Category: John’s Weekly Column
Christy Anderson Picks Palantir and Wins 2024-2025 Derby
Posted: May 14, 2025
May 12, 2025 — (Maple Hill Syndicate) – A 446% gain in Palantir Technologies Inc. (PLTR) propelled Christy Anderson to a victory in the 2024-2025 running of Dorfman’s Three-Stock Derby, an annual stock-picking contest.
Anderson, a resident of Las Vegas, Nevada, is chief operating officer for a small company that makes radio frequency amplifiers with military applications.
As such, she became familiar with Palantir, an analytical software company whose Gotham platform is used by the U.S. military and Western-allied nations. Her company doesn’t do business with Palantir, and she doesn’t own the stock.
In fact, Anderson doesn’t own any stocks. “The stock market to me is just gambling,” she says. “I’m very intrigued by it though. I look at stocks every day.”
Anderson also picked Novo Nordisk AS (NVO), a Danish pharmaceutical company, and Hive Digital Technologies Ltd. (HIVE), which mines digital currencies. Both suffered losses, but her gain on Palantir was so huge that she ended with a 121% combined return, easily capturing first place.
Palantir is “probably overpriced now,” Anderson says. “They don’t really have the revenue to justify their market price.”
When she entered the contest, she wrote that ”the number of military hotspots continues to grow,” and that the military “will need an increasing number of unmanned assets.”
Anderson expects that the stock market will be volatile in the coming year, and will be little changed a year from now, after a lot of ups and downs.
Sanders Second
Donny Sanders, an accountant in Worcester, Massachusetts, took second place with an 82% gain. All three of his selections rose, led by Strategy (MSTR) with a 149% advance.
Tesla Inc. (TSLA) chipped in a 58% gain, while iShares Bitcoin Trust (IBIT) gained 39%. Of the three stocks, Sanders actually holds only one, Tesla. He doesn’t own a Tesla car, but “might get one eventually,” he says. He regards the car as “a super piece of technology.”
Sanders doesn’t have a strong guess as to what the market will do in the coming year. “Hold for the long term, that’s my motto,” he says.
Robinson Third
Ronald Robinson, a retiree in Pahrump, Nevada, took third place with a 48% combined gain on his three choices. Spotify Technology SA (SPOT) led the way, with a 107% gain. Uber Technologies Inc. (UBER) returned 25% and Energy Transfer LP (ET) 11%.
Robinson formerly worked for a transportation company in Alaska. He invests in stocks “just for kind of fun,” he says.
Robinson is optimistic about the market for the coming year. Lately, he says, the market has been “based on negative news. If the negative news can simmer down, I think the market will be good.” He thinks the U.S. and China will probably reach “some kind of agreement” on trade.
Eighteen Up
Of 34 contestants, three saw all three of their picks go up. They were Sanders, Robinson, and Larry Weiner, a real estate agent in Las Vegas. Eighteen contestants notched positive returns, and 16 showed a loss. The Standard & Poor’s 500 Total Return Index was up 6.8% for the contest period.
You Can Play
You are welcome to enter the next running of Dorfman’s Three-Stock Derby. This will be the 18th stock-picking contest I have run, and the ninth in which contestants have to pick three stocks, not just one.
To enter, send me:
- Your name
- Address
- Occupation
- Email address
- Home and work phone numbers.
- The names and stock symbols of the three stocks you choose. You don’t have to give your reasons but I appreciate it if you do.
Email me your entry at jdorfman@dorfmanvalue.com. Or mail it to John Dorfman, Dorfman Value Investments, 101 Federal Street, Suite 1900, Boston MA 02110.
Entries must be postmarked or time stamped by midnight May 31, 2025. The contest period will be from the market close on that date through the close on April 30, 2026.
If you finish in the top three, I will want to interview you on short notice and possibly on a weekend, so the phone numbers are important.
You do not need to own the stocks you select, but it’s fine if you do. Stocks must be traded in the U.S., but need not necessarily be U.S. companies. Short sales are permitted but not encouraged, since I have a separate short-selling contest. Exchange traded funds (ETFs) are permitted.
There’s no fee to enter. The winner will receive a $100 gift certificate to the restaurant of her or his choice.
Disclosure: I own Novo Nordisk personally and for most of my clients.
John Dorfman is chairman of Dorfman Value Investments LLC in Boston, Massachusetts, and a syndicated columnist. His firm or clients may own or trade securities discussed in this column. He can be reached at jdorfman@dorfmanvalue.com.
Why Low-Debt Stocks Are the Way to Go
Posted: May 06, 2025
May 5, 2025 — (Maple Hill Syndicate) – When President Trump was a businessman, he was famous for taking on lots of debt. Now that he’s the President, I believe that companies would be smart to do the opposite.
High-debt companies run at least three risks.
- Rising interest rates. Tariffs could make some goods scarcer. Tight immigration policy could make labor scarcer. The combination could push up inflation, leading to higher rates that make interest payments more painful.
- A recession. If the economy turns sour, companies with lots of debt are in danger of falling into the bankruptcy chasm. J.P. Morgan Chase thinks the chance of a recession is 60%.
- Frequent policy changes increase uncertainty. When uncertainty reigns, low-debt companies are the safer bet.
Even when the economic skies look sunny, I favor low-debt companies. All the more so now.
