Guiding Investors for 75 Years FORECASTS

751946

2021

Guiding Investors for 75 Years

DOW THEORY

FORECASTS?

Vol. 77, No. 45, November 8, 2021 S to c k M a r k et Tr e n d s & S e c ur i t i e s R e p o r t s S in c e 19 4 6



Plug and play

The utility sector has long-held appeal to dividend investors. But given the likely transition toward electric vehicles in the coming decade, could utilities become an attractive space for growth investors as well? The shift toward electric vehicles, which require drivers to plug in rather than fuel up, could charge utilities' growth potential.

More than 10 million electric cars cruised roads around the world last year, up 43% from 2019, according to the International Energy Agency (IEA). About 17% of those vehicles were in the U.S, compared to 45% in China and 32% in Europe.

Some of the biggest purchasers of electric vehicles are businesses and cities. ($3,384; AMZN) ordered 100,000 electric commercial vehicles last year, while UPS ($213; UPS) ordered 10,000 in 2019. The city of Austin, Texas, plans to spend $650 million over 20 years for electric buses and a charging facility.

There is still a long runway for growth in coming decades. Less than 1% of U.S. vehicles are currently electric. But that share should reach 15% by 2030, estimates the U.S. Department of Energy. In August, Ford ($19; F),

Continued on page 2

Income vehicles come up big so far this year

With the S&P 500 Index up 24% this 49% so far this year, while the FTSE

year, most investors with diversified NAREIT All REITs Index returned

portfolios of large-cap stocks have 31%. Those robust returns helped ease

done well. Of course, many of you the pain alternative-income inves-

who invest with

tors encountered

income in mind

last year, when the

may own a lot of

MLP index lost

INCOME SPOTLIGHT stock alternatives

such as real estate

29% and the REIT index 6% -- in-

investment trusts

cluding dividends

(REITs) and master limited partner- -- versus an 18% return for the S&P

ships (MLPs).

500.

Fortunately for those of you who

Since the end of 1995, REITs have a

seek alternative income sources, RE- slight edge. However, owners of REITs

ITs and MLPs have performed even and MLPs need a stronger stomach,

better, as shown below. The Alerian

MLP Index managed a total return of

Continued on page 4

REITs, MLPs ENJOY EDGE THIS YEAR

Year-to-date

49%

total returns

Annualized total return since 1995

10.1%

10.4%

10.2%

31% 24%

Alerian FTSE All S&P 500 MLP index REITs Index Index

Alerian FTSE All S&P 500 MLP index REITs Index Index

The Alerian MLP Index, FTSE All REIT Index, and S&P 500 Index have all generated total returns between 1,100% and 1,200%, or an annualized 10.1% to 10.4%, since the end of 1995, with the REIT index in the lead and the other two roughly neck and neck. So far this year, MLPs have outperformed, with the Alerian index returning 49% and the S&P 500 in the rear with a still-impressive 24%.

Dow Theory Forecasts is an independent investment adviser and makes no commissions on the stock transactions of its subscribers.

Plug and play

Continued from page 1

General Motors ($56; GM), and Stellantis (parent of Chrysler) said they expect electric vehicles to account for 40% to 50% of U.S. sales by 2030. Additionally, GM plans to stop selling new gasoline-powered cars and light trucks by 2035.

Obviously, such developments should increase demand for electric utilities. To travel 100 miles, electric vehicles typically require the same amount of electricity an average American home uses each day. If all Americans switch to electric vehicles, the U.S. would need roughly 25% more electricity than it currently uses. The electrification of all sectors of the U.S. economy could increase electrical consumption by nearly 40%, estimates the U.S. Department of Energy.

To meet surging electrical needs, utilities will likely ramp capital expenditures to expand their power grids. But the cost of these capacity upgrades could be curtailed if utilities find ways to smooth out electrical demand -- such as encouraging drivers to charge their cars during the day, when solar power is plentiful. Higher electrical demand, combined with potential new unregulated products -- such as providing maintenance to customers' charging stations -- could boost utilities' cash flows for years to come.

We aren't ready to call utilities growth stocks. But get back to us in a few years.

The Dow Theory is a method of interpreting and classifying general market trends and does not directly encompass the selection or rating of individual stocks or the duration of market movements. Dow Theory Forecasts endeavors to supply its subscribers with sound opinions and advice based on its analysis of public information from sources believed to be reliable. The opinions and advice of Dow Theory Forecasts are not based on the individual investment objectives of subscribers. It should not be assumed that present or future recommendations will be profitable or will equal past performance. Horizon Publishing Company (HPC), its employees, officers, inside directors and its affiliates (collectively, "Horizon") may buy or sell securities recommended by its newsletters for itself or themselves at any time except for securities considered "small-capitalized". Horizon cannot effect trades in such securities earlier than the beginning of the second full day after HPC's recommendations of smallcapitalized securities are made available to subscribers. A

MORE AMERICANS ARE PLUGGING, NOT PUMPING

U.S. electric car stock (millions)

PHEV (plug-in hybrid electric vehicle)

0.57

0.60

0.48

0.36 0.27 0.20

BEV (battery electric vehicle)

1.10 0.88

0.64

0.20

0.30

0.40

2015

2016

2017

2018

2019

2020

More than 10 million electric cars prowled roads around the world last year.

