Guiding Investors for 75 Years FORECASTS

751946

2021

Guiding Investors for 75 Years

DOW THEORY

FORECASTS?

Vol. 77, No. 38, September 20, 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



Sales growers have outperformed

App Store fends off legal challenges

A U.S. judge's ruling in the lawsuit between Apple ($149; AAPL) and Epic Games provided a mixed outcome for both companies. But it threatens to add more cracks to the foundation of Apple's walledoff App Store.

For in-app purchases, Apple now must let application developers direct users to payment options outside of the iPhone maker's App Store. But the ruling stopped short of calling Apple a monopoly, despite the company's share of the mobile-game market exceeding 55%. It also did not require Apple to allow third-party marketplaces run on its operating system as App Store alternatives. Finally, the judge left in place the App Store's 30% commission, though noting the rate seemed artificially high. The App Store generates more than $21 billion in annual sales by charging developers a fee on software sold through the platform. Gaming applications represent about 70% of App Store revenue.

Although Apple shares fell on the news, analysts were generally upbeat about the judge's decision, foreseeing limited financial fallout. One analyst predicted Apple could

Continued on page 6

These are interesting -- and poten- slow next year, with the median S&P

tially lucrative -- times for investors 1500 company expected to see its

focused on operating momentum.

sales growth decelerate to 6.1% from

Shares of the one-fifth of compa- 12.3% this year. Consensus estimates

nies with the fastest sales growth in for the large-company S&P 500 In-

their most recent quarter have outper- dex call for 6.6% revenue growth for

formed the

full-year 2022,

average stock

down from the

in four of

14.9% expect-

INVESTMENT STRATEGY the last five

months. But

ed for full-year 2021, accord-

year-to-year

ing to FactSet.

comparisons have been distorted by Per-share-earnings growth is pegged at

the pandemic, and growth seems cer- 9.4% for 2022, down from the 42.6%

tain to slow in coming periods.

expected for this year.

Excluding changes of more than

Against that backdrop of deceler-

75%, the average company in the ating growth, we seek companies for

broad S&P 1500 Index reported which profit expectations continue

17.5% year-to-year sales growth in its to improve. So is Wall Street, as the

most recent quarter -- higher than at top one-fifth of stocks based on

any point since the index's 1994 incep- Quadrix? Earnings Estimates scores

tion. Median sales growth of 15.5% is have outperformed in six of the last

also at an all-time high.

Growth is widely expected to

Continued on page 4

SALESESTIMATE MODEL FAVORS BIG STOCKS

Sales-estimate trends serve as a useful check on profit-estimate trends, so

we created a model to assess those trends. Our model considers estimate revi-

sions, sales growth, and quarterly sales surprises, with a top score of 32. The

nearby story goes into more detail on the mechanics, while the numbers below

reflect stocks at the top of the pile. Large stocks score higher than small and

midcap stocks.

Index

Average Sales

Estimate Score

Number Of Companies

????????? With Score Of: ?????????

32

31

30

29 28

S&P 500 (large-cap) stocks

26

S&P MidCap 400 stocks

24

S&P SmallCap 600 stocks

21

37

42

49 41 34

16

31

33 31 35

12

26

30 36 33

S&P 1500 stocks

23

65

99 112 108 102

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

Introducing new all-ETF portfolios

Exchange-trade funds (ETFs) have won over millions of investors, largely because of their low expenses. But they also bring a lot more to the table: Because most ETFs track an index, investors usually know exactly what's inside them on any given day. Like stocks, ETFs can be bought or sold at any time during trading hours, offering real-time pricing. Unlike traditional mutual funds, ETFs don't have investment minimums. In many cases, investors can avoid paying commissions on ETF trades if they use an online broker. Compared to mutual funds, ETFs tend to generate smaller amounts of taxable capital gains.

With those points in mind, we built two all-ETF portfolios that should appeal to fund investors. The portfolios, which mimic the allocations of our recommended Growth and Conservative portfolios, contain 14 to 15 holdings listed in the nearby table. Notably, eight of the ETFs are current members of our fund portfolios.

As shown in the nearby table, the all-ETF Growth portfolio has an annual expense ratio of 0.17%, while the all-ETF Conservative portfolio costs 0.18%. Income investors should find both appealing -- the Conservative portfolio yields around 1.5%, versus 1.4% for Growth. U.S. stocks repre-

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

Only ETFs need apply

The two all-ETF portfolios below approximate our recommended Growth

and Conservative portfolios. The 15 ETFs should be purchased in the propor-

tion suggested by the target weight.

