Category: John’s Weekly Column
First Solar, Cal-Maine, Gentex Boast Low Debt
Posted: May 05, 2026
May 4, 2026 — (Maple Hill Syndicate) – A household with high debt doesn’t need to teeter on the edge of bankruptcy to feel uncomfortable. They may have to skip the vacation to Mexico they had planned, or need to sell the antique table they got from Aunt Florence.
Companies with high debt are in a similar bind. They may miss a great acquisition opportunity, or have to sell a promising division. Low-debt companies have many strategic options, high-debt companies have fewer.
Every May, I recommend a few stocks that have low debt or none at all. Over 23 years, the average return on my low-debt recommendations has been 23.5%. That’s well above the 11.9% 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.
Here are five low-debt companies whose stocks look enticing to me now. I’m repeating two of my recommendations from a year ago — Cal-Maine Foods Inc. (CALM) and Monarch Cement Co. (MCEM)
First Solar
The largest manufacturer of solar panels in the U.S., First Solar Inc. (FSLR) has debt equal to only 7 percent of the company’s equity (corporate net worth). While the Biden administration was enthusiastically pro-solar, the Trump administration prefers oil and gas.
Many of the subsidies that helped solar energy have been cut or eliminated. So, it’s not surprising that First Solar shares sell for slightly less than they did three years ago.
The company is still growing, though. Revenue was up an average of almost 14% a year in the past five years, and 24% in the past year.
Cal-Maine
Based in Ridgeland, Mississippi, Cal-Maine Foods is the largest U.S. egg producer. Americans eat about 220 to 204 eggs a year. A dream scenario for Cal-Maine would have that figure climb toward the 1945 high, about 400 eggs a year.
For now, Cal-Maine stock sells for a rock-bottom multiple – five times recent earnings. That’s because analysts expect earnings to plunge. They think 2025 was the peak for egg prices, as avian flu reduced the egg supply last year.
Egg prices have already fallen quite a lot, but Cal-Maine shares have held their own, partly because the company is emphasizing specialty eggs and prepared food.
Cal-Maine is debt-free.
Gentex
Gentex Corp., out of Zeeland, Michigan, makes glare-control mirrors for cars, including mirrors that alert drivers when someone is in their blind spot. The stock has lost about a third of its value in the past five years, even as earnings have risen about 6% a year. The company is debt-free.
Gentex shares go for about 18 times recent earnings, but only 12 times analysts’ estimate of earnings for the next four quarters. Only nine analysts follow the stock, and only four of them recommend it. I’m with the minority.
Monarch Cement
Another debt-free stock is Monarch Cement, based in Humboldt, Kansas. The stock is thinly traded and partially owned by the fifth generation of the founding Wulf family. In addition to its home state of Kansas, it sells concrete in Arkansas, Iowa, Missouri, Nebraska and Oklahoma.
The stock has more than doubled in the past three years, and sells for about 18 times earnings. Traded on the pink sheets, not on any exchange, this stock is completely neglected by Wall Street.
EverQuote
Based in Cambridge, Mass., EverQuote Inc. (EVER) is a small company that provides an online marketplace for insurance shopping. It went public in 2018 and had several years of losses before breaking into the black in 2024. Only eight analysts cover it; six of them recommend it.
One issue with EverQuote is that consumers report getting more solicitations after using its site. But it must be doing something right. Revenue rose 34% last year and earnings tripled. The stock sells for about six times earnings, a possible bargain. Debt is about 1% of equity.
Last Year
Of my 23 sets of low-debt recommendations, 15 have been profitable and 14 have beaten the S&P 500. Last year wasn’t one of the successes.
My picks from a year ago returned a paltry 1.7%, while the S&P zipped up 28.4%. I had losses in Cal-Maine Foods (down 13.9%), which I’m recommending again this year, and in Employers Holdings Inc. (EIG, down 10.4%).
Gentex Corp., Monarch Cement Co. and T. Rowe Price Group Inc. (TROW) all advanced, but none of them beat the surging S&P.
Disclosure: I own Cal-Maine personally and for almost all 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 Picks Returned 59% in the Past Year
Posted: April 28, 2026
April 27, 2026 (Maple Hill Syndicate) – I’ve never seen Old Faithful geyser in Wyoming. But I feel like it’s an old friend. I named one of my favorite stock-selection screens after it.
To appear on the Old Faithful list, a stock has to:
- 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).
Once a year for more than two decades, I’ve shared some recommendations drawn from the Old Faithful screen with readers of this column. Here are five that I think are suitable for many investors now.
Toll Brothers
I like homebuilders because I think there’s tremendous pent-up demand for single-family homes. When the dam caused by today’s fairly high mortgage rates bursts, I think we’ll see a flood of home buying.
One homebuilder that seems timely to me now is Toll Brothers Inc. (TOL), which caters to the upper prong of the K-Shaped economy. The average selling price for a Toll Brothers home is very close to $1 million.
Upper-tier consumers are doing well, thanks partly to a buoyant stock market and Trumpian tax cuts. Toll Brothers shares sell for about ten times earnings, an attractive multiple.
