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Older federal student loan debtors who fall behind on payments may be at risk of having their Social Security checks garnished.
A bill that has been reintroduced in Congress seeks to protect Social Security benefits from being reduced in those circumstances.
Borrowers who rely on these federal benefits may still seek other relief.

Jose Miguel Sanchez | Istock | Getty Images

Federal student loan repayment is set to restart in October following a pandemic hiatus that has been in place since March 2020.
Millions of Americans will be on the hook to make monthly payments on those debts, including some Social Security beneficiaries. But if those debtors fall behind on their federal student loans, that may eventually put a portion of the income they receive from Social Security benefits at risk.

However, new protections put in place under President Joe Biden as payments restart will delay any garnishments from happening.
“The earliest I can see someone getting their Social Security garnished would be late fall of 2024,” said Betsy Mayotte, president and founder of The Institute of Student Loan Advisors, a provider of student loan advice and dispute resolution.
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Last week, a group of Democratic Congressional lawmakers sought to get ahead of the issue and reintroduced a bill to prevent the federal government from garnishing Social Security benefits from debtors who fall behind to repay student loans or other non-tax federal debts.
The Protection of Social Security Benefits Restoration Act was introduced in the House by Reps. John Larson, D-Conn., and Raul Grijalva, D-Ariz., and in the Senate by Sen. Ron Wyden, D-Oregon.

“Social Security is an earned benefit Americans have paid into their entire working lives, and garnishing these already-modest benefits to recover student loan debt hurts their ability to retire with dignity,” Larson said in a statement.
The reduction in annual Social Security benefits from such garnishments can be about $2,500 on average, the Center for Retirement Research at Boston College has estimated based on 2019 data. That represents about 4% to 6% of household income, which may instead be used to cover other expenses, according to the Center for Retirement Research.

Student debt held by older Americans rises

The number of Social Security beneficiaries who had a portion of their Social Security benefits taken by the government for student loan repayment increased by more than five times between 2002 and 2016, according to a 2016 Government Accountability Office report. At least 114,000 beneficiaries saw their Social Security checks garnished when they fell behind on student loan repayments, according to the research.
“The amount of student debt held by older adults has gone up dramatically in the past 15 years or so,” said Kate Lang, director of federal income security at Justice in Aging, an organization devoted to fighting senior poverty.
One effort to alleviate that debt burden, the promise of up to $20,000 in federal student loan forgiveness, fell through in June when the Supreme Court struck down President Joe Biden’s plan. The administration has provided other targeted debt forgiveness, and has said it plans to pursue additional forgiveness of federal student loan balances where possible.
The Biden administration has unveiled new plans to help alleviate student loan borrowers’ financial burdens as they begin repayment on their federal debts.
A 12-month “on ramp” will exempt borrowers from the worst consequences of missed, late or partial payments. For debtors with defaulted federal loans, a one-time temporary program, called Fresh Start, will provide special benefits and help them get out of default.

The amount of student debt held by older adults has gone up dramatically in the past 15 years or so.

director of federal income security at Justice in Aging

“Anybody who is in default now that is worried about their Social Security or even just regular wages being garnished should take advantage of the Fresh Start program,” Mayotte said.
Not only does the program eliminate the risk of garnishment for its duration, but it also puts the borrower back in good standing so they can take advantage of income-driven repayment plans, Mayotte noted.
In addition, the Biden administration has also unveiled a new income-driven repayment plan that cuts borrowers’ obligation to just 5% of discretionary income. That may cut many enrollees’ previous monthly payments in half, and will leave some with no monthly bill.
That plan may be able to help older borrowers reduce their monthly payments. “We’re hopeful about that process,” Lang said.
Nevertheless, for older debtors, restarting federal student loan debt payments may be a struggle.
“We’re very concerned about what’s going to happen next month once collections starts up again,” she said.