Target

?? Weights ??

Conser-

Fund (Price; Ticker)

vative Growth

? Total Return ? Year- 5 Years Exp. To-Date (Annual.) Ratio Yield

First Trust Int'l Equity Opp. ($68; FPXI)

10% 11%

Invesco Int'l Corp. Bond ($29; PICB)

3

3

Invesco Total Return Bond ($58; GTO)

5

0

iShares Core Growth Allocation ($57; AOR) 9

9

iShares Core S&P Small-Cap ($109; IJR)

4

4

-0.8% -2.7 1.2 9.5 18.8

21.6% 3.3 5.7 10.0 14.1

0.70% 0.4% 0.50 1.0 0.50 1.7 0.25 1.6 0.06 0.9

iShares MSCI EAFE Small-Cap ($78; SCZ)

3

5

Schwab U.S. Dividend Equity ($76; SCHD) 6

6

SPDR Portfolio High Yield Bond ($27; SPHY) 4

3

Vanguard Growth ($303; VUG)

9

9

Vanguard Mid-Cap Value ($143; VOE)

7 10

15.4 11.9 19.9 16.4 5.4 5.8 20.1 23.8 20.6 11.8

0.40 1.6 0.06 2.8 0.10 5.3 0.04 0.5 0.07 1.8

Vanguard S&P 500 ($409; VOO)

14 15

Vanguard Short-Term Corp. Bond ($83; VCSH) 6

3

Vanguard Small-Cap Growth ($288; VBK)

7

8

Vanguard Small-Cap Value ($170; VBR)

4

4

Vanguard Value ($139; VTV)

9 10

19.5 18.1 0.5 2.9 7.8 18.3 20.1 11.7 17.4 12.9

0.03 1.3 0.05 1.8 0.07 0.4 0.07 1.6 0.04 2.1

Portfolio statistics

Conservative Growth

Expense Ratio

0.18% 0.17

Estimated Yield

1.5% 1.4

?????????????????? Allocations ?????????????????? % Of Equity Exposure

U.S. Int'l Bonds Large- Mid- SmallStocks Stocks & Cash Caps caps Caps

63% 16% 21%

69

19

12

55% 29% 16% 54 32 14

sent at least 63% of each portfolio, reflecting sizable exposure to largecap stocks. Below, we review two high-potential ETFs. Schwab U.S. Dividend Equity ($76; SCHD) which focuses on largecap value stocks with sustainable dividends, mirrors an index designed by Horizon Investment Services -- a sister company of Horizon Publishing that earns a fee based on its asset size. Up 19.9% so far in 2021, the fund ranks among the top 3% of its category

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

based on five-year performance. Vanguard Growth ($303; VUG) has a minuscule 0.04% expense ratio -- shareholders pay only $4 annually for every $10,000 invested. The fund, which holds mostly large-cap stocks, including Apple ($149; AAPL) and Microsoft ($305; MSFT), boasts a fiveyear annualized return of 23.8%. The 10-year annualized return is 19.1%, ranking it among the top 24% of its category. The fund is a member of our recommended portfolios.

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MetaStock is a registered trademark of Equis Int'l.

2

Dow Theory Forecasts, September 20, 2021

MARKET COMMENTARY

Watch the airlines

DOW INDUSTRIALS

The Dow Theory is criticized for its reliance on the Dow Jones Transportation Average, sometimes because of its exposure to airlines. The airline group ranks among the worst U.S. industries for investors over the last half century, and its debt-heavy balance sheets and massive fixed costs mean the risk of bankruptcy is never far from mind.

