While I write about more than 200 stocks each year, I own far fewer. Once a year in this column, I discuss my holdings. Here are the 25 I own personally and for most clients now.
Communications
I hold the same three communications stocks I held a year ago — Alphabet Inc. (GOOGL), Paramount Global (PARA), and Walt Disney Co. (DIS). It’s been a rough year for Paramount and Disney, which are down 38% and 4% respectively.
When Paramount was riding high in 2021, I sold enough shares to get back all of my initial investment. I’m mulling a possible sale, but I do think Paramount is undervalued at 0.4 times revenue.
Consumer discretionary
With recession talk rife in the past year, I sold most of my consumer discretionary stocks. Currently, I have just one, Meritage Homes “Corp. (MTH). I believe there is a shortage of single-family homes, which puts homebuilders in a favorable position even though mortgage rates have risen.
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Consumer staples
I think people overpay for the presumptive steadiness of the big staples stocks like Procter & Gamble Co. (PG) or Kellogg Co. (K). I own John B. Sanfilippo & Son Inc. (JBSS), a purveyor of nuts. But I trimmed my holding this month. The stock has risen 79% in the past year and now sells for 21 times earnings.
Since I wrote about my energy holdings a year ago, the price of oil has fallen from about $120 a barrel to about $71. I expect it to stabilize at $80 or more for the next couple of years.
Hence, I have held onto all three of the oil & gas stocks I mentioned a year ago — Pioneer Natural Resources Co. (PXD), Dril-Quip Inc. (DRQ), and Total Energies SE (TTE) — and have added a fourth, Diamondback Energy Inc. (FANG).
The only financial stock among the 25 is Berkshire Hathaway Inc., run by Omaha billionaire Warren Buffett.
Health care
I hold two conservative stocks in health care and one speculation. Merck & Co. (MRK) and Pfizer Inc. (PFE) are old-line drug companies with diverse product lines.
Fulgent Genetics Inc. (FLGT) does genetic testing and COVID-19 testing. The latter became the tail that wags the dog in the past two years, but it’s the former that interests me.
Industrials
Relations with China are rotten, and those with Russia are worse. Iran and North Korea are threats, too. Accordingly, I own three defense stocks: General Dynamics Corp. (GD), Lockheed Martin Corp. (LMT), and Ducommun Inc. (DCO).
Snap-On Inc. (SNA) makes car-repair tools and may benefit from the transition to electronic cars. Sterling Infrastructure Inc. (STRL) builds or repairs bridges and tunnels and is getting a boost from increased federal spending in that area.
I’m also partial to Matson Inc. (MATX), an ocean shipper based in Hawaii. Matson sells for only four times earnings.
Newmont Corp. (NEM), one of the world’s largest gold mining companies, is my only holding in the materials sector right now. It hasn’t done well so far, and I’m not sure it will be a long-term holding.
Technology
Technology stocks were market leaders in 2019, 2020, and 2021, then took it on the chin last year. Lately, they have again been leading the market’s parade.
For a value investor like me, tech stocks often seem pricey. But there are four I currently like and own. My newest tech holding is Cirrus Logic (CRUS), which makes sound chips and has taken a tumble because of rumors it may lose Apple Inc. (AAPL) as a customer.
Apple itself is my longest-standing tech holding. I’ve owned it for five years. I love the iPhone’s franchise and the company’s hoard of $55 billion in cash and marketable securities.
Texas Instruments Inc. (TXN) posted a 57% return on equity in the past four quarters, making it one of the most profitable technology stocks. It sells for 19 times earnings, which I consider pretty reasonable considering the company’s growth and profitability.
After parting with Lam Research Corp. (LRCX) during the tech wreck of 2022, I now own it again. It’s a leader in semiconductor equipment, particularly gear for “etch.”
The record
In most of my columns, I give the performance of past column recommendations and say that “these results shouldn’t be confused with the performance of accounts I manage for clients.”
However, today’s column is about the stocks I do own for clients. Therefore, here is my firm’s performance for the 23¼ years through March 2023.
On an aggregate of individual accounts, our return has been 528% (including dividends), versus 335% for the Standard & Poor’s 500 Index. Past performance doesn’t predict future returns.
Disclosure: I own the stocks discussed today personally and for most of my clients.
John Dorfman is chairman of Dorfman Value Investments in Newton Upper Falls, Massachusetts. His firm or clients may own or trade the stocks discussed here. He can be reached at jdorfman@dorfmanvalue.com.
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