Justice in Aging has endorsed the legislative proposal to prevent Social Security checks from garnishment, which may help provide additional protections, according to Lang. Yet this kind of bill has been proposed in the past and not made it into law, she said.
Social Security beneficiaries who have their benefits garnished are guaranteed at least $750 per month in benefits, Lang noted. But that threshold has not been adjusted for inflation since it was established in the 1990s, which means affected beneficiaries face a greater risk of being pushed into poverty.
Some Social Security beneficiaries may qualify to have their loans discharged if they have a total and permanent disability, according to Lang. Notably, this does not require having to meet the Social Security Administration’s definition of a disability. Instead, the process requires the debtor have their doctor fill out a form indicating their physical condition prevents them from working.
“That’s an opportunity that a lot of older adults don’t know about,” Lang said, particularly if they don’t think of themselves as a person with a disability who may be eligible for that kind of discharge. More

These days, fewer Americans, including millionaires, feel confident about their financial standing.
But there are certain money moves wealthy Americans are more likely to make to improve their long-term well-being.
Here are some of the habits of millionaires that help in times of economic uncertainty.

Svyatoslav Balan | Getty

Almost regardless of how much you have in the bank, it’s hard to feel financially secure.
Across the board, households are facing surging child-care costs, ballooning auto loans, high mortgage rates and record rents amid economic uncertainty and recessionary fears.

Of those with more than $1 million in investable assets, as many as one third — or 33% — fear they could outlive their savings, according to Northwestern Mutual’s 2023 Planning and Progress Study.
And nearly half, or 47%, of wealthy Americans said their financial planning needs improvement.
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Despite their high net worth, less than half of all millionaires, or 44%, felt “very comfortable,” a separate report by Edelman Financial Engines found.
Even doctors, lawyers and other highly paid professionals — also referred to as the “regular rich” — who benefit from stable jobs, homeownership and a well-padded retirement savings account said they don’t feel well off at all. Some even said they feel poor, according to another recent survey conducted by Bloomberg.

Yet there are things millionaires do that the rest of us may not, Northwestern Mutual’s report also found, which can go a long way toward improving long-term well-being.
Here are three moves wealthy Americans are more likely to make:

1. Planning for ups and downs

“Wealthy people hold themselves to an exceptionally high standard when it comes to managing their finances,” said Aditi Javeri Gokhale, chief strategy officer and head of institutional investments at Northwestern Mutual.
In fact, 84% of the wealthiest Americans said they have a long-term financial plan that accounts for economic ups and downs, Northwestern Mutual found. Only 52% of the general population said the same.

“They don’t go on autopilot. Instead, they aim to see well beyond today,” Gokhale said. “That includes the possibility of twists and turns in their financial lives.”
Maintaining a well-diversified portfolio has never been more important, experts say, including stocks and high-quality bonds, which have historically performed well during a downturn.  

2. Working with an advisor

To come up with a plan based on risk tolerance and goals, millionaires are also much more likely to seek professional help.
Seven out of 10 wealthy Americans work with a financial advisor, nearly double the amount of the mainstream population, Northwestern Mutual found.

“When you work with an advisor you get this opportunity to have an agent — very akin to a therapist,” said Douglas Boneparth, a certified financial planner and president and founder of Bone Fide Wealth, a wealth management firm based in New York.
“When life events come up, like the birth of a child or job change, having that third party can help you focus on what you can control and making smart decisions,” he said. Boneparth is also a member of CNBC’s Advisor Council.

3. Staying committed to a financial plan

It follows that “financial planning leads to more disciplined money management,” Boneparth said.
Roughly 42% of millionaires consider themselves “highly disciplined” when it comes to their financial goals and how they plan to reach them; among all Americans, only 1 in 5 said the same.
In most cases, being disciplined means a commitment to save more than you spend, invest regularly, stay diversified and keep emotions in check.
“This financial planning tool is what gives us a road map of what we need to do to accomplish our goals,” Boneparth said. “Without those plans we are shooting from the hip and that’s not great.”
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As the IRS pauses on processing new claims for the employee retention tax credit, or ERC, some small businesses are in limbo.
The agency is working on further guidance on how to withdraw unprocessed ERC claims, along with a settlement program for small businesses who wrongly received the credit and want to pay it back.