Here are five publicly traded companies that stand out because they have little or no debt.
Gentex
Down 37% over the past year, Gentex Corp. (GNTX) of Zeeland, Michigan, seems to me due for a comeback. The company’s main product is self-dimming mirrors for cars. Car sales in the U.S. are so-so, and Gentex has stopped shipping to China.
The U.S. has imposed a 145% tariff on imports from China, which has retaliated with a 125% tariff. Analysts expect Gentex’s profits to fall about 3% this year, but bounce back in 2026 and 2027.
Gentex is totally debt-free, and the stock sells for about 13 times earnings.
Employers Holdings
Employers Holdings Inc. (EIG), out of Reno, Nevada, sells workers compensation insurance, mostly in California. It serves mid-sized and small businesses, especially restaurants. Profits haven’t grown fast, but have been consistent: No losses in 23 years.
The stock is cheap, selling for 1.1 times book value (corporate net worth per share). But it seems to be permanently cheap: the price-to-book ratio is the same as the ten-year average.
Monarch Cement
Monarch Cement Co. (MCEM), which I mentioned in a recent column on small stocks, has a market value of a little under $1 billion. It hails from Humboldt, Kansas, and does business in that state plus parts of Arkansas, Iowa, Nebraska, and Oklahoma.
The company has zero debt, and lately has posted a profit margin of about 22%. Earnings are reasonably consistent: Monarch has been profitable in 14 of the past 15 years. (It had a small loss in 2011.) So far as I can tell, the company is completely neglected by Wall Street.
Cal-Maine Foods
I featured Cal-Maine Foods Inc. (CALM) in columns about low-debt stocks a year ago and two years ago. It posted 12-month returns of 21% the first time and 75% the second time. Sticking with it for a third straight year is tempting fate…but I will.
Cal-Maine, based in Ridgeland, Mississippi, is the largest U.S. egg producer. Eggs, as every supermarket shopper knows, have been fetching high prices. Cal-Maine racked up a 50% return on stockholders’ equity in the past four quarters.
That’s unsustainable, and the whole world knows it, which is why the stock sells for less than five times earnings.
T. Rowe Price
The big mutual-fund company, T. Rowe Price Group Inc. (TROW) is down 19% year-to-date through May 2. Based in Baltimore, Maryland, it sells both stock and bond funds, and runs investment plans for employers.
It’s no mystery why the stock is down this year: It’s been a rocky year for the markets. But T. Rowe has history on its side. It has been profitable every year in the past 30 years, always scoring at least a 15% return on equity and occasionally exceeding the 30% barrier.
The company’s debt is only 3% of its equity.
The Record
The average 12-month return on my past recommendations of low-debt stocks has been 25.4%, versus 11.15% for the Standard & Poor’s 500 Total Return index. That’s based on 22 columns written from July 1998 through a year ago.
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.
My picks from a year ago achieved a 39.8% return from May 6, 2024 through May 2, 2025, while the index was up 11.3%. All five of my recommendations beat the index, led by Cal-Maine’s 75.5% return.
Alpha Metallurgical Resources Inc. (AMR) returned 57.3%, Mueller Industries Inc. (ML) 31.9%, Cognizant Technology Solutions Corp. (CTSH) 18.8%, and Incyte Corp. (INCY) 15.6%.
In 22 outings, my low-debt recommendations have beaten the S&P 14 times and been profitable 15 times.
Disclosure: I own Cal-Maine Foods and Mueller Industries personally and for most of my clients.
John Dorfman is chairman of Dorfman Value Investments LLC in Boston, and a syndicated columnist. His firm or clients may own or trade securities discussed in this column. He can be reached at jdorfman@dorfmanvalue.com.
Old Faithful Fizzled Last Year, But Watch for a Spurt
Posted: April 29, 2025
April 28, 2024 (Maple Hill Syndicate) – One of my favorite tools for picking stocks is a paradigm I call Old Faithful, named after the geyser in Yellowstone Park. This paradigm fizzled last year, but has an outstanding long-term record.
To appear on the Old Faithful list, a stock must:
- Post good profits (15% return on equity).
- Have debt under control (debt less than stockholders’ equity).
- Be cheap (no more than 15 times earnings and two times book value).
- Show decent earnings growth (averaging at least 10% a year for the past five years).
Drawn from the Old Faithful screen, here are four stocks I feel optimistic about for the coming 12 months.
Halliburton
Halliburton Co. (HAL), with headquarters in Houston, Texas, is one of the Big Three oilfield service companies. The other two are Schlumberger Ltd. (SLB) and Baker Hughes Co. (BKR).
I consider a 15% return on stockholders’ equity good and 20% excellent. Halliburton notched 20.6% in the past four quarters. Its stock is below $21 as of April 25, and the consensus of Wall Street analysts is that it will rise to $30 in the next 12 months.
Of 29 analysts who cover the stock, 22 recommend it. The stock sells for about 9 times earnings, whereas over the past decade, it’s usually fetched a multiple of about 17.
Cincinnati Financial
Based not in Cincinnati but in Fairfield, Ohio, Cincinnati Financial Corp. (CINF) sells home, auto and life insurance. It does business in all 50 states and has relatively little exposure in Florida, where hurricanes often cause severe losses.
Earnings growth has averaged 13% the past five years. It was faster last year, but I don’t put much emphasis on that since insurers had recently won big price increases from regulators. That’s not a regular occurrence.