About 1.7 million of those vehicles operated in the U.S., more than four times

higher than in 2015. Battery electric vehicles (BEV) rely entirely on electricity,

while plug-in hybrid electric vehicles (PHEV) use both electricity and fuel.

Source: International Energy Agency.

TOP 15 UTILITIES PORTFOLIO

Company (Price; Ticker)

?? Dividend ?? 5-Year Annual.

Yield Growth

YearTo-Date Trailing Total P/E Ratio Return

Atmos Energy ($93; ATO) Comcast ($53; CMCSa) DTE Energy ($113; DTE) Duke Energy ($103; DUK) Entergy ($103; ETR)

2.7% 8%

1.9 13

3.4

7

3.8

3

3.9

2

18

0%

17

3

16 12

19 15

17

6

Evergy ($64; EVRG)

3.4

6

Fortis ($45; FTS)

3.7

6

MDU Resources ($31; MDU) 2.7

3

National Fuel ($58; NFG)

3.2

2

OGE Energy ($35; OGE)

4.7

8

18 18 21 13 15 20 15 44 16 14

Otter Tail ($65; OTTR)

2.5

4

Portland General ($50; POR) 3.5

6

Public Service Ent. ($63; PEG) 3.2

5

UGI ($45; UGI)

3.1

8

Verizon Commun. ($53; VZ) 4.8

2

19 55 20 20 18 12 14 30 10 -6

Portfolio average

3.4

6

17 17

Note: Quadrix scores are percentile ranks, with 100 the best.

?? Quadrix Scores ?? Momen-

tum Value Overall

54 60 59 38 70 48 53 61 46 37 50 43 37 60 39

48 61 55 18 53 35 43 70 64 72 62 82 34 61 46

91 52 86 54 64 58 37 47 42 50 79 69 40 87 74

47 62 56

small-capitalized security is defined as meeting one of the following criteria: 1) a market capitalization of less than $300 million or 2) a three-month average daily trading volume of less than 200,000 shares, and a market capitalization of less than $1 billion.

Editor, Director of Research Richard J. Moroney, CFA Managing Editor, Analyst Robert A. Sweet, CFA Contributing Editors, Analysts Charles B. Carlson, CFA David A. Wright, CFA

David B. Walle, CFA

Dow Theory Forecasts (ISSN 0300-7324 USPS 997-000) published weekly by Horizon Publishing Company, 7412 Calumet Ave, Hammond, Indiana 46324-2692. Subscription Rate $289 a year. Back issues are available for $10

each by writing to the address above, or free to our subscribers on our website at . Visit us on Facebook at dowtheoryforecasts. Periodicals postage paid at Hammond, Indiana, and at additional mailing offices. When you move -- Please notify us three weeks in advance of any change in address. This will insure uninterrupted service. Periodically we rent our mailing list to companies with products that may be of interest to subscribers. If you would prefer not to be included in these mailings, please notify us in writing.

POSTMASTER: Send address change to Dow Theory Forecasts, 7412 Calumet Avenue, Hammond, Indiana 46324-2692. Copyright 2021 Horizon Publishing Company. Any reproduction without written authorization is prohibited. If you have any questions about your subscription, please write us at the address above or phone us at (800) 233-5922 or (219) 852-3200.

MetaStock is a registered trademark of Equis Int'l.

2

Dow Theory Forecasts, November 8, 2021

MARKET COMMENTARY

Transports surge to new highs DOW INDUSTRIALS

The Dow Industrials, Dow Transports, and S&P 500 Index closed at all-time highs on Nov. 2, reconfirming the bullish primary trend under the Dow Theory. Our buy lists have 92% to 96% in stocks.

Upside breakout

For critics of the Dow Theory and its insistence on clear-cut highs and lows from the averages, the week ended Nov. 2 was a textbook example of an "overly rigid" approach to market-timing.

On Oct. 26, with the Dow Industrials and S&P 500 Index having already reached new highs, the Dow Transports closed just seven points below its May high of 15,943.30. The Transports flirted with that high over the next four days, closing Nov. 1 less than a point from fresh highs. On Nov. 2, spurred by a 108% one-day surge in Avis Budget Group ($298; CAR), the Transports jumped nearly 1,100 points, or 7%.

