% of total shareholder return since 1932, according to Hartford Funds.

The biggest drawback is the double taxation of dividends. First, they are taxed before a corporation pays them to shareholders. And then shareholders are taxed when you receive them. Of course, there are some ways to reduce that tax bite, including putting your dividend-paying shares into a retirement plan in which you can defer them until later, when your tax obligations should be lighter.

Alternatively, a buyback is when a company purchases its own stock—in the open market—just like investors do. The reason that investors like buybacks is because they reduce the number of shares outstanding, meaning that EPS will be higher, and so will a company’s profitability measures, such as Return on Equity and Cash Flow per Share. And very importantly to shareholders—climbing EPS will often lead to rising share prices. Lastly, there’s no immediate tax on buybacks; you only get hit with tax when you sell your shares at a profit.

The timing of a buyback is also important. Companies want their buybacks to look like a show of strength—confidence in the company’s future. And while share prices can—and often do—rise after a buyback, if, for some reason, they took a dive, the buyback may be considered a failure.

And if the shareholders believe the company should be investing its excess cash back into the growth of a company instead of repurchasing shares, the buyback could backfire.

Also, a company might be using buybacks to camouflage the number of shares it is handing out to its top executives in the form of stock options. The buybacks may balance out the options issuance, keeping the total number of shares constant, and essentially not benefiting the shareholders.

Which Method Rewards Shareholders the Most?
Goldman Sachs says that buybacks will reach $720 billion by the end of 2021. And according to Janus Henderson, dividends are expected to rise to $1.39 trillion this year.

The following chart shows the positive strategies of owning stocks that pay dividends and/or utilize buybacks since 1999.

Standard & Poors - Dividends and Buybacks

Total shareholder return of both buybacks and dividends in Q4 2020 rose, by 14.7%, to $249.4 billion.

Historically speaking, from January 2000 to June 2015, the return for both indexes was almost identical, with the Buyback Index gaining 9.90% and the Dividend Aristocrats Index up 9.89%.

So far this year, the S&P 500 Dividend Aristocrats (SPDAUDP) has returned 5.8%, a bit better than the SPDR S&P 500 Buyback ETF’s (SPYB) 4.98%. But, the 1-year total return has the Buyback Index whipping the Aristocrats —18.46% compared to 7.2%.

Bottom line, both buybacks and dividends can be very profitable for investors. Both strategies can pay off in enhanced returns to shareholders.

The next Wall Street’s Best Stocks issue will be published on November 2, 2021.

Cabot Wealth Network
Publishing independent investment advice since 1970.

President & CEO: Ed Coburn
Chief Investment Strategist: Timothy Lutts
Cabot Heritage Corporation, doing business as Cabot Wealth Network
176 North Street, PO Box 2049, Salem, MA 01970 USA
800-326-8826 | |

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