Hartford Insurance
A relationship with the American Association of Retired Persons (AARP) is one of the strengths of Hartford Insurance Group Inc. (HIG). It is the exclusive provider for the AARP auto insurance program. It also offers property and casualty insurance in the U.S. and overseas.
Profitability is strong, with a 22% return on equity in the past four quarters. The stock has almost doubled in the past three years, but still sells for only 10 times earnings.
Ingredion
Ingredion Inc. (INGR), based in Westchester, Illinois, took its current name in 2012. Previously it was Corn Products International. It makes ingredients for food and animal feed, including starches, thickeners and sweeteners.
One of its more controversial products is high-fructose corn syrup, but it has reduced its reliance on that product line in recent years. The stock sells for only 10 times earnings and 1.0 times revenue – modest multiples by today’s standards.
Carter Bankshares
Of the 28 companies that passed the Old Faithful screen recently, Carter Bankshares Inc. (CARE) has the highest return on stockholders’ equity at 25%. (That’s profits as a percentage of corporate net worth.)
Carter Bank has 63 branches in Virginia and North Carolina. It had a major headache with a cluster of nonperforming loans issued to the Justice family (the family of Senator Jim Justice, a Republican from West Virginia). This year, it sold the loans, for about $289 million, cleaning up the bank’s balance sheet.
The buyer of those loans wasn’t disclosed. The transaction cut the bank’s ratio of nonperforming loans from more than 6% to well under 1%. The stock is up more than 50% in the past year, but sells for a modest multiple, five times recent earnings.
Vital Farms
I recommended Vital Farms just a week ago, in a column about small-capitalization stocks. The company, based in Austin, Texas, sells pasture-raised eggs and butter. It has very little debt (only 15% of equity) and has increased sales at a 23% annual clip in the past five years.
The stock sells for about nine times recent earnings and less than 1.0 times revenue.
Performance
I’m quite pleased with the results of the 23 Old Faithful columns I’ve written from l999 through a year ago. Of the 23 sets of recommendations, 17 have beaten the Standard & Poor’s 500 Total Return Index. Sixteen of the 23 have been profitable.
The average 12-month return on these picks has been 20.7%, compared to 8.9% for the index. All figures are total returns, including dividends.
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 returned 59.0%, led by a 100.9% advance in Halliburton Co. (HAL). Oshkosh Corp. (OSK) returned 72.0%, and Southern Bancshares NC Inc. (SBNC) 39.4%.
For the same period (April 28, 2025 through April 24, 2026), the S&P 500 total return was 31.2%. My only pick from a year ago that trailed the index was Cincinnati Financial Corp. (CINF) with a return of 23.8%.
Disclosure: A hedge fund I manage owns Oshkosh. I own Toll Brothers for one client. Two of my family members own Ingredion.
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.
A Small-Stock Revival Is Here at Last
Posted: April 21, 2026
April 20, 2026 (Maple Hill Syndicate) – Well, finally!
Small-cap stocks have risen more than 12% this year through April 17, while large-caps have advanced 4.5%. This small-stock revival has been a long time coming.
Over the past five years, large-company stocks have averaged a 12.8% return per year (including dividends), while small-cap stocks have averaged 5.6%. As a fan of small stocks, I’ve been impatient for a revival.
Cap is short for capitalization, the current market value of a company’s stock. There’s no widely accepted taxonomy for stock size.
I define large-capitalization stocks as those with a market value of $10 billion or more. Mid-caps have a market value of $1 billion to $10 billion, small-caps $250 million to $1 billion, and micro-caps less than $250 million.
By that definition, there are about 1,150 small-cap stocks among U.S. companies. Here are five of them that look promising to me now.
Bank7
Bank7 Corp. (BSVN), based in Oklahoma City, Oklahoma, serves customers in Texas and Kansas as well as its home state. Its lending program stresses commercial loans in the real estate, energy and agricultural industries.
I like to see banks earn 1.0% on assets or better. Bank7 has done that in each of the past ten years, and often much better.
Risk factors include a high percentage of commercial real estate loans, and a relatively high cost of funds.
I recommended Bank7 in my last column on small-cap stocks, a year ago. It is up nearly 29% since then, but still sells for only nine times the past four quarters’ earnings.
Vital Farms
“Conscious Capitalism” is the motto at Vital Farms Inc (VITL). Based in Austin, Texas, the company sells eggs and butter from animals that were raised in pastures, not pens or cages.
Over the past five years, Vital Farms has increased its sales at a 23%-a-year clip. Yet the stock sells for only nine times earnings and 0.74 times revenue, cheap multiples.
Shares have plunged 58% this year as the company projected a slowdown in growth. Multiple shareholder lawsuits have been filed. Yet most analysts still maintain a favorable rating on the stock.
Taylor Devices
Taylor Devices Inc. (TAYD) makes shock-absorption systems, not for cars but for military aircraft and buildings. The founder, Paul Taylor, was a pilot and aircraft designer. He started Taylor Devices in 1955, emphasizing liquid springs, which were more effective than mechanical coil springs.