Does it really make sense to follow the Dow Theory, when its conclusions hinge on minuscule movements and a shortcovering rally in a single stock? For our money the answer is yes, for at least four reasons: The Dow Theory is a system, and a system needs clear rules. Without such rules, users will be tempted to let their own views of the market color their interpretation of the market's action. That goes against the central idea of the Dow Theory -- letting the averages tell the story. Perhaps more important, without clear rules it's impossible to grade the Dow Theory's accuracy, or make changes to improve its effectiveness. New highs are not nothing. While 15,943.30 and 15,943.09 may seem equivalent, history suggests a move above previous highs usually indicates that the majority money opinion is bullish. On May 7, when the Transports closed at 15,943.30, investors were overwhelmingly positive on the outlook for the economy. As the average flirted with that level over the past week, investors doubting that outlook had a chance to sell at prices set amid widespread optimism. Yet the bulls prevailed, suggesting the majority money opinion believes that the profit outlook for transportation companies continues to improve. The Dow Theory was already in the bullish camp. The new highs in the Transports do not indicate a new bull market; they merely signal that the bull market that began last year continues. In other words, the burden of proof remains on the bears. Other indicators are also breaking to new highs. The Russell 2000, S&P SmallCap 600, and S&P MidCap 400 indexes have all broken out of extended trading ranges. The S&P 1500 advance-decline line, a running daily total of advancing minus declining stocks in the broad S&P 1500 Index, also reached fresh highs. So have cyclical areas like financials, industrials, and semiconductors.

Mar Apr May Jun Jul Aug Sep Oct

DOW TRANSPORTS

36,000 34,800 33,600 32,400 31,200

16,800 16,000 15,200 14,400 13,600

Mar Apr May Jun Jul Aug Sep Oct

S&P INDEXES

% change since 3/1/21

S&P 500 Index (large-cap)

20%

S&P MidCap 400 Index

15

10

5

S&P SmallCap 600 Index

0

Mar Apr May Jun Jul Aug Sep Oct

S&P 1500 ADVANCEDECLINE LINE

Running daily totals of advancing S&P 1500 stocks minus declining S&P 1500 stocks

8,800 6,600 4,400 2,200

0

Mar Apr May Jun Jul Aug Sep Oct

S&P 1500 SECTOR INDICES

Financials sector 18%

9

Industrials sector

0

Semiconductors & equipment group -9

% change since 3/1/21

Mar Apr May Jun Jul Aug Sep Oct

Charts by MetaStock ?

Dow Theory Forecasts, November 8, 2021

3

Income vehicles come up big

Continued from page 1

as both the REIT and MLP indexes showed more month-to-month volatility than the S&P 500. On average, the REITs in our Alternative Income Watch List earn Quadrix? Overall scores of 42, while MLPs average 60. We make a deeper dive into MLPs on page 5.

We don't recommend any REITs or MLPs on our recommended lists, though we have done so at times in the past. Investors interested in REITs or MLPs should review our Alternative Income Watch List ( Go/Alt); focus on the A-rated options.

NOT ALL REITs CREATED EQUAL

Average year-todate total return

42.4% 35.0%

52.0% 53.7% 32.8%

Diversified

3.6% 17.2%

Health Hotel & Induscare resort trial

17.2% Office

Retail

Residential

Specialty

32.4%

Average REIT

Specialty REITs -- a 21-member group that includes companies that generate revenue from such varied properties as storage units, billboards, tracts of forest land, communications infrastructure, and data centers -- account for 42% of the market capitalization of the 108 REITs in the S&P 1500 Index. Because of the segment's size, the performance of specialty REITs often skews the group -- but so far this year, they've averaged total returns of 33%, in line with the average REIT. Residential, retail, and industrial REITs have set the pace, while the REITs focused on health care, hospitality, or office space lagged.

REITs WORTH WATCHING

Company (Price; Ticker)

Market Value Dividend Yield (Billions)

????????????? Quadrix Scores ?????????????

12-

Momen-

Factor Reranked

tum Value Quality Overall Sector Overall

Rank

Industry

Alexandria RE Equities ($208; ARE) $4.48 2.2% $32.2

American Tower ($281; AMT)

5.24 1.9 127.8

AvalonBay Communities ($237; AVB) 6.36 2.7 33.0

Camden Property Trust ($163; CPT)

3.32 2.0

16.7

Duke Realty ($56; DRE)

1.12 2.0 21.4

29 24 79 42 43

18

38 21 84 46 48

25

70 20 46 48 71

59

84

9 27

42

68

86

57 10 54 41 57

52

A Office A Specialized B Residential B Residential A Industrial

Equity LifeStyle Properties ($85; ELS) 1.45 1.7 15.6

Equity Residential ($85; EQR)

2.41 2.8 31.7

Essex Property Trust ($336; ESS)

8.36 2.5 21.8

Extra Space Storage ($199; EXR)

