Take A Sneak Peek At My Purloined Portfolio
Posted: October 22, 2019
Stolen fruit, anyone?
Filings with the Securities and Administration make it easy to follow what almost any U.S. money manager is doing with his or her portfolio. I like to keep tabs on what my competitors are doing, especially the competitors I respect.
Once a year, I feature some of these stolen stock ideas in a collection I call the Purloined Portfolio.
Since 2000, the 15 previous Purloined Portfolios have enjoyed a 13.8% average 12-month return. That looks pretty good compared to the 9.6%% return for the Standard & Poor’s 500 Index.
Thirteen of the previous 15 portfolios have been profitable, and eight have beaten the index.
Bear in mind that my column recommendations are theoretical and don’t reflect actual trades, trading costs or taxes. Their results shouldn’t be confused with the performance of portfolios I manage for clients. And past performance doesn’t predict future results.
Here now is the 16th Purloined Portfolio:
My friend Randall Eley runs pension money and the Edgar Lomax Value Fund from offices in Alexandria, Virginia. From his holdings, I select Chevron (CVX), the giant integrated oil company.
The energy industry has been dreadfully out of favor for five years. Chevron has managed to remain profitable every year except for 2016, and its stock price has held up better than many of its peers. The stock offers a 4% dividend yield, which looks reasonably secure to me.
From Scott Black, the head honcho at Delphi Management in Boston, I will steal the idea of Fox (FOXA). International media mogul Rupert Murdoch has reorganized his empire and sold off part of it. He kept a big stake in Fox Corp., which owns Fox News, Fox Sports and the Fox broadcasting operations.
Analysts figure that Fox will earn about $2.32 a share in fiscal 2020 (which is already underway, and ends in June), and about $2.77 in fiscal 2121. With the stock at $32.21, it sells for about 14 times the fiscal 2020 estimate and 12 times the fiscal 2021 guess.
Since Fox is new in its present form, there is a pretty wide variation in the earnings estimates.
From Chuck Royce, who runs a large family of Royce mutual funds, I pick MKS Instruments (MKSI). Based in Andover, Massachusetts, MKS specializes in equipment to monitor and control semiconductor-making processes.
The semiconductor equipment industry is subject to rapid, sharp ups and down. Lately it’s been down. But analysts anticipate a rebound in the coming year. MKS sells for about 24 times recent earnings but less than 15 times estimated earnings for 2020.
Ken Heebner is a Boston money manager who often led the mutual-fund pack in past years, but has floundered in recent years. I don’t believe that people really transform from geniuses into idiots (or vice versa) and I remain keenly interested in what Heebner is up to.
From Heebner’s list I will pluck Sinclair Broadcast Group (SBGI). Based in Hunt Valley, Maryland, the company owns some 58 television stations, which together reach about 22% of U.S. households.
Yes, TV stations are losing advertising market share to the internet, just as newspapers and radio stations are. But Sinclair has managed double-digit revenue growth consistently. And its stock sells for modest multiples—12 times recent earnings and 11 times next year’s estimate.
David Katz is the chief investment officer of Matrix Asset Advisors in New York. One of his stocks that I like is Zimmer Biomet Holdings (ZBH). It is a leading maker of artificial knees, hips and other orthopedic reconstruction products.
As the U.S. population gets older, I think the demand for knee and hip replacement will grow. The company posted a loss last year—its first loss in at least 15 years—but analysts expect a return to profitability this year. This stock was also in the Purloined Portfolio last year.
Last Year
My Purloined Portfolio underperformed the S&P 500 in the 12 months from October 15, 2018 through October 15, 2019. The main culprit was Cohu (COHU), which fell 28%.
I also had a small loss on Laboratory Corp. of America Holdings (LH). There were some good gains in Allstate (ALL), Walt Disney (DIS), and Zimmer Biomet (ZBH), but they weren’t enough. The overall return was 4.5%, versus 11.1% for the index.
Disclosure: I own Allstate, Chevron and Zimmer Biomet for one or more clients, but not personally. I own Walt Disney Co. for almost all my clients, and personally.
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