What the critics miss is that the volatility and exposure to cyclical swings are features, not bugs. Dow Theory adherents are not telling you to invest in transportation stocks; they're saying you should watch the stocks, precisely because their cyclicality makes them useful bellwethers. Today that is especially true for airline stocks, for several reasons: Operating leverage. Whether an airplane is 50% or 90% full, it costs about the same amount to fly. That makes airline profits highly sensitive to customer demand -- and airline stocks highly sensitive to shifting expectations for pricing and capacity utilization. Financial leverage. American Airlines ($19; AAL) has a stock-market value of $12.4 billion and an enterprise value (the combined value of its common stock and debt, less cash on its balance sheet) of $42.8 billion. Assuming that approximates the company's total value, a 10% decline in its value equates to a drop of $4.28 billion. That entire decline will be reflected in the value of the common stock, unless investors begin to doubt the company's ability to service its debt. In other words, a 10% drop in company value could result in a 35% decline in stockmarket value. Not all airlines have as much debt as American, but the entire industry relies heavily on debt financing. The industry is a re-opening play. What are the chances of things getting back to normal anytime soon? The action in airline stocks provides a good read on that question, and lately the prognosis has been negative. Airline stocks are attracting some bargain-hunting interest. Four major U.S. airlines lowered their September-quarter profit outlooks on Sept. 9. Yet the stocks of all four are little changed from Sept. 8, suggesting some believe the bad news is already discounted in their stock prices. When stocks begin to rally amid bad news, it often signals a turn in the tide. Airline stocks reflect broader worries about the economy. While airline stocks are unusually sensitive to such worries, airfreight, railroad, and other cyclical stocks have also been under pressure since this spring.

2019

2020

DOW TRANSPORTS

35,000 30,000 25,000 20,000 2021

14,400 12,000 9,600 7,200

2019

2020

2021

S&P 1500 AIRLINE GROUP

360 300 240 180

2019

2020

2021

MAJOR AIRLINE STOCKS

Southwest Airlines 30%

Delta Air Lines

0

American Airlines

% change since 1/1/19 2019

-30

-60 United Airlines

2020

2021

S&P 1500 TRANSPORT GROUPS

Trucking

Railroads

Airfreight

120% 60

Conclusion

0

A rebound in airline stocks, which comprise about 10% of the Dow Jones Transportation Average, would bode well for the broader market. For now, our buy lists have about 93% in stocks.

% change since 1/1/19 2019

Airlines 2020

-60

2021

Charts by MetaStock ?

Dow Theory Forecasts, September 20, 2021

3

Sales growers have outperformed Continued from page 1

seven months. We're also paying more attention to sales estimates, which provide a useful check on earningsestimate trends.

In fact, we recently created a new model to screen for companies with superior sales momentum, rewarding stocks with: At least three sales estimates from Wall Street analysts for the next four quarters, this year, and next year. Upward revisions to sales estimates over the last 90 days for the next four quarters, this year, and next year. We also looked for upward revisions over the last 45 days. Expected positive sales growth in the next four quarters, this year, and next year. Better-than-consensus sales in the last eight quarters.

The maximum a company can earn is 32 points. The average S&P 1500 company earns 23 points, with bigger companies earning more points on average. The table on page 5 lists 15 companies that earned at least 31 points, ranking among the top 11% of S&P 1500 companies. All 15, including the six reviewed below, also earn Quadrix scores of at least 60 for Earnings Estimates and at least 79 for Overall.

Although Alphabet's ($2,889; GOOGL) management isn't known for sharing its forecasts with investors, analyst estimates are trending higher for both per-share profits and revenue. For the second half of the year, the consensus projects 24% higher earnings on sales growth of 29%. Looking ahead to 2021, analysts target 5% profit growth on 17% higher revenue.

The stock earns a Quadrix Overall score of 86, bolstered by high marks for Momentum (91), Quality (98), Financial Strength (93), and Performance (93). For the 12 months ended June, Alphabet grew earnings per share 99%, sales 33%, cash from operations 46%, and free cash flow

TECH SCORES BEST, UTILITIES LAG

While not all sectors average the same scores based on our sales-estimate model, eight of the 11 are concentrated at 23 or 24. Technology stands out with the highest average score (27), while only utilities score below 20 (17).

S&P 1500 Industry (Number Of Stocks)

Communications (44) Cons. discretionary (209) Consumer staples (77) Energy (64) Financials (242)

Health care (177) Industrials (234) Materials (90) Real estate (115) Technology (197) Utilities (51)

Sales Estimate ?????? Score ?????? Average High Low

24

32 9

24

32 3

23

32 6

23

30 3

21

32 0

24

32 7

24

32 7

23

31 6

24

32 5

27

32 9

17

24 6

Number Of Companies ?????? With Score Of: ?????? 32 31 30 29 28

1 6 411 6 16 20 16 21 1 4 773 0 0 333 3 9 9 5 14

13 10 11 17 9 7 8 15 30 23 0 4 557 6 2 13 12 9 28 40 25 12 12 0 0 000

88%. Earning a Value score of 30, the stock will never be mistaken for cheap. But Alphabet shares look reasonably valued versus peers, trading at 31 times trailing earnings, versus the median of 30 for the S&P 1500 Index interactive-media industry. Alphabet is a Focus List Buy and a Long-Term Buy.