5.00 2.5 26.7

Federal Realty Investment ($128; FRT) 4.28 3.3 10.0

53 19 52 38 68

45

90 16 33 52 81

88

88 15 47 57 98

90

75 17 76 63 87

66

95 20 30 50 58

74

B Residential B Residential A Residential A Specialized B Retail

Iron Mountain ($48; IRM) Kilroy Realty ($70; KRC) Kimco Realty ($24; KIM) Lamar Advertising ($122; LAMR) Macerich ($22; MAC)

2.47 5.1 13.5

2.08 3.0

8.1

0.68 2.8 14.7

2.50 2.1 12.3

0.60 2.8

4.6

84 37 74 74 84

80

41 42 60 48 57

38

88 26 21 49 89

78

96 26 44 60 98

93

71 51

2 44 94

76

A Specialized B Office A Retail B Specialized B Retail

Medical Properties Trust ($21; MPW) 1.12 5.3

Mid-America Apartment ($203; MAA) 4.10 2.0

National Retail Properties ($46; NNN) 2.12 4.6

Omega Healthcare Investors ($30; OHI) 2.68 9.0

Prologis ($148; PLD)

2.52 1.7

12.6 23.4 8.2 7.1 109.2

16 46 51 35 42

22

69 14 42 46 86

79

74 43 36 56 61

72

31 55 25 28 36

30

56 12 55 44 62

52

B Health care A Residential B Retail B Health care A Industrial

Public Storage ($333; PSA)

8.00 2.4 58.3

Realty Income ($72; O)

2.83 3.9 40.9

Simon Property Group ($166; SPG)

6.00 4.0 54.6

SL Green Realty ($74; SLG)

3.64 4.9

5.0

Summit Hotel Properties ($10; INN) 0.00 0.0

1.1

77 16 50 59 76

82

65 23 33 41 38

59

87 28 22 54 77

87

24 73 64 50 32

17

88 18

5 36 39

83

A Specialized B Retail B Retail B Office B Hotel & resort

UDR ($55; UDR) VICI Properties ($30; VICI) W.P. Carey ($78; WPC) Weyerhaeuser ($38; WY)

1.45 2.6

17.1

1.44 4.8 18.7

4.21 5.4

14.6

0.68 1.8

27.1

91

9 29

45

90

87

36 56 70 49 44

22

67 29 43 47 53

63

46 81 76 70 69

33

B Residential B Specialized B Diversified A Specialized

REIT average *

3.1 23.3

61 28 40 42 55

52

Note: Quadrix scores are percentile ranks, with 100 the best. 12-Factor Sector and Reranked Overall scores were specifically designed to compare REITs to other REITs, not the broader real estate sector. * Includes companies not in table.

4

Dow Theory Forecasts, November 8, 2021

MLPs outperform every sector but energy

Energy stocks led the S&P 1500 Index's 11 sectors this year, averaging an 84% total return, nearly tripling the average of 31% for stocks in the broad index. If the 22 master limited partnerships (MLPs) in our Alternative Income Watch List were their own sector, they would rank second, with an average total return of 57%.

The main appeal of MLPs is their massive dividends -- the group averages a yield of 7.1%. MLPs do not pay corporate income tax and tend to pass most of their profits on to investors through cash distributions. MLPs must generate at least 90% of cash flows from "qualifying sources," such as natural resources, chemicals, and some forms of financial services.

Most MLPs focus on midstream energy operations, such as pipelines and storage. About two-thirds of the MLPs that we monitor hail from the energy sector. As for the nonenergy MLPs, Star Group ($11; SGU) and Suburban Propane Partners ($15; SPH) distribute propane and reside in

MLPs PAY MORE, RETURN LESS

The 22 master limited partnerships (MLPs) in our Alternative Income

Watch List offer superior dividend yields and lower P/E ratios relative to other

S&P 1500 Index energy stocks, but have generated weaker total returns. All

numbers are averages.

Div.

Group

Yield

??? P/E Ratio ??? Estimated

Trailing Next Year

Earnings ??? Per Share ??? 12-Month Est. 2022 Change Change

? Total Return ? Past 3 YearMonths To-Date

MLPs we cover

7.1% 13

13

S&P 1500 Energy stocks 2.2

26

15

S&P 1500 Index stocks 1.5

23

21

-6% 15%

0

18

20

20

12% 51% 21 84 5 31

the utilities sector. AllianceBernstein ate strong growth next year, setting

($56; AB) is an investment man- the stage for investors to collect

ager. Cedar Fair ($49; FUN) operates higher dividends. The average MLP

amusement parks and resorts. Icahn is expected to generate 15% higher

Enterprises ($58; IEP) is a sprawling earnings per share in 2022, versus

conglomerate

18% growth for en-

that manages

ergy stocks. Energy

private invest-

stocks also have an

INCOME SPOTLIGHT ment funds,

along with op-

edge in projected revenue growth,

erating in the

28% versus 23%

oil-refining, metals, food-packaging, for MLPs alone, though expectations

home-fashion, real estate, and phar- for both groups are unusually high.

maceutical markets.