The company has very little debt – only 6% of equity.
Oshkosh
Fire engines, garbage trucks, military trucks and aerial work platforms are the main products at Oshkosh Corp. (OSK), based in Oshkosh, Wisconsin. The stock hasn’t gone much of anywhere in three years.
It sells for less than nine times earnings, compared with a typical multiple over the past decade of 15. That measure and other valuation measures are at five-year or ten-year lows.
Analysts are split, with eight recommending the stock and eight demurring. Recession is a risk. In the pandemic recession of 2020, profits fell almost 50%, but the company stayed profitable. In the Great Recession of 2008-2009, it posted a big loss.
I may be prejudiced, since I made a lot of money in this stock many years ago, but Oshkosh looks appealing to me. Investors might want to take a toehold now, and add to it if the shares, now at about $89, fall below $80.
Southern Bancshares
If you have $8,250 lying around, you can buy one share of Southern Bancshares NC Inc. (SBNC), a community bank based in Mount Olive, North Carolina. It has about 60 branches in North Carolina and Virginia.
The stock is thinly traded and, so far as I can tell, completely uncovered by Wall Street. One thing I look for in a bank is a return on assets of 1.0% or better. Southern Bancshares has achieved that in five of the past six years.
Ratings agencies don’t regard the bank’s financial strength highly; its debt gets BBB or BB ratings. That’s probably why the stock is so cheap, selling for four times recent earnings and just over book value (corporate net worth per share).
This is not a conservative investment, but the risk/reward ratio looks good to me.
The Record
Starting in 1999, I’ve written 22 columns featuring picks from the Old Faithful screen. (Today’s is the 23rd.)
The average 12-month return has been 18.96%, which is more than double the 7.88% return for the Standard & Poor’s 500 Total Return Index over the same 22 periods.
Be aware that my column results are hypothetical and shouldn’t be confused with results I obtain for clients. And past performance doesn’t predict the future.
My Old Faithful picks have beaten the index 16 times out of 22, and have been profitable 15 times.
My selections from a year ago failed to erupt. They fell 13.4%, while the S&P 500 returned 7.0% including dividends. Not a single one of my 2024 picks beat the index. The best performer was Farmers & Merchants Bancorp (FMCB) with a feeble 2.3% gain.
Hibbett Inc. returned only 2.1% even though it was taken over by a British company, JD Sports Fashion. My worst selection was Agco Corp., down 28.9%.
Disclosure: A hedge fund I run owns call options on Schlumberger.
John Dorfman is chairman of Dorfman Value Investments LLC in Boston, Massachusetts, and a syndicated columnist. His firm or clients may own or trade securities discussed in this column. He can be reached at jdorfman@dorfmanvalue.com.
Five Small Stocks That Ring My Bells
Posted: April 22, 2025
April 21, 2025 (Maple Hill Syndicate) – Traditionally, large stocks were considered more international, and small stocks more domestic. At a time of trade hostilities, you’d think that small stocks would be doing well.
Alas, not. This year through April 18, big stocks (as measured by the Standard & Poor’s 500 Total Return Index) are down 9.8%, while small ones (gauged by the Russell 2000 Index) have fallen 15.3%.
This is partly because the small fry are more volatile, and partly because in times of stress, people flee to the relative safety of big stocks.
Nonetheless, small stocks have advantages. They are less combed over by Wall Street analysts, and offer a better chance of big gains if you choose astutely.
Here are five little stocks that look promising to me.
Apogee
Apogee Enterprises Inc. (APOG), based in Minneapolis, Minnesota, makes architectural glass and framing, especially for skyscrapers. The stock has been a miserable investment or a great one, depending on your timing. It’s down 36% so far this year but up 150% over the past five years.
Right now, Apogee stock is out of favor, partly because commercial real estate is suffering in a post-Covid world. It sells for about 10 times the past four quarters’ earnings. Over the past decade, that multiple has usually been more like 17.
Bank7
Based in Oklahoma City, Oklahoma, Bank7 Corp. (BSVN) has compiled a strong record of profitability. I like to see banks earn at least 1.0% on assets. Bank7 has done that nine years in a row, including six years where the figure was over 2.0%.
Unlike most banks, Bank7 has no corporate debt. It has increased its earnings by 18% a year over the past five years. The stock sells for less than eight times recent earnings.
Legacy Housing
A small homebuilder based in Bedford, Texas, Legacy Housing Corp. (LEGH) specializes in very small homes and manufactured homes. If the economy slows down, as seems possible this year, I would guess that the low end of the housing market might be a good place to be.
Mortgage rates remain higher than any homebuilder would prefer. But Legacy has very little debt, and so can probably make it through tough times if necessary. The stock sells for 10 times earnings and 1.2 times book value (corporate net worth per share).
Monarch Cement
Over the past decade, Monarch Cement Co. (MCEM) has increased its annual profits an average of 24% a year – coincidentally, the same as Alphabet Inc., the parent of Google. The stock has done extremely well, up 650% in the past ten years. It’s up 7% year-to-date, defying the general downtrend.
Monarch stock is fairly inexpensive, selling for 13 times recent earnings. And the company is debt-free, a quality I love and rarely see these days. Based in Humboldt, Kansas, the company has little or no Wall Street coverage.