Facebook's ($374; FB) sales growth has accelerated in each of the past four quarters, reaching 55% in the June quarter. But when Facebook previewed the second half of 2021 during its earnings call in late July, management's tone turned stark. For the September and December quarters, "we expect year-over-year total revenue growth rates to decelerate significantly on a sequential basis," said CFO David Wehner. Against that bleak backdrop, the direction of analysts' sales estimates took a surprising turn -- up.

The consensus now calls for 37% higher sales for the September quarter, up from the 31% expected around the time of the announcement. For the December quarter, Facebook's sales are projected to rise 24%, up from 20% at the time. Analyst estimates are also trending higher for 2022, with the consensus now targeting 19% growth. In addition, profit estimates are trend-

ing higher, though they imply sharply narrower margins. The stock trades at 26 times estimated 2021 earnings, a 6% discount to the median S&P 1500 Index interactive-media stock. Based on projected 2022 profits, Facebook shares offer an 8% discount to their industry median. Facebook is a Focus List Buy and a Long-Term Buy.

Jabil ($63; JBL) provides custom manufacturing services that cut costs and accelerate product delivery for an impressive roster of clients, including Apple ($149; AAPL), Cisco Systems ($58; CSCO, and Tesla ($756; TSLA). With August-quarter results expected later this month, analysts anticipate earnings per share of $1.38, up 41%, on revenue of $7.67 billion, up 5%.

Looking ahead to fiscal 2022 ending August, the consensus calls for 8% profit growth on 5% higher sales. Over the past 90 days, analyst estimates for per-share profits and revenue have risen for both the August quarter and fiscal 2022.

At 12 times trailing earnings, the stock trades at a 33% discount to the median of 18 for electronics-manufacturing stocks in the S&P 1500 Index. Jabil shares trade at just 11 times estimated fiscal 2022 earnings,

4

Dow Theory Forecasts, September 20, 2021

below its industry median of 16. If Jabil's trailing P/E ratio rises to 15 and the company merely meets the most pessimistic analyst profit estimate of $5.77 per share for fiscal 2022, the stock would rally 38% over the next 13 months. Jabil is rated Best Buy in sister newsletter Upside.

Near-term and long-term consumer trends favor LKQ ($53; LKQ), a maker of aftermarket and recycled auto parts used in dealerships and repair shops. First, tight supplies for new vehicles in 2021 have boosted demand for older vehicles, which are more likely to require repair. Second, vehicle miles driven are rebounding but still haven't reached prepandemic levels, suggesting room for more growth as conditions normalize.

Additionally, the average age of a vehicle on U.S. roads has steadily climbed over the past 15 years, reaching a record 12 years in 2020. Moreover, LKQ says two transformational changes within the automotive industry -- electric vehicles and autonomous vehicles -- should have little, if any, effect on its business model during this decade.

LKQ raised its 2021 profit guidance in July, prompting analysts to hike their estimates for sales for the September quarter (now expected to rise 7%), December quarter (6% growth), and 2022 (3%). LKQ has topped the consensus sales estimate in seven of the past eight quarters. LKQ expects full-year earnings per share to climb 39% to 47%. The consensus currently targets 44% growth, leaving some room for upside. Earning a Quadrix Overall score of 95, LKQ is a Focus List Buy and a Long-Term Buy.

Qorvo ($180; QRVO) shares slid 4% in the past month, despite building enthusiasm for Apple's ($149; AAPL) next iPhone, unveiled on Sep. 14. Yet if the new iPhone follows recent trends, the upcoming launch should be a source of optimism for Qorvo. After all, each subsequent iPhone model tends to contain more

SKIMMING THE CREAM

Below, we present recommended stocks that score at least 31 using our

sales-estimate model (maximum score of 32). Stocks from our sister newslet-

ter Upside are in bold.

Company (Price; Ticker)

Sales Estimate Score

? Estimated Current Year ?

Per-

Share-

90-Day

Profit Sales Sales

Growth Growth Revision

? Estimated Next Year ?