The company, based in North Tonawanda, New York, got into earthquake protection systems in the 1980s. It has notched a profit 21 years in a row, and 29 out of the past 30. Taylor Devices is debt free, and the stock seems reasonably priced to me at about 18 times earnings.
Orange County
Orange County Bancorp (OBT) doesn’t serve the well-known luxury area of Orange County, California. It serves the more middle-income area of Orange County, New York.
This little bank posted a 1.6% return on assets last year (you’ll recall I consider 1.0% or better to be attractive) and an 18% return on stockholders’ equity. Wall Street hasn’t discovered it yet. Only two analysts follow it, both of whom rate it a “buy” or “outperform.”
EACO
From Anaheim, California, comes EACO Corp. (EACO), which is mainly a distributor of electronic components and fasteners. It has three divisions: Bisco Industries, Fast-Cor and National-Precision. Few investors have heard of any of them, or the parent company either.
Nonetheless, the stock has risen more than double in the past year and has more than quintupled in the past five years. It’s still not very expensive, selling at about 12 times earnings. Return on equity has been running lately at 24%, a handsome showing.
Performance
Since the beginning of 2000, I’ve written 28 columns recommending a group of small-cap stocks. The average one-year return on these recommendations has been 13.8%.
That beats both the Standard & Poor’s 500 Total Return Index (a large-cap index) at 9.2% and the Russell 2000 Total Return Index (a small-cap gauge) at 11.3%. My small-cap picks have beaten the S&P 16 times, and the Russell 2000 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.
My picks from a year ago didn’t set the world on fire. Bank7 was my best choice, returning 28.8%. Apogee Enterprises Inc. was worst, down 16.6%. Overall, my picks returned only 7.0%, versus 29.9% for the S&P and 52.9% for the Russell.
Disclosure: I own Taylor Devices and Orange County Bancorp in a hedge fund I run.
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.
Baseball Has a 30-30 Club, Why Not Companies?
Posted: April 14, 2026
April 13, 2026 (Maple Hill Syndicate) – Baseball is one of the few worlds as much in love with statistics as the stock market is.
In baseball, the “30-30 Club” is for players who hit at least 30 home runs and steal at least 30 bases in the same season. Think Hank Aaron, Willie Mays, Barry Bonds, and only 48 other players in the history of the game.
In the stock market, I track my own 30-30 Club. It’s for corporations that achieve five-year profit growth of 30% a year, and score at least a 30% return on stockholders’ equity.
Using software from Gurufocus.com, I found that 20 companies made my 30-30 club this year. I recommend three of them.
Deckers Outdoor
You may not know the name Deckers Outdoor Corp. (DECK) but you might be familiar with their products – Ugg boots and Hoka shoes.
Unlike most of the 30-30 companies, Deckers has a stock that isn’t high-priced. Shares go for about 15 times earnings.
Of the 27 Wall Street analysts who follow this stock, just over half (14) call it a buy. I think the analysts are worried that earnings growth is slowing: It averaged nearly 31% for the past five years, but was only about 15% last year.
This month, the company announced that PinkPantheress, a British singer, song writer and producer, will be the face of its social-media campaign. I don’t know much about the Pantheress, but I have a good feeling about the stock.
Exelixis
Exelixis inc. (EXEL), with headquarters in Alameda, California, is a biotech firm that develops and markets cancer drugs, sometimes in partnership with Roche, a giant Swiss pharmaceutical firm.
Sales passed the $2 billion mark in 2024 and have risen at a 20% clip the past five years. Earnings growth has averaged close to 34% over that period, and was above 55% last year.
Considering that growth, I think the stock is quite reasonably priced at about 16 times earnings. Yet most analysts aren’t wild about the stock, fearing (among other things) competition from Merck & Co. in treatment of kidney cancers.
The balance sheet is terrific, with debt only 8 percent of stockholders’ equity.
MPLX
MPLX LP (MPLX) is an oil-and-gas pipeline company affiliated with Marathon Petroleum Corp. It’s structured as a limited partnership, which has certain tax advantages but complicates the tax return for shareholders, who receive an annual Form K-1.
If you’re not afraid of K-1s (or if you have an accountant who isn’t), I think MPLX is worth consideration. It offers a 7% dividend yield (as of early April) and has raised dividends at almost an 11% annual pace in the past three years.
The stock has doubled in the past five years, and sells for about 12 times earnings.
Honor Roll
Stocks of the other 17 members of the 30-30 Club this year are mostly on the expensive side. But they deserve to be honored for their achievement as companies.
They are Argan Inc. (AGX), Arista Networks Inc. (ANET), Arrowhead Pharmaceuticals Inc. (ARWR), Chewy Inc. (CHWY), Chipotle Mexican Grill Inc. (CMG), Comfort Systems USA Inc. (FIX), Emcor Group Inc. (EME), GE Aerospace (GE), Howmet Aerospace Inc. (HWM), IES Holdings Inc. (IESC), InterDigital Inc. (IDCC), and Powell Industries Inc. (POWL).
Also: Ross Stores Inc. (ROST), Sterling Infrastructure Inc. (STRL), TJX Companies Inc. (TJX), Ulta Beauty Inc. (ULTA) and Vertiv Holdings Co. (VRT).