IRS Commissioner Daniel Werfel testifies before a Senate Finance Committee hearing on Feb. 15, 2023.
Kevin Lamarque | Reuters

As the IRS pauses on processing new claims for a pandemic-era small business tax break, some filers are in limbo as the agency works on further guidance.
The IRS on Thursday temporarily halted processing for amended payroll tax returns claiming the so-called employee retention tax credit, or ERC, which was enacted during the Covid-19 pandemic.

Worth thousands per eligible employee, the IRS said the program has triggered a flood of “questionable claims,” as a cottage industry of specialist firms has popped up and pressured small businesses to wrongly claim the tax relief.
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“Businesses that receive ERC payments improperly face the daunting prospect of paying those back, so we urge the utmost caution,” IRS Commissioner Danny Werfel said on Thursday, urging small businesses to review claims with a qualified tax professional.
In the meantime, the IRS is working on further guidance on how to withdraw unprocessed ERC claims, along with a settlement program for small businesses who wrongly received the credit and want to pay it back.

‘There’s no need to panic’

While affected small businesses may be concerned, “there’s no need to panic here,” said Jennifer Rohen, a principal at CliftonLarsonAllen with expertise in claiming the ERC.

If you claimed the credit and are worried about eligibility, it’s an excellent time to review your filing with a qualified tax professional, she said.
The IRS has released a detailed ERC eligibility checklist to assist filers. The credit was designed for small businesses and tax-exempt organizations that paid employees during government-mandated shutdowns or experienced a “significant decline in gross receipts” during certain periods in 2020 and 2021.

My blanket advice is always to talk to a qualified tax professional who has filed [ERC claims] before.

Craig Hausz
CEO and managing partner at CMH Advisors

“My blanket advice is always to talk to a qualified tax professional who has filed [ERC claims] before,” said certified financial planner Craig Hausz, CEO and managing partner at CMH Advisors in Dallas. He is also a certified public accountant. 
If you received the credit and know you don’t qualify, Hausz said you should start the process of paying the money back. “I think the IRS is going to be a lot more lenient on abating penalties and interest if someone proactively sends money back,” he added.

There’s still time for a ‘valid claim’

While the deadline for 2020 amended returns is approaching, there’s still time for legitimate ERC claims, said Kristin Esposito, director for tax policy and advocacy for the American Institute of CPAs. Small businesses have until the tax deadline in 2024 to amend 2020 returns.
“If you have a valid claim, I would still go through the calculation and have all your documentation ready,” she said. “But if it seems too good to be true, it usually is.”
New ERC claims won’t be processed until 2024 at the earliest and filers may not receive the credit until the spring or summer, according to Hausz. More

The Federal Reserve is expected skip an interest rate hike at the end of its two-day meeting this week.
Consumers will still feel the effects of higher rates and persistent inflation.
Here’s a breakdown of how the Fed impacts your monthly expenses and savings.

Artistgndphotography | E+ | Getty Images

The Federal Reserve is likely to skip an interest rate hike when it meets this week, experts predict. But consumers may not feel any relief.
The central bank has already raised interest rates 11 times since last year — the fastest pace of tightening since the early 1980s.

Yet recent data is still painting a mixed picture of where the economy stands. Overall growth is holding steady as consumers continue to spend, but the labor market is beginning to loosen from historically tight conditions.
At the same time, inflation has shown some signs of cooling even though it remains well above the central bank’s 2% target.
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Even with a break in rate hikes, “the one thing that remains very clear is that the Fed is nowhere close to cutting rates,” said Greg McBride, chief financial analyst at Bankrate.com. “Rates remain really high and will stay there for a while.”
The federal funds rate, which is set by the U.S. central bank, is the interest rate at which banks borrow and lend to one another overnight. Although that’s not the rate consumers pay, the Fed’s moves still affect the borrowing and savings rates they see every day.

Here’s a breakdown of how the impact has already been felt:

Credit card rates top 20%

Most credit cards come with a variable rate, which has a direct connection to the Fed’s benchmark rate.
After the previous rate hikes, the average credit card rate is now more than 20% — an all-time high, while balances are higher and nearly half of credit card holders carry the debt from month to month, according to an earlier Bankrate report.