MLPs rated A (above average) and B

MLPs appear positioned to gener- (average) are listed below.

MLPs WORTH WATCHING

Below, we list master limited partnerships (MLPs) rated come Watch List. Most hail from the energy sector, though A (above average) or B (average) in our Alternative In- a handful come from the financials or utilities sectors.

Company (Price; Ticker)

Market Value (Millions) Dividend Yield

??? P/E Ratio ??? Estimated

Trailing Next Year

YearTo-Date ????? Quadrix Scores ????? Price MomenChange tum Value Quality Overall

Industry

Rating

Alliance Resource Part. ($11; ARLP) $1,428 $0.80 7.0% 10

5

AllianceBernstein ($56; AB)

5,542 3.56 6.3

16 15

Cheniere Energy Part. ($43; CQP) 21,157 2.72 6.3

18 12

DCP Midstream ($32; DCP)

6,463 1.56 4.9

15 11

155% 67 23 70

86 93 33 96 51 38 83 68 74 52 85 81 52 60 19 53

Coal & fuels A Asset mgmt. A Oil storage B Oil storage B

Energy Transfer ($10; ET)

26,589 0.61 6.2

5

7

59

56 99 32 68 Oil storage B

EnLink Midstream ($7; ENLC)

3,860 0.38 5.2 NM 40

99

57 65 11 58 Oil storage B

Enterprise Products ($22; EPD) 48,494 1.80 8.1

10 10

13

46 74 50 63 Oil storage B

Holly Energy Part. ($18; HEP)

1,887 1.40 7.9

9

8

25

56 87 32 60 Oil storage B

Magellan Midstream ($51; MMP) 11,264 4.16 8.2

11 12

19

79 64 53 78 Oil storage A

MPLX ($31; MPLX)

31,937 2.75 16.5

11 11

43

60 75 73 87 Oil storage A

Phillips 66 Partners ($39; PSXP)

8,716 3.50 9.1

11

9

46

39 58 50 53 Oil storage B

Plains All American ($11; PAA)

7,604 0.72 6.8

11

8

29

27 83 17 37 Gas utilities B

Star Group ($11; SGU)

438 0.57 5.1

8 NA

18

25 96 93 88 Gas utilities A

Suburban Propane Part. ($15; SPH) 965 1.25 8.2

29 10

3

48 96 52 84 Oil refining B

Sunoco ($41; SUN)

3,467 3.32 8.0

11 10

44

37 80 60 62 Oil storage A

Western Midstream Part. ($22; WES) 8,960 1.26 5.8

10

8

57

37 86 49 75 Oil storage A

MLP average *

9,574

7.1

13 13

42

50 67 38 60

Note: Quadrix scores are percentile ranks, with 100 the best. * Includes companies not in table. NA Not available. NM Not meaningful.

Dow Theory Forecasts, November 8, 2021

5

Rank changes

With its broad portfolio of insurance products, Chubb ($192; CB) is being upgraded to the Focus List. For the 12 months ended September, Chubb grew per-share profits 87%, sales 12%, and operating cash flow 28%. Benefiting from an impressive September-quarter report, the shares have rallied 9% in the past month and are now up 25% for the year. Yet the stock trades at just 13 times estimated 2022 earnings, projected to grow 18% -- and analyst estimates have risen sharply in the past month. Yielding 1.7%, Chubb is also a Long-Term Buy. ON Semiconductor ($58; ON) joins the Buy and Long-Term Buy lists. ON designs semiconductors for a diverse range of end markets, including automotive, medical, aerospace, networking, and industrials. Analyst estimates are up sharply since ON's September-quarter report, with the consensus now targeting 16% profit growth in 2022 on revenue growth of 6%. ON shares trade below 18 times estimated 2022 profits, versus the median of 23 for S&P 1500 Index semiconductor stocks. Comcast ($53; CMCSa) is being dropped from the Buy and Long-Term Buy lists after a decent Septemberquarter report failed to bring the stock out of its malaise of weak share-price action and poor Quadrix? scores. Comcast earns an Overall score of just 48, dragged down by subpar ranks for Momentum, Earnings Estimates, and Performance. Comcast is now rated B (average). Ally Financial ($50; ALLY) is being dropped from the Focus List. Ally says its auto-financing business remains robust, noting strong pricing and the highest flow of loan applications in 15 years. But management expects demand to eventually normalize, resulting in loan originations potentially falling about 10% next year. Analyst estimates are rising and seem achievable, with the consensus calling for 15%

RANK CHANGES

Chubb ($192; CB) is joining the Focus List, replacing Ally Financial ($50; ALLY), which remains a Buy and a Long-Term Buy. We are adding ON Semiconductor ($58; ON) to the Buy and Long-Term Buy lists, while Comcast ($53; CMCSa) comes off the Buy and Long-Term Buy lists and is currently rated B (average). Qualcomm ($139; QCOM) is joining the Buy List, while Qorvo ($178; QRVO) comes off the Focus and Buy lists but remains a Long-Term Buy.