Performance
I’ve been compiling my 30-30 Club for 23 years. In two of those years, I didn’t recommend any of the stocks, but in 21 years, I did.
The average 12-month return on my recommendations in this series has been 21.2%, more than double the 9.1% average for the Standard & Poor’s 500 Total Return Index. Thirteen of the 21 sets of picks showed a profit, and 13 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.
My recommendations a year ago, in April 2025, caught lightning in a bottle. Powell Industries Inc. (POWL), a maker of electrical transmission equipment, advanced 304%, helped by electricity demand from power-hungry data centers.
Sterling Infrastructure (STRL), which builds those centers among other things, returned 230%. Crocs Inc. (CROX) chipped in 10%. Docusign Inc. (DOCU) detracted, falling 43%.
The overall result was a gain of 125%, which dwarfed the 28% return on the S&P 500. I doubt I’ll ever get that lucky again.
Disclosure: I own Sterling Infrastructure personally and for almost all of my clients. I’m thankful for its gains, but I’m not sure I would launch a new position at today’s prices.
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.
Humana and Thor Hit the Casualty List
Posted: April 07, 2026
April 6, 2026 (Maple Hill Syndicate) – Think of my Casualty List as a court of appeals for innocent stocks that have been unjustly punished.
Well, maybe not completely innocent. But punished too much, in my view.
In the first quarter this year, marked by armed hostilities between the U.S. and Iran, the Standard & Poor’s 500 Total Return Index fell 4.3%. For the Casualty List, I looked for stocks that had dropped 20% or more.
Here are five that I think can revive and thrive.
Humana
Health-insurance organizations are about as popular as the mumps. But they serve a useful function. Much as we all complain about insurance premiums, paying for doctors and hospitals without insurance could be a lot worse.
Humana Inc. (HUM) is one of the largest health insurers in the U.S., and specializes in Medicare, Medicaid and military patients. Since Uncle Sam is trying to reduce health outlays, these programs have gotten stingier in what they pay.
That’s why Humana shares have fallen a sickening 57% in the past five years, including 32% in the latest quarter. But I suspect the damage is mostly done. The stock seems attractive to me at 0.17 times revenue and 1.2 times book value (corporate net worth).
Cognizant
Lots of companies want to outsource their information-technology operations. Companies that want to do so cheaply may prefer to outsource them to India. That’s the idea behind Cognizant Technology Solutions Corp. (CTSH). Originally based in India, it moved its headquarters to Teaneck, New Jersey in 1997.
Last year, Cognizant’s revenue increased more than 8% and profits were up 11%. Both figures are a little above the company’s ten-year average. The stock, however, fell 26% in the first quarter as investors fretted that artificial intelligence will upend traditional information-technology operations.
Abercrombie
Abercrombie & Fitch Co. (ANF) sells clothing, mainly for young adults. Though its stock has more than tripled in the past three years, it dropped 27% in the first quarter. One reason is that much of its clothing is imported, and hurt by the Trump administration’s tariffs.
Holiday sales in 2025 were disappointing, and I suspect one reason for that (which I haven’t seen in brokerage-house reports) is that people in the 20s have had to resume payment on their student loans.
The stock sells for about nine times earnings. In my view, that’s too low for a company that earned a 38% return on stockholders’ equity in the past four quarters.
Harmony Biosciences
Harmony Biosciences Holdings Inc. (HRMY) surrendered 25% of its value in the first quarter. The company, based in Plymouth Meeting, Pennsylvania, is working on drugs for rare neurological diseases. It is approaching $1 billion in annual revenue, but so far is heavily dependent on one drug, Wakix.
That drug is scheduled to lose patent protection in 2030 and might lose it even sooner, if court cases go the wrong way. The stock is speculative, but at ten times earnings, I like the risk/reward picture.
Thor
I’m nervous about my final pick — Thor Industries Inc. (THO), a leading maker of motor homes. It’s no mystery why the stock fell 22% in the first quarter. The price of gasoline soared with the Iran war.
Fuel prices may stay high for quite a while, but my contrarian instincts tell me this is a good time to bottom-fish in Thor shares. The balance sheet is strong, and several valuation measures are near ten-year lows.
Performance
The Casualty List from a year ago worked out particularly well, with a 91% average return for five stocks. It was helped considerably by a 230% gain in Peabody Energy Corp. (BTU).
Also notable were an 87% return on Dillard’s Inc. (DDS), a 56% return on Steven Madden Ltd. (SHOO) and a 55% return in Synchrony Financial (SYF). Bringing up the rear was a 27% return on Abercrombie & Fitch Co., which I’m recommending again today.
By comparison, the Standard & Poor’s 500 Total Return Index returned 31.7%.
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 course, not every Casualty List does as well as the one from last April. I’ve compiled 92 lists and one-year returns can be calculated for 88 of them.
Only 41 of the lists have beaten the S&P 500 total return. But when they win, they often win by a considerable margin. As a result, the average one-year return for all 88 lists has been 15.7%, versus 11.9% for the index.
Disclosure: Currently, 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.
What is Your Sell Discipline? Do You Have One?
