Columnist Dorfman divulges stock holdings, makes no promises on returns
I recommend about 200 stocks a year in this column, but typically own only about 25 for clients.
From time to time, readers ask me which stocks I actually own. Here are 25 that I own for most clients.
Transportation
I like transportation stocks a lot, and have for about a year. In my opinion the economy is still improving, and oil prices, which were more than $100 a barrel last July, seem to be settling into the $60 to $70 zone. So jet fuel and gasoline cost less than they did a year ago.
Spirit Aerosystems Holdings Inc.(SPR) makes fuselages and wings for Boeing and Airbus, and has improved profits by jettisoning a money-losing project for Gulfstream private jets.
Alaska Airline Group Inc.(ALK) has a route structure I like and a history of profitability superior to that of most airlines. Delta Air Lines Inc. (DAL) has been at a disadvantage because it had unfavorable fuel contracts. But those contracts will be rolling off.
Lear Corp. (LEA) makes electrical systems and seats for cars. It serves most major carmakers worldwide, and its profits have been on a substantial upswing.
Penske Automotive Group Inc. (PAG) is a chain of auto dealerships, mostly upscale. (It gets about a quarter of revenue from selling BMWs.) I believe that lower gas prices remove an impediment to the sale of luxury cars.
Health care
With about 17 million people added to the rolls of those with health insurance in the past two years, and with the U.S. population aging, many health care companies are doing well. Among my holdings are health insurers Aetna Inc. (AET) and Cigna Corp. (CI). They were cheap when I bought them, but are medium-priced now.
Because of the same trends, I expect that demand for diagnostic tests will be robust. I own Quest Diagnostics Inc. (DGX), but it too has gained a fair amount since I bought it; I'm not sure I would put new money into it now.
I own a pair of biotech stocks. Gilead Sciences Inc. (GILD) sells for only 13 times earnings, and I recommend it at current prices. United Therapeutics Corp. (UTHR) has more than doubled since I bought it. It now sells for 50 times recent earnings, and I've been trimming the holding.
Technology
My clients and I have been getting hit on some of our technology stocks. Micron Technology Inc. (MU) has been hurt by overcapacity in semiconductors. Hewlett-Packard Co. (HPQ) is held in poor regard because of frequent management changes and strategic shifts. I still like both of them, though.
NetEase Inc. (NTES), a Chinese Internet gaming company, has more than doubled since I bought it. I am keeping the holding but trimming it, since I feel the Chinese stock market has already had quite a run.
OmniVision Technologies Inc. (OVTI) makes image-sensing chips for mobile phones and computers.
Western Digital Corp. (WDC) is my longest-standing holding, going back six years. For many clients it has tripled. Yet I continue to like it, partly because of its oligopoly position in disk drives.
Other positions
Rounding out my core holdings are 10 stocks in miscellaneous industries.
• The Andersons Inc. (ANDE) trades grain, stores grain, produces ethanol, rents railcars and repairs locomotives. It is starting to attract takeover interest.
• DST Systems Inc. (DST) does electronic money transfers and recordkeeping for mutual funds and other customers.
• HollyFrontier Corp. (HFC) operates five oil refineries in the western United States.
• ICICI Bank (IBN) is an Indian bank that could benefit from rapid growth in India and recent economic reforms that strip away excessive regulation.
• Kohl's Corp. (KSS) is a nationwide discount department store competing with the likes of Target and Wal-Mart.
• Northrop Grumman Corp. (NOC), a diversified Defense contractor, makes warplanes, military electronics, surveillance equipment, and other products.
• NVR Inc. (NVR) is a homebuilder, primarily in the Washington area. I think the recovery in homebuilding is gathering steam.
• Sanderson Farms (SAFM) is an old favorite of mine that I recently repurchased. It is one of the larger chicken-farming companies in the U.S.
• Sony Corp. (SNE), based in Japan, has a rich history of innovation in consumer electronics. Today it's a turnaround story.
• Twenty-First Century Fox Inc. (FOX) produces movies and television shows. At eight times earnings, it's one of the few cheap stocks in a relatively rich market.
The record
This is the fourth time I've written about my own holdings, the previous times being June 2012 through 2014. All three of those lists have beaten the Standard & Poor's 500, though not necessarily by much. The average margin of victory has been about 3 percentage points.
Caution: The performance of my column recommendations is hypothetical, and doesn't reflect trading costs or taxes. The column's performance shouldn't be confused with returns I achieve for clients on actual portfolios. And past performance doesn't predict future results.
John Dorfman is chairman of Dorfman Value Investments LLC in Boston and a syndicated columnist. He can be reached at jdorfman@dorfmanvalue.com.