Per-

Share-

90-Day

Profit Sales Sales

Growth Growth Revision

Adobe ($661; ADBE)

31

Alphabet ($2,889; GOOGL)

31

Applied Materials ($141; AMAT) 31

AutoNation ($110; AN)

31

Chubb ($183; CB)

32

21.3% 21.8% 1.5% 72.0 37.2 6.1 65.2 35.4 2.6 110.5 25.8 8.2 70.1 10.9 3.3

14.0% 14.7% 1.7% 5.4 16.7 6.3 15.8 11.2 4.7 -13.8 2.3 6.7 10.9 5.2 3.5

Crocs ($154; CROX) Danaher ($325; DHR) Facebook ($374; FB) Jabil ($63; JBL) LKQ ($53; LKQ)

31 110.0 63.6 11.2 31 49.9 28.7 3.0 32 40.2 39.0 3.4 31 91.5 8.4 3.3 31 44.5 11.6 4.2

19.7 14.5 17.3 3.4 5.8 4.3 13.1 19.2 3.3 7.6 4.8 2.0 3.8 3.5 4.2

Microsoft ($305; MSFT)

32 10.3 13.9 15.2

Qorvo ($180; QRVO)

32 24.1 18.3 2.9

Qualcomm ($138; QCOM)

31 96.8 52.6 2.7

Tempur Sealy Int'l ($48; TPX) 32 68.9 36.2 10.3

Ultra Clean ($47; UCTT)

32 40.6 44.3 2.8

14.4 12.7 16.4 10.1 7.6 3.2 12.2 10.3 4.0 12.7 10.0 14.3 12.8 9.6 1.7

Qorvo semiconductor components than its predecessor. Although Apple has begun designing some of its own semiconductors, analysts say the company is unlikely to start manufacturing radio-frequency components, which Qorvo makes. Sales to Apple's contract manufacturers accounted for 30% of Qorvo's revenue for fiscal 2021 ended March.

Analyst sales estimates for the September quarter have risen since Qorvo's June-quarter report. But the consensus of 18% higher revenue still leaves room for upside, given management's growth target of 16% to 19%. Qorvo has topped the consensus sales estimate in 26 straight quarters. The midpoint of Qorvo's profit forecast for the current quarter is $3.24 per share, implying 33% growth but below the consensus of $3.26. Management has surpassed the consensus profit estimate in each of the past 19 quarters. The stock trades at just 15 times estimated current-year profits, below the semiconductor-industry median of 23. Qorvo is a Focus List Buy and a Long-Term Buy.

Tempur Sealy International ($48; TPX) sells mattresses and other

bedding products under popular brand names, such as Posturepedic and Stearns & Foster. With increasing focus on health and sleep quality, U.S. consumers are more willing to pay up for better mattresses. Tempur Sealy sees this trend continuing, leading to higher sales prices and a shorter replacement cycle. Per-share profits and sales have grown more than 12% in seven of the past eight quarters; both metrics look poised to keep rising by double-digit rates through at least the March 2022 quarter.

Analyst estimates are up sharply since Tempur Sealy raised its 2021 guidance in July. Management now expects full-year sales to climb more than 35%, up from its prior target of more than 20%. Tempur Sealy anticipates 2021 earnings per share will rise 62% to 70%. For the September quarter, the consensus calls for 14% profit growth on 18% higher sales. Underscoring management's bullishness, Tempur Sealy announced a 29% dividend hike in July. The quarterly dividend, initiated last year, consumes just 13% of earnings, leaving room for more growth. Tempur Sealy, yielding 0.8%, is rated Best Buy in Upside.

Dow Theory Forecasts, September 20, 2021

5

App Store fends off legal challenges

Continued from page 1

lose $1 billion to $4 billion in annual sales, depending on how many developers use the new policy of bypassing the App Store for in-app purchases. But an analyst at Morgan Stanley ($103; MS) said most application developers will likely hesitate to disturb the App Store's seamless payment option for fear of losing customers.

The ruling could offer optimism to Alphabet ($2,889; GOOGL), which finds itself embroiled in a similar lawsuit with Epic Games over commissions charged on applications. That trial is at least a year away. In other news, Alphabet faces a fresh antitrust probe by the European Union over claims the company is requiring device makers to install Google Assistant on Android devices as the default voice assistant. Alphabet has already racked up about $9.5 billion in fines from the EU over the past decade. Both

Aiming to combat the recent resurgence of coronavirus cases and vaccine resistance in some pockets of the U.S., President Biden announced new policies requiring most federal workers to be fully inoculated by Nov. 22. Biden is requiring federal contractors to ensure their workers have also been vaccinated, along with hospitals and other health-care facilities that receive reimbursement from Medicare or Medicaid. Additionally, Biden is urging large companies to follow suit.