Steel Partners
Though its name might fool you, Steel Partners Holdings LP (SPLP) of New York City is not a steel maker. It’s more of a small conglomerate. It makes building materials and tubing, owns WebBank in Utah, and runs a youth sports business in New Jersey.
Steel Partners had four losses in the six years through 2019, but has been nicely profitable since, with a return on equity of 25% last year. Since the company is structured as a limited partnership, owning this stock may complicate your tax return.
The Record
Since the beginning of 2000, I’ve written 27 columns recommending small-cap stocks. The average one-year return on my recommendations has been 14.1%. That beats both the Standard & Poor’s 500 Total Return Index at 8.5% and the Russell 2000 Index (with dividends reinvested) at 9.8%.
My picks in this series have been profitable 19 times out of 27. They have beaten the large-cap index 16 times and the small-cap index 15 times.
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.
I’d rather not tell you how last year’s picks did, but I reluctantly will. All five of my picks from a year ago are down significantly, with an average loss of 40.7%. By comparison the S&P was up 8.5% and the Russell 2000 was down 3.4%.
While all my picks did badly, the worst was Quanex Building Products Corp. (NX), down 52%. The least disastrous was John B. Sanfilippo & Son Inc. (JBSS) down 29%.
That shows the dangers small-caps can pose. But the long-term results show the benefits.
Disclosure: I own Alphabet personally and for almost all of my clients.
John Dorfman is chairman of Dorfman Value Investments LLC in Boston, Massachusetts. His firm or clients may own or trade securities mentioned in this column. He can be reached at jdorfman@dorfmanvalue.com.
Netflix, Crocs and 19 Other Stocks Make the 30-30 Club
Posted: April 16, 2025
April 14, 2025 (Maple Hill Syndicate) – In today’s tumultuous market climate, it’s hard to know what stocks to hold. But the stocks of outstanding companies always deserve a look.
Consider the members of my 30-30 Club. In baseball, the 30-30 Club includes players who hit 30 home runs and steal 30 bases in a year. My 30-30 club is for companies that score a return on equity of 30% or more and grow profits at a 30% annual clip for five years.
This year, 21 stocks made the roster, the fewest in several years. I admire all of these companies, and recommend four of the stocks. Some of the others are too pricey for my taste.
Powell
Powell Industries Inc. (POWL) makes large-scale equipment for the transmission and control of electricity. There is a consensus in the U.S. that the power grid needs improvement, and I figure that bodes well for Powell.
Only three Wall Street analysts follow Powell (two like it, one doesn’t). I love the fact that the company is debt-free and I think the stock is modestly priced at 13 times earnings.
Trade hostilities shouldn’t hurt this stock much. The vast majority of its business is in the United States, with a bit in Canada and a touch in Europe and Africa.
Crocs
Crocs Inc. (CROX), on the other hand, stands to be flattened by the trade wars. It shoes (you know, the ones with holes) are made mostly in China and Vietnam. President Trump has threatened China with a 145% tariff, and Vietnam with a 46% tariff.
That’s why Crocs shares have fallen below $93 from a high near $160 last year. It’s an utter speculation, but if you believe that the U.S. is prepared to strike trade deals, even with China, the gamble could pay off. The stock sells for a paltry six times earnings.
DocuSign
DocuSign Inc. (DOCU), which allows people to execute documents on the Internet instead of with paper and ink, used to have a lot of debt. I sold this stock short in 2022, betting on a decline.
I made money on that short sale, but I unwound it in early 2024. I felt that DocuSign was providing a needed service, and would grow. And grow it has, increasing revenue 20% a year over the past five years.
It has also cleaned up its balance sheet, and now has hardly any debt. The stock sells for about 15 times earnings.
Sterling Infrastructure
The biggest position in my clients’ portfolios (and my own) in 2023 and 2024 was Sterling Infrastructure, which traditionally built bridges, highways, and airports. In recent years it has started to specialize in data centers.
The stock has gained 428% in the past three years, but is down 18% this year (through April 11). As the stock became expensive in 2024, I trimmed it from a 10% position down to a 4% holding. With the recent market slide, it seems decently valued to me at about 17 times earnings.
Honorees
In addition to the four stocks I recommend, I want to honor the other companies that achieved membership in the 30-30 club. The best known is Netflix Inc. (NFLX). I consider it a wonderful company but the stock is too expensive for me at 46 times earnings.
Other big companies that made the roster are Albertsons Companies Inc. (ACI), Arista Networks Inc. (ANET), Chipotle Mexican Grill Inc. (CMG), Coca-Cola Consolidated Inc. (COKE), Comfort Systems USA Inc. (FIX), Insulet Corp. (PODD), Ross Stores Inc. (ROST), and TJX Companies Inc. (TJX).
Other honorees are Blackline Inc. (BL), Churchill Downs Inc. (CHDN), InterDigital Inc. (IDCC), Kinsale Capital Group Inc. (KNSL), Lantheus Holdings Inc. (LNTH), Medpace Holdings Inc. (MEDP) Murphy USA Inc. (MUSA), Texas Roadhouse Inc. (TXRH).
The Record
Before today’s column, I’ve written 22 columns about the Thirty Thirty Club. The average gain on my recommendations in this series has been 16.01%, almost double the 8.16% average 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 22 columns, 12 were profitable and 12 beat the index.