* * * * * Check for rank changes and market updates on our twice-weekly hotlines, updated Wednesdays after the market's close and Fridays around noon Central time. Go to or call (800) 931-2295. For November, the passcode for the telephone hotline is 422.

lower earnings per share next year on 5% sales growth. Ally, yielding 2.0%, remains a Buy and a Long-Term Buy. We are adding Qualcomm ($139; QCOM) to the Buy List after the semiconductor maker posted an outstanding September quarter and gave impressive guidance for the current quarter. Adjusted earnings per share surged 76% to $2.55, surpassing the consensus of $2.26. Sales grew 12% to $9.34 billion, also ahead of the consensus. For the December quarter, Qualcomm expects earnings per share of $2.90 to $3.10, up 34% to 43%, and revenue of $10.0 billion to $10.8 billion, implying 22% to 31% growth. The then-consensus projected earnings of $2.59 per share on revenue of $9.73 billion. Qualcomm, earning a Quadrix Overall score of 92, is also a Long-Term Buy. Qorvo ($178; QRVO) said adjusted earnings per share climbed 41% to $3.42 in the September quarter, topping the consensus of $3.25. Sales grew

6

Dow Theory Forecasts, November 8, 2021

18% to $1.26 billion. At its midpoint, Qorvo's December-quarter forecast calls for per-share profits of $2.75, down 11%, and revenue of $1.11 billion, up 1%, both below expectations. The weak guidance reduces our confidence that Qorvo can outperform over the next year. We are dropping the stock from the Focus and Buy lists, though it remains a Long-Term Buy.

Earnings reviews

Health care

For the September quarter, Charles River Laboratories International ($388; CRL) said earnings per share grew 16% to $2.70 excluding special items to top the consensus estimate by $0.12. Sales advanced 21% to $896 million, missing the consensus. Reflecting divestitures in Sweden and Japan and a weaker tailwind from foreign exchange, Charles River lowered its 2021 sales outlook. Charles River slumped on the report but remains a Focus List Buy and a Long-Term Buy. ICON's ($276; ICLR) grew adjusted earnings per share 33% to $2.55 in the September quarter, exceeding the consensus of $2.39. Sales surged 167% to $1.87 billion, also ahead of the consensus. The backlog grew 14% to $18.6 billion. ICON, which raised its 2021 outlook, remains a Buy and a Long-Term Buy. Laboratory Corp. of America ($287; LH) reported Septemberquarter earnings per share of $6.81 excluding special items, down 19% but $1.90 above the consensus. Revenue climbed 4% to $4.06 billion, also comfortably ahead of analyst estimates. LabCorp raised its fullyear guidance, implying 13% profit growth and 13.5% higher sales at the midpoint of its target ranges; both data points topped consensus estimates. LabCorp is a Buy and a Long-Term Buy. PerkinElmer ($174; PKI) grew adjusted earnings per share 11% to $2.31 for the September quarter, exceeding the consensus by $0.56. Sales, up 21% to $1.17 billion, also surpassed

analyst forecasts. For the December quarter, management targets earnings per share of $2.05, down 48%, on revenue of $1.2 billion, down 11%. The consensus projected per-share profits of $1.76 and sales of $1.06 billion at the time of the announcement. PerkinElmer is a Long-Term Buy.

Consumer discretionary

LKQ ($57; LKQ) increased adjusted earnings per share 36% to $1.02 in the September quarter, surpassing the consensus by $0.16. Revenue advanced 8% to $3.30 billion. The company raised its 2021 guidance for per-share profits to a range with a midpoint of $3.83, implying 50% growth and above the then-consensus of $3.69. LKQ also initiated a quarterly dividend of $0.25 per share, payable Dec. 2. LKQ is a Focus List Buy and a Long-Term Buy.

Technology

Apple's ($151; AAPL) Septemberquarter earnings per share jumped 70% to $1.24, matching the consensus. Sales climbed 29% to $83.36 billion but fell short of analyst forecasts. Apple expects sales growth in the December quarter but declined to offer specific guidance. At the time of the announcement, the consensus targeted 7% higher sales, but that estimate dropped to 5% in the days following the report. Apple is a Focus List Buy and a Long-Term Buy.