Biden is tapping the Defense Production Act to accelerate production of coronavirus tests, with major retailers expected to sell the tests at cost for the next three months. Both Abbott Laboratories ($127; ABT) and Laboratory Corp. of America ($300; LH) make take-home coro-

RANK CHANGES

No changes were made this week in Dow Theory Forecasts.

* * * * * 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 September, the passcode for the telephone hotline is 416.

Apple and Alphabet are rated Focus List Buy and Long-Term Buy. Morgan Stanley is rated A (above average).

Dealbook

J.P. Morgan Chase ($158; JPM) agreed to buy a roughly 75% stake in Volkswagen's payments platform. Formed in 2017, Volkswagen Payments lets customers digitally buy and lease cars, while also paying for parking, fuel, and charging services for electronic vehicles. The deal marks

Coronavirus update

navirus tests. The U.S. has purchased 600 million doses of the Pfizer ($45; PFE) and Moderna ($434; MRNA) two-shot vaccines and 200 million doses of Johnson & Johnson's ($165; JNJ) single-shot vaccine. Just 377.6 million doses have been administered in the U.S. so far.

Shares of health-care stocks that have seen surging demand during the pandemic -- such as LabCorp, Charles River Laboratories International ($440; CRL), Danaher ($325; DHR), PerkinElmer ($187; PKI), and Thermo Fisher Scientific ($563; TMO) -- rose on Biden's announcement. But days later the stocks retreated after medical journal Lancet published an article suggesting most people would not need a booster shot. Although Israel and the U.K. are proceeding with booster shots,

J.P. Morgan's first step into the automotive industry and continues the bank's push into digital payments. Terms for the takeover, slated to be completed in the first half of 2022, were not announced.

Separately, J.P. Morgan announced plans to acquire The Infatuation, which owns several websites and applications that offer restaurant guides and reviews, such as Zagat. The deal coincides with a strategy by J.P. Morgan's credit-card business to attract affluent consumers who like to travel and dine out. The bank plans to give these customers premium access to The Infatuation's special events and online articles. J.P. Morgan is a Buy and a Long-Term Buy. Automotive-technology company Veoneer ($36; VNE) didn't accept Qualcomm's ($138; QCOM) latest takeover offer, preferring to stick with a merger proposal made by Magna International ($80; MGA). Qualcomm's bid exceeded $4 billion, topping Magna's $3.8 billion offer. But Veoneer said it will continue negotiations with

debate over their merits continues in the U.S.

3M ($184; MMM), the largest producer of N95 masks in the U.S., vowed to comply with the vaccine mandate for its workers. Separately, 3M cautioned that inflation is running higher than previously expected. Surging costs for raw materials, labor, and logistics could reduce September-quarter profits by 1.0% to 1.5%; management had previously expected inflation to reduce earnings by 0.5% to 1.0%. Charles River, Danaher, and Thermo Fisher are rated Focus List Buy and a Long-Term Buy. Both 3M and LabCorp are rated Buy and Long-Term Buy. PerkinElmer is a Long-Term Buy. Johnson & Johnson and Pfizer are rated A (above average). Abbott Laboratories is rated B (average).

6

Dow Theory Forecasts, September 20, 2021

Qualcomm. Veoneer designs software that helps vehicles avoid crashes, an area of interest for Qualcomm, which is pushing into automotive technology as it seeks to diversify beyond consumer electronics and networking gear. Qualcomm is a Long-Term Buy. Laboratory Corp. of America ($300; LH) completed its acquisition of the auto-immune testing business from MyriadGenetics, which includes a rheumatoid arthritis assay. The deal was first announced in May. LabCorp is a Buy and a Long-Term Buy.

Apple and Facebook unwrap new gadgets

Apple ($149; AAPL) unveiled new models of its iPhone, iPad, and smartwatch. Apple made relatively minor tweaks to its iPhone 13, featuring a faster processor, improved camera, sharper screen, and larger battery. Prices are the same as last year, ranging from $699 to $1,099. The new iPhone becomes available Sept. 24. Apple also refreshed its smartwatch, now called Watch Series 7. Due out later this fall, the Series 7 boasts a larger screen and carries a price tag starting at $399. Apple is a Focus List Buy and a Long-Term Buy. Facebook ($374; FB) launched its first smart glasses model, called RayBan Stories. The augmented-reality device lets users listen to music, make phone calls, and take photographs and videos. Other companies, including Alphabet, have struggled to win over consumers with smart glasses. Prices for Facebook's version start at $299. Facebook is a Focus List Buy and a Long-Term Buy.