The recommendations I made one year ago were a disaster. Their 42.7% loss was the worst showing in any year since I started this series in 1999. The worst loser was Atkore Inc. (ATKR), which plummeted 71%. My best pick was Cisco Systems Inc. (CSCO), which rose 14%.
Disclosure: I own Sterling Infrastructure personally and for almost all my clients. My wife Katharine Davidge, who is a portfolio manager at my firm, owns Lantheus for some clients.
John Dorfman is chairman of Dorfman Value Investments LLC in Boston, Massachusetts, and a syndicated columnist. His firm or clients may own or trade securities discussed in this column. He can be reached at jdorfman@dorfmanvalue.com.
The Tariff Steamroller Has Flattened Some Good Stocks
Posted: April 08, 2025
April 7, 2025 –- The tariff steamroller ran over the stocks of some good companies in the first quarter and early April. That provides lots of candidates for my Casualty List, a roster of stocks that have been hit hard and that I believe have excellent recovery potential.
The basic idea in investing is to buy low and sell high, Market declines offer an opportunity for the “buy low” part. Are we near a bottom? I can’t tell. But I know that many stocks are priced more attractively than they were at the mid-February peak.
Today I’m adding five stocks to the Casualty List.
Synchrony
Synchrony Financial (SYF) provides private-label credit cards for Amazon.com, Lowe’s, Sam’s Club, Verizon, Walgreens and other companies, serving more than 70 million people in all.
Credit card delinquencies were creeping up even before the trade wars broke out. If tariffs cause a recession, that situation will get worse. Since January, Synchrony stock has come down from nearly $71 to about $44 as of April 4.
Today’s price is only five times recent earnings and six times the earnings analysts anticipate for the next four quarters. Synchrony didn’t exist in its current form during the Great Recession of 2007-2009. But it held up decently through the Covid-19 recession of 2020.
Abercrombie
The Trump administration slapped a 46% tariff on Vietnam, one of the biggest announced for any country. Clothing retailer Abercrombie & Fitch Co. (ANF) got 34% of its clothes from Vietnam in 2023. Cambodia (49% tariff) and India (26%) are also big suppliers to Abercrombie.
Abercrombie executives must be chagrined, as they had reduced their imports from China, only to get caught up in a broader trade war. Vietnam has already offered to reduce its tariffs to zero if the U.S. would ease up. Perhaps a deal will be struck.
Abercrombie stock, which was above $180 last summer, has fallen to about $73, or less than seven times recent earnings.
Dillard’s
Down 29% this year, Dillard’s Inc. (DDS) is a department store chain concentrated in the South. The chain’s revenue has grown 15% a year over those five years, but analysts expect soggy revenue going forward, as the new tariffs slow economic growth.
Only four Wall Street analysts follow the stock. None of them rate it a buy, and two rate it “underperform.”
My view is rosier than the consensus. I consider a return on equity of 15% good and 20% excellent. Dillard’s has been above 30% four years in a row. I like the stock at $317, down from a high of $508. The current price is nine times recent earnings.
Peabody
Selling for less than book value (corporate net worth per share), Peabody Energy Corp. (BTU), looks cheap enough to me to discount a host of bad news.
The largest U.S. coal producer is both an importer and an exporter. Some of its coal comes in from nine mines in Australia. And it sells coal in 26 countries, including India, Japan and South Korea.
In the past decade, Peabody shares have usually fetched above five times earnings. Today the multiple is under four.
Steven Madden
Right in the danger zone is shoemaker Steven Madden Ltd. (SHOO). It saw the tariff threat coming, but not in time to deflect it much. As of last November, it had 71% of its shoes made in China, which is being hit with the steepest tariff rate, 54%.
Steven Madden has sliced Chinese imports to 58%, and hopes to get to 40% by the end of this year. Since many of its shoes will be tariffed, the company has said it will try to raise prices where it can. But of course, customers may resist.
Over the past decade, Steven Madden has grown sales and earnings at about an 8% annual clip. The stock currently fetches 10 times earnings, versus a ten-year median of 19.
The Record
Today’s Casualty List is my 88th one. Performance can be calculated for 84 lists, started in June 2000. The average return on my Casualty List recommendations has been 14.6%, which nicely beats the 11.4% average 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 84 lists, 39 have beaten the S&P and 53 have been profitable.
My selections a year ago suffered a 2.2% loss from April 1, 2024 through April 1, 2025. My worst pick was Humana Inc. (HUM), which fell almost 24%. My best was Universal Corp (UVV), up a bit more than 17%.
Disclosure: I don’t own the stocks discussed in today’s column, personally or for clients.
John Dorfman is chairman of Dorfman Value Investments LLC in Boston, Massachusetts. He or his clients may own or trade securities discussed in this column. He can be reached at jdorfman@dorfmanvalue.com.
Go Off the Beaten Path with Mid-Cap Stocks
Posted: April 01, 2025
March 31, 2025 (Maple Hill Syndicate) – You’re probably hearing a lot – much of it malarky – about how to position your investment portfolio in an age of tariffs and trade wars.
One piece of advice you may hear, which at least makes some sense, is that mid-capitalization stocks are less dependent on foreign suppliers and foreign markets than large companies are. I think in general that’s true, but of course what matters is a company’s specific situation.