Mortgage rates are above 7%

Although 15-year and 30-year mortgage rates are fixed, and tied to Treasury yields and the economy, anyone shopping for a new home has lost considerable purchasing power, partly because of inflation and the Fed’s policy moves.
The average rates for a 30-year, fixed-rate mortgage “remain anchored north of 7%,” said Sam Khater, Freddie Mac’s chief economist. “The reacceleration of inflation and strength in the economy is keeping mortgage rates elevated.”

Adjustable-rate mortgages, or ARMs, and home equity lines of credit, or HELOCs, are pegged to the prime rate. As the federal funds rate rose, the prime rate did, as well, and these rates followed suit.
Now, the average rate for a HELOC is up to 9.12%, the highest in 22 years, according to Bankrate. “That HELOC is no longer low-cost debt and it warrants a much higher focus on repayment than it has for a long time,” McBride said.

Auto loan rates top 7%

Even though auto loans are fixed, payments are getting bigger because the price for all cars is rising along with the interest rates on new loans.
The average rate on a five-year new car loan is now 7.46%, the highest in 15 years, according to Bankrate.
Experts say consumers with higher credit scores may be able to secure better loan terms or shop around for better deals. Car buyers could save an average of $5,198 by choosing the offer with the lowest APR over the one with the highest, according to a recent report from LendingTree. 

Federal student loans are now at 5.5%

Federal student loan rates are also fixed, so most borrowers aren’t immediately affected by the Fed’s moves. But undergraduate students who take out new direct federal student loans are now paying 5.50% — up from 4.99% in the 2022-23 academic year and 3.73% in 2021-22.
For those with existing debt, interest is now accruing again as of Sept. 1. In October, millions of borrowers will make their first student loan payment after a three-year pause.

Private student loans tend to have a variable rate tied to the Libor, prime or Treasury bill rates — and that means that those borrowers are already paying more in interest. How much more, however, varies with the benchmark.

Deposit rates at some banks are up to 5%

While the Fed has no direct influence on deposit rates, the yields tend to be correlated to changes in the target federal funds rate. The savings account rates at some of the largest retail banks, which were near rock bottom during most of the Covid pandemic, are currently up to 0.43%, on average, according to the Federal Deposit Insurance Corporation, or FDIC.
Average rates have risen significantly in the last year, but they are still very low compared to online rates, according to Ken Tumin, founder of DepositAccounts.com.
Thanks, in part, to lower overhead expenses, top-yielding online savings account rates are now paying over 5%, according to Bankrate, which is the most savers have been able to earn in more than 15 years.
However, if the Fed skips a rate hike at its September meeting, then those deposit rate increases are likely to slow, Tumin said.
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U.S. billionaire Ray Dalio said it is important for new investors to have a diversified portfolio as economic and geopolitical headwinds continue to rage on. 
The Bridgewater Associates founder also shared that the biggest mistake investors can make is “believing that markets that performed well, are good investments, rather than more expensive.”

Ray Dalio speaks during the 2023 Forbes Iconoclast Summit at Pier 60 on June 12, 2023 in New York City. 
Taylor Hill | GGetty Images

U.S. billionaire Ray Dalio says new investors should have a diversified portfolio as economic and geopolitical headwinds persist.
“I would like to have diversification, because what I don’t know is going to be much greater than what I do know,” said Dalio, founder of one of the world’s largest hedge funds, Bridgewater Associates.

“Diversification can reduce your risk without reducing them sharply, if you know how to do it well,” he said at the Milken Institute Asia Summit in Singapore last week.
“Pay attention to the implications of the great disruptions that are going to take place because the world will be radically different in five years. And it’s going to become radically different year by year,” he explained.

It’s like going through a time warp. We’re going to be in a different world. And the disruptors will be disrupted.

Founder, Bridgewater Associates

The artificial intelligence evolution has caught the hedge fund manager’s attention too — but Dalio said he recommends investors put money in companies that adopt this new technology, rather than those creating them. 
“It’s like going through a time warp. We’re going to be in a different world. And the disruptors will be disrupted,” Dalio said. “I don’t need to pick those who are creating the new technologies. I need to really pick those who are using the new technologies in the best possible way.” 

