Actions Speak Louder Than Words: My Stock Model Portfolio

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
GOOGL
, Paramount Global (PARA) and Walt Disney
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

MTH
(MTH). I believe there is a shortage of single-family homes, which puts homebuilders in a favorable position even though mortgage rates have risen.

Consumer Staples

I think people overpay for the presumptive steadiness of the big staples stocks like Procter & Gamble
PG
or Kellogg Co. (K). I own John B. Sanfilippo & Son (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.

Energy

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
PXD
, Dril-Quip and Total Energies SE (TTE) – and have added a fourth, Diamondback Energy
FANG
.

Financial

The only financial stock among the 25 is Berkshire Hathaway
BRK.B
, run by Warren Buffett.

Healthcare

I hold two conservative stocks in healthcare and one speculation. Merck
MRK
and Pfizer
PFE
are old-line drug companies with diverse products lines.

Fulgent Genetics 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

GD
(GD), Lockheed Martin

LMT
(LMT) and Ducommun
DCO
.

Snap-On (SNA) makes car-repair tools and may benefit from the transition to electronic cars. Sterling Infrastructure (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
MATX
, an ocean shipper based in Hawaii. Matson sells for only four times earnings.

Materials

Newmont (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
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
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
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 23 ¼ 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.