Utilities

MDU Resources ($31; MDU) reported September-quarter earnings per share of $0.68, down 11% and $0.14 below the consensus. Revenue slipped 1% to $1.59 billion, also below analyst forecasts. MDU blamed the disappointing quarter on rising costs, labor constraints, poor weather in some areas, and adjusted estimates for a construction-services contract. MDU lowered its full-year profit target in response to the shortfall, though the December-quarter profits implied by

BUYS AND LONGTERM BUYS

The Buy List represents our top choices for 12-month gains. Focus List stocks, listed in bold, represent the best picks among that group. Long-Term Buys are our top choices for 24- to 48-month gains.

If you want your equity portfolio to track the Buy List or Long-Term Buy List, purchase each of the stocks below in the proportion suggested by the target weight. To represent the cash portion of your equity portfolio, hold 7.6% (Buy List) or 4.5% (Long-Term Buy List) in the Vanguard Short-Term Corporate Bond ($82; VCSH) exchange-traded fund.

If you are copying the Focus List, hold a 7.6% fund position and put the rest into equal-dollar positions in the Focus List stocks.

Company (Price; Ticker)

? Adobe ($655; ADBE) Ally Financial ($50; ALLY)

? Alphabet ($2,932; GOOGL) ? Apple ($151; AAPL) ? Applied Materials ($143; AMAT)

Target Weight Buy LT Buy List List

3.1% 2.9% 3.1 2.9 3.5 3.3 3.5 3.3 3.5 3.3

Estimated ??? Current Year ??? Div. Sales EPS P/E Yield Growth Growth Ratio

0.0% 22% 23% 53

2.0 21 180

6

0.0 39 83 27

0.6 3 1 27

0.7 36 65 21

Quadrix Overall 52-Wk. Score Range

83 $674 - $421 94 57 - 27 87 2,973 - 1,694 68 157 - 109 90 146 - 61

Charles River Labs. ($388; CRL) 3.5 3.3 0.0 22 26 38 54 460 - 224

Chubb ($192; CB)

3.5 3.3 1.7 12 67 16 94 198 - 131

Danaher ($311; DHR)

3.5 3.3 0.3 30 55 32 84 334 - 211

Dell ($55; DELL)

2.9 0.0 11 14

6 83 58 - 31

Dover ($170; DOV)

3.5 3.3 1.2 17 33 23 56 176 - 113

FedEx ($240; FDX)

3.1 2.9 1.2 8 8 12 62 320 - 216

? Garmin ($143; GRMN)

3.1 2.9 1.9 19 11 25 52 179 - 109

? ICON ($276; ICLR)

3.1 2.9 0.0 94 41 30 68 302 - 169

J.P. Morgan Chase ($171; JPM) 3.1 2.9 2.3 2 76 11 83 173 - 99

LabCorp Of America ($287; LH) 3.1 2.9 0.0 14 12 11 89 310 - 193

? Lam Research ($581; LRCX) Lennar ($84; LENb)

? LKQ ($57; LKQ) MDU Resources ($31; MDU)

? Meta Platforms ($332; FB) NC

3.5 3.3 1.0 21 26 17 84 674 - 355

3.1 2.9 1.2 21 59

7 88 90 - 56

3.5 3.3 1.8 12 51 15 93 57 - 33

3.1 2.9 2.7 8 9 15 64 35 - 23

3.5 3.3 0.0 37 38 24 68 384 - 245

? Microsoft ($334; MSFT)

3.5 3.3 0.7 16 15 36 85 335 - 203

? NetApp ($90; NTAP)

3.5 3.3 2.2 9 23 18 89 95 - 45

ON Semiconductor ($58; ON) NEW 3.1 2.9 0.0 27 228 21 86 59 - 25

PerkinElmer ($174; PKI) ? Qorvo ($178; QRVO)

2.9 0.2 30 29 16 94 192 - 120 2.9 0.0 18 24 15 87 202 - 128

? Qualcomm ($139; QCOM)

3.1 2.9 2.0 52 98 17 92 168 - 122

Quanta Services ($117; PWR)

3.5 3.3 0.2 11 21 25 72 123 - 62

? Signature Bank ($325; SBNY)

3.1 2.9 0.7 24 45 22 76 327 - 71

Target ($260; TGT)

3.1 2.9 1.4 12 38 20 77 267 - 155

Thermo Fisher Scient. ($642; TMO) 3.5 3.3 0.2 15 19 28 87 643 - 434

UnitedHealth ($457; UNH)

3.1 2.9 1.3 11 12 24 74 466 - 315

? Nasdaq Stock Exchange. NEW Added to list. Recent rank change. Notes: Quadrix scores are percentile ranks, with 100 the best. NC Name change.

the guidance are roughly in line with expectations. For now, MDU remains a Buy and a Long-Term Buy.