Asia, an ‘exciting region’

Speaking to the audience at the summit in Singapore, Dalio said the city-state is a “very special place, in what will be a very exciting region.” 

“The world landscape is changing, the world order is changing … And with Singapore as essentially a hub, it’s a terrific place to be.” 

Asked about the growing number of family offices being set up in Singapore, Dalio shared the three biggest considerations one should take when choosing a country to invest in.
A country needs to have a good income statement and balance sheet, an environment of civility where “people [are] working together to make good things happen,” he said. The side that the country takes when an international conflict arises is also an important factor to consider, he added.
He highlighted that the biggest mistake investors make is “believing that markets that performed well, are good investments, rather than more expensive.” More

Starting in October, health insurance is poised to act as a countervailing force that buoys inflation for about a year, economists said.
Health insurance prices have been declining roughly 3% to 4% a month since October 2022.
For a year starting in October, the CPI for health insurance will start rising just over 1% month over month.

Suriyapong Thongsawang | Moment | Getty Images

Why health insurance inflation is hard to measure

Health insurance prices are a tricky thing for economists to quantify.
The BLS doesn’t measure direct consumer costs such as monthly premiums. That’s because those premiums don’t buy the same quality of insurance. Benefits and risk factors vary from policy to policy, for example.
“Price change between health plans of varying quality cannot be compared, and any quality adjustment methods to facilitate price comparison would be difficult and subjective,” according to a BLS fact sheet.

Instead, the agency measures health insurance inflation indirectly based partly on health insurers’ profits. Profit margins serve as a proxy of consumer prices.

The BLS updates those calculations once a year in October.  
It appears that health insurance prices measured in the CPI “will start rebounding” again, said Andrew Hunter, deputy chief U.S. economist at Capital Economics.
Health insurance prices have been declining roughly 3% to 4% a month since October 2022, helping to pull down inflation at a time when other metrics proved stubbornly high.
Now, for a year starting in October, the CPI for health insurance will start rising just over 1% month over month, said Mark Zandi, chief economist at Moody’s Analytics.

How health insurance profits affect inflation

Early in the Covid-19 pandemic, health insurers’ profits jumped. Consumers were still paying premiums but were generally disallowed from visiting doctors or hospitals for elective procedures.
But consumers used their insurance more often in 2021. Insurers’ aggregate profits shrank because they paid out more insurance benefits relative to 2020. Hence, the monthly inflation readings flipped negative.
The BLS’ updated calculation will assess insurers’ profits in 2022, which were stronger than the prior year — and that’s the dynamic that will be reflected in the forthcoming CPI update, Zandi said.

Why health insurance inflation matters

The U.S. Federal Reserve raised interest rates aggressively starting early last year to rein in persistently high inflation. Financial experts expect the central bank is near the end of that cycle, if not already there.
Annual inflation has come down significantly from its 9.1% pandemic-era peak in June 2022 — the highest since 1981 — to 3.7%. But it’s not yet back to target.
Anything that keeps inflation elevated may increase the odds the Federal Reserve raises borrowing costs again, economists said. Federal Reserve chair Jerome Powell said in August that inflation “remains too high” and that the Fed is “prepared to raise rates further.”

When assessing inflation trends, policymakers tend to prefer a gauge that strips out food and energy prices, which can be volatile. This measure is known as “core” inflation.
Getting back to target would require consistent core CPI readings of about 0.2% a month, economists said.  
The health insurance index has been subtracting about 3 basis points, 0.03%, a month from the core CPI, Zandi said. In October, that will change. It will add over 1 basis point, 0.01%, to monthly core CPI, he estimated.
In the past year, health insurance has reduced core CPI more than 0.2 percentage points. It will increase it by less than 0.1 percentage point in the coming year, Zandi said.
“It’s small in the grand scheme of things,” he said. “But when you’re fighting for every basis point on inflation, it matters.” More

CrowdStrike IPO at the Nasdaq exchange June 12, 2019.
Source: Nasdaq

While macro uncertainty continues to distract investors, it is prudent to focus on companies that are well-positioned to navigate challenges with their solid execution and deliver attractive growth over the long term by capitalizing on secular trends. 
Here are five such stocks chosen by Wall Street’s top analysts, according to TipRanks, a platform that ranks analysts based on their past performance.