Posted: March 31, 2026
March 30, 2026 (Maple Hill Syndicate) – You can find dozens of books and hundreds of articles on how to buy stocks. When to sell them? A deafening silence.
It’s not just ordinary investors who struggle with selling. A 2021 paper looked at the performance of 783 institutional investors. These professionals outperformed the market with their buy decisions – and gave back some of that performance with poor sell decisions.
In fact, the selling performance would have been better had it been done at random. Authors of that study were Alex Imas of the University of Chicago, Lawrence Schmidt of Massachusetts Institute of Technology, Klakow Akepanidtaworn of the International Monetary Fund, and Rick DiMascio of Inalytics.
The study covered 16 years (January 2000 through March 2016) and involved some 2.4 million buy trades and 2 million sells. The authors concluded that portfolio managers devote “more cognitive resources to buying than selling.”
Five Methods
Many investors try to systematize their selling by using sell rules, or a “sell discipline.”
A paper by Ryan Kennedy at the Albany branch of State University of New York examined five sell disciplines often used by mutual-fund managers. The paper is a bit dated – published in 2012, using data from January 2003 to August 2008 — but I mention it because information of this type is scarce.
The best returns in the Kennedy study were achieved by funds that sell when a pre-determined target price is reached. Such funds had average monthly returns of 1.23%, which annualizes to 14.76%.
The worst of the six methods was the “opportunity cost” strategy, at 12.2% annualized. This is selling when you see another opportunity that seems considerably better.
Funds that sold when a stock became too expensive (i.e. a higher price/earnings or price/book ratio than the manager prefers) achieved the second-best results, 13.56% annualized.
In the middle were two other strategies: selling when fundamentals deteriorate (12.13%), and selling when a stock is down from cost (12.14%). This last method would include “stop loss” protocols such as “sell when a stock is down 20%.”
I applaud the study’s effort, but I see several problems. A sell discipline that works in one period might flop in another. Results for the five methods were closely bunched. And the five categories were rather broad. More sharply focused sell rules might do better (or worse).
Deterioration
There are many ways a company’s fundamentals can deteriorate. And several of them can generate sell triggers.
One rule is to sell when earnings decline. This can be a good guideline, because a decline in reported earnings sometimes means that a company has run out of ways to hide the bad news.
Selling when revenue declines also makes some sense, since that may indicate waning demand for a company’s product or service.
Selling if debt goes above a certain level gives you some protection against bankruptcy. Of course, you will want to know why the company took on more debt. It might be to fund an acquisition that will be great for profits.
Some people sell if inventories rise, or if accounts receivable rise (bad if the company’s customers are struggling). These can be indicators of trouble, but there can also be innocent explanations.
Combinations
Some managers, myself included, use a combination of sell rules. Here are my own sell rules.
One that I took from my mentor, David Dreman, is to sell any stock that has been held for three years with no appreciation. Critics would say that’s too long to wait. Be that as it may, at least it’s a limit.
Any decline of 20% or more triggers a hard look, and a decline of 30% calls presumptively for a sale. It’s a rebuttable presumption, however. If we’re in an environment like 2008, when most stocks were down more than 30%, a decline that size isn’t necessarily the kiss of death.
My attitude toward stop losses is influenced by the experience I had early in my career with Applied Signal Technology Group. I bought it at about $5. It fell to about $4 and then quintupled.
Had I used a hard stop loss at 20%, I would have sold Applied Signal at $4, missing an extremely pleasant gain. The company eventually was acquired by Raytheon.
I generally sell a stock if its price climbs (or its earnings fall) enough to push the price/earnings ratio over 30. Again, that’s a rebuttable presumption.
Finally, I sell a stock if I come to realize that my reason for buying it was faulty. How often does that happen? Somewhere between never and more often than I prefer to admit.
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.
Defense Stocks Could Explode Upward Again
Posted: March 25, 2026
March 23, 2026 (Maple Hill Syndicate) – Even if armed hostilities in Iran and Ukraine stop in 2026, three things will still be true.
- Iran will still hate the United States.
- Vladimir Putin’s vision for Russia will be expansionist.
- Members of NATO will feel uneasy about the strength of their alliance with the United States.
To me, this implies that military spending will increase in 2027 and 2028, both in the U.S. and Europe. Most European nations have pledged to spend about 5% of gross domestic product on defense by 2035. That dwarfs the recent spending level, which has been less than 2%.
I think that it makes sense for investors to include at least one defense stock in their portfolios. For many of my clients, four of the 25 portfolio slots are in the defense industry.
Here’s a rundown on the “big five” U.S. defense contractors, plus a few in Europe.
Lockheed Martin
Lockheed Martin Corp. (LMT) is the largest U.S. defense contractor, and the proprietor of the famous “skunk works” where a lot of secret research takes place.
On the plus side, Lockheed is extremely profitable. The main negative to me is that it carries a lot of debt – more than three times stockholders’ equity.
RTX
You may remember a time when RTX Corp. (RTX) was Raytheon Co. It took its present name in 2023, three years after Raytheon merged with United Technologies Corp. It’s a major producer of missiles, military electronics, and jet engines. Most years, a little over half its sales are to the U.S. military.