Corporate roundup

J.P. Morgan Chase ($158; JPM) warned that trading revenue would fall about 10% in the September quarter, while Citigroup ($70; C) expects a drop of roughly 10% to 16%. J.P. Morgan also said credit-card spending for 2021 is on track to rise 18% to 19% from 2019 levels, though it has seen

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 6.8% (Buy List) or 6.6% (Long-Term Buy List) in the Vanguard Short-Term Corporate Bond ($83; VCSH) exchange-traded fund.

If you are copying the Focus List, hold a 6.8% fund position and put the rest into equal-dollar positions in the Focus List stocks.

Company (Price; Ticker)

3M ($184; MMM) ? Adobe ($661; ADBE)

Ally Financial ($52; ALLY) ? Alphabet ($2,889; GOOGL) ? Apple ($149; AAPL)

? Applied Materials ($141; AMAT) Charles River Labs. ($440; CRL) Chubb ($183; CB)

? Comcast ($57; CMCSa) Danaher ($325; DHR)

Dover ($168; DOV) ? Facebook ($374; FB)

FedEx ($257; FDX) ? Garmin ($169; GRMN)

ICON ($263; ICLR)

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

3.2% 10% 15% 18

0.0 22 21 54

1.9 21 169

6

0.0 37 72 29

0.6 33 70 27

Quadrix Overall 52-Wk. Score Range

64 $209 - $156 81 674 - 421 96 57 - 23 86 2,925 - 1,402 61 157 - 103

3.5 3.3 0.7 35 65 20 89 146 - 54 3.5 3.3 0.0 22 26 43 71 451 - 206 3.1 2.9 1.8 11 70 15 98 188 - 112 3.5 3.3 1.8 11 19 18 58 62 - 41 3.5 3.3 0.3 29 50 34 82 334 - 201

3.5 3.3 1.2 17 32 22 79 176 - 105 3.5 3.3 0.0 39 40 26 90 384 - 244 3.1 2.9 1.2 8 17 12 88 320 - 230 3.5 3.3 1.6 18 9 30 63 179 - 92 3.1 2.9 0.0 94 41 28 76 268 - 169

J.P. Morgan Chase ($158; JPM) 3.1 2.9 2.3 2 64 11 71 167 - 91

LabCorp Of America ($300; LH) 3.1 2.9 0.0 8 -1 13 96 310 - 176

? Lam Research ($612; LRCX)

3.5 3.3 1.0 21 25 18 79 674 - 296

Lennar ($82; LENb)

3.1 2.9 1.2 27 67

6 87 90 - 56

? LKQ ($53; LKQ)

3.5 3.3 0.0 12 44 14 94 53 - 27

MDU Resources ($31; MDU) ? Microsoft ($305; MSFT)

PerkinElmer ($187; PKI) ? Qorvo ($180; QRVO)

Qualcomm ($138; QCOM)

3.1 2.9 2.7 8 9 15 64 35 - 21 3.5 3.3 0.7 14 10 35 81 306 - 196

2.9 0.1 22 20 19 89 191 - 115 3.5 3.3 0.0 18 24 15 89 202 - 123

2.9 2.0 53 97 17 92 168 - 108

Quanta Services ($118; PWR)

3.5 3.3 0.2 11 20 26 78 120 - 49

? Signature Bank ($263; SBNY)

3.1 2.9 0.9 23 42 19 70 273 - 71

Target ($244; TGT)

3.1 2.9 1.5 12 38 19 84 267 - 146

Thermo Fisher Scien. ($563; TMO) 3.5 3.3 0.2 12 13 25 75 576 - 413

UnitedHealth ($418; UNH)

3.1 2.9 1.4 10 11 22 57 431 - 290

? Nasdaq Stock Exchange. Notes: Quadrix scores are percentile ranks, with 100 the best.

recent softness in travel, airlines, and lodging as coronavirus cases rise. J.P. Morgan is a Buy and a Long-Term Buy. Citigroup is rated A (above average). Microsoft ($305; MSFT) raised its quarterly dividend 11% to $0.62 per share, payable Dec. 9. The company has now increased its dividend in 12 straight years, with annual growth ranging from 8% to 11% over the past six years. Microsoft also announced a new share-repurchase program worth

up to $60 billion. Buybacks have shaved 4% from Microsoft's share count over the past five years. Microsoft is a Focus List Buy and a Long-Term Buy. Adobe Systems ($661; ADBE) plans to launch a payment-services feature by the end of the year to its online platform used by e-commerce customers. Adobe started offering software to help retailers run online stores in 2018. Adobe is a Buy and a Long-Term Buy.

