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John Dorfman
John Dorfman
Articles (176)  | Author's Website |

My 10 Favorite Stocks for 2020 Include Disney and Oshkosh

These companies deserve strong consideration

If you’re doing a portfolio refresh for the new year, here are 10 stocks that I think deserve strong consideration.

Most of them sell for 16 times earnings or less, in a market where the average multiple is about 23. They all have low debt or reasonable debt, in my judgment.

America’s Car-Mart

Selling used cars to people with bad credit may not sound like a great business, but it has been for America’s Car-Mart Inc. (NASDAQ:CRMT). It has been profitable in each of the past 15 years, even during the wracking recession of 2008. Almost every customer takes a car loan, at hefty interest rates.

D.R. Horton

I am keen on the homebuilding industry. Housing starts are about double the trough level from the Great Recession, but roughly half the peak level from 2005-06. I particularly like D.R. Horton Inc. (NYSE:DHI) because of its relatively low debt, and because it sells houses at a variety of price points.

General Dynamics

I’ve owned General Dynamics Corp. (NYSE:GD) many times over the years, and it’s rarely disappointed me – except in 2018 and 2019. I expect this defense contractor to bounce back in 2020. The return on stockholders’ equity (profit divided by corporate net worth per share) was more than 26% recently.

Gold

Most of my clients own a 4% to 5% position in the SPDR Gold Trust (GLD), a trust that owns physical gold. Gold generally (but not always) thrives in times of political turmoil, inflation or low interest rates on fixed-income investments.

Intel

The world’s largest semiconductor maker, Intel Corp. (NASDAQ:INTC) has increased its dividend consistently. Dividend increases are a welcome sign that a company’s board thinks its profit growth is sustainable. Intel’s profits have grown at a 21% annual pace for the past five years, and a little faster last year.

Oshkosh

Based in Oshkosh, Wisconsin, Oshkosh Corp. (NYSE:OSK) makes aerial-lift trucks, fire engines, troop transport vehicles and garbage trucks. It took an awful loss during the Great Recession, but has been profitable in 14 of the past 15 years. Lately it has earned more than 22% on stockholders’ equity.

Societe Bic

I don’t expect a recession until 2021 at the earliest, but there have been some warning signs, including three declines in the conference board’s index of “leading indicators.” If you want a defensive stock, consider Societe Bic of France (BICEY), which makes Bic pens, lighters and razors--all steady products.

Sony

I’m nervous about Sony Corp. (NYSE:SNE) as the Japanese consumer-electronics conglomerate has already had a big move (up about 40% in the past year). But it still sells for only 11 times recent earnings. Among its business lines are a movie studio, parts for Apple’s iPhones and the Sony PlayStation.

Walmart

Utilizing its huge purchasing power as a lever, Walmart Inc. (NYSE:WMT) can sell a wide variety of goods at a lower price than most of the competition. While online sales bedevil most retailers, Walmart has put a lot of effort into selling on the internet, and is having increasing success there.

Walt Disney

Walt Disney Co. (NYSE:DIS) is one of the few companies where the word “synergy” means something. Its theme parks, movies, toys and TV shows reinforce each other. Its streaming service already looks like a hit, and I believe it will be a “must have” for families with young children.

Past results

My top picks for 2018 returned 18.8% (including dividends), compared to 29.3% for the Standard & Poor’s 500 index. The S&P 500 has become a hard bogey to beat because the popularity of index funds keeps drawing capital into its component stocks.

My best gainers were Apple Inc. (NASDAQ:AAPL), up about 84%, and Sanderson Farms Inc. (SAFM), up about 76%. I still like both, but they are not my favorites at today’s prices.

My biggest losers were Antero Resources Inc. (AR), down about 71%, and Walgreens Boots Alliance (WBA), down about 14%.

Ironically, my “favorite stocks for the new year” columns haven’t done as well over the years as many of my other series of columns, such as the Robot Portfolio, Casualty List, Perfect 10 Portfolio and Low Debt List.

In 15 years, my favorite picks for the new year have averaged a 5.6% return, versus 10.0% for the S&P 500. Eleven of my 15 lists have been profitable, but only five have beaten the S&P 500.

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.

Disclosure: I own all of the stocks mentioned today, personally and for most of my clients.

John Dorfman is chairman of Dorfman Value Investments LLC in Newton Upper Falls, Massachusetts, and a syndicated columnist. His firm or clients may own or trade securities discussed in this column. He can be reached at [email protected].

About the author:

John Dorfman
John Dorfman founded Dorfman Value Investments in 1999. Previously he was a Senior Special Writer for The Wall Street Journal, executive editor of Consumer Reports, and a managing director at Dreman Value Management. His syndicated column appears on Tuesdays on this website and also in the Pittsburgh Tribune Review, Ohio.com, Virginian Pilot and Omaha World Herald.

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