Corporate roundup

Dell Technologies ($55; DELL) completed the spin-off of its 81% stake in VMware ($132; VMW) Nov. 1. Investors received 0.440626 shares of VMware for each share old Dell held. VMware also distributed a special

cash dividend of $11.5 billion to its shareholders. Dell is a Long-Term Buy. VMware is rated C (below average). Facebook ($332; FB) changed its name to Meta Platforms, signaling the company's push into a shared virtual environment called the metaverse. Starting Dec. 1, Meta shares will trade under ticker symbol MVRS. The stock, now called Meta Platforms, is a Focus List Buy and a Long-Term Buy.

Dow Theory Forecasts, November 8, 2021

7

ANALYSTS' CHOICE

Long-Term

Recent

P/E Shares Debt as % 52-Week

Price Dividend Yield Ratio (Millions) of Capital Price Range

$2,932 $0.00 0.0% 28 680

9% $2,973.00 - $1,694.00

With Alphabet, look past PR problems

Alphabet ($2,932; GOOGL) generates so much news that we could fill up this entire space with timely reportage, never touching on the Focus List Buy's investment merits, a topic we at the Forecasts find both more interesting and more important. But the news is real, and sometimes headline risk morphs into market risk.

So, with dual priorities in mind, we'll start with . . .

Why investors worry

Last month, Australia became just the latest government to target Alphabet on antitrust grounds, in this instance trying to limit how aggressively the company can use data gathered via online searches to market targeted ads. American, British, and EU regulators are mulling similar moves. Past antitrust actions have attacked: Contracts that require customers to use Alphabet's networks and products, muscling competitors out of its markets, particularly online advertising. The Google search engine's policies regarding which sites get top billing -- and favoring its own shopping comparison system. Dominant smartphone operating system Android's insistence that handset makers preinstall its preferred applications.

European regulators have proven themselves the most active Alphabet hunters, levying more than $9 billion in fines in recent years. Alphabet challenged all of these rulings in court and has yet to pay up.

While every one of the issues presented above could potentially drive Alphabet to alter its business practices, we don't worry much on that front, as most of the cases will take

ALPHABET

Chart by MetaStock?

2,750 2,200 1,650 1,100

2018

2019

2020

2021

Quarter

Sep '21 Jun '21 Mar '21 Dec '20

Per-Share Earnings *

$27.99 vs $16.40 27.26 vs 10.13 26.29 vs 9.87 22.30 vs 15.35

Sales Change

41% 62 34 23

Quarterly Price Range

$2,925.08 - $2,430.63 2,461.91 - 2,091.43 2,145.14 - 1,696.10 1,843.83 - 1,433.23

P/E Ratio Range

32 - 26 33 - 28 37 - 29 36 - 28

Year (Dec.)

Sales Per-Share Per-Share (Bil.) Earnings * Dividend

52-Week Price Range

P/E Ratio Range

2020 $182.5 $58.61 2019 161.9 52.38 2018 136.8 43.70 2017 110.9 32.01

$0.00 $1,843.83 - $1,008.87 0.00 1,367.07 - 1,022.37 0.00 1,291.44 - 977.66 0.00 1,086.49 - 796.89

31 - 17 26 - 20 30 - 22 34 - 25

* Earnings exclude special items. Quadrix scores are percentile ranks.

Quadrix Scores

Overall 87

Momentum 83

Value 37

Quality 98

Fin'l Strength 94

Earnings Ests. 71

Performance 84

Reversion 5

years to adjudicate, the company has the cash to pay fines if needed, and Alphabet has a long history of adapting to change without losing its edge. Let's look past the Everybody Hates Google show and consider . . .

Why investors should buy

Just about all of Alphabet's legal and regulatory challenges revolve around the fact that it has created digital platforms that have grown ubiquitous enough to afford the company massive negotiating leverage. That leverage has paid off in the form of incredible growth, with annualized gains of 21% in sales and 43% in pershare profits over the last decade.

Analysts target sales growth of 39% this year and 17% in 2022, with pershare profits up 83% and 4%, respec-

For six pages of statistical reports on Alphabet, visit Go/Page8.

tively. Since the company topped the September-quarter profit consensus by 20%, analyst targets for 2022 and 2023 have risen at least 5%, yet the 2022 profit estimate still seems way low.

Digital-advertising revenue grew 43% in the September quarter. Google is gaining share in the cloud and investing billions in such initiatives as machine learning, quantum computing, self-driving vehicles, and drones -- businesses with the potential to open up huge new markets.

All this growth comes at an appealing price. Alphabet trades at 27 times projected 2021 earnings, in line with the median for interactive-media companies despite its market leadership and wealth of long-term growth initiatives. Google is among our top picks for year-ahead gains.

Alphabet Inc., 1600 Amphitheatre Parkway, Mountain View, CA 94043, (650) 253-0000, abc.xyz.

8

Dow Theory Forecasts, November 8, 2021

 ................
................

In order to avoid copyright disputes, this page is only a partial summary.

Google Online Preview   Download