Zscaler

First, we will look at cybersecurity solutions provider Zscaler (ZS). Earlier this month, the company reported its fiscal fourth-quarter results and outlook, which topped Wall Street’s expectations. That said, management cautioned that deals are taking longer to close due to a challenging macro backdrop.
Praising Zscaler’s performance, TD Cowen analyst Shaul Eyal said that the rising demand for the company’s Zero Trust solutions and disciplined spending drove the fourth-quarter outperformance.
The analyst noted that over the past seven quarters, Zscaler’s annual recurring revenue (ARR) has doubled to $2 billion from $1 billion. Other interesting points that the analyst focused on included the company’s large deals, a strong pipeline, and growing federal contracts. (Zscaler serves 12 of the 15 U.S. cabinet-level agencies.)  
Further, the company continues to invest in AI and sees huge growth potential for its AI-powered features. It provides data protection capabilities to prevent the leakage of sensitive data through generative AI.  
Overall, the analyst reiterated a buy rating on ZS stock with a price target of $195, saying, “Investments in AI, Cloud and go-to-market are set to accelerate growth.”

Eyal holds the 9th position among more than 8,500 analysts tracked on TipRanks. In all, 70% of his ratings have been profitable, with each generating an average return of 25.5%. (See Zscaler’s Financial Statements on TipRanks)

CrowdStrike Holdings

Another cybersecurity stock in this week’s list is CrowdStrike (CRWD), which recently reported upbeat fiscal second-quarter results and issued solid guidance.
In reaction to the impressive performance, Needham analyst Alex Henderson raised his price target for CRWD stock to $200 from $170 and reiterated a buy rating on the stock. The analyst noted that the company achieved strong growth in new products under its Identity, Cloud, and LogScale Security Information and Event Management (SIEM) offerings.
The analyst also highlighted management’s commentary about the company’s generative AI cybersecurity product called Charlotte AI, which they believe can immensely improve execution for customers by automating workflows. He added that the use of AI helped the company enhance its own adjusted operating margin, which increased by 472 basis points to 21.3% in the fiscal second quarter.
Henderson called CRWD one of his top recommendations in cybersecurity and said, “Crowd is taking market share with relatively stable pricing and strong new product uptake.”
The analyst also said that the company’s managed services, which are core to the Falcon Complete offering, are enjoying high demand and differentiate the platform from others like Microsoft (MSFT).    
Henderson ranks 162nd among more than 8,500 analysts tracked by TipRanks. His ratings have been profitable 58% of the time, with each rating delivering a return of 15.1%, on average. (See CrowdStrike’s Technical Analysis on TipRanks) 

Chipotle Mexican Grill

Next up is Mexican fast food chain Chipotle Mexican Grill (CMG). Baird analyst David Tarantino, who ranks 357 out of more than 8,500 analysts on TipRanks, said that CMG remains his top idea for investors with a 12-month horizon.
The analyst observed that the stock has pulled back since the mixed second-quarter results due to concerns about late Q2 2023 and early Q3 traffic, subdued Q3 restaurant margin outlook, and macro factors. Nevertheless, he feels that this pullback has created an attractive opportunity to buy CMG stock based on multiple positive catalysts that could emerge in the months ahead.
“Specifically, we expect signs of strong same-store traffic momentum and further pricing actions to lead to an upward bias to EPS estimates and support robust valuation metrics on CMG heading into year-end,” said Tarantino.
Additionally, he sees the possibility of CMG accelerating its unit growth to the high end of its target of 8% to 10% annually, supported by the hiring of additional construction managers this year. Tarantino estimates that a combination of about 10% unit growth and mid-single-digit comparable sales could drive low-to-mid teens revenue growth and more than 20% EPS increase, a profile which he believes deserves a premium valuation.
Tarantino reaffirmed a buy rating on CMG stock with a price target of $2,400. His ratings have been successful 62% of the time, with each rating delivering an average return of 10%. (See CMG Hedge Fund Trading Activity on TipRanks).