I define mid-caps as stocks with a market value between $1 billion and $10 billion. (Some people put the range at $2 billion to $10 billion.)
I’ve always been partial to mid-caps, but not out of any desire to avoid foreign entanglements. I like them because they aren’t closely followed by analysts and institutions. You’re more likely to find a bargain in a stock that’s analytically neglected than in one that’s widely followed.
Here are five mid-caps that I think are attractive now.
Axos Financial
Axos Financial Inc. (AX) was launched as Bank of Internet USA in 2000. Although the Internet has vanished from the bank’s name, it remains key to the bank’s methodology: It does business mainly online.
Axos has grown its earnings by 20% a year, over the past decade. Growth in the latest year was even faster, and the stock is up 21% in the past 12 months. Operating entirely in the U.S., the bank appears somewhat immune to trade wars. The stock trades at less than nine times earnings.
Meritage Homes
Down 18% in the past year (through March 28), Meritage Homes Corp. (MTH) seems to me to have comeback potential. The homebuilding industry is beset by two problems. Homes are too expensive for many buyers. And people are reluctant to move because they are hanging onto low-cost mortgages.
Even so, Meritage earned a 16% return on equity in the past four quarters. Think what it could do if and when industry conditions improve.
The company, based in Scottsdale, Arizona, does business in ten states, concentrating on warm-climate states such as Arizona, California, Florida, Texas and the Carolinas. The stock is cheap, about seven times earnings and only 0.8 times sales.
U.S. Lime
United States Lime & Minerals Inc., based in Dallas, Texas, sells lime and limestone products used in construction, paper and glass manufacturing, steel making, water treatment, and other applications.
Weighing in at 23 times earnings, this is not a cheap stock. However, its return on equity sparkles at 24% and its net profit margin is 34%. The balance sheet is super, with debt only 1% of equity.
Academy Sports
According to Wikipedia, Academy Sports + Outdoors Inc. (ASO), out of Katy, Texas, started in 1938 as an Army-Navy surplus goods store, and was a privately held company owned by the Gochman family until 2011. Then private-equity firm Kohlberg Kravis Roberts bought it, and sold it to the public in 2020.
As a public company, it has been profitable every year, but profits fell in fiscal 2024 and 2025. The stock has fallen 31% in the past year, and now sells for a mere eight times earnings. Value investors I respect (such as Joel Greenblatt and Chuck Royce) have been nibbling at the shares.
The chain has more than 300 stores in 21 states, selling sporting goods including guns and ammunition.
Seadrill
Energy stocks have lagged behind the overall market in the past year, which is odd since the U.S. now has a “drill baby, drill” President. I think that the pendulum has swung too far, and I like the energy sector, including Seadrill Ltd (SDRL), an offshore drilling contractor based in Houston, Texas.
It operates off the coasts of the U.S. Angola, Brazil, Canada and Norway. The stock has plummeted almost 50% in the past year, and now sells for a pitiful multiple — four times recent earnings. The stock price is below book value (corporate net worth per share).
The Record
This is the second column I’ve written about mid-cap stocks. The first one, in January 2024, produced a 17.1% return in 12 months.
That was better than the 15.8% return on the Standard & Poor’s 400 Mid-Cap Index but not as good as the 24.3% return on the S&P 500 Total Return Index, which tracks large-cap stocks.
My best pick was Unum Group (UNM), up 69%. My worst was Agco Corp. (AGCO), down 13%.
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.
Disclosure: I own Meritage shares personally and for most of my 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.
Five Foreign Stocks Worth Considering as U.S. Market Lags
Posted: March 25, 2025
March 24, 2025 (Maple Hill Syndicate) – This year through March 21, stocks were up 9% in France, 15% in Germany, and 18% in Hong Kong.
In the U.S. stocks were down 3%.
A little international diversification might be a good idea, especially with U.S. stocks currently on the expensive side. Yet many American investors have 100% of their portfolios in U.S.-based companies.
If you want a few international stocks in your portfolio, here are five that I think are worthy of consideration.
Hannover Rueck
In Germany, I like Hannover Rueck SE (HVRRY) a reinsurance company (an insurer to insurers) based in Hannover. It gets about 18% of its revenue in Europe, 16% in Britain, 42% in North America, and 24% in the rest of the world.
Hannover Rueck has notched a profit in 22 of the past 23 years. It had a modest loss in 2008, the height of the great financial crisis. The stock seems moderately valued to me, selling for 14 times recent earnings, and is up 16% this year.
Hikari Tsushin
In Japan, I’m drawn to Hikari Tsushin Inc. (HKTGF), which sells networking and automation products to small and medium-sized businesses. For example, it offers routers, LED lighting and water coolers.
It has grown its earnings at a 22% annual clip over the past decade, though revenue growth was considerably slower. The stock sells for only 11 times recent earnings. It’s up about 6% this year.
Total Energies
In France, I’m partial to Total Energies SE (TTE). It’s France’s biggest oil company and is also active in solar and wind energy. The stock weighs in at less than 10 times earnings, 0.8 times revenue and 1.2 times book value (corporate net worth per share), even though it’s up 15% year-to-date.
The company produces or sells energy in 120 countries. It has attracted both praise and criticism for its close relationship with the French government, and for dealing with Russia and China.
JD.com
I’m almost entirely out of China these days, mostly because I dislike the governing philosophy and methods of President Xi Jinping. I have no Chinese stocks for most clients, and only one small holding in my hedge fund.