Dow Theory Forecasts, September 20, 2021

7

ANALYSTS' CHOICE

Long-Term

Recent

P/E Shares Debt as % 52-Week

Price Dividend Yield Ratio (Millions) of Capital Price Range

$57 $1.00 1.8% 20 4,653 50% $61.80 - $40.97

Comcast plays Age of Empires

Over the past decade, conglomerates have fallen out of fashion, with investors rewarding companies that spin off dissimilar businesses to become concentrated pure-play investments. But after years of empire building, Comcast's ($57; CMCSa) breadth played to its advantage during the pandemic-driven recession. Its cable-communications unit (56% of total revenue for the 12 months ended June) backstopped weakness at NBCUniversal (26%) and Sky (18%). The units were hurt by advertisers cutting back, as well as the temporary closure of theaters and theme parks.

Both NBCUniversal and Sky are starting to rebound. Although Comcast shares have rallied 9% in 2021, the company's prospects still don't feel fully reflected in the stock price. Comcast, yielding 1.8%, is a Focus List Buy and a Long-Term Buy.

Peacock feathers in its cap

Comcast's cable business exhibits the steady operating momentum typically reserved for utilities. Only a global pandemic could halt the cable segment's remarkable growth streak -- revenue dipped 0.2% for the three months ended June 2020, the sole quarter of lower sales since at least 2000. Outside of that quarter, the unit's sales growth has ranged from 3% to 11% since 2010.

For the 12 months ended June, the cable business increased sales 6%, primarily driven by a 12% jump from broadband (20% of companywide revenue), though smaller units also posted strong growth, including wireless (2% of revenue), up 44%, advertising (3%), up 27%, and business services (8%), up 6%. The video

COMCAST

Chart by MetaStock?

60 50 40 30

2018

2019

2020

Quarter

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

Per-Share Earnings *

$0.84 vs $0.69 0.76 vs 0.71 0.56 vs 0.79 0.65 vs 0.79

Sales Change

20% 2 -2 -5

Quarterly Price Range

$59.11 - $52.46 58.59 - 48.15 52.49 - 40.97 47.50 - 39.03

P/E Ratio Range

22 - 20 22 - 18 18 - 14 16 - 13

Year (Dec.)

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

52-Week Price Range

P/E Ratio Range

2020 $103.6 $2.61 2019 108.9 3.13 2018 94.5 2.55 2017 84.5 2.06

$0.92 $52.49 - $31.71 20 - 12 0.84 47.27 - 33.42 15 - 11 0.76 44.00 - 30.43 17 - 12 0.61 42.18 - 34.12 20 - 17

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

2021

Quadrix Scores

Overall 58

Momentum 55

Value 53

Quality 62

Fin'l Strength 50

Earnings Ests. 52

Performance 73

Reversion 20

unit (20%) held sales flat, as price hikes offset a 7% smaller subscriber base. Broadband subscribers rose 7%. Earlier this month, Comcast warned that growth in broadband subscribers would slow to more traditional rates in the September quarter. Shares fell on the news, though the company reiterated its expectations for the full year.

NBCUniversal sales rebounded 11% in the first half of 2021 but were down 4% for the 12 months ended June. Within NBCUniversal, revenue for theme parks (2%) jumped 62% in the first half of 2021 but is still down 39% for the past 12 months. Notably, attendance at Universal Orlando Resort exceeded prepandemic levels in June, even with virtually no international visitors. Media (19%) and studios (7%) also see improving sales.

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

Citing strong ad sales, management insists the Tokyo Summer Olympics were "very, very profitable," despite their weakest ratings since NBC started broadcasting the games in 1988.

Revenue at British pay-TV unit Sky has also reached prepandemic levels. The segment posted 11% higher 12-month sales, reflecting growth across direct-to-consumer (15% of revenue), up 9%, content (1%), up 23%, and advertising (2%), up 24%.

Per-share profits are expected to climb 28% in the second half of this year, then 22% in 2022. Analysts anticipate sales rising 12% in the second half of 2021 and 7% in 2022.

The stock trades at 20 times trailing earnings, below the median of 27 for the S&P 1500 Index communicationservices sector.

Comcast Corp., 1701 JFK Blvd., Philadelphia, PA 19103-2838, (215) 286-1700, .

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Dow Theory Forecasts, September 20, 2021

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