I like RTX stock because I think missiles and military electronics are extremely important in modern warfare. The balance sheet looks good to me but the stock is expensive, at almost 40 times earnings.
Northrop Grumman
Drones, military aircraft, missile-launch systems for submarines, and ammunition are among the many products Northrop Grumman produces. More than 90% of its sales are military, mostly to the US. government but also to some other countries.
The debt-to-equity ratio is better than Lockheed’s but not as good as RTX’s. The stock sells for a medium valuation, 24 times earnings.
General Dynamics
If I could own only one defense stock, I would choose General Dynamics. It covers a fairly broad swath of defense territory, making tanks, submarines, and military electronics. It has been consistently profitable, exceeding a 15% return on equity in 14 of the past 15 years.
The balance sheet is stronger than many of its peers, with debt at 38 percent of equity. And the stock price seems pretty reasonable, at 22 times earnings.
Boeing
Boeing Co. (BA) is the number-five defense contractor, but less than half its business comes from defense. You own this stock if you believe in its commercial-aircraft business. That business has been plagued by safety concerns, and the stock has lost about 19% of its value over the past five years.
European Defense
Dassault Aviation SA (traded in the U.S. under the symbol DUAVF) is one of the larger defense contractors in France. It makes Mirage and Rafale fighter jets, and also owns about 26% of Thales, a major defense-electronics company.
Dassault’s has been spotty, hitting my desired level (a 15% return on equity) only four times in the past ten years. But the company should benefit if France hikes defense spending. Revenue turned up sharply last year.
BAE Systems Plc (BAESY) is the largest defense contractor in Britain, and also sells equipment to the U.S., Australia and Saudi Arabia. It has a broad product line, with strength in shipbuilding and electronics. The stock has quadrupled in the past five years and is up 43% in the past year.
Babcock International Plc (BCKIY), also based in Britain, services nuclear installations, including those on nuclear submarines. About two thirds of its business is military.
Performance
I’ve written one previous column about defense stocks, in June 2023. In it, I recommended purchase of General Dynamics, Northrop Grumman, Lockheed Martin, Ducommun Inc. (DCO), Leonardo S.p.A. (FINMY) and BAE Systems.
Since then, five of the six have beaten the Standard & Poor’s 500 Total Return Index. Leonardo returned 561%, Ducommun 176%, BAE Systems 166%, General Dynamics 72% and Northrop Grumman 65%. The index return was 56%. Only Lockheed Martin trailed, at 49%.
Even after this strong performance, I think the defense group will continue to post above-average gains.
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 General Dynamics, Babcock International and Dassault Aviation personally and for almost all of my clients. I own BAE Systems for most clients, and RTX and Leonardo for one or more 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.
My Nasdaq Stock Picks Have Averaged a 17.9% return
Posted: March 17, 2026
March 16, 2026 (Maple Hill Syndicate) –- The turnaround in the Nasdaq Stock Market happened sooner than I expected.
Each March, I write a column about the Nasdaq. A year ago, I wrote that Nasdaq stocks — flailing at the time because of President Trump’s Liberation Day tariffs — would probably be a fertile buying ground within three months. The turning point actually came in three weeks, not three months.
Now, I think that the Nasdaq Composite Index, which is down more than 4% this year through March 13, will close the year with a decent gain.
The Nasdaq has a dual personality. It is the home of most large technology stocks, and also some 3,000 small stocks.
Small stocks tend to be more domestic and less international – probably a good thing at the moment. And the big tech stocks remain the hub of innovation.
Uncertainty abounds. We are battling Iran, and have a nasty trade tiff with China. The U.S. has tariffed – and offended – a large number of countries.
However, corporate profits are terrific, some U.S. taxes have been reduced, and interest rates will come down if the Federal Reserve chooses.
Hence, I predict a fairly normal year, with about a 10% gain for the Nasdaq.
Every March, I recommend a few Nasdaq stocks. Here are five for consideration.
Alphabet
Last year I didn’t include any technology members of the Magnificent Seven among my Nasdaq picks. But these seven ultra-popular stocks constitute about 52% of the Nasdaq Composite Index, even though the index contains about 3,300 stocks.
This year, I’ll recommend Alphabet Inc. (GOOGL), the parent of Google, You Tube, Waymo and Deep Mind. Its after-tax profit margin is more than 32%, and return on stockholders’ equity is about 36%. Though the stock is down about 4% this year, it has appreciated more than 700% in the past decade.
Ingredion
Based in Westchester, Illinois, Ingredion Inc. (INGR) makes sweeteners, texturizers and other ingredients for food, beverages and animal nutrition.
One of its products is high fructose corn syrup, which Robert Kennedy Jr., the U.S. Secretary of Health, has called “poison” and vowed to eliminate. I don’t think that would be a crippling blow to Ingredion, as the product constitutes less than 10% of its revenue.
Ingredion shares sell for only 10 times earnings, a modest multiple.
Green Brick
I believe there is lots of pent-up demand for single-family houses. A big obstacle to home purchases has been stiff mortgage rates. It’s iffy, but I think some relief on the mortgage front is fairly likely this year.