Nonetheless, many Chinese stocks are cheap at the moment. One is JD.com Inc. (JD), which is one of the three largest e-commerce companies in China. (Alibaba is the largest; JD.com and Pinduoduo fight for second.) JD.com has increased its sales at a 34% annual pace over the past decade.
The stock, up 23% this year, still sells for only 11 times earnings.
Taiwan Semiconductor
What company manufactures semiconductor chips for Apple, Nvidia and Qualcomm? The answer is Taiwan Semiconductor Manufacturing Co. (TSM), universally recognized as the world’s most advanced chip maker.
Taiwan Semiconductor boasts a net profit margin of about 40%, a return on equity of more than 30%, and five-year earnings growth exceeding 25%. If a U.S. company posted numbers like that, I believe it would be priced in the stratosphere.
Taiwan Semiconductor sells for 25 times recent earnings, not cheap but not terribly expensive either. That’s because the threat of a Chinese invasion of Taiwan hangs over its head like a sword of Damocles.
The Risks
Foreign stocks are riskier than American ones in some respects. Most countries have accounting standards less rigorous than those in the U.S., and less vigorous enforcement of those standards. Many countries have economic swings wider than those in America. In some countries, expropriation is a risk.
Also, investment gains can sometimes be wiped out by currency fluctuations. If you make, say, a 10% gain in Euros, but the dollar appreciates 11% against the Euro, you have a loss.
The Record
This is the 20th column I’ve written since 1998 recommending some non-U.S. stocks. The average one-year return on the recommendations in my previous 19 columns has been 14.4%. That edges out the average return on the Standard & Poor’s 500 Total Return Index for the same periods, at 14.2%.
My most recent column on the subject (January 2023) pulled down my batting average. My picks advanced 7.6% in 12 months, while the S&P 500 roared ahead 24.6%. My best pick was Itochu Corp (ITOCF) of Japan, up 40%. Worst was Aurubis AG (AIAGY) of Germany, down 28%.
Of the 19 columns, 15 were profitable but only nine beat the S&P 500.
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.
Disclosure: I own Total Energies and Taiwan Semiconductor personally and for most of my clients.
John Dorfman is chairman of Dorfman Value Investments LLC in Boston, and a syndicated columnist. His firm or clients may own or trade securities discussed in this column. He can be reached at jdorfman@dorfmanvalue.com.
On Nasdaq, I Prefer the Less-Famous Stocks
Posted: March 18, 2025
March 17, 2025 (Maple Hill Syndicate) –- The Nasdaq Stock Market led the way up in the great rally of the past two years. Now it’s leading the way down.
Nasdaq is home to most big technology stocks and many small stocks. The Nasdaq Composite Total Return Index gained more than 44% in 2023 and more than 29% in 2024. From its peak on February 19 of this year through March 14, it has lost more than 11%.
Is a buying opportunity at hand? Not yet, in my opinion. I think there will be one within the next three months.
When the time comes – perhaps when the Nasdaq Composite Index goes two weeks without declining – here are some Nasdaq Stocks that I think deserve investors’ attention.
East West
I recommended East West Bancorp (EWBC) a year ago, and it rose 21%. It’s a Pasadena, California bank that finances a lot of film and television projects and is also one of the few U.S. banks licensed to do business in China. Revenue has grown 14% a year over the past decade.
At about $88 a share, I think East West is favorably priced. That works out to about 10 times earnings, and 1.6 times book value (corporate net worth per share).
Relations between the U.S. and China are frosty, and might get even worse. But should they improve, it would be a boon to East West.
Diamondback Energy
For many years, the Permian Basin in west Texas and eastern New Mexico was a great place to find oil and gas. It still is. Now that Pioneer Natural Resources Co. has been swallowed up by Exxon Mobil Corp. (XOM), I think the best pure play on the Permian Basin is Diamondback Energy Inc. (FANG).
Over the past ten years, Diamondback has increased its revenue more than 24% a year. It slowed down last year (as did the entire oil and gas industry), which is why one can now purchase Diamondback shares for about $150 a share, or less than 10 times earnings.
Taylor Morrison
Taylor Morrison Home Corp. (TMHC), based in Scottsdale, Arizona, builds homes in Arizona and 11 other states, including Florida and Texas.
It differentiates itself from other homebuilders by emphasizing environmental controls (air filters, water filters, and safe paint) and digital marketing. It has achieved 14% annual revenue growth over the past decade.
Matson
With President Trump pushing tariffs hard, many investors fear long-term trade wars. I’m among them, but I don’t expect trade to dry up entirely. Over the past ten years, Matson Inc. (MATX), a Hawaii-based ocean shipper, has increased sales 11% a year and earnings 28% a year.
If it can do half that well in the future, I think the stock can show gains. At about $130 a share, it’s priced at only 9 times recent earnings.
Amphastar
Amphastar Pharmaceuticals Inc. (AMPH) is a drug company based in Cucamonga, California, with a specialty in inhalation and intranasal products. One of its products is naloxone hydrochloride, used for emergency treatment of opioid overdoses. Asthma inhalers are another major product.
The stock is a little below $27, and the consensus of Wall Street analysts is that it can hit $38 in a year. Revenue growth for the past decade has been at a 10.8% annual clip.
