Top Picks – Updates 843

Sold: Cassava Sciences, Inc. (SAVA) | Daily Alert June 25
SAVA has performed well, and we expect it to go higher—maybe a whole lot higher.

This market is trading at all-time highs, and we want to protect our gains, and a lot of stocks are selling off.

On May 10th, the company reported that it has initiated a 6-month Cognitive Maintenance Study (CMS) targeting 100 subjects. The results of that study and the results of its planned 3rd phase trial, if positive, could push the stock up another hundred points. And if Cassava gets FDA approval, it could move it another 100-200 points. When Biogen received approval for its Alzheimer’s drug, the stock moved from 270 to 460 intraday—in two days. It now trades at 396, and we think Cassava’s drug is superior to Biogen’s.

We bought the SAVA Jun 18 2021 75 Calls on June 15.

We sold Cassava stock at 79.42 on June 17. Nancy’s note: we recommended SAVA at 12.97 in our January 2021 issue #837. Great job, Joe!

SAVA-061521
Joseph Cotton, Cotton’s Technically Speaking, cottonstocks.net, 727-289-4436, June 15 & 17, 2021

Sold: JetBlue Airways Corporation (JBLU) | Daily Alert July 1
JetBlue’s revenue of $8.1 billion in 2019 makes it a niche flyer compared to the much larger $45 billion in revenues for major legacy carriers and about $22 billion for Southwest Airlines.
Our original thesis on JetBlue played out. With widespread vaccinations in the U.S., consumers (and eventually business travelers) are returning to flying. Recent first-quarter results were encouraging.
We recently sold our position in JetBlue with a healthy profit. Our decision was based partly on valuation and partly on fundamentals. Fundamentally, two new discount airlines are launching this year, and major airlines are becoming more aggressive, raising the specter of new price wars and a collapse of pricing discipline. Also, fuel costs have risen this year along with oil prices, creating a profit margin headwind for 20-25% of its cost structure.
Bruce Kaser, Cabot Undervalued Stocks Advisor, cabotwealth.com, 978-745-5532, June 22, 2021

Sold: U.S. Bancorp (USB)
Unlike its larger peers, it has essentially no investment banking or trading operations. When we purchased USB shares, they were out of favor as investors worried about a potential surge in credit losses due to the pandemic as well as weak earnings due to the low-interest-rate environment.

Our thesis on USB shares played out. Loan losses have remained small, such that the bank is now gradually releasing some of its vast credit reserves. Strong profits have helped add to its already-robust capital. The bank recently commenced a new $3 billion share buyback program.

We recently sold our USB shares at a healthy profit, partly on valuation and partly on fundamentals. The shares had reached our price target, which was set at about 2.4x tangible book value.

Credit and operating costs have little room for improvement. While an increase in interest rates would boost profits, the bank’s bloated deposit base won’t likely be matched by faster lending (common among all banks), weighing on its net interest margin.

The bank remains exceptionally well managed, has attractive payments, investment management and other services businesses and a dividend yield that is modestly above market. But, we saw the overall risk/return trade-off as unfavorable.
Bruce Kaser, Cabot Undervalued Stocks Advisor, cabotwealth.com, 978-745-5532, June 22, 2021

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