Lululemon

Athletic apparel retailer Lululemon (LULU) impressed investors with its fiscal second-quarter performance and improved outlook. The company experienced strong momentum in North America and a spike in its international business, mainly due to robust sales in China.
Commenting on the 61% growth in sales from Greater China, Guggenheim analyst Robert Drbul said that he continues to believe that China holds significant growth potential for Lululemon, as the company aims to quadruple international revenues by 2026. He also highlighted that Lulu intends to open a majority of its 35 new international stores, scheduled for this year, in China. 
The analyst raised his Fiscal 2023 and 2024 earnings estimates and believes that demand for the company’s merchandise remains strong, as competitive pressures from upcoming athletic brands seem overestimated.  
Drbul maintained a buy rating on LULU and a price target of $440, justifying that the company “stands to benefit from favorable secular tailwinds (health, wellness, casualization, and fitness, including at-home).”
Drbul ranks No. 958 out of more than 8,500 analysts tracked on TipRanks. Additionally, 57% of his ratings have been profitable with an average return of 5%. (See Lululemon Insider Trading Activity on TipRanks)

Acushnet Holdings

The last stock on this week’s list is Acushnet Holdings (GOLF), a manufacturer of golf products. Tigress Financial analyst Ivan Feinseth believes that the company is well-positioned to benefit from the ongoing growth in golf, driven by product launches and biannual new golf ball design introductions.
The analyst highlighted that GOLF’s strong brand name continues to be a growth catalyst, as its Titleist brand golf balls remain the preferred choice of PGA and LPGA Tour players. He also noted the strong growth in Titleist golf clubs, Titleist gear, and FootJoy golf wear segments, fueled by a wide range of innovative launches, including new TSR models that rapidly emerged as the most-played model on the PGA tour.
Feinseth increased his price target for GOLF to $68 from $62 and reiterated a buy rating, while emphasizing that the company is enhancing shareholder returns through ongoing dividend increases and share repurchases.
“GOLF’s incredible brand equity, driven by its best-in-class and industry-leading product lines, including FootJoy and Titleist, are major assets and the primary drivers of its premium market valuation,” said Feinseth.  
Feinseth holds the 289th position among more than 8,500 analysts tracked on TipRanks. His ratings have been profitable 58% of the time, with each rating delivering an average return of 10.9%. (See Acushnet Stock Chart on TipRanks) More

Rows of glass vials in a biologics laboratory in Sweden. Photographer: Mikael Sjoberg/Bloomberg
Bloomberg Creative | Bloomberg Creative Photos | Getty Images

Company: Catalent (CTLT)

Business: Catalent develops and manufactures solutions for drugs, protein-based biologics, cell and gene therapies, and consumer health products worldwide. The company operates through four segments. First, there’s Softgel and Oral Technologies, which provides formulation, development, and manufacturing services for soft capsules for use in a range of customer products. Biologics provides biologic cell-line, and it develops and manufactures cell therapy and viral-based gene therapy. This segment also handles the formulation, development and manufacturing for parenteral dose forms, including vials and prefilled syringes. The Oral and Specialty Delivery segment offers formulation, development and manufacturing across a range of technologies, along with integrated downstream clinical development and commercial supply solutions. Finally, the Clinical Supply Services segment offers manufacturing, packaging, storage, distribution and inventory management for drugs and biologics, as well as cell and gene therapies in clinical trials.
Stock Market Value: $8.86B ($49.16 per share)

Activist: Elliott Investment Management

Percentage Ownership:  n/a
Average Cost: n/a
Activist Commentary: Elliott is a very successful and astute activist investor, particularly in the technology sector. Its team includes analysts from leading tech private equity firms, engineers, operating partners – former technology CEOs and COOs. When evaluating an investment, the firm also hires specialty and general management consultants, expert cost analysts and industry specialists. The firm often watches companies for many years before investing and have an extensive stable of impressive board candidates. Elliott has not disclosed its stake in this investment, but based on the firm’s history, we would expect it to be approximately $1 billion.

What’s happening?