The Record
Beginning in 2001, I’ve written 18 columns recommending selected Nasdaq stocks. My latest batch, a year ago, managed only an 8.7% return, trailing behind the Nasdaq Composite and the Standard & Poor’s 500, each of which cruised to an 11.0% return.
My worst pick a year ago was MasterCraft Boat Holdings Inc. (MCFT), which fell 21%. The best was Apple Inc. (AAPL), which returned 23%.
Most years have gone better. The average one-year return on my picks from all 18 years has been 18.6%, compared to 16.0% for the Nasdaq Composite, and 12.9% for the S&P 500. My picks have beaten the S&P nine times and the Nasdaq Composite 11 times.
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.
You’ll notice that none of the five stocks I’m recommending this year are large technology stocks, or members of the Magnificent Seven – the stocks that led the 2023 and 2024 rallies.
These stocks have struggled this year through mid-March. I think they will end the year up from where they are now, but I don’t expect outstanding gains from them.
Disclosure: I own Apple, Diamondback Energy and Matson personally and for most of my clients.
John Dorfman is chairman of Dorfman Value Investments LLC in Boston, Massachusetts. He or his clients may own or trade securities discussed in this column. He can be reached at jdorfman@dorfmanvalue.com.
CEOs at 197 Companies Made Big Stock Sales Lately
Posted: March 11, 2025
March 10, 2025 (Maple Hill Syndicate) – Company insiders are ditching their own stock more than usual. An exception is oil and gas executives, some of whom are buying while their shares are depressed.
To gauge insider sentiment, look at the ratio of buys to sells by top executives and large shareholders. According to Gurufocus.com, about 34% of insiders’ transactions normally are buys. In February the figure was only 24%.
During the early stages of the pandemic in 2020, when stock prices dived, insiders stepped up to the plate and bought shares at an above-normal clip five months in a row. Insiders also bought a lot of stock in the late stages of the Great Recession in 2008.
Sells normally exceed buys because top executives get some stock (often in the form of stock options) as part of their compensation. Lately, we’ve seen ten months in a row of below-normal buying.
According to a screen I did on Gurufocus.com, chief executive officers at 197 companies have sold stock worth $1 million or more from February 1 through March 5.
CEO Sales
At Palo Alto Networks Inc. (PANW), CEO Nikesh Arora sold more than $275 million of stock in February and March. Since June 2022, his share holding has fallen from about 2.9 million shares to about 1.1 million shares. His sales were under a plan that provides for selling at predetermined intervals or prices.
At J.P Morgan Chase & Co. (JPM), chairman Jamie Dimon was a buyer in 2007, 2009, 2012, and 2016. Since last year he’s been a seller. In February he sold $233 million of stock, or more than 11% of his holding. His remaining shares are worth about $1.6 billion.
At Tempus AI Inc. (TEM), which went public less than a year ago, CEO Eric Lefkofsky cashed in more than $119 million in shares in February. That was about 8% of his holding.
Bahram Akradi, the founder and CEO of Life Time Group Holdings Inc. (LTH), sold 31% of his shares in late February, for proceeds of about $150 million. The company operates a chain of fitness centers. Akradi himself is a triathlete.
Jeffrey Tangney, CEO of Doximity Inc. (DOCS), sold about $75 million of his company’s stock in February. He has about $135 million of Doximity shares left. The company operates a digital platform for medical professionals.
When CEOs sell shares, it doesn’t necessarily mean that they are bearish on the stock market or on their own companies’ prospects. There are many reasons to sell, simple diversification being one.
Still, when I see the number of CEOs who have sold recently, and the volume of their sales, it gives me an uneasy feeling.
Energy Buys
In the oil and gas industry I see more hopeful signs.
At Noble Corp., for example, CEO Robert Eifler spent about $350,000 to add a bit to his holdings, which amount to about $31 million at current prices. Richard Barker, the chief financial officer, bought about $223,000 of Noble shares in February and has about $7 million in the stock.
At Dorchester Minerals LP (DMLP), which collects royalties on oil-and-gas properties in 28 states, CEO Bradley Ehrman spent about $100,000 on his partnership’s shares in early March. He has about $4 million in it.
And at Matador Resources Co. (MTDR), where I’ve noted insider buying previously, CEO Joseph Foran made four purchases totaling about $632,000. That brings his holding to about $245 million.
Oil and gas stocks are out of favor today, and I think they are oversold. I believe these three CEOs will be happy about their purchases a year hence.
The Record
This is the 73rd column I’ve written about insider purchases and sales. I can tabulate results for 63 columns – all those written from 1999 through a year ago.
Stocks that I said to avoid, even though insiders were buying, have under-performed the Standard & Poor’s 500 Total Return Index by 24.3 percentage points.
Stocks where I noted insider selling have done 2.3 percentage points worse than the index.
Stocks I recommended based on insider buying have returned 9.1% — not too bad, but 1.3 percentage points below the benchmark’s average.
Finally, there were some stocks where I noted insider buys, but made no comment or an ambiguous comment. These have beaten the S&P by 16.2 percentage points.
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.
Disclosure: I own J.P. Morgan shares personally and for most of my clients.
John Dorfman is chairman of Dorfman Value Investments in Boston. His firm of clients may own or trade securities discussed in this column. He can be reached at jdorfman@dorfmanvalue.com.