One homebuilder I like is Green Brick Partners Inc. (GRBK) which has hedge-fund manager David Einhorn as one of its biggest shareholders. The company carries less debt than many homebuilders, and the stock sells for about nine times earnings.
Farmers & Merchants
Farmers & Merchants Bancorp (FMCB) of Lodi, California, serves California’s Mid-Central Valley and parts of the San Francisco area. Many of its loans are agricultural. Its has been profitable 24 years in a row.
This company has $14 in cash for every dollar of debt. Wall Street pays no attention to it, and the stock has been a sleepy performer. But I like it at eight times earnings and 1.2 times book value (corporate net worth per share).
Diamondback
I’m bringing back one pick from a year ago – Diamondback Energy Inc. (FANG), an oil-and-gas producer based in Midland, Texas. A year ago, the price of oil languished below $70 per barrel. Amid today’s Middle East turmoil, the price has jumped to about $100.
For the sake of argument, let’s say that the United States is able to pry open the Strait of Hormuz, and that oil flows return to normal. Even then, I think that lingering uncertainty would keep the price of oil north of $80 for the next year or two.
All of Diamondback’s oil and gas is produced in the U.S., most of it in Texas.
Performance
I recommend a few Nasdaq stocks each year, usually with good results. Not this time. The five stocks I recommended a year ago returned only 5.4% while the Nasdaq Composite Index racked up 24.9%.
A 34% loss in Amphastar Pharmaceuticals Inc. (AMPH) was largely responsible for the soggy performance. Diamondback Energy returned 22% and East West Bancorp 21%. Matson Inc. (MATX) advanced 17%, while Taylor Morrison Home Corp. inched up less than 1%.
Long-term, the picture looks better. My Nasdaq picks have averaged a 17.9% return over 19 years. That beats the S&P 500 at 13.2% and edges out the Nasdaq Composite at 16.5%.
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 Alphabet personally and for most of my clients. I own Diamondback for most 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.
These CEOs are Stepping Up to Buy on Bad News
Posted: March 10, 2026
March 9, 2026 (Maple Hill Syndicate) –- I like to see chief executives step up and buy their own company’s shares amidst bad news. It’s a sign of faith that goes beyond rhetoric.
Here are three recent instances.
KKR
The private-equity industry – consisting of partnerships that invest in companies that aren’t publicly traded – has suffered a three-year slowdown in profits and incoming investments.
One of the best-known companies in the field is KKR & Co., formerly known as Kohlberg Kravis Roberts & Co. Although it invests in private companies, KKR itself is public, having made its initial public offering in 2010.
In the 1980s and 1990s, before it went public, KKR was one of a handful of dominant firms in private equity. Today the field is overcrowded, and high interest rates are hurting.
A little over a year ago, KKR stock hit an all-time high of $165.82. Since then, it’s been pretty much straight down. The price as of March 6 was about $91.
Five KKR insiders purchased shares in February and early March. The firm’s co-CEOs, Joseph Bae and Scott Nuttall, each spent more than $16 million. In total, Nuttall owns about $1.8 billion in KKR stock, and Bae about $1.6 billion.
Three directors also purchased shares.
Even after the recent slump, KKR shares have given investors a return of 584% over the past ten years. I think the company will return to form.
ServiceNow
Lately you hear a lot of noise about how artificial intelligence, or AI, is going to destroy software companies. In my view, AI is more likely to enhance software products, increasing their value.
William McDermott, the chief executive officer of ServiceNow Inc., bought $3 million worth of his own company’s stock in late February.
ServiceNow stock started the year at about $153 a share, and dropped below $100 in February. McDermott bought pretty close to the low, at $104.60 on February 27. Five trading days later, the stock had rebounded to $124, giving McDermott almost a 19% gain.
It was the first insider purchase by any ServiceNow executive since November 2019, when McDermott last bought shares.
Based in Santa Clara, California, ServiceNow makes software to automate companies’ core functions, especially information technology.
Walker & Dunlop
Commercial real estate has been in the doldrums ever since the pandemic hit in 2020. If people work at home, who needs office buildings? I don’t think the industry is out of the woods yet. But there are some early glimmerings of recovery.
Walker & Dunlop Inc. (WD), based in Bethesda, Maryland, provides financing packages for apartment buildings and other commercial buildings. It has shown a profit for 18 years in a row, but lately the profits have been slender.
The stock hit an all-time high of about $155 in 2021 but has descended to about $48.
William Walker, the CEO, spent about $2 million to buy shares in early March. It was his first purchase since 2013. In between he had sold shares on 16 occasions.
The stock is selling for less than book value (corporate net worth per share). I don’t think it’s good for a quick profit, but think it has good possibilities long-term.
Performance
This is the 77th column I’ve written about insider purchases and sales. I can calculate the returns for 67 columns – all those written from 1999 through a year ago.
My picks from a year ago did well. I noted insider selling in five stocks. Four did worse than the Standard & Poor’s 500 Total Return Index. Doximity Inc. (DOCS) did the worst, falling 58% in a rising market. The one outperformer was JP Morgan Chase & Co., up 27%.