On Aug. 29, Elliott and the company entered into a cooperation agreement pursuant to which Catalent agreed to temporarily increase the size of the board from 12 to 16 directors and appoint Steven Barg (global head of engagement at Elliott), Frank D’Amelio (former CFO and EVP, global supply, of Pfizer), Stephanie Okey (former SVP, head of North America, rare diseases, and U.S. general manager, rare diseases at Genzyme) and Michelle Ryan (former treasurer of Johnson & Johnson). The company will reduce the size of the board at the 2023 annual meeting; it agreed to nominate a slate of 12 candidates, including the four new directors. Catalent also agreed to establish a strategic and operational review committee, charged with conducting a review of the company’s business, strategy and operations, as well as its capital allocation priorities. This committee will include new directors Barg and Ryan. Further, John Greisch (former president and CEO of Hill-Rom Holdings) has been appointed executive chair of the board and will also chair the newly formed committee. Elliott agreed to abide by certain customary voting and standstill provisions.

Behind the scenes

Catalent is an outsourced manufacturer in the pharmaceuticals industry. This is a stable business in a growing industry operating in an oligopoly. It’s one of the three largest global contract development and manufacturing organizations, next to Lonza and a division of Thermo Fisher. The company was always seen as a market leader, but in the middle of 2022 the tides began to turn, largely due to two main factors. First, Catalent was negatively affected by a Covid cliff: During the pandemic, the government mandated that the company shut down much of its manufacturing and start producing Covid vaccines. This production led to $1.5 billion in revenue that recently went to zero. Second, Catalent had several self-inflicted wounds, including an acquisition that did not pan out like they expected and operational and regulatory issues. These are fixable issues that have sunk the stock from $142.35 in September 2021 to $48.82 this month, but they do not necessarily adversely affect the long-term intrinsic value of the company. That makes this situation an excellent opportunity for an activist.

In its most simplistic form, there are two basic elements to an activist campaign: success in the activism (for instance, getting the company to adopt your agenda) and execution of the activist agenda. Elliott has already accomplished the former, having entered into the cooperation agreement for four board seats. There’s also the establishment of a strategic and operational review committee and appointment of Greisch as executive chair of the board and as chair of the newly formed committee. While this committee’s purview is business, strategy and operations, we expect it will put an emphasis on strategy.
This is a very strategic asset, and there are likely to be several interested acquirers. In fact, on Feb. 4, Bloomberg reported that fellow life sciences conglomerate Danaher had expressed interest in purchasing Catalent at a “significant premium.” Catalent ended Feb. 3 at $56.05 per share, and the stock popped nearly 20% the following trading session. Ultimately, a deal with Danaher never materialized. Additionally, companies like Merck could be interested in buying the company or parts of it. Another possibility is an acquisition by private equity, of which Elliott’s PE arm could be an interested party. While as an activist Elliott will do whatever it feels is necessary to enhance shareholder value, in the past the firm has made significant use of the strategy of offering to acquire its portfolio companies as the best catalyst to enhance shareholder value. We would not be surprised to see that happen here. Catalent is the right size for Elliott, which recently partnered on buyout deals for Citrix Systems and Nielsen Holdings, each for roughly $16 billion. Elliott has also recently shown interest in this industry, partnering with Patient Square Capital and Veritas Capital to acquire Syneos Health (SYNH) for $7.1 billion. That acquisition is expected to close in the second half of 2023. Like Catalent, Syneos is an outsourced pharma solutions company: It outsources R&D for pharmaceutical companies, whereas Catalent outsources manufacturing.
Elliott quickly got Catalent to pursue a strategic exploration agenda, which indicates to us that there was not a lot of pushback by management. We expect that this review will conclude with a sale of the company. However, it is worth noting that Catalent has a relatively new CEO at the helm, Alessandro Maselli, who was promoted from president and COO in July 2022. A lot of the operational issues happened during his watch. If this does turn from a strategic review to an operational review, there is no guarantee that he keeps his job.
Ken Squire is the founder and president of 13D Monitor, an institutional research service on shareholder activism, and the founder and portfolio manager of the 13D Activist Fund, a mutual fund that invests in a portfolio of activist 13D investments. More