My 30-30 Club has Alphabet, Nvidia and 45 More Stocks

John Dorfman

April 11, 2022 (Maple Hill Syndicate) – Few players – stars such as Willy Mays, Hank Aaron, Mike Trout and Mookie Betts – can make baseball’s 30-30 Club. It’s for players who hit 30 home runs and steal 30 bases in the same season.

I have a 30-30 Club for companies. To make it, a company must post a return on stockholders’ equity of 30% or better, and boast earnings growth averaging 30% or more for the past five years. (It must also have a market value of $2 billion or more.)

Forty-seven companies made the roster this year. Each of them deserves a spotlight and a drum roll. I wouldn’t buy all of their stocks, however, since many are highly priced, and a few are highly indebted.

My Picks

I recommend six 30-30 club members this year.

Southern Copper Corp. (SCCO) mines copper and other metals in Peru and Mexico. I think the economy and inflation will both be running hot for the next year or so — a good environment for metals producers. The stock sells for 17 times earnings.

Medifast Inc. (MED) sells weight loss products, and I figure that a lot of people have a few extra Covid pounds to lose. The stock goes for 13 times earnings.

Williams-Sonoma Inc. (WSM), a housewares retailer, sells for only 10 times earnings, despite its outstanding profitability and growth.

Nexstar Media Group Inc. (NXST) looks like a bargain to me at nine times earnings. It owns 197 television stations.

Even more of a bargain at eight times earnings is Dick’s Sporting Goods Inc. (DKS).

Cheapest of all, at six times earnings, is Mueller Industries Inc. (MLI), which makes engineered products such as refrigerator coils. It earned a striking return on equity of almost 48% last year. I consider anything over 15% good.

The Honor Roll

The largest stocks that achieved 30-30 status this year are Alphabet Inc. (GOOGL), Nvidia Corp. (NVDA), Adobe Inc. (ADBE), Netflix Inc. (NFLX), and Regeneron Pharmaceuticals Inc. (REGN).

Boasting the fastest five-year earnings growth are Bio-Rad Laboratories Inc. (BIO), Fortinet Inc. (FTNT), Netflix, Gartner Inc. (IT) and Boise Cascade Co. (BCC).

Standing out for extremely high profitability were Fair Isaac Corp. (FICO), Sealed Air Corp. (SEE), Waters Corp. (WAT), NetApp Inc. (NTAP) and Artisan Partners Asset Management Inc. (APAM).

Missing in Action

You may be wondering about some big-name investor favorites. Where are Amazon.com Inc. (AMZN), Apple Inc. (AAPL), Meta Platforms Inc. (FB), Microsoft Corp. (MSFT) and Tesla Inc. (TSLA) on this list? The answer is that they aren’t on it.

Amazon.com came excruciatingly close, missing the return-on-equity cut-off by less than one percentage point.

Apple is spectacularly profitable, but its earnings growth rate for the past five years is about 19%.

Meta Platforms, formerly called Facebook, missed both criteria by a whisker.

Microsoft just missed the cut with 27% earnings growth.

Tesla’s return on equity was 22%, and it hasn’t been profitable long enough for a five-year earnings growth rate to be calculated.

Past Record

I’ve been compiling the 30-30 Club roster most years since 1999. In the 17 years in which I made recommendations, my picks have averaged a 10.4% return (including dividends). The Standard & Poor’s Total Return Index has averaged 8.4%.

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 selections have been profitable ten times out of 17, and have beaten the S&P ten times.

A year ago, I recommended three stocks. Regeneron Pharmaceuticals Inc. (REGN) posted a 56% return. LGI Homes Inc. (LGIH) fizzled, down 44%. Progressive Corp. (PGR) returned 25%. Collectively, my picks returned 12.5%, versus 10.3% for the index. LGI Homes and Regeneron are on the list again this year.

Full Roster

In my 30-30 roster this year, but not mentioned above, are 26 other companies, listed below:

Atkore Inc. (ATKR), BJ’s Wholesale Club Holdings Inc. (BJ), Boot Barn Holdings Inc. (BOOT) Builders FirstSource Inc. (BLDR), Citrix Systems Inc. (CTXS), Commercial Metals Co. (CMC), D.R. Horton Inc. (DHI), Encore Wire Corp. (WIRE), and Evercore Inc. (EVR).

Also: Generac Holdings Inc. (GNRC), Group 1 Automotive Inc. (GPI), Hamilton Lane Inc. (HLNE), Lam Research Corp. (LRCX), Matson Inc. (MATX), Moelis & Co. (MC), Moody’s Corp. (MCO), OneMain Holdings Inc. (OMF), Pool Corp. (POOL), SLM Corp. (SLM), and Steel Dynamics Inc. (STLD).

Completing the list: Texas Pacific Land Corp. (TPL), Trinet Group Inc. (TNET), UFP Industries Inc. (UFPI), West Pharmaceutical Services Inc. (WST), World Wrestling Entertainment Inc. (WWE), and YETI Holdings Inc. (YETI).

Disclosure: For clients and personally, I own Alphabet, Apple, D.R. Horton, Encore Wire and Lam Research. One or more of my clients owns Adobe, Amazon.com, Bio-Rad, Microsoft, Nvidia, Progressive, Sealed Air, and Tesla.

 

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.

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