Allstate and PulteGroup Show Value Plus Growth

John Dorfman

August 2, 2021 (Maple Hill Syndicate) – In a romantic partner, would you prefer good looks or intelligence?

Silly question. Of course, you’d like both.

Yet in the stock market, investors often feel that they can go for value, or growth, but not both. Sometimes you can find both in a single stock. And once a year, I write about stocks that I feel show both characteristics.

The record of this paradigm is a good one. In 15 columns, my “Value Plus Growth” choices have shown an average 12-month return of 19.9%. Compare that with the Standard & Poor’s 500 Index, which seems so unbeatable lately. The index has averaged 12.5%.

My picks in this paradigm have beaten the index 10 times out of 15, and have been profitable 12 times.

Bear in mind that my column results are hypothetical: They don’t reflect actual trades, trading costs or taxes. These results shouldn’t be confused with the performance of portfolios I manage for clients. Also, past performance doesn’t predict future results.

Here are some new suggestions. For this column I judged that a stock has “value” if it sells for 15 times the company’s per-share earnings or less. It has “growth” if its five-year earnings growth has averaged 12% or better. Of about five dozen stocks that meet those tests, here are four that I like.


I’ll start with Allstate Corp. (ALL), one of the largest property and casualty insurers in the U.S. For more than six decades, Allstate was part of then-mighty Sears, Roebuck & Co.

According to Wikipedia, insurance broker Carl Odell suggested the idea for the company to Sears chairman Robert Wood during a bridge game in 1930. Sears named the company after a popular brand of tires it sold.

Allstate, separate from Sears since 1993, has been profitable in 14 of the past 15 years – every year except recession-wracked 2008. It has grown its earnings at a 29% annual clip the past five years. And yet, its stock sells for less than 12 times per-share earnings.


One of several homebuilding stocks I like, PulteGroup Inc. (PHM), based in Atlanta, does business in some 40 states. Pulte lost money five years in a row during the housing bust that ended in 2011, but it now has a nine-year profit streak going.

Founder Bill Pulte started building houses in 1950 when he was 18 years old. The company has been public since 1972. Its revenue troughed in 2011 at a little over $4 billion, but has risen to about a $12 billion annual pace now.

The pandemic, unfortunately still going, has given a boost to homebuilders. Some people want to escape the crowded city. Some want bigger homes since they are spending more time at home, and perhaps working from home. Pulte’s return on invested capital recently climbed above 20%.

Investors, unsure if the current boom will last, value Pulte at only nine times earnings. The five-year earnings growth rate is close to 20%.


Sporting an earnings growth rate near 26% for the past five years is Supernus Pharmaceuticals Inc. (SPUN) of Rockville, Maryland, which makes drugs to treat disorders of the central nervous system.

In April, the Food and Drug Administration approved one of its drugs for the treatment of attention-deficit hyperactivity disorder in children aged six to 17. That gave a boost to the stock, but it still sells for less than 13 times earnings.

The company’s main drug is Trokendi XR, which is designed to prevent migraine headaches.

American Business Bank

The smallest stock on my list today is American Business Bank (AMBZ), a Los Angeles bank company that serves mid-sized companies in the Los Angeles area. It has increased its earnings at about a 43%-a-year clip in the past five years.

Bank stocks are out of favor because interest rates are low, which makes it harder for banks to make a good profit on the spread between what they pay for deposits and what they get on loans. Despite that, I think this stock appears to be a bargain at 10 times earnings.

Last Year

A year ago I recommended four stocks that I believe combined value and growth. Axos Financial Inc. (AX) returned 127% and Charles Schwab & Co. (SCHW) 102%. Lennar Corp. (LEN) contributed 42%%, while Miller Industries Inc. (MLR) brought up the rear with a 33% gain.

Collectively, my picks posted a 76.1% return, besting the S&P 500, which was up 38.0%.

Disclosure:  A few of my clients own Allstate. I own Miller Industries personally and in a hedge fund I manage.

John Dorfman is chairman of Dorfman Value Investments LLC in Newton Upper Falls, Massachusetts, and a syndicated columnist. His firm or clients may own or trade securities discussed in this column. He can be reached at

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