Bank of New York Mellon and Fox Show Value and Momentum
Posted: February 04, 2025
February 3, 2025 (Maple Hill Syndicate) – Last year, momentum stocks were up 46%, growth stocks 36% and value stocks only 12%.
As a long-time value investor, I find those figures (from S&P Dow Jones Indices) discouraging, yet also instructive.
Let’s define our terms:
- Momentum stocks are rising in price faster than the overall market.
- Growth stocks display rapidly rising earnings.
- Value stocks are cheap relative to a measure of intrinsic worth, such as the company’s earnings.
If you believe in the value style, you might want to seek out stocks that show both value and momentum. Here are five stocks that in my judgment display both. Each is up more than 50% in the past year, yet sells for no more than 15 times the company’s per-share earnings.
Bank of NY
Bank of New York Mellon Corp. (BK), was founded in 1784 by Alexander Hamilton. It offers traditional banking, custody services and investments. It is custodian for some $52 trillion, and manages more than $2 trillion in investments.
The Trump administration’s agenda of deregulation and tax cuts for corporations and upper-income people will probably be good for this bank. It has been profitable for 14 consecutive years and raised its dividend each year during that stretch.
The stock, up 56% in the past year (through January 31), sells for just under 15 times earnings.
REV Group
REV Group Inc. (REVG), based in Brookfield, Wisconsin, makes fire engines, ambulances, street sweepers and motorhomes. It has notched a profit in 10 of the past 12 years, with an upturn lately.
Only four analysts follow the stock, and their ratings are split symmetrically: one strong buy, one buy, one hold, and one underperform. The stock, up 77% in the past year, goes for eight times recent earnings.
Fox
The producer of Fox News, Fox Corp. (FOX) has seen its stock jump 67% in the past year. It still sells for less than 13 times earnings.
In addition to Fox News, the company produces live sports shows, and Fox Business. It also owns 29 local television stations, and the streaming platform Tubi. Surprisingly for a company with a $22 billion market value, Fox is barely covered on Wall Street.
Cal-Maine
Avian flu is raging, which poses risks for Cal-Maine Foods Inc. (CALM), the largest U.S. egg producer. The price of eggs is so high (about $4.14 a dozen, up from about $2.50 a year ago) that it’s become a political issue. Nonetheless, I think that Cal-Maine’s strong points outweigh the risks.
I’m drawn to Cal-Maine because it’s debt-free, a rarity these days. The company’s return on equity, which varies wildly from year to year, has lately hovered above 34%. The stock, up 93% in the past year, sells for eight times recent earnings.
Analysts expect earnings – and the stock price — to fall over the coming year. I expect better, albeit nervously.
Century Aluminum
Aluminum is one of the categories that President Trump selected this month for increased tariff protection. Century Aluminum Co. (CENX) is up 77% in the past year, yet sells for only six times earnings. Perhaps the tariffs will help it add to its gains.
It’s not surprising that the stock is cheap. The company has gone back and forth between gains and losses for the past 15 years, with six gains and nine losses. It’s a low-quality stock, but perhaps a timely one. And it’s improved its balance sheet lately, reducing its debt level from high to medium.
The Record
The column you’re reading is the 46th one I’ve written on stocks with value plus momentum. The average 12-month return on my recommendations in this series has been 12.7%, compared to 10.8% for the Standard & Poor’s 500 Total Return Index.
Bear in mind that my column results are hypothetical and shouldn’t be confused with results I obtain for clients. Also, past performance doesn’t predict the future.
Of the 44 columns for which one-year results can be calculated, 30 have shown a profit and 23 have beaten the index.
My picks a year ago were uninspired, I’d have to say. Collectively they posted a 0.7% loss, while the S&P 500 was up 23.9%. My worst pick was Phillips 66 (PSX), down 17%. My best was Bel Fuse Inc. (BELFA), up 17%.
Paccar Inc. had an 11% gain, but Warrior Met Coal had a 12% loss. D.R. Horton Inc. suffered a 2% loss.
Disclosure: I own Cal-Maine Foods personally and for most of my clients. My wife Katharine Davidge, a portfolio manager at my firm, owns Fox personally and for some of her clients.
John Dorfman is chairman of Dorfman Value Investments in Boston, Massachusetts. His firm or clients may own or trade the stocks discussed here. He can be reached at jdorfman@dorfmanvalue.com.