I also recommended three energy stocks that showed insider purchases. Two of them beat the index, notably Noble Corp., which advanced 99%. The dud was Dorchester Minerals LP (DMLP), which fell 2%.
Longer-term results are mixed. Stocks where I noted insider selling have trailed the S&P by an average of 4.8 percentage points per year.
Stocks I said to avoid, despite insider buying, have lagged the S&P by 24 percentage points a year.
Stocks where I noted insider buying, but made no comment (or an ambiguous comment) have beaten the index by 14 points a year.
All that is fine. But there’s a fly in the ointment. The stocks I recommended based on insider buying have lagged the S&P by 2.3 percentage points per year.
So, my record is mixed. But I believe insider trades contain valuable information, and will keep reporting on them –with, I hope, better results on the buy side.
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.
Getting Your Sectors Weights Right is Key – and Hard
Posted: March 03, 2026
March 2, 2025 (Maple Hill Syndicate) –- Think of the U.S. stock market as a pizza. According to Standard & Poor’s, it’s cut into 11 pieces, or sectors.
Astute or poor sector selection often makes the difference between a good year in the market or a bad one. Here are my views on the 11 sectors, listed in order of their performance in the 12 months through January (the “period return”). During that time, the S&P 500 Total Return Index returned 16.35%.
Communication Services
Period return 29.5%. The communication services sector includes media and internet stocks, such as Alphabet Inc. (GOOGL), Meta Platforms Inc. (META), Netflix Inc. (NFLX) and Walt Disney Co. (DIS), as well as traditional telephone stocks such as AT&T Inc. (T), Verizon Communications Inc. (VZ) and T-Mobile US Inc. (TMUS).
I think the group will continue to do well. Many of these companies are ad-dependent and will benefit from political advertising in an election year.
Technology
Period return 25.6%. Technology stocks surged in the past three years and have sputtered so far this year as investors worry about massive expenditures on data centers.
My stance is to be present in the sector, but underweight. The tech sector is the hub of innovation, so to ignore it would be foolhardy. But the valuations give me a feeling of acrophobia.
For example, Nvidia Corp. (NVDA) sells for 36 times earnings, Taiwan Semiconductor Manufacturing Co. (TSM) 30 times, and Microsoft (MSFT) 25 times. By comparison, the average stock has sold for about 15 times earnings over the years, and about a 24 multiple now.
Energy
Period return 21.8%. I like the oil-and-gas stocks. The price of oil fell in 2025 due to over-abundant supply, but has risen this year because of Middle East strife. In January, energy was the best performing group, jumping 14%.
The Trump administration has banished incentives for people to buy electric cars. And the winter of 2025-2026 was severe. Both factors favor oil-and-gas stocks.
Industrials
Period return 21.3%. This is my favorite sector, for two reasons. First, valuations are down-to-earth. Second, the sector includes the defense stocks, which I favor in a world where the U.S. is at odds with China, Russia and Iran.
My favorite defense stocks aren’t American ones, though. They are European, since Europe is being forced (both by Vladimir Putin and by Donald Trump) to spend more on national defense than it has for decades.
Utilities
Period return 14.3%. Normally stodgy, utilities are popular investments now because tech giants are greedy for electricity to run data centers. I think the popular thesis makes sense but I still feel uneasy.
Why? Minimal sales and earnings growth over the past decade, coupled with pretty high debt levels.
Materials
Period return 13.8%. The materials sector includes chemicals, steel, and mining among other things. My interest is chiefly in gold, which tends to rise when people feel insecure, when government deficits are large, when international tension is high, or when the dollar is weak. Now, all four are true.
Consumer Staples
Period return 9.7%. This is a good group to own during recessions. Even in bad times, people need tissues, toothpaste and soap. I don’t love the group as a whole, but it contains a bargain here and there, in my view.
Health Care
Period return 7.3%. Big pharmaceutical companies face intense pressure to restrain price increases. But health care is usually a good sector for shelter from market downturns.
Eli Lilly & Co. (LLY) has been a standout because of its weight-loss drugs. I think the company will continue to do well, but I’m skeptical of the stock at 45 times earnings. Several of the other pharma companies seem attractively cheap.
Financials
Period return 5.4%. I think financial stocks are due for a comeback.
The best environment for banks is low short-term interest rates (so they don’t have to pay out too much on deposits) and high long-term rates (so they reap rich returns on mortgages and business loans). It looks like that’s the kind of environment we’ll be in this year.
Real Estate
Period return 4.2%. The second-worst performing group for the 12 months through January was real estate, up about 4%. If there are signs of an imminent revival, I can’t discern them.
Consumer Discretionary
Period return 3.3%. Stocks that depend on consumers opening their wallets have struggled. Consumer confidence is low, which I attribute to tariffs, deportations, military threats and skirmishes, and fraying of the Atlantic alliance.
I like the moribund homebuilders, which I believe will take off if mortgage rates subside.
Disclosure: I own Alphabet and Taiwan Semiconductor personally and for most of my clients. One or more of my clients own Nvidia, Eli Lilly and Microsoft.
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.